<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
STARRETT CORPORATION
(Name of Subject Company)
STARTT ACQUISITION, INC.
STARTT ACQUISITION, LLC
(Bidders)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
885-677-11
(CUSIP Number of Class of Securities)
JONATHAN I. MAYBLUM
STARTT ACQUISITION, INC.
C/O LAWRENCE RUBEN COMPANY, INC.
600 MADISON AVENUE, 20TH FLOOR
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 980-0910
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
Copies To:
JOEL I. PAPERNIK, ESQ.
SQUADRON, ELLENOFF, PLESENT & SHEINFELD, LLP
551 FIFTH AVENUE
NEW YORK, NEW YORK 10176
TELEPHONE: (212) 661-6500
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$76,696,760.00 $15,339.35
* Estimated for purposes of calculating the amount of filing fee only. The
amount assumes the purchase of 6,260,960 shares of common stock, par value
$1.00 per share, at a price per Share of $12.25 in cash. Such number of Shares
represents all of the Shares outstanding as of October 16, 1997.
__ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee as previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: None.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
Page 1 of 8
Exhibit Index Begins on Page 8
<PAGE>
CUSIP No. 885-677-11 14D-1
1) Names of Reporting Persons, I.R.S. Identification Nos. of
Above Persons (entities only)
Startt Acquisition, Inc. Employer Tax Id: 13-397-0392
-------------------------------------------------------------
2) Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) ________________________________________________________
(b) X
________________________________________________________
3) SEC Use Only _______________________________________________
4) Sources of Funds (See Instructions) AF, OO
--------------------------
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(e) or 2(f)
-------------------------------
6) Citizenship or Place of Organization New York
-------------------------
7) Aggregate Amount Beneficially Owned by Each
Reporting Person 3,317,211
---------------------------
8) Check if the Aggregate Amount in Row (7) Excludes
Certain Shares (See Instructions) __________________________
9) Percent of Class Represented by Amount in Row (7) 53.0%
-----------
10) Type of Reporting Person (See Instructions) CO
-----------------
2
<PAGE>
CUSIP No. 885-677-11 14D-1
1) Names of Reporting Persons, I.R.S. Identification Nos. of
Above Persons (entities only)
Startt Acquisition, LLC Employer Tax Id: 13-397-0393
_____________________________________________________________
2) Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) _________________________________________________________
(b) X
---------------------------------------------------------
3) SEC Use Only ________________________________________________
4) Sources of Funds (See Instructions) AF, OO
________________________
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(e) or 2(f) _____________________________
6) Citizenship or Place of Organization Delaware
_______________________
7) Aggregate Amount Beneficially Owned by Each Reporting
Person 3,317,211
-----------------------------------------------------
8) Check if the Aggregate Amount in Row (7) Excludes Certain
Shares (See Instructions) __________________________________
9) Percent of Class Represented by Amount in Row (7) 53.0%
---------
10) Type of Reporting Person (See Instructions) OO
-----------------
3
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 relates to the offer by
Startt Acquisition, Inc., a New York corporation ("Purchaser"), to purchase all
outstanding shares of common stock, par value $1.00 per share (collectively,
the "Shares"), of Starrett Corporation, a New York corporation, at $12.25 per
Share, net to the seller in cash, on the terms and subject to the conditions
set forth in the Offer to Purchase dated October 23, 1997 (the "Offer to
Purchase") and in the related Letter of Transmittal, copies of which are
attached hereto as Exhibits (a) (1) and (a) (2), respectively (which, as
amended or supplemented from time to time, together constitute the "Offer").
The item numbers and responses thereto below are in accordance with the
requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is Starrett Corporation, a New
York corporation (the "Company"). The address of the Company's principal
executive offices is One Park Avenue, New York, New York 10016.
(b) The information set forth in the Introduction of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in Section 6--"Price Range of Shares;
Dividends" of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d), (g) This Statement is filed by Purchaser and Startt
Acquisition, LLC, a Delaware limited liability company ("Parent"). The
information set forth in the Introduction, in Section 8--"Certain Information
Concerning Purchaser and Parent" and in Schedules I and II to the Offer to
Purchase is incorporated herein by reference.
(e)-(f) During the last five years, neither Parent nor Purchaser nor,
to their knowledge, any of the persons listed in Schedules I and II to the
Offer to Purchase (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a)-(b) The information set forth in Section 8--"Certain Information
Concerning Purchaser and Parent," in Section 10--"Background of the Offer,
Contacts with the Company" and in Section 11--"The Offer and Merger; Merger
Agreement and Related Agreements" of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(b) The information set forth in Section 9--"Sources and Amounts
of Funds" of the Offer to Purchase is incorporated herein by reference. No
plans or arrangements have been made to finance or repay any of the borrowings
described in such Section.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(g) The information set forth in the Introduction, in the
next-to-last and last paragraphs of Section 6--"Price Range of Shares;
Dividends," in Section 10--"Background of the Offer; Contacts with the
Company," in Section 11--"The Offer and Merger; Merger Agreement and Related
Agreements," in Section 12-- "Purpose of the Offer and Merger; Plans for the
Company" and in Section 13--"Effect of the Offer on the Market for the Shares;
Exchange Act Registration; Margin Regulations" of the Offer to Purchase is
incorporated herein by reference.
4
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) - (b) The information set forth in Section 8--"Certain
Information Concerning Purchaser and Parent," in Section 11--"The Offer and
Merger; Merger Agreement and Related Agreements" and in Schedules I and II to
the Offer to Purchase is incorporated herein by reference. In addition,
Richard G. Ruben and Mark Lasry share control of the general partner of
Avenue Investors L.P., which purchased 5,900 Shares on August 29, 1997
for $10.69 per Share and 5,000 additional Shares on such date for $10.71
per Share. Both purchases were effected through brokers.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES
The information set forth in the Introduction, in Section 8--"Certain
Information Concerning Purchaser and Parent," in section 9--"Sources and Amount
of Funds," in Section 10--"Background of the Offer, Contacts with the Company,"
in Section 11--"The Offer and Merger; Merger Agreement," in Section 12
- --"Purpose of the Offer and Merger; Plans for the Company," and in Section 14
- --"Extension of Tender Period; Amendment; Termination" of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth in the Introduction and in Section 17--"Fees
and Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The information set forth in Section 8--"Certain Information
Concerning Purchaser and Parent" of the Offer to Purchase is incorporated
herein by reference.
ITEM 10. ADDITIONAL INFORMATION
(a) The information set forth in the Introduction, in Section
8--"Certain Information Concerning Purchaser and Parent," in Section
10--"Background of the Offer; Contacts with the Company," in Section 11--"The
Offer and Merger; Merger Agreement and Related Agreements" and in Section
12--"Purpose of the Offer and Merger, Plans for the Company" of the Offer to
Purchase is incorporated herein by reference.
(b)-(c) The information set forth in Section 12--"Purpose of the Offer
and Merger, Plans for the Company" and in Section 16--"Certain Legal Matters;
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 13--"Effect of the Offer on
the Market for the Shares; Exchange Act Registration; Margin Regulations" and
in Section 16--"Certain Legal Matters; Regulatory Approvals" of the Offer to
Purchase is incorporated herein by reference.
(e) The information set forth in Section 10--"Background of the Offer;
Contacts with the Company" and in Section 18--"Legal Proceedings" of the Offer
to Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter
of Transmittal, copies of which are attached hereto as Exhibits (a) (l) and (a)
(2), respectively, is incorporated herein by reference.
5
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a) (1) Offer to Purchase, dated October 23, 1997.
(a) (2) Letter of Transmittal.
(a) (3) Notice of Guaranteed Delivery.
(a) (4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a) (5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a) (6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a) (7) Text of joint press release issued by the Company, Parent and
Purchaser dated October 17, 1997.
(a) (8) Form of Tombstone Adverstisement to be published in the Wall
Street Journal, National Edition.
(b) Financing Commitment Letter from Credit Suisse First Boston
Mortgage Capital LLC, dated October 16, 1997, agreed to and
accepted by Parent.
(c) (1) Agreement and Plan of Merger dated as of October 16, 1997
by and between Purchaser and the Company.
(c) (2) Shareholders Agreement dated as of October 16, 1997 among
Paul Milstein, Henry Benach, Irving Fischer, Oded
Aboodi, the Company, Parent and Purchaser.
(c) (3) Indemnity Agreement dated as of October 16, 1997, among
Startt Acquisition, LLC and Startt Acquisition, Inc., and
Paul Milstein, Henry Benach, Irving Fischer and Oded Aboodi,
and certain persons and entities affiliated with them.
(c) (4) Escrow Agreement among Purchaser, the Company and Proskauer
Rose LLP.
(c) (5) Employment Agreement between the Company and Frank Ross, Sr.
(c) (6) Incentive Agreement between the Company and Irving R. Fischer.
(c) (7) Purchaser's Consent to proposed severance agreement between
the Company and Lewis Weinfeld.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
6
<PAGE>
SIGNATURES
After due inquiry and to the best of its knowledge and belief, each of
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: October 23, 1997
STARTT ACQUISITION, INC.
By : /s/ Jonathan I. Mayblum
--------------------------------
Jonathan I. Mayblum
President
STARTT ACQUISITION, LLC
By : /s/ Jonathan I. Mayblum
---------------------------------
Jonathan I. Mayblum
President
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
(a) (1) Offer to Purchase, dated October 23, 1997.
(a) (2) Letter of Transmittal.
(a) (3) Notice of Guaranteed Delivery.
(a) (4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a) (5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a) (6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a) (7) Text of joint press release issued by the Company, Parent and Purchaser
dated October 17, 1997.
(a) (8) Form of Tombstone Advertisement to be published in the Wall Street,
Journal, National Edition.
(b) Financing Commitment Letter from Credit Suisse First Boston Mortgage
Capital LLC, dated October 16, 1997, agreed to and accepted by Parent.
(c) (1) Agreement and Plan of Merger dated as of October 16, 1997 by and between Purchaser and the Company.
(c) (2) Shareholders Agreement dated as of October 16, 1997 among Paul
Milstein, Henry Benach, Irving Fischer, Oded Aboodi, the Company,
Parent and Purchaser.
(c) (3) Indemnity Agreement dated as of October 16, 1997, among Startt
Acquisition, LLC and Startt Acquisition, Inc., and Paul Milstein,
Henry Benach, Irving Fischer and Oded Aboodi, and certain persons and
entities affiliated with them.
(c) (4) Escrow Agreement among Purchaser, the Company and Proskauer Rose LLP.
(c) (5) Employment Agreement between the Company and Frank Ross, Sr.
(c) (6) Incentive Agreement between the Company and Irving R. Fischer.
(c) (7) Purchaser's Consent to proposed severance agreement between the Company
and Lewis Weinfeld.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
8
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
STARRETT CORPORATION
AT
$12.25 NET PER SHARE
BY
STARTT ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
STARTT ACQUISITION, LLC
- ------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON NOVEMBER 20, 1997, UNLESS THE OFFER IS EXTENDED.
- ------------------------------------------------------------------------------
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF
MERGER DATED OCTOBER 16, 1997 (THE "MERGER AGREEMENT") BY AND BETWEEN STARTT
ACQUISITION, INC. ("PURCHASER") AND STARRETT CORPORATION (THE "COMPANY").
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER, HAS DETERMINED THAT THE OFFER AND MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY,
AND RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE MERGER BY THE SHAREHOLDERS OF THE COMPANY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN),
A NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY, $1.00 PAR VALUE PER SHARE
(COLLECTIVELY, THE "SHARES"), WHICH , WHEN ADDED TO THE SHARES THEN
BENEFICIALLY OWNED BY PURCHASER OR ITS AFFILIATES, TOGETHER WITH THE SHARES
TENDERED PURSUANT TO THE SHAREHOLDERS AGREEMENT DATED AS OF OCTOBER 16, 1997
BY AND AMONG PURCHASER AND CERTAIN SHAREHOLDERS OF THE COMPANY, CONSTITUTES
AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING ON A
FULLY-DILUTED BASIS; (II) ALL REQUIRED APPROVALS, IF ANY, BY THE UNITED
STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ("HUD"); AND (III)
SATISFACTION OF THE OTHER CONDITIONS SPECIFIED IN SECTION 15 HEREOF. SEE
SECTION 15.
---------
IMPORTANT
Any shareholder desiring to tender all or any portion of such holder's
Shares should either (a) complete and sign the enclosed Letter of Transmittal
(or a facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such shareholder's signature guaranteed, if required by
Instruction 1 to the Letter of Transmittal, and mail or deliver it together
with the certificate(s) evidencing the tendered Shares and all other required
documents to the Depositary (as defined herein), or tender such Shares
pursuant to the procedure for book-entry transfer set forth in Section 3 of
this Offer to Purchase or (b) request such shareholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such shareholder. A shareholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
shareholder desires to tender such Shares.
Any shareholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available or who cannot comply
with the procedures for book-entry transfer on a timely basis may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3 of this Offer to Purchase.
Questions and requests for assistance and for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other related materials may be directed to the Information Agent
at its addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and the other tender offer
materials may also be obtained from brokers, dealers, commercial banks or
trust companies.
-------------
October 23, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C> <C>
INTRODUCTION ............................................................................ 1
1. Terms of the Offer ............................................................. 3
2. Acceptance for Payment; Payment ................................................ 4
3. Procedures for Tendering Shares ................................................ 5
4. Withdrawal Rights .............................................................. 7
5. Certain Tax Considerations ..................................................... 7
6. Price Range of Shares; Dividends ............................................... 9
7. Certain Information Concerning the Company ..................................... 9
8. Certain Information Concerning Purchaser and Parent ............................ 12
9. Sources and Amount of Funds .................................................... 12
10. Background of the Offer; Contacts with the Company ............................. 14
11. The Offer and Merger; Merger Agreement and Related Agreements .................. 16
12. Purpose of the Offer and Merger, Plans for the Company ......................... 27
13. Effect of the Offer on the Market for the Shares; Exchange Act Registration;
Margin Regulations ............................................................. 28
14. Extension of Tender Period; Amendment; Termination ............................. 29
15. Conditions to the Offer ........................................................ 30
16. Certain Legal Matters; Regulatory Approvals .................................... 31
17. Fees and Expenses .............................................................. 33
18. Legal Proceedings............................................................... 34
19. Miscellaneous .................................................................. 34
Directors and Executive Officers of Purchaser ........................................... I-1
Directors and Executive Officers of Parent and Certain Other Persons ................... II-1
Additional Information Required by the New York Security Takeover Disclosure Act ........ III-1
</TABLE>
i
<PAGE>
SUPPLEMENT, DATED OCTOBER 23, 1997, TO
SECTION 18 -- "LEGAL PROCEEDINGS" OF OFFER TO PURCHASE.
The Company announced today that the Supreme Court of the State of New
York, County of New York, has denied the motion for a preliminary injunction
made yesterday by plaintiff Starrett Acquisition, Inc., an affiliate of Jacob
Frydman, which sought, among other relief, to enjoin the transactions with
Purchaser and related parties and to order the Company to consummate a
transaction with plaintiff. Counsel to Mr. Frydman has informed the Company
that he will not appeal the decision. Unspecified damage claims by Mr.
Frydman remain outstanding. See Section 12 of the Offer to Purchase, "The
Offer and Merger; Merger Agreement and Related Agreements -- Indemnity
Agreement."
<PAGE>
To the Holders of Common Stock of
Starrett Corporation
INTRODUCTION
Startt Acquisition, Inc., a New York corporation ("Purchaser"), hereby
offers to purchase all outstanding shares of common stock, $1.00 par value
per share (the "Company Common Stock" or the "Shares"), of Starrett
Corporation, a New York corporation (the "Company"), at $12.25 per Share, net
to the seller in cash (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer"). The Purchaser is a wholly-owned subsidiary of Startt
Acquisition, LLC, a Delaware limited liability company ("Parent").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. However, any tendering shareholder or other payee who
fails to complete and sign the Substitute Form W-9 that is included in the
Letter of Transmittal may be subject to a required backup federal tax
withholding of 31% of the gross proceeds payable to such shareholder or other
payee pursuant to the Offer. See Section 3. Purchaser will pay all charges
and expenses of ChaseMellon Shareholder Services, L.L.C., which is acting as
the Depositary (in such capacity, the "Depositary"), and MacKenzie Partners,
Inc., which is acting as Information Agent (in such capacity, the
"Information Agent"), incurred in connection with the Offer in accordance
with the terms of agreements entered into between Purchaser and such persons.
See Section 17. For purposes of this Offer to Purchase, references to
"Section" are references to a section of this Offer to Purchase, unless the
context otherwise requires.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN),
A NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY
PURCHASER OR ITS AFFILIATES, TOGETHER WITH THE SHARES TENDERED PURSUANT TO
THE SHAREHOLDERS AGREEMENT DATED OCTOBER 16, 1997 BY AND AMONG PURCHASER AND
CERTAIN SHAREHOLDERS OF THE COMPANY, CONSTITUTES AT LEAST TWO-THIRDS OF THE
TOTAL NUMBER OF SHARES OUTSTANDING ON A FULLY-DILUTED BASIS (THE "MINIMUM
TENDER CONDITION"); (II) ALL REQUIRED APPROVALS, IF ANY, BY THE UNITED STATES
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ("HUD"); AND (III) SATISFACTION
OF THE OTHER CONDITIONS SPECIFIED IN SECTION 15 HEREOF. SEE SECTION 15.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 16, 1997 (the "Merger Agreement"), by and between Purchaser and
the Company. The Merger Agreement provides, among other things, that as
promptly as practicable following the completion of the Offer and the
satisfaction or waiver of certain conditions, including the purchase of
Shares pursuant to the Offer and satisfaction of the Minimum Tender Condition
(sometimes referred to herein as the "consummation" of the Offer) and the
approval and adoption of the Merger Agreement by the shareholders of the
Company, if required by applicable law, Purchaser will be merged with and
into the Company (the "Merger"), with the Company as the surviving
corporation (the "Surviving Corporation") with the result that all the
outstanding Shares will be owned by Parent. In the Merger, each issued and
outstanding Share (other than Dissenting Shares (as hereinafter defined)) not
owned directly or indirectly by the Company will be converted into and
represent the right to receive $12.25 in cash, without interest (the "Merger
Price"); provided, however, that any Shares owned by Parent or Purchaser will
be cancelled and the Merger Price will not be paid in respect of any such
Shares. See Section 11. "Dissenting Shares" means those Shares which are held
by holders of Shares who shall not have voted such Shares in favor of the
Merger or consented thereto in writing, who have filed with the Company a
written notice of election to dissent and who otherwise comply with the
applicable procedures set forth in the Business Corporation Law of the State
of New York (the "BCL").
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD" OR "BOARD OF
DIRECTORS") UNANIMOUSLY HAS APPROVED THE MERGER AGREEMENT, THE OFFER AND THE
MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF
THE OFFER AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY
THE SHAREHOLDERS OF THE COMPANY.
Goldman, Sachs & Co. (the "Company's Financial Advisor"), financial
advisor to the Company, has delivered to the Board a written opinion dated
October 16, 1997 to the effect that the consideration to be received by the
holders of Shares in the Offer and the Merger is fair to such holders from a
financial point of view. A copy of such opinion is to be included with the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") and should be read carefully in its entirety for a
description of the assumptions made, matters considered and limitations on
the review undertaken by the Company's Financial Advisor.
The Company's Board of Directors paid a regular quarterly dividend of
$.0625 per Share on October 15, 1997 to shareholders of record on September
30, 1997. Pursuant to the terms of the Merger Agreement, prior to the date on
which a majority of the Company's directors are designees of Purchaser, the
Company is prohibited from declaring any additional dividends (including
regular quarterly dividends) without the consent of Purchaser.
According to the Company, as of October 16, 1997, 6,260,960 Shares were
validly issued and outstanding, of which 10,900 Shares were owned by
affiliates of Purchaser. In addition, there is currently outstanding an
option to purchase 100,000 Shares. See Section 11 "--Employment, Severance
and Related Agreements." Based upon the foregoing information, the Minimum
Tender Condition would be satisfied if 4,229,740 Shares were validly tendered
and not withdrawn. If the option ceases to be outstanding prior to the
expiration of the Offer, the Minimum Tender Condition would be satisfied if
4,163,073 Shares were validly tendered and not withdrawn. Pursuant to the
Shareholders Agreement dated as of October 16, 1997 among Paul Milstein,
Henry Benach, Irving Fischer and Oded Aboodi, and certain persons and
entities affiliated with, or related to, them (collectively, the "Principal
Shareholders"), Parent and Purchaser, the Principal Shareholders have agreed
to tender an aggregate of 3,317,211 Shares pursuant to the Offer. See Section
11 "--The Offer and Merger; Merger Agreement and Related Agreements."
The Merger Agreement provides that, promptly upon consummation of the
Offer, Purchaser shall be entitled to designate for election to the Board
such number of persons so that the designees of Purchaser constitute the same
percentage (but in no event less than a majority) of the Board (rounded up to
the next whole number) as the percentage of the outstanding Shares acquired
pursuant to the Offer or otherwise owned by Purchaser and its affiliates.
Upon the consummation of the Offer, the Company will, at the option of
Purchaser, increase the size of the Board or obtain the resignation of such
number of directors as is necessary to enable such number of Purchaser
designees to be so elected. Under the Merger Agreement, the Company and
Purchaser have agreed that, until the Effective Time (as defined herein), the
Board of Directors shall have at least two directors (the "Independent
Directors") who are directors on the date of the Merger Agreement or who are
otherwise not officers, directors or affiliates of Purchaser and are
independent directors under the rules of the American Stock Exchange (the
"AMEX") and that, if the number of Independent Directors shall be reduced
below two for any reason whatsoever, any remaining Independent Directors (or
Independent Director, if there shall be only one remaining) shall be entitled
to designate persons to fill such vacancies who shall be deemed to be
Independent Directors for purposes of the Merger Agreement or, if no
Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers, shareholders or
affiliates of Purchaser and who are independent directors under the rules of
the AMEX, and such persons shall be deemed to be Independent Directors for
purposes of the Merger Agreement.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
2
<PAGE>
1. TERMS OF THE OFFER
Subject to the terms of the Merger Agreement and the conditions of the
Offer as set forth in Section 15 (each a "Condition," and collectively, the
"Conditions"), Purchaser will, promptly after the Expiration Date (as herein
defined), accept for payment and pay for all Shares validly tendered and not
properly withdrawn in accordance with Section 4 prior to the Expiration Date.
The term "Expiration Date" means 12:00 midnight, New York City time, on
November 20, 1997, unless and until Purchaser shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall refer to the latest time and date at which the Offer, as so
extended by Purchaser, shall expire.
Pursuant to the Merger Agreement, and subject to the terms and conditions
of the Offer, if all of the Conditions are not satisfied on the initial
Expiration Date, and the Merger Agreement has not been terminated in
accordance with its terms, Purchaser shall extend (and re-extend) the Offer
(but not for more than ten business days at a time) to provide time to
satisfy such Conditions through the Final Termination Date, unless a
reasonable, well-informed person would conclude that any Condition is
incapable of being satisfied prior to the Final Termination Date. The "Final
Termination Date" is December 31, 1997. Any extension of the Offer beyond the
Final Termination Date would require the mutual agreement of the Company and
Purchaser.
Subject to the terms of the Merger Agreement, Purchaser expressly reserves
the right to modify the terms and conditions of the Offer in any respect by
giving oral or written notice of such amendment to the Depositary, except
that, without the consent of the Company, Purchaser shall not (i) reduce the
number of Shares subject to the Offer, (ii) reduce the price per Share to be
paid pursuant to the Offer, (iii) modify or add to the Conditions, (iv)
except as provided above, extend the Offer, (v) change the form of
consideration payable in the Offer, or (vi) make any other change in the
terms of the Offer adverse to the holders of Shares.
The Offer is subject to: (i) the satisfaction of the Minimum Tender
Condition; (ii) the consents of HUD and The Chase Manhattan Bank; and (iii)
satisfaction of the other conditions specified in Section 15. If any such
Condition is not satisfied prior to the initial Expiration Date, Purchaser
shall extend the Offer and, subject to withdrawal rights as set forth in
Section 4, retain all such Shares until the expiration of the Offer as so
extended unless a reasonable, well-informed person would conclude that such
Condition is incapable of being satisfied prior to the Final Termination
Date, in which case Purchaser may terminate the Offer and return all tendered
Shares to tendering shareholders. Purchaser may also waive such Condition
and, subject to any requirement to extend the period of time during which the
Offer is open, purchase all Shares validly tendered and not withdrawn by the
Expiration Date or until satisfaction or waiver of the Conditions to the
Offer, Purchaser may delay acceptance for payment of (whether or not the
Shares have theretofore been accepted for payment), or payment for, any
Shares tendered and not withdrawn, subject to applicable law. For a
description of Purchaser's right to extend the period of time during which
the Offer is open, and to amend, delay or terminate the Offer, see Section
14. Any extension, amendment or termination will be followed as promptly as
practicable by public announcement thereof, the announcement in the case of
an extension to be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date in
accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Without limiting the
obligation of Purchaser under such Rules or the manner in which Purchaser may
choose to make any public announcement, Purchaser currently intends to make
announcements by issuing a release to the Reuters News Service.
If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of Purchaser, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of Purchaser to delay the payment for Shares which Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
3
<PAGE>
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
subject to the Merger Agreement, Purchaser will disseminate additional tender
offer materials and extend the Offer if and to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which the Offer must remain open following material changes in the
terms of the Offer or information concerning the Offer, other than a change
in price or a change in percentage of securities sought, will depend upon the
facts and circumstances, including the relative materiality of the changes or
information. With respect to a change in price or a change in percentage of
securities sought, a minimum period of ten business days is required to allow
for adequate dissemination to shareholders and investor response. If, prior
to the Expiration Date, Purchaser should decide to increase the price per
Share being offered in the Offer, such increase will be applicable to all
shareholders whose Shares are accepted for payment pursuant to the Offer. As
used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight New York City time, as computed in
accordance with Rule 14d-1 under the Exchange Act.
The Company has provided Purchaser with the Company's shareholder list and
security position listing for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished
to brokers, banks and similar persons whose names, or the names of whose
nominees, appear on the Company's shareholder list (or, if applicable, who
are listed as participants in a clearing agency's security position listing)
for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT; PAYMENT
Subject to the terms of the Merger Agreement and the Conditions of the
Offer set forth in Section 15, Purchaser will, promptly after the Expiration
Date, accept for payment and pay for all Shares validly tendered and not
properly withdrawn in accordance with Section 4 prior to the Expiration Date.
For a description of Purchaser's right to terminate the Offer and not accept
for payment or pay for Shares or to delay acceptance for payment or payment
for Shares, see Section 14.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment tendered Shares if, as and when Purchaser gives oral or written
notice to the Depositary of its acceptance of the tenders of such Shares.
Payment for Shares purchased pursuant to the Offer will be made by deposit of
the purchase price with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payment from Purchaser and
transmitting payments to tendering shareholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates evidencing such Shares
("Stock Certificates") or confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Shares into the Depositary's account at
one of the Book-Entry Transfer Facilities (as defined in Section 3), (ii) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), or in the case of a book-entry transfer, an Agent's Message (as
defined in Section 3), and (iii) any other required documents. For a
description of the procedure for tendering Shares pursuant to the Offer, see
Section 3. Accordingly, payment may be made to tendering shareholders at
different times if delivery of the Shares and other required documents occur
at different times. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER
ON THE CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR DELAY IN MAKING SUCH PAYMENT.
If Purchaser increases the consideration to be paid for Shares pursuant to
the Offer, Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Stock Certificates are submitted for more Shares than are
tendered, Stock Certificates for Shares not purchased or tendered will be
returned (or, in the case of Shares tendered by book-entry transfer, such
Shares will be credited to an account maintained at one of the Book-Entry
Transfer Facilities), without expense to the tendering shareholder, as
promptly as practicable after the expiration or termination of the Offer.
4
<PAGE>
3. PROCEDURES FOR TENDERING SHARES
VALID TENDER. To tender Shares pursuant to the Offer, either (a) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (in
the case of any book-entry transfer), and any other documents required by the
Letter of Transmittal must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either (i) the Stock Certificates evidencing such Shares
to be tendered must be received by the Depositary along with the Letter of
Transmittal or (ii) such Shares must be delivered to the Depositary pursuant
to the procedures for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary including an Agent's Message,
in each case prior to the Expiration Date, or (b) the tendering shareholder
must comply with the guaranteed delivery procedures described below. The term
"Agent's Message" means a message transmitted by a Book-Entry Transfer
Facility to and received by the Depositary and forming a part of a Book-Entry
Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such
Book-Entry Confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that Purchaser may
enforce such agreement against such participant.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at each of The Depository Trust Company and the Philadelphia
Depository Trust Company (collectively referred to as the "Book-Entry
Transfer Facilities") for purposes of the Offer within two business days
after the date of this Offer to Purchase, and any financial institution that
is a participant in the system of any Book-Entry Transfer Facility may make
book-entry delivery of Shares by causing a Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at a Book-Entry Transfer
Facility in accordance with the procedures of such Book-Entry Transfer
Facility. However, although delivery of Shares may be effected through
book-entry transfer, an Agent's Message or the Letter of Transmittal (or
facsimile thereof) properly completed and duly executed, together with any
required signature guarantees and any other required documents, must, in any
case, be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with.
DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Except as set forth below, signatures on all Letters
of Transmittal must be guaranteed by a recognized member of a Medallion
Signature Guarantee Program or by any other "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing, an
"Eligible Institution"). Signatures on a Letter of Transmittal need not be
guaranteed (a) if the Letter of Transmittal is signed by the registered
holder of the Shares tendered therewith and such holder has not completed the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (b) if such Shares are
tendered for the account of an Eligible Institution.
If a Stock Certificate is registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or a
Stock Certificate not accepted for payment or not tendered is to be returned,
to a person other than the registered holder(s), then the Stock Certificate
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appear on the Stock
Certificate, with the signature(s) on the endorsement of such Stock
Certificate or stock powers guaranteed as described above with respect to the
Letter of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Stock Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary on or prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
5
<PAGE>
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary prior to the Expiration Date as provided below; and
(iii) the Stock Certificates for such Shares, in proper form for transfer
(or a Book-Entry Confirmation), together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees (or in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the Letter of
Transmittal, are received by the Depositary within three trading days
after the date of execution of the Notice of Guaranteed Delivery. A
"trading day" is any day on which the AMEX is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mailed to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
BACK-UP FEDERAL INCOME TAX WITHHOLDING. Under the federal income tax laws,
the Depositary will be required to withhold 31% of the amount of any payments
made to certain shareholders pursuant to the Offer. In order to avoid such
backup withholding, each tendering shareholder must provide the Depositary
with such shareholder's correct taxpayer identification number and certify
that such shareholder is not subject to back-up federal income tax
withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal (see Instruction 10 of the Letter of Transmittal) or by filing a
Form W-9 with the Depositary prior to any such payments. If the shareholder
is a nonresident alien or foreign entity not subject to backup withholding,
the shareholder must give the Depositary a completed Form W-8 Certificate of
Foreign Status prior to receipt of any payments.
OTHER REQUIREMENTS. By executing a Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
the shareholder's attorneys-in-fact and proxies, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of the shareholder's rights with respect to the Shares tendered by the
shareholder and accepted for payment by Purchaser (and, except as provided in
Section 6, any and all other Shares or other securities or property issued or
issuable in respect of such Shares on or after the date of the Merger
Agreement). All such proxies and powers of attorney shall be irrevocable and
coupled with an interest in the tendered Shares. Such appointment is
effective only upon acceptance for payment of the Shares by Purchaser. Upon
such acceptance for payment, all prior proxies and consents given by the
shareholder with respect to such Shares and other securities will, without
further action, be revoked, and no subsequent proxies may be given nor any
subsequent written consent executed by such shareholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares and other securities,
be empowered to exercise all voting and other rights of such shareholder as
they in their sole discretion may deem proper at any annual, special or
adjourned meeting of the Company's shareholders, by written consent or
otherwise. Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon Purchaser's acceptance for
payment of such Shares, Purchaser is able to exercise full voting and other
rights with respect to such Shares (including voting at any meeting of
shareholders then scheduled or acting by written consent without a meeting).
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering shareholder's acceptance of the terms and
conditions of the Offer, as well as the tendering shareholder's
representation and warranty that such shareholder has the full power and
authority to tender and assign the Shares tendered, as specified in the
Letter of Transmittal. Purchaser's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the
tendering shareholder and Purchaser upon the terms and subject to the
conditions of the Offer.
6
<PAGE>
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for
payment of any tendered Shares will be determined by Purchaser in its sole
discretion, which determination shall be final and binding. Purchaser
reserves the absolute right to reject any or all tenders of any Shares
determined by it not to be in proper form or the acceptance for payment of or
payment for which may, in the opinion of Purchaser's counsel, be unlawful.
Purchaser also reserves the absolute right to waive any defect or
irregularity in any tender of Shares. No tender of Shares will be deemed to
have been properly made until all defects and irregularities relating thereto
have been cured or waived. Purchaser's interpretation of the terms and
conditions of the Offer in this regard (including the Letter of Transmittal
and the Instructions thereto) will be final and binding. None of Purchaser,
Parent, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in
tenders or will incur any liability for failure to give any such
notification.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date only pursuant to the procedures set forth below.
Thereafter, such tenders are irrevocable, except that they may be withdrawn
at any time after December 21, 1997 if they have not previously been accepted
for payment as provided in this Offer to Purchase.
To be effective, a written, telegraphic or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder, if different from that of the person who tendered such
Shares. If Stock Certificates evidencing Shares to be withdrawn have been
delivered to the Depositary, a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution (except in the case of Shares tendered
by an Eligible Institution) must be submitted prior to the release of such
Shares. In addition, such notice must specify, in the case of Shares tendered
by delivery of Stock Certificates, the name of the registered holder (if
different from that of the tendering shareholder) and the serial numbers
shown on the particular Stock Certificates evidencing the Shares to be
withdrawn, or, in the case of Shares tendered by book-entry transfer, the
name and number of the account at one of the Book-Entry Transfer Facilities
to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be
deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be tendered by again following one of the procedures described in
Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding. None of Purchaser,
Parent, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
5. CERTAIN TAX CONSIDERATIONS
The following summary addresses the material federal income tax
consequences to holders of Shares who sell their Shares in the Offer or whose
Shares are converted to cash pursuant to the Merger. The summary does not
address all aspects of federal income taxation that may be relevant to
particular holders of Shares and thus, for example, may not be applicable to
holders of Shares who are not citizens or residents of the United States, who
are employees of the Company and who acquired their Shares pursuant to the
exercise of compensatory stock options, or who are entities that are
otherwise subject to special tax treatment under the Internal Revenue Code of
1986, as amended (the "Code") (such as insurance companies, tax-exempt
entities, broker-dealers, and regulated investment companies); nor does this
summary address the effect of any applicable foreign, state, local or other
tax laws. The discussion assumes that each holder of Shares holds such Shares
as a capital asset within the meaning of Section 1221 of the Code. The
federal income tax discussion set forth below is included for general
information only
7
<PAGE>
and is based upon present law. The precise tax consequences of the Offer (or
the Merger) will depend on the particular circumstances of the holder.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
FEDERAL, STATE, LOCAL FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF THE OFFER
AND THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATE
MINIMUM TAX.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign tax laws. In
general, a shareholder who receives cash for Shares pursuant to the Offer or
the Merger will recognize gain or loss for federal income tax purposes equal
to the difference between the amount of cash received in exchange for the
Shares sold (without reduction for any backup withholding discussed below)
and such shareholder's adjusted tax basis in such Shares. Such gain or loss
will generally be capital gain or loss. Gain or loss will be calculated
separately for each block of Shares (i.e., Shares which were purchased at the
same time and price) tendered pursuant to the Offer or the Merger. Under the
recently enacted Taxpayer Relief Act of 1997, net capital gain (i.e.,
generally, capital gain in excess of capital loss) recognized by an
individual upon the sale or exchange of a capital asset that has been held
for more than 18 months will generally be subject to tax at a rate not to
exceed 20%. Net capital gain recognized by an individual from the sale or
exchange of a capital asset that has been held for more than 12 months but
not for more than 18 months will continue to be subject to tax at a rate not
to exceed 28%, and net capital gain recognized from the sale or exchange of a
capital asset that has been held for 12 months or less will continue to be
subject to tax at ordinary tax rates. In addition, net capital gain
recognized by a corporate taxpayer will continue to be subject to tax at the
ordinary income tax rates applicable to corporations. Ordinary income
recognized by an individual (including dividends and short-term capital gains
recognized by individuals) is subject to Federal income tax at a maximum rate
of 39.6%. The maximum federal tax rate applicable to all capital gains and
ordinary income recognized by a corporation is 35%.
WITHHOLDING. Unless a shareholder complies with certain reporting and/or
certification procedures, or is an exempt recipient under applicable
provisions of the Code (and regulations promulgated thereunder), such
shareholder may be subject to a "backup" withholding tax of 31% with respect
to any payments received in the Offer, the Merger or as a result of the
exercise of the holder's dissenters' rights. Shareholders should contact
their brokers to ensure compliance with such procedures. Foreign shareholders
should consult with their tax advisors regarding U.S. withholding taxes in
general. Those tendering their Shares in the Offer may prevent backup
withholding by completing the substitute form W-9 included in the Letter of
Transmittal.
DISSENTERS. A shareholder who does not tender Shares in the Offer or vote
in favor of the Merger and who otherwise exercises and perfects such
shareholder's rights under the BCL to demand fair value for such Shares will
recognize capital gain or loss (and may recognize an amount of interest
income) attributable to any payment received pursuant to the exercise of such
rights based upon the principles described above. See Section 16.
8
<PAGE>
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded under the symbol "SHO" on the AMEX. The following
table sets forth, for the fiscal quarters indicated, the high and low sales
prices per Share on the AMEX.
<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
Fiscal Year Ended December 31, 1995:
Quarter ended March 31, 1995 $ 8 $ 6 5/8
Quarter ended June 30, 1995 $10 5/8 $ 7 7/8
Quarter ended September 30, 1995 $10 1/2 $ 8 3/8
Quarter ended December 31, 1995 $ 8 7/8 $ 7
Fiscal Year Ended December 31, 1996:
Quarter ended March 31, 1996 $15 1/4 $ 8
Quarter ended June 30, 1996 $12 5/8 $ 9 9/16
Quarter ended September 30, 1996 $14 $10
Quarter ended December 31, 1996 $13 1/8 $10
Fiscal Year Ended December 31, 1997:
Quarter ended March 31, 1997 $11 1/4 $ 9 3/4
Quarter ended June 30, 1997 $11 1/2 $ 8 3/4
Quarter ended September 30, 1997 $11 3/4 $ 9 5/8
Quarter ending December 31, 1997
(through October 22, 1997) $11 7/8 $10 5/8
</TABLE>
On October 16, 1997, the last full trading day prior to the announcement
of the execution of the Merger Agreement, the last reported sales price per
Share on the AMEX was $11. On October 22, 1997, the last full trading day
prior to the commencement of the Offer, the last reported sales price per
Share on the AMEX was $11 13/16. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.
The Company has paid regular cash dividends on its Shares for
approximately the past three years and presently pays quarterly dividends at
the annual rate of $0.25 per Share. The Company's Board of Directors paid a
regular quarterly dividend of $.0625 per Share which was paid on October 15,
1997 to shareholders of record on September 30, 1997.
Pursuant to the Merger Agreement the Company has agreed that, without the
prior consent of Parent, it will not (i) declare, set aside or pay any
dividend or make any other distribution or payment with respect to any Shares
other than the regular quarterly cash dividend of $0.0625 per Share payable
to shareholders of record at September 30, 1997, or (ii) redeem, purchase or
otherwise acquire any Shares.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
The following information concerning the Company has been taken from or
based upon publicly available documents on file with the Securities and
Exchange Commission (the "SEC" or the "Commission"), other publicly available
information and information provided by the Company. Although neither
Purchaser nor Parent has any knowledge that would indicate that such
information is untrue, neither Purchaser nor Parent takes any responsibility
for, or makes any representation with respect to, the accuracy or
completeness of such information or for any failure by the Company to
disclose events that may have occurred and may affect the significance or
accuracy of any such information but which are unknown to Purchaser or
Parent.
GENERAL. The Company is a New York corporation with its principal offices
located at One Park Avenue, 17th Floor, New York, New York 10016. The
Company's operations consist of (i) the development, management and ownership
of real estate properties; (ii) the single-family home and garden apartment
development and electronic home security surveillance business conducted
through a Subsidiary in Florida and Puerto Rico; (iii) the mortgage credit
business conducted through a Subsidiary in Puerto Rico and Florida; and (iv)
the supplying of construction services through a Subsidiary. The
9
<PAGE>
Company groups its business into these four segments. As used herein,
"Subsidiary" or "Subsidiaries" means each corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated
with the Company for financial reporting purposes.
Over the years the Company and its Subsidiaries have constructed a wide
range of office, industrial, public and institutional buildings, among the
most notable being the Empire State Building, the Rockefeller Research
Laboratories at Memorial Sloan Kettering Cancer Center, Whitney Museum,
Citicorp Center and Chase Bank World Headquarters, and many well-known
residential communities and developments, including Starrett at Spring Creek,
Manhattan Park at Roosevelt Island, Trump Tower and the Trump International
Hotel in New York City. The Company is actively engaged in all fields of
construction, development, management and technical services.
CERTAIN FINANCIAL INFORMATION FOR THE COMPANY. The following table sets
forth certain summary consolidated financial information with respect to the
Company and its Subsidiaries excerpted or derived from the audited financial
statements contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (the "Company 10-K") and the unaudited
financial information from the Company for the six months ended June 30, 1996
and 1997 contained in the Company's Quarterly Report on From 10-Q for the
quarter ended June 30, 1997. More comprehensive financial information is
included in such reports and other documents filed by the Company with the
SEC, and the following summary is qualified in its entirety by reference to
such documents (which may be inspected and obtained as described below),
including the financial statements and related notes contained therein.
Neither Parent nor Purchaser assumes any responsibility for the accuracy of
the financial information set forth below.
10
<PAGE>
STARRETT CORPORATION AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS, ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- ---------------------
INCOME STATEMENT DATA 1996 1995 1994 1993 1992 1997 1996
- ------------------------------- ---------- ---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ....................... $167,282 $138,947 $141,335 $122,182 $111,855 $94,505 $72,896
Income before income taxes .... 10,201 12,377 10,306 4,588 1,045 1,550 4,530
Income before extraordinary
item and cumulative effect of
accounting change ............. 4,355 7,365 6,159 2,140 284 1,500 4,530
Extraordinary item ............. 824
Cumulative effect of accounting
change ........................ 1,287
Net income ..................... 4,355 7,365 6,159 2,140 2,395 863 2,534
Earnings per share:
Income before extraordinary
item and cumulative effect of
accounting change ............ .70 1.18 .98 .34 .04 .14 .40
Extraordinary item ............ .13
Cumulative effect of
accounting change ............ .20
Net income .................... .70 1.18 .98 .34 .37 .14 .40
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
--------------------------------------------------- --------------------
BALANCE SHEET DATA 1996 1995 1994 1993 1992 1997 1996
- ---------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets ................ 166,972 126,209 116,267 120,284 136,738 191,263 154,627
Long-term obligations ....... 53,030 34,459 36,066 41,033 32,603 60,526 48,330
Common shareholders' equity.. 55,194 52,138 47,117 41,819 41,139 55,272 53,889
Cash dividends (per share) .. .25 .25 .125 None .25 .125 .125
</TABLE>
AVAILABLE INFORMATION. The Company is subject to the information
requirements of the Exchange Act, and is required to file reports and other
information with the SEC relating to its business, financial condition and
other matters. Information, as of particular dates, concerning the Company's
directors and executive officers, their remuneration, options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company, is required to be
described in periodic statements distributed to the Company's shareholders
and filed with the SEC. These reports, proxy statements, and other
information, including the Company 10-K, the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September
30, 1997 (which will be filed on or before November 14, 1997) are available
for inspection at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located at Seven World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of this material may also be obtained
by mail, upon payment of the prescribed rates, from the SEC's public
reference facilities in Washington, D.C. Such material is also available for
inspection at the offices of the AMEX, 86 Trinity Place, New York, New York
10005. The SEC also maintains an Internet site on the World Wide Web at
http://www.sec.gov that contains reports and other information regarding
registrants that file electronically with the SEC.
A copy of this Offer to Purchase, along with certain of the agreements
referred to herein, is attached to Purchaser's Tender Offer Statement on
Schedule 14D-1, dated October 23, 1997 (the "Schedule 14D-1"), which has been
filed with the SEC. The Schedule 14D-1 and the exhibits thereto, along with
such other documents as may be filed by Purchaser with the SEC, may be
examined and copied from the offices of the SEC in the manner set forth
above.
11
<PAGE>
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
GENERAL. Purchaser is a newly-formed New York corporation and a
wholly-owned subsidiary of Parent. Parent is a newly-formed Delaware limited
liability company. To date, neither Purchaser nor Parent has conducted any
business other than in connection with the Offer. Until immediately prior to
the time Purchaser purchases Shares pursuant to the Offer, it is not
anticipated that Purchaser or Parent will have any significant assets or
liabilities or engage in activities other than those incident to the
formation and capitalization of such entities and the transactions
contemplated by the Offer. Because Purchaser is a newly-formed corporation
and Parent is a newly-formed limited liability company and each has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser or Parent is available.
The principal executive offices of Parent and Purchaser are located at c/o
Lawrence Ruben Company, Inc., 600 Madison Avenue, New York, New York 10022.
The name, citizenship, principal occupation, business address and material
positions held during the past five years of each of the directors and
executive officers of the Purchaser, Parent and certain other persons is set
forth on Schedule I and II attached hereto. In addition, the beneficial
ownership by certain affiliates of Parent of 10,900 shares is described on
Schedule II.
As described in more detail below under Section 11, "The Offer and Merger;
Merger Agreement and Related Agreements--Shareholders Agreement," the
Principal Shareholders have agreed, provided that Purchaser is not then in
material breach of the Merger Agreement and an injunction has not been issued
which would prohibit such Principal Shareholders from tendering their
respective Shares, to validly tender (and not to withdraw), pursuant to the
Offer, the Shares beneficially owned by the Principal Shareholders. By virtue
of such agreement, Purchaser, Parent and the persons who control Purchaser
and Parent (who are set forth on Schedules I and II) may be deemed to share,
with each other and with the Principal Shareholders, beneficial ownership of
the 3,317,211 Shares subject to the agreement. Each of Purchaser, Parent and
the persons who control Purchaser and Parent disclaim such beneficial
ownership.
Except as set forth in this Offer to Purchase: (i) none of Purchaser,
Parent or, to the best of their knowledge, any of the persons listed on
Schedules I or II or any subsidiary of the Purchaser or Parent, beneficially
owns or has a right to acquire any Shares; (ii) none of the Purchaser, Parent
or, to the best of their knowledge, any of the persons listed on Schedules I
or II, hereto, has any contract, arrangement, understanding or relationship
with any other persons with respect to any securities of the Company,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies; (iii) none
of the Purchaser, Parent or, to the best of their knowledge, any of the
persons listed on Schedules I or II, since January 1, 1994, has had any
transactions with the Company or any of its executive officers, directors or
affiliates that would require disclosure under the rules and regulations of
the SEC applicable to the Offer; and (iv) since January 1, 1994, there have
been no contacts, negotiations or transactions between Parent or Purchaser,
or their respective subsidiaries or, to the best knowledge of any of Parent
or Purchaser, any of the persons listed on Schedule I or II on the one hand,
and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of
securities, election of directors or a sale or other transfer of a material
amount of assets of the Company.
9. SOURCES AND AMOUNTS OF FUNDS
The total amount of funds required by Purchaser to purchase all currently
outstanding Shares and satisfy its obligations under the Merger Agreement is
expected to be approximately $76.7 million. Purchaser will also require
approximately $6.3 million to pay fees, expenses and other costs expected to
be incurred in connection with the successful completion of the Offer and the
Merger (excluding fees and expenses that may be incurred in connection with
the financing required to complete the Offer and the Merger).
12
<PAGE>
Purchaser plans to obtain all funds needed for the Offer and the Merger
through (i) $66 million of financing to be provided by Credit Suisse First
Boston Mortgage Capital LLC (the "Lender" or "CSFB"); and (ii) approximately
$17,000,000 of funds to be contributed to Parent by its members, including up
to $2,000,000 of funds which may be borrowed by one member of Parent pursuant
to arrangements that have not as yet been determined. All of such funds to be
contributed by Parent and all required amounts to be provided by CSFB will be
made available to Purchaser at the time Shares tendered pursuant to the Offer
are accepted for payment.
The sources and uses of the financing are expected to be as follows:
<TABLE>
<CAPTION>
<S> <C>
Sources of Funds:
Parent member cash.............. $17,000,000
Bank loans ..................... $66,000,000
Total sources of funds........ $83,000,000
Use of Funds:
Payment for Shares.............. $76,696,760
Fees, expenses and other costs 6,303,240
Total use of funds............ $83,000,000
</TABLE>
FINANCING COMMITMENT. Parent has secured a commitment letter (the
"Financing Commitment") from the Lender. The following is a summary of the
Financing Commitment, a copy of which is attached to the Schedule 14D-1 as
Exhibit (b) and is incorporated by reference hereto. All references to and
summaries of the Financing Commitment herein are qualified in their entirety
by reference to the Financing Commitment. The Financing Commitment provides
that the Lender will provide up to $66 million financing (the "Loan") to
Purchaser upon the consummation of the Offer to fund Purchaser's obligation
to purchase the Shares. The Financing Commitment provides that the terms of
the Loan will be as follows:
Purchaser will be the borrower prior to the Merger, and the Surviving
Corporation will be the borrower from and after the Merger (sometimes
referred to as the "Borrower"). The Loan will be guaranteed by all
subsidiaries of the Surviving Corporation, other than those subsidiaries
identified to and approved by the Lender which for regulatory reasons cannot
guarantee the Loan.
Pursuant to the Financing Commitment, the Lender will lend to the Borrower
an amount equal to the lesser of $66 million or 79.5% of the total
acquisition cost of the Offer and the Merger, including expenses and working
capital. The Borrower is required to invest 100% of its equity before the
Lender advances any sums. The Financing Commitment provides that the Loan
will have a term of five years.
The Financing Commitment provides that the Loan will be secured by a first
priority security interest in all of the shares of the common and any
preferred stock of the Surviving Corporation and a first priority security
interest in (or, to the extent subject to a prior security interest, a second
priority interest in) all of the shares of the capital stock or other equity
interests of all of the Surviving Corporation, present and future, direct and
indirect subsidiaries, other than those subsidiaries identified to and
approved by the Lender, the stock or other equity interests of which for
regulatory reasons cannot be pledged to secure the Loan. Stock and equity
interests not pledged will be subject to a negative pledge in favor of the
Lender. The Financing Commitment provides that the Loan will be non-recourse
to the principals of Purchaser, Parent and its members, except for customary
exclusions and exceptions.
The Financing Commitment provides that the interest rate for the loan will
be one month LIBOR on amounts outstanding, plus 350 basis points, payable
monthly in arrears, based on the actual number of days elapsed and a 360 day
year. The Loan shall be prepayable in whole or in part at any time, provided
that any partial prepayments shall be in increments of $1,000,000, exclusive
of mandatory prepayments. Certain mandatory prepayments of the Loan will be
required based on the cash flow of the Surviving Corporation. It is the
present intention of Purchaser that the Loan will be repaid using the cash
flow of the Surviving Corporation.
13
<PAGE>
The closing of the Loan will be conditioned upon, among other things, (i)
the delivery, negotiation and execution of loan documents satisfactory to the
Lender and its counsel, (ii) the Lender's final review and approval of all
documentation relating to the Offer and the Merger and (iii) payment of fees
and expenses as set forth in the Financing Commitment. The Financing
Commitment also provides that the Purchaser and the Surviving Corporation
will be subject to certain covenants and events of default customary for such
financings.
The Financing Commitment provides that after giving effect to the Merger
and the Loan, the Lender shall have a 10% participation in the equity of the
the Surviving Corporation. Lender and the Surviving Corporation shall
negotiate mutually acceptable options whereby (i) the Lender shall have the
right to put its equity participation to the the Surviving Corporation and
(ii) the the Surviving Corporation shall have the right to call Lender's
equity participation.
Pursuant to the Financing Commitment, the Lender will receive a
structuring advisory fee of 2.0% of the Loan amount, $330,000 of which was
paid at signing of the Financing Commitment and is non-refundable, with the
balance payable at the earlier of (i) the closing of the Loan or (ii)
December 31, 1997. In addition, the Financing Commitment provides that the
Lender will receive an exit fee of 1% of the original Loan amount (net of any
exit fees previously paid), payable upon any prepayment (voluntary or
mandatory) or maturity.
Upon execution of the Financing Commitment, the Borrower paid to the
Lender a good faith deposit in the amount of $200,000, which, less the
Lender's due diligence expenses, including, without limitation, fees and
expenses of the Lender's counsel and other consultants, was applied towards
payment of the balance of the structuring advisory fee.
Pursuant to the Financing Commitment, Parent acknowledged on behalf of
itself and on behalf of its affiliates, Purchaser, and the Company, that they
are working solely with the Lender to procure the Loan and agreed not to, and
to cause their affiliates not to, obtain or attempt to arrange any
acquisition financing for the Merger prior to the closing of the Loan. The
Financing Commitment also provides that should any of them or their
affiliates breach or violate the preceding sentence or should the Borrower
fail to execute the loan documents after the Lender has negotiated in good
faith on terms substantially in conformance with the Financing Commitment,
the Lender will be entitled to a break-up fee.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
To the extent any of the following information describes events to which
none of Parent, Purchaser or their advisors were a party, it is based on
information furnished by the Company. Neither Purchaser nor Parent has
independently verified, or assumes responsibility for the accuracy of, any
such information.
During the period through June 1997, the Company provided certain
information regarding the Company to a number of parties who signed
confidentiality agreements with the Company, certain of whom submitted
written indications of interest or proposed letters of intent concerning a
possible significant transaction involving the Company. In January 1997,
certain of the Principal Shareholders signed a letter of intent to sell
approximately 52% of the Company's outstanding Shares at a purchase price of
$12.00 per Share, but such letter of intent expired without agreement upon a
definitive agreement, and none of the discussions or negotiations involving a
significant transaction with the Company resulted in a definitive agreement
for such a transaction.
In July 1997, the Company entered into an agreement and plan of merger
(such agreement as subsequently replaced, the "Frydman Agreement") with
certain entities controlled by Jacob Frydman, providing for cash
consideration to the Company's shareholders of $12.25 per Share. On August
21, 1997, the Company notified Mr. Frydman that it had terminated the Frydman
Agreement as a consequence of his failure to deliver to the Company a
commitment for Mr. Frydman's financing of the transactions contemplated by
the Frydman Agreement reasonably acceptable to the Company and his failure to
deliver a $5,000,000 letter of credit required to be delivered by him. Mr.
Frydman has commenced legal proceedings against the Company arising out of
the termination of the Frydman Agreement; the Company has disclosed that it
believes that its termination of such agreement was proper and intends to
vigorously contest any such proceedings. See Section 18.
14
<PAGE>
On August 21, 1997, the Company publicly announced the termination of the
Frydman Agreement. During the period commencing August 22, 1997, the Company
engaged in discussions and negotiations with a number of parties respecting a
possible significant transaction with the Company. Beginning at the same
time, the Principal Shareholders held discussions with one party respecting
the possible sale of their Shares. On August 27, 1997, members of management
and the Board of Directors held an exploratory meeting with representatives
of affiliates of Purchaser respecting a possible transaction involving the
Company and, on September 11, 1997, affiliates of Purchaser wrote to the
Company confirming its interest in such a transaction.
On September 15, 1997, the Board of Directors of the Company determined to
establish procedures for the possible sale of the Company, including a
request that any party desiring to make a proposal for the acquisition of the
Company present a written proposal to the Board no later than September 19,
1997, specifying the proposed purchase price, confirming such party's
willingness to immediately post a $5 million cash deposit, describing such
party's equity financing and a timetable for confirming such party's debt
financing for the transaction, and, among other things, confirming the
absence of a due diligence or similar condition to closing.
Such procedures were communicated by the Company in a letter dated
September 15, 1997 to a number of parties (including Purchaser) who had
expressed interest in a significant transaction with the Company. On
September 18, 1997, the Company entered into a confidentiality agreement with
Purchaser.
On September 19, 1997, the Company received three proposals from parties
other than Purchaser for the acquisition of all of the Company's outstanding
Shares at prices ranging from $12.00 to $12.50 per Share. On September 23,
1997, the Company engaged the Company's Financial Advisor as its financial
advisor in connection with the possible sale of all or a portion of the
Company. Also on September 23, 1997, affiliates of Purchaser wrote to the
Principal Shareholders expressing their interest in acquiring the Shares held
by the Principal Shareholders at price of $12.10 per Share. On or about
September 24, 1997, the Principal Shareholders informed affiliates of
Purchaser that they were not interested in pursuing a transaction with
Purchaser for less than all of the Company's outstanding Shares.
On September 25, 1997, counsel to the Company wrote to affiliates of
Purchaser and to the three parties which had provided the acquisition
proposals described above, inviting such parties to submit to the Company's
counsel and financial advisors by September 29, 1997 a binding proposal for
the acquisition of all of the Company's Shares accompanied by a mark-up of an
Agreement and Plan of Merger enclosed with such letter which such party would
be willing to sign and a refundable $5 million cash deposit. By October 1,
1997, the Company's counsel and financial advisors had received three
responses to such letter, each accompanied by the $5 million refundable
deposit, two of which proposed a purchase price of $12.25 or $12.30 per Share
and one of which, submitted by Purchaser on September 29, 1997, proposed a
purchase price of $11.00 per Share. On September 30, 1997, the Company
informed Purchaser that it would not consider an offer at $11.00 per Share
and Purchaser replaced its response with one offering $12.50 per Share, which
was subsequently reduced to $12.25 per Share.
On October 1, 1997, a special meeting of the Company's Board of Directors
was held at which the status of various proposals for the purchase of the
Company and related matters were reviewed by the Board, and the Company's
financial advisors were instructed to inform potential purchasers of the
Company that all issues pertaining to the acquisition and definitive
acquisition agreements were required to be resolved by October 8, 1997.
Various meetings and telephone conferences were held between October 1,
1997 and October 9, 1997 between members of management and the Board of
Directions of the Company and Purchaser, as well as among the respective
counsel and advisors of the parties in connection with the negotiation of a
definitive Agreement and Plan of Merger. Simultaneous negotiations took place
between the Company and two other potential bidders for the Company.
At a special meeting of the Company's Board of Directors held on October
9, 1997, the Board reviewed the three proposals which had been made to the
Company and, after consideration of such proposals with the Company's
financial advisors and counsel, authorized management to enter into an
15
<PAGE>
agreement with Purchaser whereby neither party would be bound to enter into a
definitive merger agreement with the other party but under which the Company
agreed to negotiate with Purchaser on an exclusive basis through noon on
October 13, 1997 to finalize the terms of the definitive Merger Agreement.
On October 14, 1997, the Board of Directors of the Company held a special
meeting to discuss the sale of the Company. After consideration of the
various bids and upon conclusion of the presentation of the Company's
Financial Advisor regarding the Offer and the Merger, the Board approved the
terms of the Merger Agreement and resolved to recommend that the holders of
the Shares accept the Offer and approve and adopt the Merger Agreement and
the Merger.
11. THE OFFER AND MERGER; MERGER AGREEMENT AND RELATED AGREEMENTS
The following is a summary of the Merger Agreement and certain related
agreements, copies of which are attached to the Schedule 14D-1 as Exhibits
(c)(1) through (c)(7), respectively, and are incorporated by reference
hereto. All references to and summaries of such agreements herein are
qualified in their entirety by reference to the full text of such agreements.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Merger Agreement.
MERGER AGREEMENT
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five
business days after the public announcement of the execution of the Merger
Agreement, subject to the other provisions of the Merger Agreement. The
obligation of Purchaser to consummate the Offer and accept for payment, and
pay for, Shares tendered pursuant to the Offer is subject to (i) satisfaction
of the Minimum Tender Condition, (ii) expiration or termination of all
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") applicable to the purchase of Shares
pursuant to the Offer if filings under the HSR Act are deemed to be
necessary, (iii) the consents of HUD and The Chase Manhattan Bank, and (iv)
the satisfaction and waiver of the other Conditions. Subject to the terms of
the Merger Agreement, Purchaser expressly reserves the right to modify the
terms and conditions of the Offer, except that, without the consent of the
Company, Purchaser shall not (i) reduce the number of Shares subject to the
Offer, (ii) reduce the price per Share to be paid pursuant to the Offer,
(iii) modify or add to the Conditions, (iv) except as described below, extend
the Offer, (v) change the form of consideration payable in the Offer, or (vi)
make any other change in the terms of the Offer adverse to the holders of
Shares. Purchaser may extend the Offer in accordance with applicable law, but
if the Conditions set forth in Section 15 are satisfied as of the then
scheduled Expiration Date of the Offer, the Offer may be extended only with
the prior written consent of the Company or as required by law. If the
Conditions set forth in Section 15 are not satisfied or waived by the
Expiration Date, Purchaser shall extend the Offer from time to time until the
earlier of the consummation of the Offer or December 31, 1997 (provided that
Purchaser shall not be obligated to make any such extension, if a reasonable,
well-informed person would conclude that any such condition is incapable of
being satisfied by December 31, 1997). Any individual extension of the Offer
shall be for a period of no more than 10 business days. Upon the terms of the
Merger Agreement and subject to the Conditions, Purchaser shall pay for all
Shares validly tendered and not withdrawn pursuant to the Offer after the
expiration of the Offer.
CONDITIONS TO THE OFFER. The Merger Agreement provides that,
notwithstanding any other term of the Offer or the Merger Agreement, and
subject to the Conditions set forth in Section 15, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer, unless (i) there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares which, when added to any other Shares owned by Purchaser or its
affiliates, shall equal at least two-thirds of the number of Shares
outstanding on a fully-diluted basis immediately after the termination of the
Offer (the "Minimum Tender Condition"), (ii) all waiting periods under the
HSR Act applicable to the purchase of Shares pursuant to the Offer shall
16
<PAGE>
have expired or have been terminated if filings under the HSR Act are deemed
to be necessary, and (iii) the consents of HUD and The Chase Manhattan Bank.
THE MERGER. The Merger Agreement provides that, following consummation of
the Offer, subject to the approval and adoption of the Merger Agreement and
the Merger by the affirmative vote of the holders of two-thirds of the
outstanding shares of Common Stock entitled to vote thereon (if then required
by the BCL), approval by certain regulatory authorities and compliance with
certain other covenants and conditions, Purchaser will be merged with and
into the Company, at which time the separate corporate existence of Purchaser
will cease and the Company will continue as the "Surviving Corporation".
Following consummation of the Merger, the Company, as the Surviving
Corporation, will be a wholly-owned subsidiary of Parent. Hereinafter, the
date on which the Closing of the Merger shall take place is referred to as
the "Closing Date" and the time on the Closing Date when the Closing shall
take place is referred to as the Closing Time. The Merger shall become
effective at such time as a duly prepared and executed certificate of merger
(the "Certificate of Merger"), in form and substance reasonably satisfactory
to Purchaser and Company, providing for the Merger, is filed by the Secretary
of State of the State of New York in accordance with the relevant provisions
of the BCL (the "Effective Time"). The Company and Purchaser have agreed to
use their respective best efforts to cause the Merger to be consummated at
the earliest practicable time after consummation of the Offer, and the
Certificate of Merger shall be filed as soon as practicable after the closing
of the Merger.
CONVERSION OF SHARES. Pursuant to the Merger Agreement, at the Effective
Time, the Shares, immediately prior to the Effective Time (other than the
Dissenting Shares) shall, by reason of the Merger and without any action by
the holders thereof, be converted into the right to receive $12.25 per share
in cash (the "Merger Consideration"), without interest. Each Share which is
held in the treasury of the Company immediately prior to the Effective Time
and any Shares owned by Parent or Purchaser shall, by virtue of the Merger,
cease to be outstanding and shall be canceled and retired without payment of
any consideration therefor. At the Effective Time, the stock transfer books
of the Company shall be closed, and no transfer of Shares shall thereafter be
made. All such Shares, when converted as provided herein, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously evidencing such Shares shall
thereafter represent only the right to receive the Merger Consideration.
Notwithstanding the above, any Dissenting Shares will not be converted
into the right to receive, or be exchangeable for, the Merger Consideration,
but instead such shareholders will be entitled only to the rights granted by
provisions of the BCL, including Sections 623 and 910, which entitles
dissenting shareholders to receive a judicial determination of the fair value
of the Shares and to receive payment of such fair value in cash, together
with a fair rate of interest, if any. Such judicially determined fair value
could be more or less than the price per Share paid in the Merger. See
Sections 5 and 16.
Each share of the capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into one fully
paid and nonassessable share of common stock, par value $1.00 per share, of
the Surviving Corporation.
DIRECTORS AND OFFICERS; GOVERNING DOCUMENTS. At the Effective Time, the
directors and officers of Purchaser immediately prior to the Effective Time,
will become the directors and officers of Surviving Corporation until the
earlier of their death, resignation or removal, in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws or until
their respective successors are duly elected or appointed and qualified, as
the case may be. The Certificate of Incorporation and Bylaws of the Company
at the Effective Time will become the Certificate of Incorporation and
Bylaws, respectively, of the Surviving Corporation after the Effective Time;
provided that such Certificate of Incorporation and Bylaws of the Company may
be amended, subject to the provisions in "--Indemnification and Insurance"
below and in accordance with the BCL, in such manner as Purchaser may, in its
sole discretion, determine.
SHAREHOLDERS' APPROVAL. Pursuant to the Merger Agreement, if required by
applicable laws, the Company, acting through the Board, shall, in accordance
with applicable laws and the Company's Certificate of Incorporation, as
amended, its Bylaws and the requirements of the AMEX, duly call, give notice
of and convene and hold a special meeting of its shareholders as soon as
practicable following
17
<PAGE>
expiration of the Offer for the purpose of considering and approving the
Merger, the Merger Agreement and the transactions contemplated thereby (the
"Shareholders' Meeting"). The Company's Board of Directors will, subject to
its good faith and fiduciary obligations to the Company's shareholders,
recommend that the Company's shareholders vote in favor of the Merger, the
Merger Agreement and the transactions contemplated thereby and cause the
Company to take all lawful actions to solicit from the Company's shareholders
proxies in favor of such approval. Notwithstanding the foregoing sentence, if
Parent and Purchaser shall collectively own, following consummation of the
Offer, at least 90% of the outstanding Shares, each of Parent, Purchaser and
the Company shall take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after expiration of the
Offer (but in no event later than ten (10) business days thereafter) without
a meeting of the shareholders of the Company, in accordance with the
"short-form" merger provisions of Section 905 of the BCL. If Parent and
Purchaser shall not collectively own, following consummation of the Offer, at
least 90% of the outstanding shares, the Company shall prepare (and the
Purchaser will assist, where reasonable and appropriate), a proxy statement
relating to the Shareholders' Meeting (the "Proxy Statement") and a form of
proxy for use at the Shareholders' Meeting relating to the vote of the
shareholders with respect to the Merger, the Merger Agreement and the
transactions contemplated thereby. The Company will mail such Proxy Statement
to the Company's shareholders at the earliest practicable date following
consummation of the Offer. The Purchaser will furnish the Company with such
information as may be reasonably requested by the Company for inclusion in
the Proxy Statement as required by law or by the Commission. Purchaser agrees
to cause all Shares purchased pursuant to the Offer and all other Shares
owned by Purchaser or Parent to be voted in favor of approval and adoption of
the Merger, the Merger Agreement and all transactions contemplated thereby.
DESIGNATION OF DIRECTORS. The Merger Agreement provides that, if Purchaser
acquires at least two-thirds of the Shares outstanding pursuant to the Offer,
Parent shall be entitled to designate up to such number of directors, rounded
up to the next whole number, of the Board so that the designees of Parent
constitute the same percentage of the Board (but in no event less than a
majority) as the percentage of Shares acquired pursuant to the Offer, and the
Company shall increase the size of the Board or obtain the resignations of
incumbent directors as is necessary to enable such number of Parent designees
to be elected. The Merger Agreement also provides that, at all times prior to
the Effective Time, at least two of the members of the Board shall be
Independent Directors (as defined below). Successor Independent Directors
will be designated either by any remaining Independent Directors, or by the
other directors, if no Independent Director remains. Subject to applicable
law, the Company will take all action requested by Purchaser necessary to
effect any election of such designee or Independent Director, including
mailing to its shareholders an Information Statement in accordance with
Section 14(f) of the Exchange Act and Rule 14f-1. Following the election or
appointment of Parent's designees pursuant to the foregoing and prior to the
Effective Time, if requested by a majority of the Independent Directors, such
designees shall abstain from acting upon, and the approval of a majority of
the Independent Directors shall be required, and shall be sufficient, to
authorize any resolution with respect to the termination of the Merger
Agreement by the Company, any amendment of the Merger Agreement requiring
action by the Board of the Company, any extension of time for the performance
of any of the obligations or other acts of Parent or Purchaser under the
Merger Agreement and any waiver of compliance by Purchaser with any provision
under the Merger Agreement for the benefit of the Company or its
shareholders. Under the Merger Agreement, "Independent Director" means any
member of the Board of the Company as of the date of the Merger Agreement or
who is otherwise not an officer, director or affiliate of Purchaser and who
is an independent director under the rules of the AMEX.
ACCESS TO INFORMATION. The Company has agreed to (and to cause each of its
Subsidiaries to) afford, upon reasonable notice, the directors, officers,
employees, lenders, accountants, counsel and other representatives of Parent
and Purchaser, including potential financing sources and their employees,
accountants, counsel and other representatives (collectively, the
"Representatives"), access, during normal business hours during the period
prior to the Closing Date, to all of its properties, accounts, books,
contracts, commitments, tax returns and records as Purchaser shall reasonably
request. The Company and Purchaser have agreed that the Representatives will
be permitted to discuss the business affairs, finances and accounts of the
Company and the Subsidiaries with the officers, directors, executives,
counsel, auditors and actuaries of the Company and its Subsidiaries.
18
<PAGE>
NO SOLICITATION. Pursuant to the Merger Agreement, the Company has agreed
that, prior to the date on which designees of Purchaser constitute a majority
of the directors of the Company, (a) neither the Company nor any of its
Subsidiaries shall, nor shall it or any of its Subsidiaries permit their
respective officers, directors, executive employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of the Subsidiaries) to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) with respect to a
merger, consolidation or other business combination, sale of a material
amount of assets outside the ordinary course of business or the issuance of
Voting Debt or Options (each as defined below), sale of shares of capital
stock outside of the ordinary course of business or similar transaction
involving the Company or any of the Subsidiaries (any such transaction being
hereinafter referred to as an "Acquisition Transaction") or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Acquisition
Transaction (excluding the Offer and the Merger contemplated by the Merger
Agreement and excluding any matters related to interim operations of the
Company permitted in the Merger Agreement), or otherwise facilitate any
effort or attempt to make or implement an Acquisition Transaction; and (b)
that it will notify Purchaser promptly with all relevant details if any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, it, and if said inquiry or proposal is in writing it will
deliver to Purchaser a copy of such inquiry or proposal as promptly as is
practicable. However, nothing in the Merger Agreement shall prohibit the
Board of Directors or officers of the Company from furnishing information to,
or entering into discussions or negotiations with, any person or entity that
makes an unsolicited bona fide proposal relating to an Acquisition
Transaction, if, and only to the extent that, (A) the Board of Directors of
the Company, based upon advice of outside counsel, determines in good faith
that such action is required for the Board of Directors to comply with its
fiduciary duties to shareholders under applicable law, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, the Company provides written notice to Purchaser
to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity, which notice shall
(to the extent consistent with the fiduciary duties of the Board of Directors
to shareholders under applicable law) include the identity of the person or
entity engaging in such discussions or negotiations, requesting such
information or making such proposal, and the material terms and conditions of
any proposed Acquisition Transaction, and (C) the Company keeps Purchaser
reasonably informed of the status and all material information with respect
to any such discussions or negotiations. Under the Merger Agreement, the
Company agreed that it would immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted by the Company or any employee, agent
or representative of any kind with respect to any Acquisition Proposal
existing on the date of the Merger Agreement. "Voting Debt" is defined as
bonds, debentures, notes or other indebtedness of the Company or any of the
Subsidiaries which has the right to vote (or which is convertible into or
exchangeable for other securities having the right to vote) on any matters on
which shareholders of the Company may vote. "Options" are defined as
subscriptions, warrants, options, contracts, rights (preemptive or
otherwise), calls, commitments or demands of any character relating to any
authorized and issued or unissued shares of capital stock of the Company or
any of the Subsidiaries, including, without limitation, Shares, or
outstanding securities, obligations, rights, Voting Debt or other instruments
convertible into or exchangeable for such stock, or which obligate the
Company to seek authorization to issue additional shares of any class of
stock or Voting Debt.
INDEMNIFICATION AND INSURANCE. Pursuant to the Merger Agreement, the
Company shall, to the fullest extent permitted under applicable law and
regardless of whether the Merger becomes effective, indemnify and hold
harmless, and after the Effective Time, the Surviving Corporation shall, to
the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer and fiduciary of the
Company or any of the Subsidiaries (collectively, the "Indemnified Parties")
against any fees, costs or expenses (including reasonable attorneys' fees)
and judgments, fines, losses, damages, liabilities and amounts paid in
settlement (collectively, "Losses"), in connection with any pending,
threatened or completed claim, action, suit, proceeding or investigation
arising out of any actions
19
<PAGE>
or omissions occurring at or prior to the Effective Time that are in whole or
in part based on or arising out of the fact that such person is or was a
director, officer or fiduciary of the Company or pertaining to any of the
transactions contemplated by the Merger Agreement. In addition, Purchaser
agreed that all rights to indemnification existing as of the date hereof in
favor of the present or former directors, officers, employees, fiduciaries
and agents of the Company or any of the Subsidiaries, as provided in the
Company's certificate of incorporation or by-laws or pursuant to other
agreements, arrangements or the certificate of incorporation, by-laws or
similar documents of any of the Subsidiaries as in effect on the date of the
Merger Agreement, with respect to matters occurring prior to the Effective
Time shall survive the Merger and shall continue in full force and effect
pursuant to the terms thereof.
The Merger Agreement provides that the Surviving Corporation shall cause
to be maintained in effect for not less than six years from the Effective
Time the policies of directors' and officers' liability insurance and the
Company employed lawyers liability insurance maintained by the Company and
its Subsidiaries, each as in effect on the date of the Merger Agreement
(provided that they may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous),
with respect to matters occurring prior to the Effective Time.
FURTHER ACTION, REASONABLE EFFORTS. In the Merger Agreement and subject to
the terms and conditions thereof, the Company and Purchaser have agreed to
use all reasonable efforts to effectuate the transactions contemplated by,
and fulfill the conditions and obligations of each of the Company and
Purchaser under the Merger Agreement, subject, as applicable, to the
fiduciary duties of the Board of Directors of the Company, including
cooperating fully with the other party, including by providing information
and making all necessary filings in connection with, among other things,
approvals by HUD. The Company will use all reasonable efforts to obtain any
consent from third parties necessary to allow the Company and its
Subsidiaries to continue operating their business as presently conducted as a
result of consummation of the transactions contemplated by the Merger
Agreement. In case at any time after the Effective Time, any further action
is necessary or desirable to carry out the purposes of the Merger Agreement
or to vest the Surviving Corporation with full title to all properties,
assets, rights, approval, immunities and franchises of either the Company or
Purchaser, the proper officers and directors of each of the Company and
Purchaser shall take all such necessary action.
The Company and Purchaser have agreed to give the other party prompt
written notice of (a) the failure of such party to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with
or satisfied by it under the Merger Agreement and (b) in the case of the
Company, the occurrence of any threat by any executive officer or senior
management employee of the Company or any of its Major Subsidiaries (as
defined below) to resign or otherwise terminate their employment relationship
with the Company or any of its Major Subsidiaries.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has agreed that, prior to the date on which a majority of the
Company's directors are designees of Purchaser, unless Purchaser has
consented in writing thereto (which consent shall not be unreasonably
withheld), the Company:
(a) shall, and shall cause its Subsidiaries Grenadier Realty Corporation,
HRH Construction Corporation, Levitt Corporation, or Levitt Homes Puerto
Rico, Incorporated (collectively, the "Major Subsidiaries") to, conduct
their operations in all material respects according to their usual,
regular and ordinary course in substantially the same manner as heretofore
conducted;
(b) shall use its reasonable efforts, and shall cause its Subsidiaries,
other than inactive Subsidiaries, to use its reasonable efforts, to
preserve intact its business organization and goodwill, keep available the
services of its officers and employees and maintain satisfactory
relationships with those persons having business relationships with it
(Purchaser agreeing to reasonably cooperate with the Company in such
efforts);
(c) shall promptly deliver to Purchaser true and correct copies of any
report, statement or schedule filed with the SEC or any other state or
federal Governmental Authority in connection with this Agreement and the
transactions contemplated hereby (as used herein, the term "Governmental
Authority" means any court, administrative agency or commission or other
governmental or regulatory authority, domestic or foreign);
20
<PAGE>
(d) shall not, and shall not permit any of the Subsidiaries to, amend its
Certificate of Incorporation or By-laws;
(e) shall not, and shall cause each of the Subsidiaries to not, (w)
issue, transfer, deliver or sell any shares of its capital stock, effect
any stock split or otherwise change its capitalization as it existed on
the date hereof, (x) grant, confer or award any Option, Voting Debt,
conversion right or other right not existing on the date hereof to acquire
any share of its capital stock, or amend the terms of or reprice any
outstanding option, warrant, or conversion right, or grant, confer or
award any bonuses or other forms of cash incentives to any officer,
director or employee except consistent with past practice, (y) increase
any compensation under any employment agreement with any of its present or
future officers, directors or employees, except for normal increases
consistent with past practice, grant any severance or termination pay to,
or, except as permitted by Purchaser, enter into any employment or
severance agreement with, or extend any loan or advance to any officer,
director or employee or amend any such agreement in any material respect
other than severance arrangements which are consistent with past practice
with respect to employees terminated by the Company, or (z) adopt any new
employee benefit plan (including without limitation, any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, any
stock option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan (other than a multiemployer plan) in any material
respect, without Purchaser's written consent, not to be unreasonably
withheld;
(f) shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or other ownership interests other than the regular quarterly cash
dividend of $0.0625 per share payable to shareholders of record at
September 30, 1997, or (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of any
of the Subsidiaries, or make any commitment for any such action;
(g) shall not, and shall not permit any of the Subsidiaries to, acquire,
sell, lease, encumber or otherwise dispose of any assets for its own
account (including, without limitation, capital stock of or other equity
interests in Subsidiaries or other entities) in the aggregate for an
amount exceeding $250,000 except in the ordinary course of business or as
set forth in the schedules to the Merger Agreement;
(h) shall not, and shall not permit any of the Subsidiaries to, incur or
assume any indebtedness for borrowed money, except in the ordinary course
of business consistent with past practice or as set forth in the schedules
to the Merger Agreement, or guarantee any such indebtedness or make any
loans, advances or capital contributions to, or investments in, any other
person other than a wholly-owned Subsidiary, except in compliance with any
partnership agreement or joint venture agreement, to which the Company or
a Subsidiary is a party, or otherwise or sell any debt securities, in the
aggregate exceeding $250,000;
(i) shall not, nor shall it permit any of its Subsidiaries to, (i) merge
or consolidate with, or acquire any equity interest in, any corporation,
partnership, association or other business organization, or enter into an
agreement with respect thereto, or (ii) acquire or agree to acquire any
assets of any corporation, partnership, association or other business
organization or division thereof, except for the purchase of inventory and
supplies in the ordinary course of business;
(j) shall not authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the
Company or any of its Subsidiaries;
(k) shall not, nor shall the Company permit any of its Subsidiaries to,
(A) enter into any contracts involving in any individual case, aggregate
annual payments by the Company or any of its subsidiaries in each case for
its own account in excess of $250,000, or (B) modify, rescind, terminate,
waive, release or otherwise amend in any material respect any of the terms
or provisions of any material contract in any manner that is material and
adverse to the Company or the respective Subsidiary of the Company party
thereto;
(l) shall not settle or compromise any claim for appraisal rights in
respect of the Merger without the prior written consent of Purchaser;
21
<PAGE>
(m) shall not, and shall not permit any of the Subsidiaries to, authorize
or make capital expenditures in excess of $250,000 in the aggregate,
except for, (l) in the case of Levitt, the purchase and development of
land described in the schedules to the Merger Agreement in the ordinary
course of business, and (2) capital expenditures in an aggregate amount
not exceeding $2,000,000 in connection with moving the Company's corporate
offices;
(n) shall not and shall not permit any of the Subsidiaries to, mortgage
or otherwise encumber or subject to any Lien any properties or assets
except as would not materially adversely affect the business of the
Company or any Major Subsidiary;
(o) shall not make any material change to its accounting (including tax
accounting) methods, principles or practices, except as may be required by
generally accepted accounting principles or by applicable tax laws; and
(p) shall not, and shall not permit any of the Subsidiaries to, do or
agree to do any of the foregoing set forth in clauses (d), (e), (f), (g),
(h), (i), (j), (k), (l), (m), (n) and (o).
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
representations and warranties of the Company regarding: the due
organization, good standing, qualification and authority to conduct business
and own, lease and operate its properties for each of the Company and its
Subsidiaries; the capitalization of the Company and its Subsidiaries; the
authority of the Company to enter into the Merger Agreement and the other
documents contemplated thereby (collectively, the "Transaction Documents")
and to consummate the transactions contemplated thereby, subject to the
Company Shareholder Approval; the absence of conflict between transactions
contemplated by the Transaction Documents and other agreements, documents and
permits and absence of violations of the Certificate of Incorporation or
Bylaws of the Company or its Subsidiaries; the absence of violations of laws
applicable to the Company; the need for consents and approvals; the accuracy,
truthfulness and adequacy of documents filed with or sent to the SEC or any
other regulatory authority; the holding of good title by the Company and its
Subsidiaries to tangible property and assets; the ownership of property in
fee and the holding of leasehold interests, by the Company and its
Subsidiaries free and clear of all mortgages, pledges, liens, encumbrances
and security interests; compliance with all applicable laws, rules, orders
and regulations; the absence of litigation; certain matters relating to
taxes; insurance coverage; the disclosure of material contracts to which the
Company or any Subsidiary are parties or by which the Company or any
Subsidiary are bound; the full disclosure by the Company of certain
management, employment, consulting or other agreements, contracts or
commitments; the intellectual property and proprietary rights held by the
Company and its Subsidiaries; certain matters relating to ERISA; the conduct
of business in the ordinary course and the absence of certain changes or
events since June 30, 1997; any finder's fees in connection with the Merger
Agreement or the transactions contemplated thereby; the absence of
application of Section 912 of the BCL; certain environmental matters; the
absence of undisclosed material liabilities; the Company's receipt of the
opinion of Goldman Sachs & Co. as to the fairness, from a financial point of
view, of the cash consideration to be received by the shareholders of the
Company in the Offer and the Merger; the shareholder vote required to approve
the Merger Agreement and the Merger; compliance with applicable employment
laws and indemnification of employees; labor matters; the condition of the
tangible property of the Company and its Subsidiaries; the recommendation by
the Board of Directors of the Company of the Merger Agreement, the Offer and
the Merger; the disclosure of certain related party transactions; and the
compliance of the Schedule 14D-9 and the information supplied by the Company
for inclusion in the Transaction Documents or the Schedule 14D-1, and any
amendments thereof or supplements thereto, in all material respects with the
Exchange Act.
The Merger Agreement also includes representations and warranties by
Purchaser regarding: the due organization, good standing and authority to
conduct business and own, lease and operate its properties; the authority of
Purchaser to enter into the Merger Agreement and the other Transaction
Documents to which it is a party; the absence of conflict with other
agreements and documents and the absence of violations of laws applicable to
Purchaser; consents and approvals; the absence of a finder's fee in
connection with the Merger Agreement or the transactions contemplated
thereby; the absence of litigation; absence of disqualifications or sanctions
by the United State Department of Housing and Urban Development or any other
government agency; and the receipt by Purchaser of certain financing
commitments for the Merger.
22
<PAGE>
The Company and the Purchaser have each agreed to not knowingly take any
action or knowingly permit any Subsidiary to take any action which if had
been taken prior to the execution of the Merger Agreement, would have caused
or constituted a material breach of any of the representations and warranties
set forth in the Merger Agreement and summarized above in this Section 11.
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligations of each party to the Merger Agreement to effect the Merger are
subject to the satisfaction or waiver of the following conditions prior to
the Closing Time: (i) no order, decree or judgment has been issued by a
court, agency or other authority to set aside, restrain, enjoin or prevent
the performance of the Merger or any of the transactions contemplated by the
Merger Agreement, and no statute, rule, regulation, executive order, decree
or injunction shall have after the execution of the Merger Agreement been
enacted, entered, promulgated or enforced by any United States court or
governmental authority of competent jurisdiction which prohibits the
consummation of the Merger, provided that Purchaser shall have used its
commercially reasonable best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as reasonably possible
any injunction or other order that may be entered, (ii) the Merger, the
Merger Agreement and the transactions contemplated thereby shall have been
approved in a manner required by applicable law and by the applicable
regulations of the AMEX, provided that Purchaser and its affiliates shall
have voted all Shares owned by them in favor of the Merger Agreement and that
each of Purchaser and the Company shall have used its commercially reasonable
efforts to cause such approval to be obtained, and (iii) Purchaser shall have
accepted for purchase and paid for Shares tendered pursuant to the Offer,
provided that this condition will be deemed satisfied if Purchaser shall have
failed to purchase Shares pursuant to the Offer in violation of the terms of
the Offer or the Merger Agreement.
ESCROW DEPOSIT. Simultaneously with the execution and delivery of the
Merger Agreement, Purchaser deposited the cash sum of $5 million (the "$5
Million Deposit") under an Escrow Agreement among Purchaser, the Company and
the escrow agent thereunder. Pursuant to such Escrow Agreement and the Merger
Agreement, the $5 Million Deposit shall be paid as prescribed under the
provisions described below under "--Termination Fees and Expenses."
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented
in connection with the Merger by the shareholders of the Company or by
Purchaser, subject, in the case of the Company, to the Merger Agreement
provisions described regarding abstention from voting by Parent's designees
with regard to certain matters above under "--Designation of Directors":
(a) by the mutual consent of Purchaser and the Company;
(b) by Purchaser, if prior to the consummation of the Offer, (i) the
Board of Directors of the Company fails to make, or withdraws or
materially modifies or changes in a manner adverse to Purchaser its
recommendation to the Company's shareholders to accept the Offer, the
Merger or the Merger Agreement and the transactions contemplated thereby,
or resolves to do the foregoing or (ii) the Board of Directors of the
Company shall have recommended that the Company's shareholders accept or
approve an Acquisition Transaction with a person other than Purchaser, or
resolves to do the foregoing or (iii) a tender or exchange offer for any
of the outstanding shares of capital stock of the Company is commenced
(other than by Purchaser or its affiliates) and the Board of Directors of
the Company fails to timely recommend against the Company's shareholders'
rendering their shares into such tender or exchange offer;
(c) by the Company, if in the exercise of its judgment as to its
fiduciary duties to its shareholders, after consultation with outside
counsel, the Board of Directors of the Company determines that such
termination is required by reason of a proposal relating to an Acquisition
Transaction being made;
(d) by the Company, if the Offer shall not have been consummated on or
before November 20, 1997 or such later expiration date for the Offer as
may be expressly permitted under the Merger Agreement (provided that the
conditions to consummation of the Offer have been satisfied on such date);
23
<PAGE>
(e) by the Company, if there has been a violation or breach by Purchaser
of any representation, warranty or agreement contained in this Agreement
specifically qualified by materiality, or a material violation or breach
by Purchaser of any material representation, warranty or agreement not so
qualified contained in the Merger Agreement (which breach is not cured by
Purchaser within 30 days after written notice by the Company to Purchaser
reasonably describing such breach);
(f) by Purchaser prior to consummation of the Offer, if there has been a
violation or breach by the Company of any representation, warranty or
agreement contained in the Merger Agreement as though such
representations, warranties and agreements were made without reference to
a Starrett Material Adverse Effect (which violation or breach is not cured
by the Company within 30 days after written notice by Purchaser to the
Company reasonably describing such breach), except in all cases where the
failure or failures of such representations and warranties to be so true
and correct or such agreements to be performed or complied with would not
have, singly or in the aggregate, a Starrett Material Adverse Effect;
(g) by Purchaser or the Company, if the Offer shall not have been
consummated on or before December 31, 1997, or if prior to such day a
reasonable, well-informed person would conclude that any Condition shall
be incapable of being satisfied by such date (except that a party whose
breach of covenant has caused such failure to consummate shall not be
entitled to so terminate this Agreement), or the Merger has not been
consummated by October 16, 1998; or
(h) by the Company if the Company is not in material breach of this
Agreement and if the Offer has not been timely commenced in accordance
with the Merger Agreement.
TERMINATION FEES AND EXPENSES. The Merger Agreement provides that all
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses, except (i) as otherwise described below, and (ii) with respect to
costs of obtaining certain governmental approvals.
The Merger Agreement provides that if the Merger Agreement is terminated
by the Company pursuant to the provisions described in clause (d) above,
clause (e) above, clause (g) above (as a result of a breach of the Merger
Agreement by Purchaser), or clause (h) above, the $5 Million Deposit shall be
forthwith paid to the Company as liquidated damages, which remedy shall
represent the only damages that may be sought by the Company or any Company
shareholder under the Merger Agreement in the event of a termination of the
Merger Agreement as aforesaid or any violation or breach of the Merger
Agreement which gave rise thereto. The Merger Agreement provides that if it
is terminated for any reason other than the provisions referenced in this
paragraph, the $5 Million Deposit shall be returned to Purchaser and no party
shall have any further liability under the Merger Agreement.
If the Merger Agreement is terminated prior to consummation of the Offer
pursuant to the provisions described in clause (b) above, clause (c) above,
or (as a result of the willful breach of covenant or agreement under the
Merger Agreement by the Company, which breach is not cured by the Company
within 30 days after written notice by Purchaser to the Company reasonably
describing such breach) clause (f) above or clause (g) above, the Company
shall pay to Purchaser a fee (the "Fee") equal to $2,500,000 and shall
reimburse Purchaser for its reasonable out-of-pocket expenses up to a maximum
amount of $500,000 incurred in connection with the transactions contemplated
by the Merger Agreement, the payment of such Fee to be made simultaneously
with the termination of the Merger Agreement and the reimbursement of such
expenses to be made promptly upon presentation of invoices therefor.
Moreover, if the Merger Agreement is terminated prior to consummation of the
Offer pursuant to the provisions described in clause (f) above (as a result
of the non-willful breach of representation, warranty, covenant or agreement
under the Merger Agreement by the Company, which breach is not cured by the
Company within 30 days after written notice by Purchaser or Parent to the
Company reasonably describing such breach), the Company shall reimburse
Purchaser for its reasonable out-of-pocket expenses, up to a maximum amount
of $1,000,000, incurred in connection with the transactions contemplated by
the Merger Agreement, the reimbursement of such expenses to be made promptly
upon presentation of invoices therefor. Such expense reimbursement shall
represent liquidated damages and the only damages that may be sought by
Purchaser in the event of a termination of the Merger Agreement
24
<PAGE>
as aforesaid or of any violation or breach of the Merger Agreement which gave
rise thereto. In addition, if a More Favorable Transaction (as such term is
defined below) is consummated within one year after the effective date of the
termination of the Merger Agreement as described in this paragraph prior to
consummation of the Offer, the Fee shall be increased to an amount equal to
the excess, if any, of (A) the (i) the aggregate value of the consideration
received by the shareholders of the Company in the More Favorable Transaction
minus the amount of the Original Consideration (as such term is defined
below), multiplied by (ii) 25%, over (B) $2,500,000. The Fee shall represent
liquidated damages and the only damages that may be sought by Purchaser in
the event of a termination of the Merger Agreement as aforesaid or any
violation or breach of the Merger Agreement which gave rise thereto. As used
herein, (i) a "More Favorable Transaction" shall mean any Acquisition
Transaction under which the Company and/or the holders of more than 50% of
the Shares receive consideration equal to a value in excess of $12.25 per
Share and (ii) the "Original Consideration" shall mean the product of $12.25
multiplied by the number of Shares sold or otherwise disposed of by
shareholders of the Company in the More Favorable Transaction and for which
the shareholders of the Company receive consideration in such More Favorable
Transaction.
CONFIDENTIALITY. The Merger Agreement provides that any corporate
information, records, documents, descriptions or other disclosures of
whatsoever nature or kind made or disclosed by either of the parties to the
other party, or to the authorized representatives thereof, or learned or
discovered by such other party or by any representatives thereof in
connection with the transactions contemplated by the Merger Agreement
(whether prior to or after the date of the execution of the Merger Agreement)
and not known by or available to the public at large shall be received in
confidence and neither of the parties nor any such authorized representative
shall disclose or make use of such information or authorize anyone else to
disclose or make use thereof without the written consent of the other party
hereto, except (a) as necessary to consummate the transactions contemplated
hereby or (b) as compelled by judicial or administrative process or by other
requirements of applicable law including any disclosure under federal
securities laws; provided, however, that in the case of any disclosure
contemplated pursuant to this clause (b), the party seeking to disclose such
information shall give the other party reasonable prior written notice
thereof in order to afford such other party reasonable opportunity to seek a
protective order or other limitation under such disclosure.
AMENDMENT TO MERGER AGREEMENT; GOVERNING LAW. The Company and Purchaser
have agreed that the Merger Agreement may be amended in writing by them at
any time before or after shareholder approval of the Merger and related
transactions (as discussed above in "--Shareholders' Approval"), subject in
the case of approval by the Company to the designation of directors (see
"--Designation of Directors"), but, after any such shareholder approval, no
amendment may be made which by law requires further shareholder approval.
The Merger Agreement and any other agreement entered into in connection
with the Merger will be governed by, and construed under and in accordance
with, the laws of the State of New York applicable to contracts made and
wholly to be performed therein by residents thereof, without giving effect to
the conflict of law principles thereof.
EMPLOYMENT, SEVERANCE AND RELATED AGREEMENTS.
In connection with the execution of the Merger Agreement, the Company and
Frank Ross, Sr., the Chairman and Chief Executive Officer of HRH Construction
Corporation ("HRH"), one of the Company's Major Subsidiaries, have entered
into an employment agreement (the "Ross Employment Agreement"). The Ross
Employment Agreement provides for Mr. Ross's continued employment as the
Chairman and Chief Executive Officer of HRH after the Effective Time and
until December 31, 1999. Mr. Ross's compensation under the Ross Employment
Agreement will be in the form of a base salary of $300,000 per year, annual
bonus compensation described below, participation in the Company's executive
insurance plans and continued contribution to Mr. Ross's annuity, or, in
certain circumstances, participation in the Company's pension plan. Pursuant
to the Ross Employment Agreement, Mr. Ross is entitled to bonus compensation
equal to 10% of the first $3,000,000 of pre-tax income of HRH and its
subsidiaries on an annual basis and 5% of the such pre-tax income exceeding
$3,000,000 on an annual basis. Mr. Ross
25
<PAGE>
may terminate his employment without cause upon 30 days advance written
notice to the Company. The Company may terminate the Ross Employment
Agreement "for cause" (as enumerated in the Ross Employment Agreement) or
without cause, by written notice to Mr. Ross. If the Company terminates the
Ross Employment Agreement without cause, Mr. Ross is entitled to severance
payments equal to the amount of 12 months of his base salary, less applicable
taxes, payable in 12 monthly installments. Mr. Ross would also be entitled to
continued health insurance coverage for 12 months following termination, as
well as his bonus compensation for the year in which the termination took
place. If the Company terminates Mr. Ross's employment pursuant to the Ross
Employment Agreement due to illness, accident or disability, Mr. Ross would
be entitled to severance payments equal to 50% of his base salary for a
period of 24 months from the date of termination, plus his bonus compensation
for the year during which the termination took place. Mr. Ross has agreed
pursuant to the Ross Employment Agreement not to compete with the Company in
the construction or real estate development business in the New York City
metropolitan area during the term of his employment and for a period of one
year following termination, and he is subject to certain duties to the
Company, including, without limitation, duties of loyalty and
confidentiality.
In connection with the execution of the Merger Agreement, Purchaser
granted its consent (the "Severance Consent") to the Company's entering into
a severance agreement with Lewis Weinfeld, the Executive Vice President,
Chief Financial Officer and Secretary of the Company. The Severance Consent
provides that the Company may enter into a severance agreement with Mr.
Weinfeld on the following terms (and only the following terms): the Company
or the Surviving Corporation terminates Mr. Weinfeld without cause, or
demotes Mr. Weinfeld from a senior executive position, or changes any of the
base salary, bonus or benefits package of Mr. Weinfeld in a manner so that
any of such items is less favorable to him than the base salary, bonus or
benefits package to which he was entitled as of September 30, 1997, Mr.
Weinfeld will be entitled to severance, consisting of twice his annual base
if Mr. Weinfeld is terminated prior to the second anniversary of consummation
of the Offer or his annual base salary if Mr. Weinfeld is terminated (or
terminates his own employment for any reason) thereafter.
As described in more detail above under "--Conduct of Business Pending the
Merger," pursuant to the Merger Agreement, the Company has agreed that prior
to the date on which a majority of the Company's directors are designees of
Purchaser, unless Purchaser has consented in writing thereto (which consent
shall not be unreasonably withheld), the Company shall not enter into any
employment or severance agreement with any officer, director, or employee, or
amend any such agreement in any material respect. As described above,
Purchaser has consented to a severance arrangement with Mr. Weinfeld to the
extent such arrangement is consistent with the Severance Consent.
The Company is a party to an agreement (the "Incentive Agreement") with
Irving R. Fischer, the President, Chief Operating Officer and a director of
the Company, dated November 7, 1996. Pursuant to the Incentive Agreement, in
the event that the Company is the target of a tender offer consummated during
1997, Mr. Fischer will, subject to certain limitations, receive from the
Company a lump sum cash payment of $1,000,000 and a grant of 100,000 Shares.
In connection with the execution of the Merger Agreement, the Company and
Purchaser have agreed that, at the Company's request and prior to the
consummation of the Offer, Purchaser will have provided the Company with
sufficient funds to make the aforesaid cash payment to Mr. Fischer, unless
other arrangements are entered into by Purchaser and Mr. Fischer.
SHAREHOLDERS AGREEMENT.
In connection with the execution of the Merger Agreement, the Principal
Shareholders entered into a Shareholders Agreement dated October 16, 1997
with Purchaser and Parent, pursuant to which each of the Principal
Shareholders agreed, provided that Purchaser is not then in material breach
of the Merger Agreement and an injunction has not been issued which would
prohibit such Principal Shareholders from tendering their respective shares,
severally and not jointly, to validly tender (and not to withdraw), pursuant
to the Offer, not later than the fifth business day after receipt by the
respective Principal
26
<PAGE>
Shareholders of the Offer to Purchase, the Shares beneficially owned by the
Principal Shareholders on the date of the Shareholders Agreement, together
with any Shares acquired by any of the Principal Shareholders after the date
of the Shareholders Agreement and prior to the termination of the Merger
Agreement.
INDEMNITY AGREEMENT.
In connection with the execution of the Merger Agreement, the Principal
Shareholders entered into an Indemnity Agreement dated October 16, 1997 with
Purchaser and Parent (the "Indemnity Agreement"), pursuant to which the
Principal Shareholders agreed to indemnify Parent and Purchaser for Frydman
Claims (as defined therein) arising out of certain arrangements between the
Principal Shareholders, the Company and Starrett Acquisition, Inc. and
Stonemerger, Inc., both corporations controlled by Jacob Frydman. The
Indemnity Agreement provides that, after the consummation of the Offer,
Parent and Purchaser jointly and severally (and the Surviving Corporation
after the Merger) will bear the first $1,000,000 of losses and expenses
arising out of any Frydman Claims and that any remaining losses and expenses
will be shared equally by Parent and Purchaser jointly and severally (and,
following the consummation of the Merger, the Surviving Company) on the one
hand and the Principal Shareholders on the other. Each of the Principal
Shareholders are severally liable for their respective proportionate share
(according to their shareholdings) of the losses for which Purchaser and
Parent are indemnified under the Indemnity Agreement, except that Paul
Milstein and Seymour Milstein shall be jointly and severally liable for all
liabilities under the Indemnity Agreement of the Principal Shareholders.
MANAGEMENT AGREEMENT. In connection with the execution of the Merger
Agreement, subject to certain exceptions, the sole shareholder of Evergreen
Gardens, Inc. ("Evergreen") agreed with Purchaser to extend Evergreen's
management agreement with Grenadier Realty Corp., one of the Company's Major
Subsidiaries, on each of the next four annual renewal expiration dates for
that agreement, for an additional one year term on market-rate terms, insofar
as it is within that shareholder's reasonable control and in accordance with
applicable governmental regulations. Paul Milstein, Chairman of the Board of
the Company, is the general partner of the sole shareholder of Evergreen.
12. PURPOSE OF THE OFFER AND MERGER, PLANS FOR THE COMPANY
The purpose of the Offer and the Merger is to acquire all the outstanding
Shares and thereby to obtain control of the Company. The Offer, as the first
step in the acquisition of the Company, is intended to facilitate the
acquisition of all the Shares. Consummation of the Offer will provide
Purchaser with at least two-thirds of the equity interests in the Company.
The Merger will allow Purchaser to acquire all Shares not tendered and
purchased pursuant to the Offer or otherwise. Pursuant to the Merger, each
then outstanding Share (other than Shares owned directly or indirectly by the
Company or Parent, Shares held in the treasury of the Company and Shares
owned by shareholders who perfect appraisal rights under the BCL) would be
converted into the right to receive an amount in cash equal to the price per
Share paid by the Purchaser pursuant to the Offer, provided, however, that
any Shares owned by Parent or Purchaser will be canceled and the Merger Price
will not be paid in respect of any such shares. The acquisition of the entire
equity interest in the Company has been structured as a cash tender offer and
a cash merger in order to provide for a prompt and orderly transfer of
ownership of the Company from the public shareholders of the Company to
Parent. The purchase of Shares pursuant to the Offer will increase the
likelihood that the Merger will be consummated.
Except in the case of a "short-form" merger as described below, under the
BCL, the approval of the Company's Board of Directors and the affirmative
vote of holders of two-thirds of the outstanding Shares (including any Shares
owned by the Purchaser) would be required to approve the Merger. Upon
consummation of the Offer, the Purchaser will have obtained voting power with
respect to at least two-thirds of the outstanding Shares, sufficient voting
power to effect the Merger without the vote of any other shareholder of the
Company.
The BCL also provides that if a parent company owns at least 90% of each
class of stock of a subsidiary, the parent company can effect a "short-form"
merger with that subsidiary without a
27
<PAGE>
shareholder vote. Accordingly, if, as a result of the Offer or otherwise,
Purchaser acquires or controls the voting power of at least 90% of the
outstanding Shares, Purchaser could, and in the Merger Agreement has agreed
to, effect the Merger without prior notice to, or any action by, any other
shareholder of the Company. Shareholders of the Company will, under certain
circumstances, have the right to dissent and demand appraisal of their shares
in the Merger. See Section 16.
In the event the Purchaser acquires at least two-thirds of the outstanding
Shares pursuant to the Offer, and thereafter obtains control of the Company's
Board of Directors, it expects to cause the Company to cease paying quarterly
dividends on the remaining outstanding Shares. The Merger Agreement provides
that Parent and Purchaser intend that (i) the directors of Purchaser at the
Effective Time will be the initial directors of the Surviving Corporation,
(ii) the officers of the Purchaser at the Effective Time will be the initial
officers of the Surviving Corporation.
In connection with the Offer, Parent has reviewed, and will continue to
review, various possible business strategies that it might consider in the
event that it acquires all or substantially all of the equity interests in
the Company. Prior to making the Offer, Parent reviewed and analyzed the
business of the Company on the basis of publicly-available information and
information provided by the Company. The strategies which Parent might
consider could include, among other things, the disposition of certain assets
or lines of business of the Company. Following the consummation of the Offer,
Parent intends to conduct a detailed review of the Company and its assets,
corporate structure, capitalization, operations, properties, policies,
management and personnel and consider what changes, if any, would be
desirable in light of the circumstances which then exist. To the extent that
Parent or Purchaser causes the Company to dispose of any of its businesses or
assets following the Merger and the proceeds of such dispositions are
distributed to the Company's shareholders, such distributions, to the extent
received by Parent or Purchaser, may be used to reduce indebtedness incurred
by them in connection with the Offer.
Except as described above, in Section 13, or elsewhere in this Offer to
Purchase, Purchaser does not have any present plans or proposals which relate
to or would result in an extraordinary corporate transaction, such as a
merger, reorganization or liquidation involving the Company or any of its
Subsidiaries, a sale or transfer of a material amount of the Company's assets
(or assets of its Subsidiaries), any material change in the Company's present
capitalization, any other material change in the Company's business or
corporate structure, causing a class of securities of the Company to be
delisted from a national securities exchange association, or causing a class
of equity securities of the Company to become eligible for termination of
registration pursuant to the Exchange Act.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT
REGISTRATION; MARGIN REGULATIONS
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of
holders of Shares, which could adversely affect the liquidity and market
value of the remaining Shares held by shareholders other than Purchaser.
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on
the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the AMEX for continued listing
and may, therefore, be delisted from such exchange. According to the AMEX's
published guidelines, the AMEX could consider delisting the Shares if, among
other things, the number of publicly-held Shares (excluding Shares held by
officers, directors, their immediate families and concentrated holdings of 5%
or more) were less than 200,000, there were less than 300 public holders of
at least 100 Shares or the aggregate market value of the publicly-held Shares
were less than $1 million. If, as a result of the purchase of Shares pursuant
to the Offer, the Shares no longer meet the requirements of the AMEX for
continued listing and the listing of Shares on such exchanges is
discontinued, the market for the Shares could be adversely affected.
If the AMEX were to delist the Shares, it is possible that the Shares
would trade on another securities exchange or in the over-the-counter market
and that price quotations for the Shares would be reported by such exchange
or through the Nasdaq Stock Market or other sources. The extent of the public
market
28
<PAGE>
for the Shares and the availability of such quotations would, however, depend
upon such factors as the number of holders and/or the aggregate market value
of the publicly-held Shares at such time, the interest in maintaining a
market in the Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act and other
factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans
made by brokers.
The Shares are currently registered under the Exchange Act. Registration
of the Shares under the Exchange Act may be terminated upon application of
the Company to the SEC if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its shareholders
and to the SEC and would make certain provisions of the Exchange Act no
longer applicable to the Company, such as the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act, the requirement of
furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in
connection with shareholders' meetings and the related requirement of
furnishing an annual report to shareholders, and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant
to Rule 144 promulgated under the Securities Act may be impaired or
eliminated. It is the current intention of Parent to deregister the Shares
after consummation of the Offer if the requirements for termination of
registration are met.
14. EXTENSION OF TENDER PERIOD; AMENDMENT; TERMINATION
Purchaser also reserves the right, in its sole discretion, subject to the
terms of the Merger Agreement, in the event any of the Conditions specified
in Section 15 will not have been satisfied and so long as Shares have not
theretofore been accepted for payment, to delay (except as otherwise required
by applicable law) acceptance for payment of or payment for Shares or to
terminate the Offer and not accept for payment or pay for Shares.
If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of Purchaser, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of Purchaser to delay the payment for Shares which Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer (including the Minimum Condition), Purchaser
will disseminate additional tender offer materials and extend the Offer to
the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act. The minimum period during which the Offer must remain open following
material changes in the terms of the Offer or information concerning the
Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances, including the relative
materiality of the terms or information. With respect to a change in price or
a change in percentage of securities sought, a minimum period of ten business
days is generally required to allow for adequate dissemination to
shareholders and investor response. If prior to the Expiration Date,
Purchaser should decide to increase the price per Share being offered in the
Offer, such increase will be applicable to all shareholders whose Shares are
accepted for payment pursuant to the Offer. See Section 1.
29
<PAGE>
15. CONDITIONS TO THE OFFER
Notwithstanding any other term of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer unless (i) the Minimum Tender Condition has
been met, (ii) all waiting periods, if any, under the HSR Act applicable to
the purchase of Shares pursuant to the Offer shall have expired or have been
terminated and (iii) all required approvals, if any, by HUD. Furthermore,
notwithstanding any other term of the Offer, Purchaser shall not be required
to accept for payment or, subject as aforesaid, to pay for any Shares not
theretofore accepted for payment or paid for, and may, subject to the Merger
Agreement, amend the Offer, if upon the expiration date of the Offer, any of
the following conditions exists and shall be continuing:
(a) Representations and Warranties. The representations and warranties of
the Company contained in the Merger Agreement shall not be true and
correct in all respects in each case at and as of such time as though such
representations and warranties were made at and as of such time without
reference to a Starrett Material Adverse Effect, except for those
representations and warranties which are expressly made as of a specified
earlier date, in which case such representations and warranties shall be
true and correct as of such specified date in all respects without
reference to a Starrett Material Adverse Effect, and except in all cases
where the failure or failures of such representations and warranties to be
so true and correct would not have, singly or in the aggregate, a Starrett
Material Adverse Effect. As used herein, "Starrett Material Adverse
Effect" means any event, occurrence or condition which has or would be
reasonably likely to (i) have a material adverse effect on the business,
properties, assets, liabilities, results of operations or financial
condition of Starrett and its Subsidiaries taken as a whole or (ii)
materially impair the ability of Starrett to perform its obligations under
the Merger Agreement or consummate the transactions contemplated therein.
(b) Covenants. The Company shall not have performed and complied with any
agreement or condition on its part required by the Merger Agreement to be
performed or complied with prior to or at such time, which failure of
performance or compliance, singly or in the aggregate, has a Starrett
Material Adverse Effect.
(c) Absence of Changes. From the date of the Merger Agreement through
such time, there shall have occurred any event or events, or change or
changes in the financial condition, business or operations of the Company
that, singly or in the aggregate, has a Starrett Material Adverse Effect.
(d) Actions or Proceedings. There shall be any action or proceeding by or
before any Governmental Authority which has resulted in the issuance of an
injunction or order which (i) restrains, prohibits or materially delays
the consummation of the Offer, (ii) makes the purchase of, or payment for,
some or all of the Shares pursuant to the Offer or Merger illegal, or
results in a material delay in the ability of Purchaser to accept for
payment or pay for some or all of the Shares, (iii) compels Purchaser to
dispose of or hold separately all or any material portion of the Company's
and its Subsidiaries' business or assets, (iv) makes illegal or otherwise
directly or indirectly restrains or prohibits or imposes material
financial burdens, penalties or fines, or requires the payment of material
damages (other than financial burdens or damages resulting from any claim,
action, suit or proceeding arising from certain agreements and other
documents identified in the Merger Agreement or any circumstances relating
thereto) in connection with the making of the Offer, the acceptance for
payment of, payment for, or ownership, directly or indirectly, of some of
or all the Shares by Purchaser, or the consummation of the Offer or the
Merger, (v) otherwise prevents consummation of the Offer or the Merger, or
(vi) imposes material limitations on the ability of Purchaser effectively
(A) to acquire, hold or operate the business of the Company and its
Subsidiaries taken as a whole or (B) to exercise full rights of ownership
of the Shares acquired by it, including, but not limited to, the right to
vote the Shares purchased by it on all matters properly presented to the
shareholders of the Company, which, in either case, would effect a
material diminution in the value of the Company or the Shares.
30
<PAGE>
(e) Injunctions. There shall have been any statute, rule, regulation,
order, decree or injunction enacted, promulgated or entered by any
Governmental Authority or any other action shall have been taken by any
Governmental Authority, in any such case on or after the date of the
Offer, that has resulted in any of the consequences referred to in clauses
(i) through (vi) of the paragraph (d) above.
(f) Force Majeure. There shall have occurred and be continuing (i) any
general suspension of trading in, or general limitation on prices for
securities on the New York Stock Exchange, Inc. or the AMEX (other than
suspensions of not more than one business day), (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States (whether or not mandatory), (iii) the commencement of a
war, armed hostilities or other international or national calamity
involving the United States and having a Starrett Material Adverse Effect,
or (iv) any material limitation by any Governmental Authority that
materially adversely affects generally the extension of credit by banks or
other financial institutions.
(g) Consents. The Company shall have failed to obtain the consents of The
Chase Manhattan Bank and HUD set forth in the Merger Agreement.
(h) Shareholders Agreement. The Shareholders Agreement among Purchaser
and the Principal Shareholders shall no longer be in full force and
effect, or any of the Principal Shareholders shall have breached any
material obligation thereunder.
(i) Gateway/Starrett City. Either (i) the Second Amended and Restated
Memorandum of Understanding, dated March 29, 1996 by and among the City of
New York, its Department of Housing Preservation and Development, Gateway
Housing Associates and Gateway Estates Housing Development Fund Company,
Inc. with respect to the development of the site known as Spring Creek in
the Fresh Creek Urban Renewal Area of Brooklyn, New York or (ii) the
Managing Agency Agreement, dated July 1, 1979, between Starrett City,
Inc., a predecessor-in-interest to Starrett City Associates L.P., Delmar
Management Company, predecessor-in-interest to Grenadier Realty Corp.
shall not be in full force and effect.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition (other than a breach by Purchaser of the Merger Agreement) and may
be waived by Purchaser in whole or in part, at any time and from time to
time, in the sole discretion of Purchaser. The failure by Purchaser at any
time to exercise any of the foregoing rights will not be deemed a waiver of
any right and each right will be deemed an ongoing right which may be
asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
GENERAL. Except as described in this Section 16, based upon a review of
publicly available filings by the Company with the SEC and other publicly
available information concerning the Company, neither Parent nor Purchaser is
aware of any license or regulatory permit that appears to be material to the
business of the Company and its Subsidiaries, taken as a whole, that might be
adversely affected by the acquisition of Shares by Purchaser pursuant to the
Offer, the Merger or otherwise, except as set forth below, or of any approval
or other action by any governmental, administrative or regulatory agency or
authority, domestic or foreign, that would be required prior to the
acquisition of Shares by Purchaser pursuant to the Offer, the Merger or
otherwise. Should any such approval or other action be required, Purchaser
currently contemplates that it would be sought. While Purchaser does not
currently intend to delay the acceptance for payment of Shares tendered
pursuant to the Offer pending the outcome of any such matter, there can be no
assurance that any such approval, other action, if needed, would be obtained
or would be obtained without substantial conditions or that adverse
consequences might not result to the Company's business or that certain parts
of the business of the Company might not have to be disposed of in the event
that such approvals were not obtained or any other actions were not taken.
Purchaser's obligation under the Offer to accept for payment and pay for
Shares is subject to certain conditions, including conditions relating to
certain of the legal matters discussed in this Section 17. See Section 16.
STATE TAKEOVER STATUTES. Section 912 of the BCL prohibits business
combination transactions involving a New York corporation (such as the
Company) and an "interested shareholder" (defined
31
<PAGE>
generally as any person that directly or indirectly beneficially owns 20% or
more of the outstanding voting stock of the subject corporation) for three
years following the date such person became an interested shareholder, unless
special requirements are met or certain exceptions apply, including that
prior to such date the board of directors of the subject corporation approved
either the business combination or the transaction which resulted in such
person being an interested shareholder. In the Merger Agreement, the Company
has represented that the Board of Directors has duly and validly approved the
transactions contemplated by the Merger Agreement, including the Offer, the
Merger and the acquisition of Shares pursuant thereto, for purposes of
Section 912, and that such provisions of Section 912 are not applicable to
such transactions.
A number of states, including New York, have adopted "takeover" statutes
that purport to apply to attempts to acquire corporations that are
incorporated in such states, or whose business operations have substantial
economic effects in such states, or which have substantial assets, security
holders, employees, principal executive offices or principal places of
business in such states. The Company conducts business in a number of states
throughout the United States, some of which have enacted "takeover" statutes.
Except as discussed herein, Purchaser does not know whether any of these
statutes will, by their terms, apply to the Offer, and has not complied with
any such statutes. To the extent that certain provisions of these statutes
purport to apply to the Offer, Purchaser believes that there may be
reasonable bases for contesting such statutes. If any person should seek to
apply any state takeover statute, Purchaser would take such action as then
appears desirable, which action may include challenging the validity or
applicability of any such statute in appropriate court proceedings. If it is
asserted that one or more takeover statutes apply to the Offer, and it is not
determined by an appropriate court that such statute or statutes do not apply
or are invalid as applied to the Offer, Purchaser might be required to file
certain information with, or receive approvals from, the relevant state
authorities, and Purchaser might be unable to purchase or pay for Shares
tendered pursuant to the Offer, or be delayed in continuing or consummating
the Offer. In such case, Purchaser may not be obligated to accept for payment
or pay for Shares tendered. See Section 14.
New York has also adopted the New York Security Takeover Disclosure Act,
as amended (the "NYSTDA"), which purports to apply to any tender offer to
purchase any equity security of a "target company" (which is defined to mean
a corporation organized under the laws of the State of New York which has its
principal executive offices or significant business operations located within
the State of New York) if, after the tender offer, the offeror would be a
beneficial owner of more than 5% of any class of the issued and outstanding
equity securities of such target company. If applicable, the NYSTDA requires
an offeror to file with the Attorney General of the State of New York and
deliver to the target company a registration statement as soon as practicable
on the date of commencement of the tender offer. The NYSTDA also permits,
among other things, an investigation and public hearing to review the
adequacy of the required disclosure. Without conceding the constitutionality
or applicability of the NYSTDA or otherwise prejudicing their rights to
challenge the constitutionality or applicability of the NYSTDA, Purchaser and
Parent have filed a registration statement pursuant to the NYSTDA with the
New York Attorney General and have included in Schedule III to this Offer to
Purchase certain additional information required by NYSTDA concerning Parent
and Purchaser.
HUD TPA APPROVAL. HUD's Transfer of Physical Assets (TPA) process is the
means by which HUD reviews and approves transfers of ownership or control of
projects with HUD-insured mortgages. A so-called "full TPA review" is
required in cases involving transfer of (i) title of the project; (ii) any
interest in a mortgagor partnership which causes a dissolution of the
partnership under state law; or (iii) the entire beneficial interest in a
passive trust, which results in a change in control of the mortgaged asset.
As part of the TPA full review process, HUD examines whether the project's
physical repair and replacement needs and operating financial needs will be
met and whether the transfer complies with other HUD requirements.
A so-called "modified TPA review" is required in the case of (i) a
transfer in excess of 50% of the interests in a partnership mortgagor that
does not cause dissolution of the partnership; (ii) substitution of one or
more general partners of the mortgagor partnership; or (iii) other
transactions resulting in a change in control of a mortgagor. A modified TPA
review requires the submission of certain documentation to HUD and HUD review
of the physical and financial needs of the project to ascertain whether
additional project support is required.
32
<PAGE>
The Purchaser believes that modified TPA approval will be required for the
Lands End One project, and that such approval will be obtained without
requiring additional project support. No assurance can be given, however,
that HUD will not take a view contrary to that of Purchaser with regard to
the applicability or outcome of the TPA process.
HUD 2530 PROCESS. The HUD Previous Participation Certification process is
HUD's centralized review of the past and present performance of principals
applying for participation (or acquiring a qualifying interest in a
participant) in HUD's multifamily housing programs.
The proposed new principal officers and directors of the Company, its
subsidiaries having a general partnership interest or acting as managing
agent of a housing development assisted by HUD or the holders of more than a
10% stock interest in the Company, or a 25% interest in an LLC owning more
than a 10% interest in the Company, or the LLC's operating or managing member
("Covered Principals"), must receive HUD Previous Participation clearance by
filing a HUD Form 2530 Previous Participation Certificate, which requires
detailed disclosure regarding previous participation in government housing
and other government programs, as well as issues of integrity and status. The
involvement of any Covered Principal during the past 10 years in certain
"Investigatory Events," including (i) certain mortgage or other defaults or
contractual non-compliance under housing finance agency projects; (ii)
unresolved findings as a result of HUD or other governmental investigations;
(iii) suspension or termination of payment under certain HUD assistance
contracts; (iv) felony convictions, complaints or indictments; and (v)
suspension or restriction from doing business with government agencies, could
form the basis for denial of HUD clearance.
While Purchaser believes that HUD clearance will be obtained with respect
to any Covered Principals of Purchaser, there can be no assurance that this
will be the case.
ANTITRUST. Purchaser and Parent believe that the provisions of the HSR
Act are inapplicable to the acquisition of the Shares by Purchaser. While
private parties and state attorneys general may also bring legal action under
the antitrust laws in certain circumstances, based upon an examination of
publicly available information relating to the business in which Parent and
the Company are engaged, Parent and Purchaser believe that the acquisition of
Shares by Purchaser will not violate the antitrust laws. Nevertheless, there
can be no assurance that a challenge to the Offer or other acquisition of
Shares by Purchaser on antitrust grounds will not be made or, if such
challenge is made, of the result. See Section 15 for certain conditions to
the Offer, including conditions with respect to litigation and certain
governmental actions.
DISSENTERS' RIGHTS. Holders of Shares do not have appraisal rights as a
result of the Offer; however, holders of Shares will have certain rights
pursuant to the provisions of the BCL, including Sections 623 and 910 upon
consummation of the Merger including the right to dissent and demand
appraisal of Dissenting Shares thereof. Under the BCL, dissenting
shareholders who have filed with the Company a written notice of election to
dissent and who otherwise comply with the applicable procedures set forth in
the BCL will be entitled to receive a judicial determination of the fair
value of the Shares and to receive payment of such fair value in cash,
together with a fair rate of interest, if any. Any such judicial
determination of the fair value of the Shares could be based upon factors
other than, or in addition to, the price per Share to be paid in the Merger
or the market value of the Shares. The value so determined could be more or
less than the price per Share paid in the Merger. The foregoing summary does
not purport to be complete and is qualified in its entirety by reference to
the applicable provisions of the BCL.
FEDERAL RESERVE BOARD REGULATIONS. The margin regulations promulgated by
the Federal Reserve Board place restrictions on the amount of credit that may
be extended for the purpose of purchasing margin stock (including the Shares)
if such credit is secured directly or indirectly by margin stock. Purchaser
believes that the financing of the acquisition of the Shares as contemplated
by the Financing Commitment will be made in accordance with the margin
regulations.
17. FEES AND EXPENSES
Purchaser and Parent have retained MacKenzie Partners, Inc. to act as the
Information Agent and ChaseMellon Shareholders Services, L.L.C. to serve as
the Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
33
<PAGE>
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities and expenses under the federal securities laws.
Neither Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person or entity (other than as described in the
preceding paragraph) in connection with the solicitation of tenders of Shares
pursuant to the Offer. Brokers, dealers, banks and trust companies will be
reimbursed by Purchaser upon request for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
18. LEGAL PROCEEDINGS
On October 22, 1997, a complaint (the "Complaint") captioned Starrett
Acquisition, Inc. v. Starrett Corporation et al., Index No. 605392/97, was
filed in the Supreme Court of the State of New York, County of New York. The
Complaint was brought by Starrett Acquisition, Inc., of which Jacob Frydman
is the President. The Company is a named defendant in the Complaint and
certain persons in privity with the Company, which may be intended to
represent Purchaser and related parties, are unnamed defendants. The
Complaint alleges, among other things, that the Company is in breach of
certain contractual obligations to the plaintiff arising out of the Frydman
Agreement and subsequent negotiations. The Complaint seeks specific
performance of the Company's alleged contractual obligations to the
plaintiff, injunctive relief with the respect to the commencement of the
Offer and unspecified damages. The Company believes that the allegations
contained in the Complaint are without merit, and the Company and Purchaser
intend to vigorously contest the action.
19. MISCELLANEOUS
Purchaser is not aware of any jurisdiction in which the making of the
Offer is prohibited by administrative or judicial action pursuant to any
valid state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer, Purchaser will make a good faith effort
to comply with such statute. If, after such good faith effort, Purchaser
cannot comply with such state statute, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) holders of Shares in such
state.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser and Parent have filed with the SEC the Tender Offer Statement on
Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with
exhibits, furnishing certain additional information with respect to the
Offer, and may file amendments thereto. Such Schedule 14D-1 and any
amendments thereto, including exhibits, should be available for inspection
and copies should be obtainable in the manner set forth in Section 8 (except
that such material will not be available at the regional offices of the SEC).
Startt Acquisition, LLC
Startt Acquisition, Inc.
October 23, 1997
34
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of
Purchaser and certain other information are set forth below. All directors
and executive officers listed below are citizens of the United States. Unless
otherwise indicated, each such person has held his or her position with
Purchaser since its inception, and each such person has held each of the
positions set forth below for the past five years.
DIRECTORS OF PURCHASER
RICHARD G. RUBEN
Mr. Ruben is Principal of Lawrence Ruben Company, Inc., which is engaged
in the development, investment and management of commercial and residential
real estate. In addition, Mr. Ruben shares control of the general partner of
Avenue Investments L.P., which owns 10,900 shares of Common Stock of the
Company, and he thereby beneficially owns such shares. Mr. Ruben's business
address is Lawrence Ruben Company, Inc., 600 Madison Avenue, 20th Floor, New
York, NY 10022.
JONATHAN I. MAYBLUM
Since 1996, Mr. Mayblum has been Executive Vice President of Lawrence
Ruben Company, Inc., which is engaged in the development, investment and
management of commercial and residential real estate. Mr. Mayblum was Vice
President and General Counsel of Lawrence Ruben Company, Inc. from 1990 until
he became Executive Vice President in 1996. Mr. Mayblum's business address is
Lawrence Ruben Company, Inc., 600 Madison Avenue, 20th Floor, New York, NY
10022.
JEFFREY B. CITRIN
Mr. Citrin has been, since August, 1994, the President of Blackacre
Capital Management Corp., the general partner of Blackacre Capital Group,
L.P., the real estate investment affiliate of the Cerberus Partners funds and
other funds under common management. From June 1993 through July 1994, Mr.
Citrin was a Managing Director of Oppenheimer & Co., a securities firm,
located at World Financial Plaza, New York, New York. From September 1991
through June 1993, Mr. Citrin was a Vice President of CS First Boston Corp.,
a securities firm, located at that time at 55 East 52nd Street, New York, New
York. Mr. Citrin's business address is Blackacre Capital Group, L.P., 450
Park Avenue, 28th floor, New York, NY 10022.
RONALD J. KRAVIT
Mr. Kravit has been, since July 1996, a Vice President of Blackacre
Capital Management Corp., From September 1994 through July 1996, Mr. Kravit
was a Principal of Apollo Real Estate Advisors, a real estate investment and
financing firm, located at 1301 Avenue of the Americas, New York, New York.
From September 1993 through October 1994, Mr. Kravit was a Principal of
Reichman International, a real estate investment and financing firm, located
at 520 Madison Avenue, New York, New York. From May 1991 through September
1993, Mr. Kravit was a Vice President and the Chief Financial Officer of
Maxxam Property Co., a real estate investment and financing firm, located at
5847 San Felipe Boulevard, Houston, Texas 77057. Mr. Kravit's business
address is Blackacre Capital Group, L.P., 450 Park Avenue, 28th floor, New
York, NY 10022.
ANDREW PENSON
Mr. Penson has been the principal of Argent Ventures LLC, a New York
limited liability company which engages in the purchase and sale of real
estate investments, since January 1997. From January 1993 through January
1997, Mr. Penson was a Managing Director of Amroc Investments, Inc. Mr.
Penson is a principal of The Penson Corporation, a real estate management
firm. Mr. Penson's business address is Argent Ventures LLC, 335 Madison
Avenue, 26th Floor, New York, NY 10017.
I-1
<PAGE>
MARK LASRY
Mr. Lasry is the founder and a Managing Director of Amroc Investments,
Inc., which is engaged in trading distressed debt. In addition, Mr. Lasry
shares control of the general partner of Avenue Investments L.P., which owns
10,900 shares of Common Stock of the Company, and he thereby beneficially
owns such shares. Mr. Lasry's business address is Amroc Investments, Inc.,
335 Madison Avenue, New York, NY 10017.
EXECUTIVE OFFICERS OF PURCHASER
JONATHAN I. MAYBLUM
President of Purchaser.
MARTIN J. SUMNER
Vice President, Secretary and Treasurer of Purchaser. Mr. Sumner is the
Chief Financial Officer of Lawrence Ruben Company, Inc. Mr. Sumner's business
address is Lawrence Ruben Company, Inc., 600 Madison Avenue, 20th Floor, New
York, New York 10022.
CONTROLLING PERSON OF PURCHASER
Parent owns all of the issued and outstanding capital stock of Purchaser.
I-2
<PAGE>
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND CERTAIN OTHER PERSONS
The name of each director and executive officer of Parent, of Parent's
members and of certain other persons are set forth below. The business
address, present principal occupation or employment and five-year employment
history of such persons are set forth in Schedule I or below. All directors
and executive officers listed below are citizens of the United States.
DIRECTORS OF PARENT
RICHARD G. RUBEN
JONATHAN I. MAYBLUM
JEFFREY B. CITRIN
RONALD J. KRAVIT
ANDREW PENSON
MARK LASRY
EXECUTIVE OFFICERS OF PARENT
JONATHAN I. MAYBLUM
President
MARTIN J. SUMNER
Vice President, Secretary and Treasurer
MEMBERS OF PARENT AND CERTAIN OTHER PERSONS
Information with respect to LR STARTT, LLC, AV STARTT, LLC, AM STARTT, LLC
and BA STARRT, LLC, the members of Parent, and certain other persons is set
forth below.
LR STARTT, LLC
Executive Officers: Jonathan I. Mayblum, President; Richard G. Ruben, Vice
President and Secretary, Martin J. Sumner, Vice President and Treasurer
Controlling Person: Richard G. Ruben
AV STARTT, LLC
Controlling Person: Andrew Penson
AM STARTT, LLC
Controlling Person: Mark Lasry
BA STARTT, LLC
Controlling Persons: Jeffrey B. Citrin is the sole shareholder of Blackacre
Capital Management Corp., which is the general partner of Blackacre Capital
Group, L.P., a Delaware limited partnership, which is the managing member of
BA STARTT, LLC.
See below for Executive Officers and Directors of Blackacre Capital
Management Corp.
II-1
<PAGE>
SCHEDULE III
ADDITIONAL INFORMATION REQUIRED BY THE
NEW YORK SECURITY TAKEOVER DISCLOSURE ACT
Purchaser was incorporated on September 25, 1997, and Parent was organized
on October 10, 1997. Neither has engaged in any business since its
incorporation or organization other than that incident to its incorporation
or organization and in connection with the Offer and the Merger. Accordingly,
neither Purchaser nor Parent has engaged in any significant community
activities nor has Purchaser or Parent made any significant community
activities or charitable, cultural, educational or civic contributions.
Neither Purchaser or Parent has any employees. Accordingly, neither has
any existing pension plans, profit-sharing plans, savings plans, has not
provided any educational opportunities or relocated adjustments to any
employees, and has had no labor or employment related claims or disputes.
Neither Parent nor Purchaser has any present plans or proposals relating
to material changes in the Company's business, corporate structure,
management, personnel or activities, which would have a substantial impact on
residents of the State of New York.
Except as set forth in this Schedule III, all information regarding
Purchaser, Parent and the Company and the Offer required to be disclosed
pursuant to the NYSTDA is set forth in this Offer to Purchase and is
incorporated by reference in the Registration Statement filed pursuant to the
NYSTDA.
III-1
<PAGE>
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each shareholder of the Company or
his broker, dealer, commercial bank or other nominee to the Depositary at one
of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand: By Overnight Courier: By Mail:
120 Broadway -13th Floor 85 Challenger Road P.O. Box 3301
New York, NY 10271 Ridgefield Park, NJ 07660 South Hackensack, NJ 07606
Attn: Reorganization Department Mail Drop: Attn: Reorganization Department
Reorganization Department
</TABLE>
Other information
By Facsimile (for eligible institutions only):
(201) 329-8936
Confirm facsimile by telephone only:
(201) 296-4860
Any questions or requests for assistance or additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at its telephone numbers
and location listed below. You may also contact your broker, dealer,
commercial bank or trust company or nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
- ------------------------------------------------------------------------------
MACKENZIE PARTNERS, INC.
LOGO
- ------------------------------------------------------------------------------
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE: (800) 322-2885
<PAGE>
EXHIBIT (A)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
STARRETT CORPORATION
AT
$12.25 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 23, 1997
BY
STARTT ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
STARTT ACQUISITION, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON NOVEMBER 20, 1997, UNLESS THE OFFER IS EXTENDED.
This Letter of Transmittal, certificates for shares of the Common Stock,
par value $1.00 per share, of Starrett Corporation ("Shares") and any other
required documents should be sent or delivered by each shareholder of the
Company or his broker, dealer, commercial bank or other nominee to the
Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand: By Overnight Courier: By Mail:
120 Broadway -13th Floor Mail Drop Reorg. Dept. P.O. Box 3301
New York, NY 10271 85 Challenger Road South Hackensack, NJ 07606
Attn: Reorganization Department Ridgefield Park, NJ 07660 Attn: Reorganization Department
</TABLE>
Other information
By Facsimile
(for eligible institutions only):
(201) 329-8936
Confirm facsimile by telephone only:
(201) 296-4860
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING
THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
SHARE OF SHARES NUMBER
CERTIFICATE REPRESENTED OF SHARES
NUMBER(S)* BY CERTIFICATES* TENDERED**
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
TOTAL SHARES:
- ------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate
delivered to the Depositary are being tendered hereby. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be completed by shareholders of Starrett
Corporation either if certificates are to be forwarded herewith or if
delivery is to be made by book-entry transfer to the Depositary's account at
The Depository Trust Company ("DTC") or the Philadelphia Depository Trust
Company ("PDTC") (each, a "Book-Entry Transfer Facility" and collectively,
the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 3 of the Offer to Purchase (as defined below).
Shareholders whose certificates evidencing Shares ("Share Certificates")
are not immediately available or who cannot deliver their Share Certificates
and all other documents required hereby to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) or who
cannot comply with the book-entry transfer procedures on a timely basis, must
tender their Shares according to the guaranteed delivery procedure set forth
in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY
[ ] CHECK HERE, IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF
THE BOOK-ENTRY TRANSFER FACILITIES, AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
------------------------------------------------------------------------
Check Box of Book-Entry Transfer Facility (Check one):
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
------------------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------------------
[ ] CHECK HERE, IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY SENT TO THE DEPOSITARY PRIOR TO THE DATE HEREOF,
AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):
------------------------------------------------------------------------
2
<PAGE>
Window Ticket Number (if any):
------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
------------------------------------------------------------------------
Check Box of Book-Entry Transfer Facility if Delivered by Book-Entry
Transfer (check one):
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number (if delivered by Book-Entry Transfer):
------------------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Startt Acquisition, Inc., a New York
corporation ("Purchaser") and a wholly-owned subsidiary of Startt
Acquisition, LLC, a Delaware limited liability company ("Parent"), the
above-described shares of Common Stock, par value $1.00 per share
(collectively, the "Shares"), of Starrett Corporation, a New York corporation
(the "Company"), at a price of $12.25 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated October 23, 1997 (the "Offer to Purchase"),
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer"). The undersigned understands that Purchaser reserves the right to
transfer or assign, in whole or in part from time to time to Parent or one or
more direct or indirect wholly-owned subsidiaries of Parent, the right to
purchase Shares tendered pursuant to the Offer.
Subject to and effective upon acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions
of the Offer, the undersigned hereby sells, assigns and transfers to, or upon
the order of, Purchaser all right, title and interest in and to all of the
Shares that are being tendered hereby and all other Shares or other
securities or property issued or issuable in respect thereof on or after
October 23, 1997 (such other Shares, securities or property other than the
Shares being referred to herein as the "Other Securities") and irrevocably
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares and all Other Securities with full
power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) deliver Share
Certificates evidencing such Shares and all Other Securities, or transfer
ownership of such Shares and all Other Securities on the account books
maintained by any of the Book-Entry Transfer Facilities, together, in either
case, with all accompanying evidences of transfer and authenticity, to or
upon the order of Purchaser, upon receipt by the Depositary, as the
undersigned's agent, of the purchase price, (b) present such Shares and all
Other Securities for transfer on the books of the Company, and (c) receive
all benefits and otherwise exercise all rights of beneficial ownership of
such Shares and all Other Securities, all in accordance with the terms of the
Offer.
The undersigned hereby irrevocably appoints Jonathan I. Mayblum and Martin
J. Sumner, and each of them or any other designees of Parent or Purchaser,
the attorneys and proxies of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights, including to
exercise such voting and other rights as each such attorney and proxy or his
(or her) substitute shall, in his (or her) sole discretion, deem proper, and
otherwise act (including pursuant to written consent), with respect to all of
the Shares tendered hereby which have been accepted for payment by Purchaser
(and any and all Other Securities issued or issuable in respect thereof on or
after October 23, 1997), which the undersigned is entitled to vote at any
meeting of shareholders of the Company (whether annual or special and whether
or not an adjourned meeting), or written consent in lieu of such meeting, or
otherwise. This proxy and power of attorney is coupled with an interest in
the Shares tendered hereby and is irrevocable and is granted in consideration
of, and is effective upon, the acceptance for payment of such Shares by
Purchaser in accordance with the terms of the Offer. Such acceptance for
payment shall, without further action, revoke all prior proxies and consents
granted by the undersigned with respect to such Shares (and all Shares
3
<PAGE>
and other securities issued in Other Securities in respect of such Shares),
and no subsequent proxy or power of attorney or written consent shall be
given (and if given or executed, shall be deemed not to be effective) with
respect thereto by the undersigned. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's acceptance for payment of such Shares, Purchaser is able to
exercise full voting and other rights with respect to such Shares (including
voting at any meeting of shareholders then scheduled or acting by written
consent without a meeting).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Other Securities, and that when such Shares are
accepted for payment by Purchaser, Purchaser will acquire good, marketable
and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances, and that none of such Shares and Other Securities
will be subject to any adverse claim. The undersigned, upon request, shall
execute and deliver any signature guarantees or additional documents deemed
by the Depositary or Purchaser to be necessary or desirable to complete the
sale, assignment and transfer of the Shares tendered hereby and all Other
Securities. In addition, the undersigned shall promptly remit and transfer to
the Depositary for the account of Purchaser all Other Securities in respect
of the Shares tendered hereby, accompanied by appropriate documentation of
transfer, and pending such remittance or appropriate assurance thereof
Purchaser shall be entitled to all rights and privileges as owner of such
Other Securities and may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by Purchaser in
its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated
in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions of the
Offer. The undersigned recognizes that under certain circumstances set forth
in the Offer to Purchase, Purchaser may not be required to accept for payment
any of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates evidencing Shares not tendered or not accepted for payment in
the name(s) of the registered holder(s) appearing under "Description of
Shares Tendered." Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price and/or
return any Share Certificates evidencing Shares not tendered or accepted for
payment (and accompanying documents, as appropriate) to the address(es) of
the registered holder(s) appearing under "Description of Shares Tendered." In
the event that both the Special Delivery Instructions and the Special Payment
Instructions are completed, please issue the check for the purchase price
and/or return any Share Certificates evidencing Shares not purchased
(together with accompanying documents as appropriate) in the name(s) of, and
deliver said check and/or return such Share Certificates to, the person or
persons so indicated. Shareholders tendering Shares by book-entry transfer
may request that any Shares not accepted for payment be returned by crediting
such account maintained at DTC or PDTC as such shareholder may designate by
making an appropriate entry under "Special Payment Instructions." The
undersigned recognizes that Purchaser has no obligation pursuant to the
Special Payment Instructions to transfer any Share from the name of the
registered holder(s) thereof if Purchaser does not accept for payment any of
the Shares so tendered.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased
or Share Certificates evidencing Shares not tendered or not purchased are to
be issued in the name of someone other than the undersigned.
Issue [ ] Check and/or [ ] Certificate(s) to:
Name(s)
----------------------------------------------------------------------------
(PLEASE PRINT)
----------------------------------------------------------------------------
Address
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
----------------------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased
or Share Certificates evidencing Shares not tendered or not purchased are to
be mailed to someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered."
Mail [ ] Check and/or [ ] Certificate(s) to:
Name(s)
----------------------------------------------------------------------------
(PLEASE PRINT)
----------------------------------------------------------------------------
Address
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
[ ] CHECK HERE IF ANY OF THE SHARE CERTIFICATES THAT YOU OWN AND WISH TO
TENDER HAVE BEEN LOST, DESTROYED OR STOLEN. (SEE INSTRUCTION 11.)
Number of Shares represented by lost, destroyed or stolen certificates:
5
<PAGE>
SHAREHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SIGNATURE(S) OF SHAREHOLDER(S)
(Must be signed by registered holder(s) as name(s) appear(s) on share
certificate(s) or on a security position listing or by person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or any other person acting
in a fiduciary or representative capacity, please provide the following
information. See Instruction 5.)
PLEASE PRINT OR TYPE
Dated: , 1997
Name(s):
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
(Please Print or Type)
Capacity (Full Title)
- ----------------------------------------------------------------------------
Address
- ----------------------------------------------------------------------------
(Include Zip Code)
Area Code and
Telephone Number (Home)
- ----------------------------------------------------------------------------
Area Code and
Telephone Number (Business)
- ----------------------------------------------------------------------------
Tax Identification or
Social Security Number
- ----------------------------------------------------------------------------
(Complete Substitute Form W-9 Below)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- ----------------------------------------------------------------------------
Name
- ----------------------------------------------------------------------------
(PLEASE PRINT OR TYPE)
Full Title
- ----------------------------------------------------------------------------
Name of Firm
- ----------------------------------------------------------------------------
Address
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
ZIP CODE
Area Code and
Telephone Number
- ----------------------------------------------------------------------------
Dated: , 1997
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. All signatures on this Letter of Transmittal
must be guaranteed by a participant in a Medallion Signature Guarantee
Program or any other "eligible guarantor institution" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended (each, an
"Eligible Institution"), unless (i) this Letter of Transmittal is signed by
the registered holder(s) of Shares (which term, for the purposes of this
document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares)
tendered hereby and such holder(s) has (have) not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on this Letter of Transmittal or (ii) such Shares are tendered
for the account of an Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed by shareholders
either if Share Certificates are to be forwarded herewith or if a tender of
Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or confirmation ("Book-Entry
Confirmation") of any book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility of Shares delivered by book-entry transfer as
well as a properly completed and duly executed Letter of Transmittal, must be
received by the Depositary, at one of the addresses set forth herein prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase). If
Share Certificates are forwarded to the Depositary in multiple deliveries, a
properly completed and duly executed Letter of Transmittal must accompany
each such delivery. Shareholders whose Share Certificates are not immediately
available, who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date or who cannot comply
with the book-entry transfer procedures on a timely basis may tender their
Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in Section 3
of the Offer to Purchase. Pursuant to such procedure, (i) such tender must be
made by or through an Eligible Institution, (ii) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form
provided by Purchaser, must be received by the Depositary prior to the
Expiration Date, and (iii) the Share Certificates evidencing all physically
tendered Shares (or Book-Entry Confirmation with respect to such Shares), as
well as a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within three American Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery, all as provided in
Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARES AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES AND
DOCUMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted. All
tendering shareholders, by execution of this Letter of Transmittal (or
facsimile thereof), waive any right to receive any notice of the acceptance
of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers and/or the number of
Shares tendered should be listed on a separate signed schedule and attached
hereto.
4. Partial Tenders. (Not applicable to shareholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any Share
Certificate submitted are to be tendered, fill in the number of Shares which
are to be tendered in the box entitled "Number of Shares Tendered." In such
case, new Share Certificate(s) evidencing the remainder of the Shares that
were evidenced by the old Share Certificate(s) will be sent to the registered
holder, unless otherwise provided in the appropriate box on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by Share Certificates delivered to the Depositary will be deemed
to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the Share Certificate(s) without
alteration, enlargement or any change whatsoever. If any of the Shares
tendered hereby are held of record by two or more persons, all such persons
must sign this Letter of Transmittal.
7
<PAGE>
If any tendered Shares are registered in different names on several Share
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares evidenced by Share Certificates listed and transmitted hereby, no
endorsements of Share Certificates or separate stock powers are required
unless payment is to be made to or Share Certificates evidencing Shares not
tendered or purchased are to be issued in the name of a person other than the
registered holder(s), in which case the Share Certificate(s) evidencing the
Shares tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered
holder(s) appear(s) on such Share Certificate(s). Signatures on such
certificates and stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names
of the registered holder or holders appear on the Share Certificate(s).
Signatures on such Share Certificate(s) or stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal or any Share Certificates or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
agent, officer of a corporation or any person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of such person's authority so to
act must be submitted.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6,
Purchaser will pay or cause to be paid any stock transfer taxes with respect
to the transfer and sale of Shares to it or its order pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or if Share
Certificates evidencing Shares not tendered or purchased are to be registered
in the name of, any person other than the registered holder(s), or if Share
Certificates evidencing tendered Shares are registered in the name of any
person other than the person (s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered
holder(s) or such other person) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence
of the payment of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER
OF TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
such check or any such Share Certificate is to be sent and/or any Share
Certificates are to be returned to someone other than the signer above, or to
the signer above but at an address other than that shown in the box entitled
"Description of Shares Tendered" above, the appropriate boxes on this Letter
of Transmittal should be completed. Shareholders tendering Shares by
book-entry transfer may request that Shares not purchased be credited to such
account maintained at any of the Book-Entry Transfer Facilities as such
shareholder may designate under "Special Delivery Instructions." If no such
instructions are given, any such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facilities designated above.
8. Request for Assistance or Additional Copies. Requests for assistance
may be directed to, or additional copies of the Offer to Purchase, this
Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained
from, the Information Agent or the Dealer Manager at the telephone numbers
and address set forth below. Shareholders may also contact their broker,
dealer, commercial bank or trust company.
9. Waiver of Conditions. Except as otherwise provided in the Offer to
Purchase, Purchaser reserves the right in its sole discretion to waive in
whole or in part at any time or from time to time any of the specified
conditions of the Offer or any defect or irregularity in tender with regard
to any Shares tendered.
10. Substitute Form W-9. The tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"),
generally the shareholder's Social Security Number or Employer Identification
Number, on Substitute Form W-9, which is provided under "Important Tax
Information" below, and to certify, under penalties of perjury, whether he or
she is subject to backup withholding of federal income tax. If a tendering
shareholder is subject to backup withholding, he or she must cross out item
(2) of the Certification Box on Substitute Form W-9. Failure to provide the
information on Substitute Form W-9 may subject the tendering shareholder to
31% federal income tax withholding on the
8
<PAGE>
payment of the purchase price. If the tendering shareholder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future, he or she should write "Applied For" in the space provided
for the TIN in Part I, sign and date the Substitute Form W-9 and sign and
date the Certificate of Awaiting Taxpayer Identification Number. If "Applied
For" is written in Part I and the Depositary is not provided with a TIN
within 60 days, the Depositary will withhold 31% of payments for surrendered
Shares thereafter until a TIN is provided to the Depositary.
11. Mutilated, Lost, Stolen or Destroyed Certificates. Any holder of a
Share Certificate whose certificate(s) has been mutilated, lost, stolen or
destroyed should (i) complete this Letter of Transmittal and check the
appropriate box on this Letter of Transmittal and (ii) complete and return to
the Depositary any additional documentation, including the posting of any
indemnity bond, requested by the Depositary. If required by Purchaser, the
holder will be required to post a bond in such reasonable amount as Purchaser
may direct as indemnity against any claim that may be made against Parent,
Purchaser or any of their respective affiliates with respect to such
certificate(s).
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, OR AN AGENT'S MESSAGE IN THE CASE OF A
BOOK-ENTRY DELIVERY, TOGETHER WITH CERTIFICATES (OR BOOK-ENTRY CONFIRMATION)
AND ALL OTHER REQUIRED DOCUMENTS OR A PROPERLY COMPLETED AND DULY EXECUTED
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR
TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal tax law, a shareholder whose tendered Shares are accepted
for payment is required to provide the Depositary (as payor) with such
shareholder's correct TIN on Substitute Form W-9 below. If such shareholder
is an individual, the TIN is such shareholder's Social Security Number. If
the Depositary is not provided with the correct TIN or an adequate basis for
exemption, the shareholder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments that are made to such
shareholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding in an amount equal to 31% of the gross proceeds
resulting from the Offer.
Certain shareholders (including, among others, certain corporations and
foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that shareholder must submit an IRS Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9
for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the shareholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the
Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of his or her correct TIN by completing the
Substitute Form W-9 contained herein, certifying that the TIN provided on the
Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN)
and that (1) the shareholder is exempt from backup withholding, (2) the
shareholder has not been notified by the Internal Revenue Service that he or
she is subject to backup withholding as a result of failure to report all
interest or dividends, or (3) the Internal Revenue Service has notified the
shareholder that he or she is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the Social Security
Number or Employer Identification Number of the record owner of the Shares.
If the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the tendering shareholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future,
he or she should write "Applied For" in the space provided for the TIN in
Part I, sign and date the Substitute Form W-9 and sign and date the
Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% of all payments of the purchase price
until a TIN is provided to the Depositary.
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS DEPOSITARY
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN IN THE BOX ----------------------------
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING Social Security
DEPARTMENT OF THE TREASURY BELOW. or
INTERNAL REVENUE SERVICE -------------------------------------------- Employer Identification
NAME (Please Print) Number
-------------------------------------------- ----------------------------
ADDRESS (If awaiting TIN write
-------------------------------------------- "Applied For")
CITY STATE ZIP CODE
PAYOR'S REQUEST FOR PART II--For Payees NOT subject to backup withholding, see the enclosed
TAXPAYER IDENTIFICATION Guidelines for Certification of Taxpayer Identification Number on
NUMBER (TIN) Substitute Form W-9 and complete as instructed therein.
AND CERTIFICATION CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
1. The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be issued
to me); and
2. I am not subject to backup withholding because either (a) I am
exempt from backup withholding, (b) I have not been notified by
the Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS --You must cross out item (2) above if you
have been notified by the IRS that you are subject to backup withholding
because of under-reporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to
backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out
item (2).
(Also see instructions in the enclosed Guidelines.)
- ----------------------------------------------------------------------------------------------------------
Signature: Dated: , 1997
------------------------- ----------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9.
10
<PAGE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will
be withheld until I provide a number.
- -------------------------------- ------------------------
Signature(s): Dated:
----------------------------------------------------------------------------
11
<PAGE>
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each shareholder of the Company or
his broker, dealer, commercial bank or other nominee to the Depositary at one
of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand: By Overnight Courier: By Mail:
120 Broadway -13th Floor Mail Drop Reorg. Department P.O. Box 3301
New York, NY 10271 85 Challenger Road South Hackensack, NJ 07606
Attn: Reorganization Department Ridgefield Park, NJ 07660 Attn: Reorganization Department
</TABLE>
Other information
By Facsimile
(for eligible institutions only):
(201) 329-8936
Confirm facsimile by telephone only:
(201) 296-4860
Any questions or requests for assistance or additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at its telephone numbers
and location listed below. You may also contact your broker, dealer,
commercial bank or trust company or nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE: (800) 322-2885
12
<PAGE>
EXHIBIT (A)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF
COMMON STOCK
OF
STARRETT CORPORATION
As set forth in Section 3 of the Offer to Purchase (as defined below),
this form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if the certificates representing shares
of common stock, par value $1.00 per share (collectively, the "Shares"), of
Starrett Corporation are not immediately available or time will not permit
all required documents to reach the Depositary prior to the Expiration Date
(as defined in the Offer to Purchase) or the procedures for book-entry
transfer cannot be completed on a timely basis. Such form may be delivered by
hand or transmitted by facsimile transmission or mail to the Depositary and
must include a guarantee by an Eligible Institution (as defined in Section 3
of the Offer to Purchase). See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand: By Overnight Courier: By Mail:
120 Broadway 13th Floor 85 Challenger Rd P.O. Box 3301
New York, NY 10271 Ridgefield Park, N.J. 07660 South Hackensack, N.J. 07606
Attn: Reorganization Department Mail Drop Reorganization Department Attn: Reorganization Department
</TABLE>
Other Information
By Facsimile
(for eligible institutions only):
201-329-8936
Confirm facsimile by telephone only:
201-296-4860
------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN AS LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Startt Acquisition, Inc., a New York
corporation and a wholly-owned subsidiary of Startt Acquisition, LLC, a
Delaware limited liability company, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated October 23, 1997 (the
"Offer to Purchase") and the related Letter of Transmittal (which, as amended
or supplemented from time to time, together constitute the "Offer"), receipt
of which is hereby acknowledged, the number of Shares indicated below
pursuant to the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase.
Number of Shares:
-----------------------------------------------------------
Share Certificate Numbers (if available):
-----------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
If Share(s) will be delivered by book-entry transfer, check one box.
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
-------------------------------------------------------------
Dated: , 1997
----------------------------------------------------------------
Name(s) of Record Holder(s):
-----------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Please Type or Print
Address(es):
----------------------------------------------------------------
- -----------------------------------------------------------------------------
Zip Code
Area Code and Telephone Number:
---------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Signature(s)
Dated: , 1997
----------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a participant in the Security Transfer Agents Medallion
Program or any other "eligible guarantor institution" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended (each, an
"Eligible Institution"), hereby guarantees that either the certificates
representing the Shares tendered hereby in proper form for transfer, or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (pursuant to procedures set forth in Section 3 of
the Offer to Purchase), together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message (as
defined in the Offer to Purchase)) and any other documents required by the
Letter of Transmittal, will be received by the Depositary at one of its
addresses set forth above within three (3) American Stock Exchange trading
days after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal,
certificates for Shares and any other required documents to the Depositary
within the time period shown herein. Failure to do so could result in a
financial loss to such Eligible Institution.
- -----------------------------------------------------------------------------
Name of Firm:
- -----------------------------------------------------------------------------
Address:
- -----------------------------------------------------------------------------
Zip Code
Area Code and
Telephone Number:
-----------------------------------------------------------
- -----------------------------------------------------------------------------
Authorized Signature
Name:
-----------------------------------------------------------------------
Please Type or Print
Title:
----------------------------------------------------------------------
Dated: , 1997
----------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES ARE TO BE DELIVERED WITH THE LETTER
OF TRANSMITTAL.
2
<PAGE>
EXHIBIT (A)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
STARRETT CORPORATION
BY
STARTT ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
STARTT ACQUISITION, LLC
AT
$12.25 NET PER SHARE
- ------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON NOVEMBER 20, 1997, UNLESS THE OFFER IS EXTENDED.
- ------------------------------------------------------------------------------
October 23, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Startt Acquisition, Inc., a New York corporation ("Purchaser") and a
wholly-owned subsidiary of Startt Acquisition, LLC, a Delaware limited
liability company ("Parent"), has commenced an offer to purchase all
outstanding shares of common stock, par value $1.00 per share (collectively,
the "Shares"), of Starrett Corporation, a New York corporation (the
"Company"), at $12.25 per Share, net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in the Offer to
Purchase dated October 23, 1997 (the "Offer to Purchase") and in the related
Letter of Transmittal (which, as amended or supplemented from time to time,
together constitute the "Offer"), copies of which are enclosed herewith.
For your information and for forwarding to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee, we
are enclosing the following documents:
1. Offer to Purchase;
2. Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents cannot be delivered to the
Depositary by the Expiration Date (as defined in the Offer to Purchase);
4. A form of letter which may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard
to the Offer;
5. A return envelope addressed to ChaseMellon Shareholder Services,
L.L.C., as the Depositary.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 16, 1997 (the "Merger Agreement"), by and between Purchaser and
the Company. The Merger Agreement provides that, among other things,
following the consummation of the Offer and the satisfaction or waiver of the
other conditions set forth in the Merger Agreement, Purchaser will be merged
with and into the Company (the "Merger"). At the effective time of the
Merger, each
<PAGE>
outstanding Share (other than Shares held in the treasury of the Company,
owned by Parent or Purchaser or any held by shareholders who perfect their
dissenters' rights under New York law) will be converted into the right to
receive the per Share price paid in the Offer, without interest.
The Board of Directors of the Company unanimously has approved the Merger
Agreement, the Offer and the Merger, determined that the Offer and the Merger
are fair to, and in the best interests of, the shareholders of the Company,
and recommends acceptance of the Offer and approval and adoption of the
Merger Agreement and the Merger by the shareholders of the Company.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will be deemed to have accepted for
payment, and will pay for, all Shares validly tendered and not properly
withdrawn by the Expiration Date (as defined in the Offer to Purchase) if, as
and when the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance of the tenders of such Shares for payment pursuant to
the Offer. Payment for Shares purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates evidencing
such Shares or timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at one of the Book-Entry Transfer Facilities
(as defined in the Offer to Purchase), (ii) a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) or, in the case of a
book-entry transfer, Agent's Message (as defined in the Offer to Purchase)
and (iii) any other documents required by the Letter of Transmittal.
In order to tender Shares pursuant to the Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message (in the case of any book-entry
transfer), and any other documents required by the Letter of Transmittal,
should be sent to the Depositary, and either certificates representing the
tendered Shares should be delivered or such Shares must be delivered to the
Depositary pursuant to the procedures for book-entry transfers, all in
accordance with the instructions set forth in the Letter of Transmittal and
the Offer to Purchase.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to deliver their certificates on or prior to the Expiration Date or
to comply with the book-entry transfer procedures on a timely basis, a tender
may be effected by following the guaranteed delivery procedures specified in
Section 3 of the Offer to Purchase.
Neither Parent nor Purchaser will pay any fees or commissions to any
broker, dealer or other person (other than the Information Agent and the
Depositary as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Purchaser will,
however, upon request, reimburse brokers, dealers, commercial banks and trust
companies for reasonable expenses incurred by them in forwarding materials to
their customers. Purchaser will pay all stock transfer taxes applicable to
its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the
Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON NOVEMBER 20, 1997, UNLESS THE OFFER IS
EXTENDED.
Any inquiries you may have with respect to the Offer may be addressed to
the Information Agent at the address and telephone numbers set forth on the
back cover page of the Offer to Purchase. Requests for additional copies of
the enclosed materials may be directed to the Information Agent.
Very truly yours,
Startt Acquisition, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY PERSON THE AGENT OF PURCHASER, PARENT, THE COMPANY, ANY AFFILIATE OF THE
COMPANY, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF
THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH
AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
EXHIBIT (A)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
STARRETT CORPORATION
AT
$12.25 NET PER SHARE
BY
STARTT ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY OF
STARTT ACQUISITION, LLC
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON NOVEMBER 20, 1997, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated October 23
1997 (the "Offer to Purchase") and the related Letter of Transmittal (which,
as amended or supplemented from time to time, together constitute the
"Offer") and other materials relating to the Offer by Startt Acquisition,
Inc., a New York corporation ("Purchaser") and a wholly-owned subsidiary of
Startt Acquisition, LLC, a Delaware limited liability company ("Parent"), to
purchase all of the outstanding shares of common stock, par value $1.00 per
share (collectively, the "Shares"), of Starrett Corporation, a New York
corporation (the "Company"), at $12.25 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
the Offer. This material is being sent to you as the beneficial owner of
Shares held by us for your account but not registered in your name. A tender
of such Shares can be made only by us as the holder of record and pursuant to
your instructions. The Letter of Transmittal accompanying this letter is
furnished to you for your information only and cannot be used by you to
tender Shares held by us for your account.
We request instructions as to whether you wish to have us tender any or
all of the Shares held by us for your account, upon the terms and subject to
the conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $12.25 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions of the
Offer.
2. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on November 20, 1997, unless the Offer is extended.
3. The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of October 16, 1997 (the "Merger Agreement"), by and between
Purchaser and the Company. The Merger Agreement provides that, among other
things, following the consummation of the Offer and the satisfaction or
waiver of the other conditions set forth in the Merger Agreement,
Purchaser will be merged with and into the Company (the "Merger"). At the
effective time of the Merger, each outstanding Share (other than Shares
held in the treasury of the Company, owned directly or indirectly by the
Company, held by the Purchaser or Parent or any held by shareholders who
perfect their dissenters' rights under New York law) will be converted
into the right to receive the per Share price paid in the Offer, without
interest.
4. The Board of Directors of the Company unanimously has approved the
Merger Agreement, the Offer and the Merger, determined that the Offer and
the Merger are fair to, and in the best interests of, the shareholders of
the Company, and recommends acceptance of the Offer and approval and
adoption of the Merger Agreement and the Merger by the shareholders of the
Company.
<PAGE>
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer, that
number of Shares which, when added to the Shares beneficially owned by
Purchaser or its affiliates, together with the Shares tendered by certain
shareholders of the Company pursuant to an agreement with Purchaser,
represent at least two-thirds of the Shares outstanding on a fully-diluted
basis (the "Minimum Tender Condition"). Subject to the terms of the Merger
Agreement, the Offer is also subject to other terms and conditions,
including receipt of certain regulatory approvals set forth in the Offer
to Purchase. Pursuant to the Merger Agreement, Purchaser has agreed to
extend and re-extend the Offer from time to time for up to ten business
days at a time until December 31, 1997, if at the initial Expiration Date
(as defined in the Offer to Purchase), or any extension thereof, all
conditions to the Offer have not been satisfied or waived, unless in the
reasonable judgment of Parent or Purchaser, such conditions are incapable
of being satisfied before December 31, 1997. Notwithstanding the
foregoing, Parent and Purchaser may, in their judgment, extend and
re-extend the Offer, from time to time, but in no event beyond December
31, 1997 if the Company elects to terminate the Merger Agreement. Any and
all conditions of the Offer, other than the Minimum Tender Condition, may
be waived by Purchaser.
6. Any stock transfer taxes applicable to the sale of Shares to Purchaser
pursuant to the Offer will be paid by Purchaser, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
In order to tender Shares pursuant to the Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or (in the case of any book-entry transfer) an Agent's
Message (as defined in the Offer to Purchase) and any other documents
required by the Letter of Transmittal, should be sent to ChaseMellon
Shareholder Services, L.L.C., the Depositary, and either certificates
representing the tendered Shares should be delivered or such Shares must be
delivered to the Depositary pursuant to the procedures for book-entry
transfers, all in accordance with the instructions set forth in the Letter of
Transmittal and the Offer to Purchase.
The Offer is being made to all holders of Shares. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
in any jurisdiction in which the making of the Offer or acceptance thereof
would not be in compliance with the laws of such jurisdiction. However,
Purchaser may, in its discretion, take such action as it may deem necessary
to make the Offer in any jurisdiction and extend the Offer to holders of
Shares in such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of Purchaser by one or
more registered brokers or dealers licensed under the laws of such
jurisdictions.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing and returning to us
the instruction form set forth below. Please forward your instructions to us
in ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares, all such
Shares will be tendered unless otherwise specified on the instruction form
set forth below.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
STARRETT CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated October 23, 1997 and the related Letter of
Transmittal, in connection with the offer by Startt Acquisition, Inc., a New
York corporation and a wholly-owned subsidiary of Startt Acquisition, LLC, a
Delaware limited liability company, to purchase for cash all outstanding
shares of common stock, par value $1.00 per share (collectively, the
"Shares"), of Starrett Corporation, a New York corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer and the related Letter of Transmittal.
- -----------------------------------------------------------------------------
DATED: , 1997
NUMBER OF SHARES TO BE TENDERED:
__________ SHARES*
----------------------------------------------------------------------------
SIGNATURE(S)
----------------------------------------------------------------------------
PLEASE PRINT NAME(S)
----------------------------------------------------------------------------
PLEASE PRINT ADDRESS(ES)
----------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER(S)
----------------------------------------------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
- ------------
* I (WE) UNDERSTAND THAT IF I (WE) SIGN THIS INSTRUCTION FORM WITHOUT
INDICATING A LESSER NUMBER OF SHARES IN THE SPACE ABOVE, ALL SHARES HELD
BY YOU FOR MY (OUR) ACCOUNT WILL BE TENDERED.
- -----------------------------------------------------------------------------
3
<PAGE>
EXHIBIT (A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
GIVE THE
SOCIAL
FOR THIS TYPE ACCOUNT: SECURITY
NUMBER OF--
- ------------------------------------------------------------------------
<S> <C>
1.An individual's account The individual
2.Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3.Husband and wife The actual owner of the
(joint account) account or, if joint funds,
either person(1)
4.Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5.Adult and Minor (joint account) The adult or, if the minor
is the only contributor,
the minor(1)
6.Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person(3)
minor, or incompetent person
7.a.The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b.So-called trust account that is not The actual owner(1)
a legal or valid trust under State
law
8.Sole proprietorship account The Owner(4)
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
GIVE THE
EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- -----------------------------------------------------------------------------
<S> <C>
9.A valid trust, estate, or pension Legal entity (Do not furnish the
fund identifying number of the personal
representative or trustee unless
the legal entity itself is not
designated in the account title)(5)
10.Corporate account The corporation
11.Religious, charitable, or The organization
educational organization account
12.Partnership account held in the The partnership
name of the business
13.Association, club, or other The organization
tax-exempt organization
14.A broker or registered nominee The broker or nominee
15.Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school
district, or prison) that
receives agricultural program
payments
</TABLE>
- -----------------------------------------------------------------------------
<PAGE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN") or you don't know
your number, obtain Form SS-5, Application for a Social Security Number Card,
or Form SS-4, Application for Employer Identification Number, at the local
office of Social Security Administration or the Internal Revenue Service
("IRS") and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a) or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government,
or agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of issue.
Exempt payees described above nevertheless should file Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TIN, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER.
IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND
DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding. For details, see the Treasury regulations under sections 6041,
6041A(a), 6045, 6050A. (All "section" references herein are
to the Internal Revenue Code of 1986)
PRIVACY ACT NOTICE--Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does
not furnish a TIN to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TIN--If you fail to furnish your TIN to a
payer, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS.
<PAGE>
FOR RELEASE: OCTOBER 17, 1997 LEWIS WEINFELD
(212) 751-3100
- ---------------------------------------------------------------------------
Starrett Corporation (SHO) (AMEX) announced today that it had entered
into a definitive Merger Agreement with an entity owned by affiliates of
Lawrence Ruben Company, Inc. Blackacre Capital Group, Amroc Investments and
Argent Ventures, under which the buying group will make a cash tender
offer for all of the outstanding shares of the Company's Common Stock at
a purchase price of $12.25 per share. The Company stated that it was expected
that the tender offer will be commenced on October 23, 1997. The transaction
is subject to the tender of a minimum of 66-2/3% of the Company's shares,
certain regulatory and contractual approvals, and certain other conditions.
Owners of approximately 52% of the Company's outstanding Common Stock have
agreed to tender their shares.
Mr. Paul Milstein, Chairman of Starrett, stated that:
"We are pleased to announce the acquisition
of our Company by this prestigious buying
group at what we believe to be an excellent
price for our shareholders."
The Company noted that a prior bidder had threatened to challenge the
previously announced termination of a merger agreement with entities
controlled by him. The Company stated that it believed that its termination
of such agreement had been proper, and it intended to vigorously contest any
such challenge.
Starrett Corporation owns HRH Construction Corporation, Grenadier Realty
Corp., and Levitt Corporation.
<PAGE>
EXHIBIT (A)(8)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The offer is made solely by the
Offer to Purchase dated October 23, 1997 and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser (as defined
below) is not aware of any jurisdiction in which the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer, Purchaser will make a good faith effort to comply
with such statute. If, after such good faith effort, Purchaser cannot comply
with such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) holders of Shares in such state.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF STARRETT CORPORATION
AT
$12.25 NET PER SHARE IN CASH
BY
STARTT ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY OF
STARTT ACQUISITION, LLC
Startt Acquisition, Inc. (the "Purchaser"), a New York corporation and a
wholly-owned subsidiary of Startt Acquisition, LLC, a Delaware limited
liability company ("Parent"), hereby offers to purchase all of the
outstanding shares of common stock, $1.00 par value per share (the "Shares"),
of Starrett Corporation, a New York corporation (the "Company"), at a price
of $12.25 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to
Purchase dated October 23, 1997 (the "Offer to Purchase") and in the related
Letter of Transmittal (which, as amended from time to time, together
constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON NOVEMBER 20, 1997 UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 16, 1997 (the "Merger Agreement"), by and between the Company
and Purchaser. The Merger Agreement provides, among other things, for the
making of the Offer and that, as promptly as practicable following the
completion of the Offer and the satisfaction or waiver of certain conditions,
including the purchase of Shares pursuant to the Offer and the approval and
adoption of the Merger Agreement by the shareholders of the Company in
accordance with the New York Business Corporation Law, Purchaser will be
merged with and into the Company (the "Merger"), with the Company as the
surviving corporation. In the Merger, each issued and outstanding Share
(other than Dissenting Shares (as defined in the Offer to Purchase)) not
owned directly or indirectly by the Company will be converted into and
represent the right to receive, upon the surrender of the certificate
formerly representing such Shares, $12.25 in cash or any higher price that
may be paid per Share in the Offer, without interest and less any required
withholding taxes; provided that any Shares owned by Parent or Purchaser will
be cancelled and the Merger Price will not be paid in respect of any such
Shares.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER, HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS, OF THE SHAREHOLDERS OF THE
COMPANY, AND RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE MERGER BY THE SHAREHOLDERS OF THE COMPANY.
The purpose of the Offer is to acquire all the outstanding Shares and
thereby to obtain control of the Company. The Offer, as the first step in the
acquisition of the Company, is intended to facilitate the acquisition of all
the Shares. Consummation of the Offer will provide Purchaser with at least
two-thirds of the equity interests in the Company. The Merger will allow
Purchaser to acquire all Shares not tendered and purchased pursuant to the
Offer or otherwise. Pursuant to the Merger, each then outstanding Share
(other than Shares owned directly or indirectly by the Company, Shares held
in the treasury of the Company and Shares owned by shareholders who perfect
appraisal rights under New York law) would be converted into the right to
receive an amount in cash equal to the price per Share paid by the Purchaser
pursuant to the Offer; provided that any Shares owned by Parent or Purchaser
will be cancelled and the Merger Price will not be paid in respect
<PAGE>
of any such Shares. The acquisition of the entire equity interest in the
Company has been structured as a cash tender offer and a cash merger in order
to provide a prompt and orderly transfer of ownership of the Company from the
public shareholders of the Company to Parent. The purchase of Shares pursuant
to the Offer will increase the likelihood that the Merger will be
consummated.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW), A
NUMBER OF SHARES, WHICH, WHEN ADDED TO THE SHARES THEN BENEFICIALLY OWNED BY
PURCHASER OR ITS AFFILIATES, TOGETHER WITH THE SHARES TENDERED PURSUANT TO
THE SHAREHOLDERS AGREEMENT DATED AS OF OCTOBER 16, 1997, BY AND AMONG
PURCHASER AND CERTAIN SHAREHOLDERS OF THE COMPANY, CONSTITUTES AT LEAST
TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING ON A FULLY-DILUTED BASIS
(THE "MINIMUM TENDER CONDITION"); (II) ALL REQUIRED APPROVALS BY THE UNITED
STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; AND (III) SATISFACTION OF
THE OTHER CONDITIONS SPECIFIED IN THE OFFER TO PURCHASE. SEE SECTION 15 OF
THE OFFER TO PURCHASE.
Pursuant to the Merger Agreement, and subject to the terms and conditions
of the Offer, if any Condition (as defined in the Offer to Purchase) is not
satisfied on the initial Expiration Date, and the Merger Agreement has not
been terminated in accordance with its terms, Purchaser shall extend (and
re-extend) the Offer to provide time to satisfy such Condition (or
Conditions) through the Final Termination Date unless a reasonable,
well-informed person would conclude that such Condition is incapable of being
satisfied prior to the Final Termination Date, in which case Purchaser may
terminate the Offer and return all tendered Shares to tendering shareholders.
Purchaser may also waive such Condition and, subject to any requirement to
extend the period of time during which the Offer is open, purchase all Shares
validly tendered and not withdrawn by the Expiration Date or, until
satisfaction or waiver of the Conditions to the Offer, delay acceptance for
payment of (whether or not the Shares have theretofore been accepted for
payment), or payment for, any Shares tendered and not withdrawn, subject to
applicable law. The "Final Termination Date" shall be December 31, 1997. Any
extension of the Offer beyond the Final Termination Date would require the
mutual agreement of the Company and Purchaser.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Thursday, November 20, 1997, unless and until Purchaser shall have extended
the period of time during which the Offer is open, in which event the term
"Expiration Date" shall refer to the latest time and date at which the Offer,
as so extended by Purchaser, shall expire.
Subject to the terms of the Merger Agreement, Purchaser expressly reserves
the right to (i) amend the terms and conditions of the Offer in any respect
by giving oral or written notice of such amendment to the Depositary (as
defined in the Offer to Purchase) and (ii) extend the period of time during
which the Offer is open and thereby delay acceptance for payment of, and the
payment for, any Shares, by giving oral or written notice of such execution
to the Depositary. Any extension, delay, termination, waiver or amendment
shall be followed as promptly as practicable by public announcement to be
made no later than 9:00 am, New York City time, on the next business day
after the previously scheduled Expiration Date. During such extension, all
Shares previously tendered and not properly withdrawn shall remain subject to
the Offer. Without the consent of the Company, however, no amendment may be
made which (A) decreases the price per Share or changes the form of
consideration payable in the Offer, (B) decreases the number of Shares
sought, or (C) changes any of the Conditions or imposes additional conditions
to the Offer or amends any other term of the Offer in any manner adverse to
the holders of Shares.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment tendered Shares if, as and when Purchaser gives oral or written
notice to the Depositary of its acceptance of the tenders of such Shares.
Payment for Shares purchased pursuant to the Offer will be made by deposit of
the purchase price with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payment from Purchaser and
transmitting such payments to tendering shareholders. In all cases, payment
for Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates evidencing such Shares
("Share Certificates") or timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase) pursuant to the procedures
set forth in Section 3 of the Offer to Purchase; (ii) a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), or in the
case of a book-entry transfer, an Agent's Message (as defined in Section 3 of
the Offer to Purchase); and (iii) any other required documents. Accordingly,
payment may be made to tendering shareholders at different times if delivery
of the Shares and other required documents occur at different times. Under no
circumstances will interest be paid by Purchaser on the consideration paid
for Shares pursuant to the Offer, regardless of any extension of the Offer or
delay in making such payment.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date only pursuant to the following provisions.
Thereafter, such tenders are irrevocable, except that they may be withdrawn
at any time after
2
<PAGE>
December 21, 1997 if they have not previously been accepted for payment as
provided in the Offer to Purchase. To be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer
to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered holder, if different from that of
the person who tendered such Shares. If Share Certificates evidencing the
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution (as defined in the Offer to Purchase) (except in the
case of Shares tendered by an Eligible Institution), must be submitted prior
to the release of such Shares. In addition, such notice must specify, in the
case of Shares tendered by delivery of Share Certificates, the name of the
registered holder (if different from that of the tendering shareholder) and
the serial numbers shown on the particular Share Certificates evidencing the
Shares to be withdrawn, or, in the case of Shares tendered by book-entry
transfer, the name and number of the account at one of the Book-Entry
Transfer Facilities to be credited with the withdrawn Shares. Withdrawals may
not be rescinded, and Shares withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered by again following the appropriate procedures described in the
Offer to Purchase at any time prior to the Expiration Date. All questions as
to the form and validity (including time of receipt) of notices of withdrawal
will be determined by Purchaser, in its sole discretion, whose determination
will be final and binding. None of Purchaser, Parent, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed to record holders of
Shares and will be furnished to brokers, banks and similar persons whose
names, or the names of whose nominees, appear on the shareholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
The Offer to Purchase and the Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance, and requests for copies of the
Offer to Purchase, the Letter of Transmittal and other tender offer
materials, may be directed to the Information Agent at its address and
telephone numbers set forth below. Holders of Shares may also contact
brokers, dealers, commercial banks and trust companies for additional copies
of the Offer to Purchase, the Letter of Transmittal or other tender offer
materials. No fees or commissions will be payable to brokers, dealers or
other persons for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL-FREE (800) 322-2885
3
<PAGE>
October 16, 1997
Startt Acquisition, LLC.
c/o Lawrence Ruben Company
600 Madison Avenue
New York, NY 10022
RE: SENIOR ACQUISITION FINANCING - STARRETT CORPORATION
Gentlemen:
The purpose of this letter is to set forth the terms and conditions upon which
Credit Suisse First Boston Mortgage Capital LLC (the "Lender" or "CSFB") will
provide up to a $66 million financing (the "Financing") to Startt Acquistion,
Inc. ("Star"), a newly formed wholly owned, bankruptcy remote subsidiary of
Startt Acquisition, LLC ("Parent"), a newly formed single-purpose
bankruptcy-remote entity whose members shall include affiliates of Lawrence
Ruben Company, Inc., Blackacre Capital Group, Amroc Investments, and Argent
Ventures, at consumation of Star's tender offer (the "Offer") to purchase up to
all of the issued and outstanding shares of common stock of Starrett
Corporation ("Starrett") pursuant to an agreement and plan of merger among Star
and Starrett (the "Merger Agreement"), to fund Star's obligation to purchase
such shares. Following consummation of the Offer upon the terms and conditions
of the Merger Agreement, Star will be merged with and into Starrett, with
Starrett being the surviving corporation after the merger (the "Merger"). Star,
Parent, their members and Starrett are hereinafter referred to as the Credit
Parties or the Company. The terms of the Financing are as follows:
BORROWER: Prior to the Merger, Star, and from and after the
Merger, Starrett.
GUARANTORS: The Financing will be guaranteed by all
subsidiaries of Starrett, other than those
subsidiaries, identified to and reasonably
approved by Lender, which for regulatory and/or
contractual reasons cannot guarantee the
Financing.
COLLATERAL: First priority security interest in all of the
shares of the common and preferred stock of
Starrett after giving effect to the Merger and a
first priority security interest in (or to the
extent subject to a prior security interest, a
second priority interest in) all of the shares of
the capital stock or other equity interests of
all Starrett's present and future, direct and
indirect subsidiaries, other than those
subsidiaries identified to and reasonably
approved by the Lender,
<PAGE>
Startt Acquisition, LLC.
October 16, 1997
Page 2
the stock or other equity interests of which for
regulatory reasons cannot be pledged to secure
the Financing. Stock and equity interests not
pledged will be subject to a negative pledge in
favor of the Lender.
The Financing shall be non-recourse to the
principals of the Credit Parties except for
customary exclusions and exceptions.
SERVICER: CSFB, or other entity selected by CSFB. The cost
of the Servicer, which is not expected to exceed
12 basis points per annum shall be paid by the
Borrower.
FINANCING AMOUNT: The lesser of $66 million or 79.5% of total
acquisition cost of the Offer and the Merger
including expenses and working capital. Borrower
shall invest 100% of its equity before Lender
advances any sums under the Financing. Lender
reserves the right to restructure the Financing
post closing into tranches for a capital markets
transaction. Such restructuring shall retain the
overall rate, term and other business terms to
the Borrower. Such restructuring shall be at no
additional cost to Borrower. Borrower shall
cooperate with Lender to effectuate such
restructuring.
FINANCING INTEREST RATE: 1 month LIBOR on the outstanding Financing
Amount, plus 350 basis points, payable monthly in
arrears on an actual/360 basis.
TERM: 5 years
VOLUNTARY PREPAYMENT: The Financing shall be prepayable in whole or in
part at any time, provided that any partial
prepayments shall be in increments of $1,000,000
exclusive of Mandatory Prepayments (as defined
below). The amount due upon prepayment will
include the prepaid principal, any accrued
interest, any breakage costs and an amount equal
to the portion of the Exit Fee (as defined below)
on the principal amount so prepaid.
MANDATORY PREPAYMENTS: Consolidated operating cash flow of Borrower, net
of (i) any taxes resulting from the activities of
Borrower; (ii) all interest on all project
related financings, permitted working capital
lines of credit, Approved Financings (as defined
below) and the Financing; (iii) permitted capital
expenditures; (iv) permitted working capital
reserves (v) advances under any project related
financings and/or
<PAGE>
Startt Acquisition, LLC.
October 16, 1997
Page 3
Approved Financing; and (vi) amortization of
project related financings and/or Approved
Financings shall be paid as follows:
1. First, to fund permitted investments at
Levitt Corporation (the "Levitt
Investments") as well as any permitted
new real estate investments (the "New
Real Estate Investments"). Types of
projects to be included as Levitt
Investments and New Real Estate
Investments shall be negotiated as part
of the Loan Documents (as defined
below). Equity for Levitt Investments
and New Real Estate Investments shall
be in an aggregate amount not to exceed
$10 million per annum (such $10 million
equity amount for Levitt Investments
and New Real Estate Investments shall
be subject to Lender's review and
approval of Borrower's business plan
and pro forma and projected financial
statements); and
2. Second, all remaining net operating
cash flow shall be used to amortize the
Financing.
Any sales and refinancing proceeds, and any other
extraordinary cash flow (after all related
expenses) of Borrower and its subsidiaries shall
be used monthly to amortize the Financing. In the
event certain to-be determined financial
covenants are met after giving effect to sales,
refinancings or other extraordinary cash flow
events, a tiered percentage of subsequent sales,
refinancings or extraordinary cash flow ( after
all related expenses) of Borrower and its
subsidiaries shall be used monthly to amortize
the Financing
EQUITY PARTICIPATION: After giving effect to the Financing and the
Merger, Lender shall have a 10% participation in
the equity of the Company and/or the Borrower
which Equity Participation may represent a
smaller percentage of the Company in the future
due to future equity investments ("New Equity")
by the Credit Parties or any new investors.
Lender shall have the right to invest New Equity
with the Credit Parties or any new investors on a
pari passu basis. At the time of any New Equity
investment, the Company shall be revalued by an
independent third party to give effect to the New
<PAGE>
Startt Acquisition, LLC.
October 16, 1997
Page 4
Equity in order to establish new percentage
interests in the Company.
Lender and Borrower shall negotiate mutually
acceptable options whereby (i) the Lender shall
have rights to put its Equity Participation to
Borrower and (ii) Borrower shall have the right
to call Lender's Equity Participation.
STRUCTURING ADVISORY FEE: 2.0% of the Financing Amount which shall be
earned upon signing of this letter. $330,000 of
the Structuring Advisory Fee shall be payable and
non-refundable at signing of this letter (the
"Partial Structuring Advisory Fee") with the
balance payable at the earlier to occur of (i)
the closing of the Financing or (ii) December 31,
1997. Such Structuring Advisory Fee shall be
evidenced by Lender's standard documentation. The
Structuring Advisory Fee is subject to the
Break-Up Fee (as described herein).
ADDITIONAL DEBT: Borrower and its subsidiaries shall be prohibited
from incurring secondary encumbrances or
additional debt without Lender's prior approval,
except for approved financing ("Approved
Financing").
Approved Financing shall mean borrowings which
meet objective standards to be agreed upon in the
Loan Documents but will include project related
financing similar in nature to (i) current
financings at Levitt and (ii) current financing
at the Company's development properties, and
working capital lines of credit. Approved
Financing shall contemplate financing necessary
for New Real Estate Investments, Levitt
Investments and refinancing of existing project
related financing.
Lender shall have a right of first refusal (the
"Right of First Refusal"), after notice by
Borrower of the terms and conditions of an offer
to provide financing by another party, to provide
any and all Additional Financings.
<PAGE>
Startt Acquisition, LLC.
October 16, 1997
Page 5
MERGER, CONSOLIDATION, OR Neither Borrower nor any of its subsidiaries will
SALE: consolidate with any other corporation or convey,
transfer or lease substantially all of its assets
in a single transaction or a series of
transactions without the approval of Lender.
FINANCIAL COVENANTS: The Loan Documents shall contain reasonable
covenants which shall include, but not be limited
to:
o EBITDA Coverage Maintenance Test
o Leverage Maintenance Test
o Minimum Tangible Net Worth Test
o Minimum Net Working Capital Test
o Limitation on permitted investments
o Restricted Payments
o Negative Pledge
Such Financial Covenants shall reflect the
current financial condition of Starrett, the
effect of the Financing, and the future business
plans of Starrett and Star.
FINANCIAL INFORMATION: Quarterly income statements, balance sheets, and
cash flow statements for Borrower and its
subsidiaries and on a consolidated basis prepared
on a GAAP basis and certified by Borrower's chief
financial officer shall be provided to Lender on
a timely basis. An annual audited income
statement, balance sheet and cash flow statement
shall also be required.
QUARTERLY AUDITS: CSFB may, at Borrower's cost, require quarterly
review and annual audits of the Financial
Information or use Borrower's audits if prepared
by an approved accounting firm ("Approved
Accounting Firm") in order to confirm compliance
with the Financial Covenants described above.
<PAGE>
Startt Acquisition, LLC.
October 16, 1997
Page 6
An Approved Accounting Firm shall mean an
accounting firm ranked among the top ten United
States accounting firms.
EVENTS OF DEFAULT: Customary for financings of this type including
but not limited to the following (subject to-be
negotiated notice and cure periods):
o Payment Defaults;
o Incorrect material representations or
warranties;
o Failure to comply with covenants;
o Failure to perform in other material
respects under the Loan Documents and
such failure to continue for reasonable
time period;
o Cross-default to indebtedness of
Borrower or any of its subsidiaries;
o Involuntary or voluntary receivership
or bankruptcy filing by Borrower or any
of its subsidiaries;
o Certain changes in senior management or
equity ownership of Borrower;
o Insolvency of Borrower or any of its
material subsidiaries;
o Unsatisfied material judgments.
COSTS AND EXPENSES: Borrower will be responsible for all customary
loan closing expenses including, but not limited
to, the costs relating to this transaction of (i)
any required third party reports, (ii) updated
title insurance and transfer and recording fees,
if any and (iii) the fees and expenses of CSFB's
and Servicer's counsel.
EXIT FEE: 1% on the original Financing Amount (net of any
Exit Fees previously paid) payable upon any
prepayment (voluntary or mandatory) or maturity.
<PAGE>
Startt Acquisition, LLC.
October 16, 1997
Page 7
REPRESENTATIONS AND
WARRANTIES: The Borrower shall deliver to Lender certain
representations and warranties, with respect to
Starrett, regarding any material adverse changes
in the financial condition or business practices
of Starrett. from March 31, 1997 to the closing
of the Financing. Lender satisfaction with
respect to the accuracy of such representations
and warranties shall be a closing condition of
the Financing.
CONDITIONS TO FUNDING: The Closing of the Financing shall be conditioned
upon delivery, negotiation and execution of Loan
Documents (as described herein) in form and
substance satisfactory to Lender and its counsel
and payment of fees and expenses as set forth
herein. Additionally the Closing of the Financing
shall be subject to final review and approval of
the Merger Agreement, the Merger, the Offer and
all documentation with respect thereto and all
applicable regulatory requirements and approvals.
INDEMNIFICATION: The Credit Parties shall indemnify CSFB for any
and all claims arising out of this Financing.
LOAN DOCUMENTATION: All documentation governing the Financing
(collectively, the "Loan Documents") shall be in
form and content acceptable to CSFB and its
counsel and shall be supported by acceptable
representations and warranties of the Credit
Parties, conditions precedent, covenants, events
of default, opinions of Borrower's counsel and
proof of related matters that Lender and Lender's
counsel shall deem necessary. Lender expects to
be able to complete negotiations of the Loan
Documents by November 14, 1997.
TAKE-OUT OF RESTRICTED DEBT: The Company and Lender acknowledge that the
existing Chase Manhattan Bank Loan to Starrett
secured by stock of Grenadier Realty Corp. (the
"Chase Loan") and the Ohio Savings Bank Loan (The
"Ohio Savings Bank Loan") to Levitt Homes Inc.
(collectively, the Ohio Savings Bank Loan and the
Chase Loan shall be known as the "Restricted
Debt") would be callable as a result of the
merger transaction contemplated herein. In the
event the Company is unable to obtain the
necessary waivers from the Restricted Debt
lenders, Lender will explore providing financing
<PAGE>
Startt Acquisition, LLC.
October 16, 1997
Page 8
so as to repay either or both of Restricted Debt
in the event same are called by the respective
lenders on to-be negotiated terms but in no event
shall Lender be committed to provide such
replacement of the Restricted Debt. Borrower
shall pay Lender a Structuring Fee of 2% of said
loan amount upon funding of same as well as
Lenders cost of making said loan. Star will not
be required to pay such Structuring Fee if it
refinances the Restricted Debt with a third party
or with equity. In the event Lender matches a
third party quote for such Restricted Debt under
its Right of First Refusal, the refinancing by
Lender of the Restricted Debt will be on such
matched terms and conditions.
GOOD FAITH DEPOSIT: Upon execution of this letter, Borrower shall pay
to Lender a good faith deposit in the amount of
$200,000 (the "Good Faith Deposit"). The Good
Faith Deposit, less Lender's reasonable due
diligence expenses, including without limitation
fees and expenses of Lender's counsel and other
consultants, shall be applied towards payment of
the Structuring Advisory Fee.
Upon execution of this letter, the Credit Parties acknowledge they are working
solely with Lender to procure the Financing described herein. The Credit
Parties agree not to, and will cause their affiliates not to, obtain or attempt
to arrange any acquisition financing for the Merger prior to the closing of the
Financing. Should any of the Credit Parties or their affiliates breach or
violate the preceding sentence or should Borrower fail to execute the Loan
Documents after Lender has negotiated in good faith on terms substantially in
conformance with this letter, Lender will be entitled to a break-up fee (the
"Break-Up Fee") of 2.0% of the maximum original Financing amount upon demand in
lieu of the Structuring Advisory Fee plus Lender's reasonable due diligence
expenses, including without limitation fees and expenses of Lender's counsel
and other consultants after application of the Good Faith Deposit. In the event
the Credit Parties do not execute the Loan Documents due to failure to
consumate the Offer pursuant to the Merger Agreement the Break-Up Fee shall be
1.0% of the maximum original Financing amount upon demand in lieu of the
Structuring Advisory Fee plus Lender's reasonable due diligence expenses,
including without limitation fees and expenses of Lender's counsel and other
consultants after application of the Good Faith Deposit.. This letter is being
delivered with the understanding that neither it nor its substance will be
disclosed to any third person by the Credit Parties or Lender, except those who
are in confidential relationships to the Credit Parties or Lender ( including
Starrett) or as may be required by law.
Please acknowledge your acceptance of the terms and conditions relating to the
Financing described herein by executing the acknowledgment below and sending us
the Partial Structuring
<PAGE>
Startt Acquisition, LLC.
October 16, 1997
Page 9
Advisory Fee. By your signature below, you agree to proceed in good faith to
mutually acceptable Loan Documents. Once such acknowledgment is received, CSFB
will direct its counsel to prepare the Loan Documents such that we can execute
said documents on the earliest practicable date after the receipt of all
Starrett shareholder and regulatory approvals required in order to consummate
the Financing which date is expected to be November 14, 1997. In any event, the
terms proposed herein shall expire at 5:00 pm on October 16, 1997.
We look forward to working with you on this transaction. Please contact me
directly at (212) 325-2439 with any questions or comments.
Sincerely,
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
William V. Adamski
Authorized Signatory
ACKNOWLEDGED BY:
STARTT ACQUISITION, L.L.C.
By:
----------------------------------------
Title:
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
STARTT ACQUISITION, INC.
AND
STARRETT CORPORATION
OCTOBER 16, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE OFFER............................................................1
Section 1.01. The Offer.............................................1
Section 1.02. Company Actions.......................................3
ARTICLE II
THE MERGER...........................................................5
Section 2.01. The Merger Closing....................................5
Section 2.02. The Merger............................................5
Section 2.03. Certain Effects of the Merger.........................5
Section 2.04. Corporate Organization................................5
Section 2.05. Conversion of Shares..................................6
Section 2.06. Dissenting Shares.....................................6
Section 2.07. Surrender and Payment.................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STARRETT...........................7
Section 3.01. Organization and Good Standing........................7
Section 3.02. Foreign Qualification.................................7
Section 3.03. Capitalization........................................8
Section 3.04. Authority of Starrett.................................9
Section 3.05. No Conflict; Required Filings and Consents............9
Section 3.06. SEC Reports..........................................10
Section 3.07. Title to Property....................................10
Section 3.08. Compliance with Law..................................12
Section 3.09. Litigation...........................................12
Section 3.10. Taxes................................................13
Section 3.11. Insurance............................................14
Section 3.12. Contracts............................................14
Section 3.13. Employment Agreements................................16
Section 3.14. Intellectual Property................................16
Section 3.15. Employees and Related Agreements: ERISA..............16
Section 3.17. Finder's Fee.........................................22
Section 3.18. Section 912..........................................22
Section 3.19. Environmental Matters................................22
Section 3.20. Opinion of Financial Advisor.........................25
Section 3.21. Vote Required........................................25
Section 3.22. Employment Relations; Compliance.....................25
Section 3.23. Indemnification of Employees, Etc....................26
i
<PAGE>
Section 3.24. Labor Relations......................................26
Section 3.25. Tangible Property....................................26
Section 3.26. Board Recommendation.................................26
Section 3.27. Related Party Transactions...........................26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUISITION.......................27
Section 4.01. Organization and Good Standing.......................27
Section 4.02. Authority of Acquisition.............................27
Section 4.03. No Conflict; Required Filings and Consents...........28
Section 4.04. Finder's Fees........................................28
Section 4.05. Litigation...........................................28
Section 4.06. HUD..................................................28
Section 4.07. Financing............................................29
ARTICLE V
COVENANTS...........................................................29
Section 5.01. Acquisition Transactions.............................29
Section 5.02. Interim Operations...................................30
Section 5.03. Shareholder Approval.................................32
Section 5.04. Access by Acquisition................................34
Section 5.05. Hart Scott Rodino Filing.............................35
Section 5.06. No Breach of Representations and Warranties..........35
Section 5.07. Consents; Notices....................................35
Section 5.08. Reasonable Efforts...................................36
Section 5.09. Indemnification; Officers' and Directors' Insurance..36
Section 5.10. Government Agency Cooperation........................37
Section 5.11. Directors............................................37
Section 5.12. Certain Agreements of Acquisition....................38
ARTICLE VI
CONDITIONS TO ACQUISITION'S OBLIGATIONS.............................39
Section 6.01. Injunctions..........................................39
Section 6.02. Shareholder Approval.................................39
ARTICLE VII
CONDITIONS TO STARRETT'S OBLIGATIONS................................39
Section 7.01. Injunctions..........................................39
Section 7.02. Shareholder Approval.................................40
ii
<PAGE>
ARTICLE VIII
ESCROW DEPOSITS; TERMINATION.................................................40
Section 8.01. Escrow Deposits......................................40
Section 8.02. Termination..........................................40
Section 8.03. Effect of Termination................................41
ARTICLE IX
MISCELLANEOUS.......................................................43
Section 9.01. Amendment............................................43
Section 9.02. Extension: Waiver....................................43
Section 9.03. Non-Survival.........................................43
Section 9.04. Further Assurances...................................43
Section 9.05. Entire Agreement.....................................43
Section 9.06. Notices..............................................44
Section 9.07. Successors and Assigns...............................44
Section 9.08. Governing Law........................................45
Section 9.09. Gender and Person....................................45
Section 9.10. Captions.............................................45
Section 9.11. Confidentiality of Disclosures.......................45
Section 9.12. Publicity............................................45
Section 9.13. Fees and Expenses....................................45
Section 9.14. Third Parties........................................46
Section 9.15. Counterparts.........................................46
EXHIBIT A
Conditions of the Offer.............................................47
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated October 16, 1997, between STARTT
ACQUISITION, INC. ("Acquisition"), a New York corporation, and STARRETT
CORPORATION ("Starrett"), a New York corporation.
WHEREAS, the respective Boards of Directors of Acquisition and
Starrett deem it to be desirable and in the best interests of their respective
companies and shareholders to consummate the business transaction provided for
herein;
WHEREAS, in the furtherance of such transaction, Acquisition shall
make a tender offer (as it may be amended from time to time only as permitted
hereunder, the "Offer") to purchase all the issued and outstanding shares of
Common Stock of Starrett, at a price per share of $12.25, upon the terms and
subject to the conditions of this Agreement; and the Board of Directors of
Starrett has adopted resolutions approving the Offer and Merger (as
hereinafter defined) and recommending that the Company's shareholders accept
the Offer; and
WHEREAS, the respective Boards of Directors of Acquisition and
Starrett have approved the merger of Acquisition with and into Starrett,
following consummation of the Offer as set forth below (the "Merger"), upon
the terms and subject to the conditions of this Agreement, whereby each issued
and outstanding share of Common Stock of Starrett not owned directly or
indirectly by Acquisition, except shares of Common Stock held by persons who
object to the Merger and comply with all the provisions of New York law
concerning the right of holders of Common Stock to dissent from the Merger and
require appraisal of their shares of Common Stock, will be converted into the
right to receive the per share consideration paid pursuant to the Offer;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
THE OFFER
Section 1.01. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the public announcement of the execution of this Agreement,
Acquisition shall commence the Offer. The obligation of Acquisition to
consummate the Offer and accept for payment, and pay for, any shares of Common
Stock of Starrett, par value $1.00 per share (the "Starrett Shares" and each
holder thereof, a "Starrett Shareholder") tendered pursuant to the Offer shall
be subject solely to the conditions set forth in EXHIBIT A (any of which may
be waived by Acquisition in its sole discretion). Acquisition reserves the
right to modify the terms of the Offer, except that, without the consent of
Starrett, Acquisition shall not (i) reduce the number of Starrett Shares
subject to the Offer, (ii) reduce the price per Starrett Share to be paid
pursuant to the Offer, (iii) modify or add to the conditions set forth in
EXHIBIT A, (iv) except as provided in this Section 1.01(a) below, extend the
Offer, (v) change the form of consideration payable in the Offer, or (vi) make
any other change in the terms of the Offer adverse to the Starrett
Shareholders. The initial
<PAGE>
expiration date of the Offer shall be November 20, 1997. Acquisition may
extend the Offer in accordance with applicable law, but if the conditions set
forth in EXHIBIT A are satisfied as of the then scheduled expiration date of
the Offer, the Offer may be extended only with the prior written consent of
Starrett or as required by law. If the conditions set forth in EXHIBIT A are
not satisfied or waived by Acquisition as of the scheduled expiration date,
Acquisition shall extend the Offer from time to time until the earlier of the
consummation of the Offer or December 31, 1997 (provided that Acquisition
shall not be obligated to make any such extension, if a reasonable,
well-informed person would conclude that any such condition is incapable of
being satisfied by December 31, 1997). Any individual extension of the Offer
shall be for a period of no more than 10 business days. Subject to the
conditions set forth in this Agreement, Acquisition shall pay for all Starrett
Shares validly tendered and not withdrawn pursuant to the Offer immediately
after the expiration of the Offer.
(b) Starrett will not, nor will it permit any of its
Subsidiaries (as defined below) to, tender into the Offer any Shares
beneficially owned by it. For purposes of this Section 1.01 only,
"Subsidiaries" means, as to any Person (as defined below): (i) any corporation
of which at least a majority of the outstanding shares of stock having by the
terms thereof ordinary voting power to elect a majority of the board of
directors of such corporation (other than stock having such voting power
solely by reason of the happening of any contingency) is at the time directly
or indirectly owned or controlled by such Person and/or one or more of its
Subsidiaries; (ii) any limited liability company, partnership or joint venture
in which such Person or Subsidiary of such Person is a managing member,
general partner or joint venturer or of which a majority of the partnership or
other ownership interests are at the time owned by such Person and/or one or
more of its Subsidiaries; or (iii) any entity which is controlled (as defined
below) by such Person or any of its Subsidiaries. For all other purposes of
this Agreement, "Subsidiaries" shall have the meaning therefor set forth in
Article III hereof. For purposes of this Agreement, (A) "Person" means any
individual, corporation, company, voluntary association, limited liability
company, partnership, joint venture, trust, unincorporated organization or
other entity and (B) "control" (including, with correlative meanings,
"controlled by" and "under common control with") means possession, directly or
indirectly, of power to direct or cause the direction of the management or
policies of a Person (whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise).
(c) On the date of commencement of the Offer, Acquisition
shall file with the Securities and Exchange Commission (the "SEC" or the
"Commission") a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents
therein pursuant to which the Offer will be made, together with any
supplements or amendments thereof, the "Offer Documents"). The Offer Documents
shall be consistent with this Agreement, shall add no conditions to the
consummation of the Offer not set forth in EXHIBIT A and shall add no
provisions to the Offer adverse to the Starrett Shareholders. The Offer
Documents shall comply as to form in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act"), and on the date
filed with the Commission and on the date first
2
<PAGE>
published, sent or given to the Starrett Shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Acquisition with respect
to information supplied by Starrett for inclusion in the Offer Documents. Each
of Acquisition and Starrett agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
Acquisition further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the Commission and to be
disseminated to the Starrett Shareholders, in each case as and to the extent
required by applicable Federal securities laws. Acquisition shall afford
Starrett and its counsel a reasonable opportunity to review and comment on the
Offer Documents prior to the filing of the respective Offer Documents with the
Commission. Acquisition agrees to provide Starrett and its counsel in writing
with any comments Acquisition or its counsel may receive from the Commission
or its staff with respect to the Offer Documents promptly after the receipt of
such comments.
(d) All amounts payable pursuant to the Offer and the Merger
may be paid net of amounts required to be deducted and withheld with respect
to the making of such payment under the Internal Revenue Code of 1986, as
amended (the "Code") or under any provision of state, local or foreign tax
law. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the
Starrett Shareholder in respect of which such deduction and withholding was
made.
Section 1.02. Company Actions. (a) Starrett consents to the Offer and
represents that (i) the Board of Directors of Starrett (the "Board" or "Board
of Directors"), at a meeting duly called and held, has duly adopted
resolutions approving the execution, delivery and performance of this
Agreement, the Offer and the Merger, determining that the price and terms of
the Offer and Merger are fair to, adequate and in the best interests of,
Starrett and Starrett's shareholders and recommending that Starrett's
shareholders accept the Offer and that Starrett's shareholders approve and
adopt this Agreement; and (ii) Goldman Sachs & Co. (the "Financial Advisor")
has delivered to the Board its opinion (the "Fairness Opinion") to the effect
that, as of the date of this Agreement and based upon and subject to the
matters set forth therein, the cash consideration to be received by the
Starrett Shareholders in the Offer and the Merger is fair to such Starrett
Shareholders from a financial point of view.
(b) As promptly as practicable after the commencement of the
Offer, Starrett shall file with the Commission a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as
amended from time to time, the "Schedule 14D-9") containing the
recommendations described in paragraph (a) and shall mail the Schedule 14D-9
to the Starrett Shareholders. Starrett will use its reasonable efforts to
cause the Schedule 14D-9 to be filed on the same date as Acquisition's Tender
Offer Statement on Schedule 14D-1 is filed and mailed together with the Offer
Documents; provided that in any event the Schedule 14D-9 shall be filed and
mailed no later than 10 business days following the commencement of the Offer.
The Schedule 14D-9 shall comply as to form in all material
3
<PAGE>
respects with the requirements of the Exchange Act and, on the date filed with
the Commission and on the date first published, sent or given to the Starrett
Shareholders, shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation is made by
Starrett with respect to information supplied by Acquisition for inclusion in
the Schedule 14D-9. Each of Starrett and Acquisition agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that such information shall have become false or misleading in any
material respect, and Starrett further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the Commission and
disseminated to the Starrett Shareholders, in each case as and to the extent
required by applicable Federal securities laws. Starrett shall afford
Acquisition and its counsel a reasonable opportunity to review and comment on
the Schedule 14D-9 prior to its filing with the SEC. Starrett agrees to
provide Acquisition and its counsel in writing with any comments Starrett or
its counsel may receive from the Commission or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments. Notwithstanding
anything to the contrary in this Agreement, the recommendations referred to in
this Section 1.02 and the Schedule 14D-9 may be withdrawn, modified or amended
if the Board of Directors of Starrett determines that it is required to do so
in the exercise of its fiduciary duties and other legal obligations after
consultation with outside counsel. If requested by Acquisition, the Schedule
14D-9 shall also incorporate the information required to be filed pursuant to
Rule 14F-1 under the Exchange Act, with respect to the designation of the
directors referred to in Section 5.11 hereof.
Section 1.03. Shareholder Lists. In connection with the Offer, at the
request of Acquisition, from time to time after the date hereof, Starrett will
promptly as practicable furnish Acquisition with mailing labels, security
position listings and any available listing or computer file maintained for or
by Starrett containing the names and addresses of the record holders of the
Starrett Shares as of a recent date and shall furnish Acquisition with such
additional information reasonably available to Starrett and assistance as
Acquisition or its agents may reasonably request in communicating the Offer to
the record and beneficial holders of Starrett Shares. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to
consummate the Merger, Acquisition and its affiliates and associates shall
hold in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will deliver to Starrett
all copies of such information in their possession.
4
<PAGE>
ARTICLE II
THE MERGER
Section 2.01. The Merger Closing. Upon the terms and subject to the
conditions of this Agreement, the closing (the "Closing") of the Merger shall
take place at 10:00 A.M., on the third business day after the fulfillment of
the conditions specified in Sections 6.02 and 7.02 hereof, at the offices of
Squadron, Ellenoff, Plesent & Sheinfeld LLP, 551 Fifth Avenue, New York, New
York 10176, or at such other time, date and place as may be agreed upon in
writing by Acquisition and Starrett. (Hereinafter, the date on which the
Closing shall take place is referred to as the "Closing Date" and the time on
the Closing Date when the Closing shall take place is referred to as the
"Closing Time".) Starrett and Acquisition shall use their respective best
efforts to cause the Merger to be consummated at the earliest practicable time
after consummation of the Offer.
Section 2.02. The Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with the Business Corporation
Law of the State of New York (the "BCL"), at the Effective Time, Acquisition
shall be merged with and into Starrett (the "Merger"). Starrett shall continue
its existence as the surviving corporation (the "Surviving Corporation") in
the Merger and the separate corporate existence of Acquisition shall terminate
at the Effective Time. The Merger shall become effective at such time as a
duly prepared and executed certificate of merger (the "Certificate of
Merger"), in form and substance reasonably satisfactory to Acquisition and
Starrett, providing for the merger of Acquisition with and into Starrett, is
filed by the Secretary of State of the State of New York in accordance with
the relevant provisions of the BCL (the "Effective Time"). The Certificate of
Merger shall be filed as soon as practicable after the Closing Time.
Section 2.03. Certain Effects of the Merger. At the Effective Time,
the Surviving Corporation shall thereafter, consistently with its certificate
of incorporation as altered by the Merger, possess all the rights, privileges,
immunities, powers and purposes, and assume and be liable for all the
liabilities, obligations and penalties, of each of Acquisition and Starrett
(sometimes hereinafter referred to as the "Constituent Corporations"); and all
property, real and personal, causes of action and every other asset of each of
the Constituent Corporations shall vest in the Surviving Corporation without
further act or deed. The directors and officers of Acquisition immediately
prior to the Effective Time shall, from and after the Effective Time, be the
initial directors and officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified, or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-laws.
Section 2.04. Corporate Organization. The Certificate of
Incorporation and By-laws of Starrett at the Effective Time shall be the
Certificate of Incorporation and By-laws, respectively, of the Surviving
Corporation after the Effective Time; provided that such Certificate of
Incorporation and By-laws may be amended, subject to Section 5.09, in such
manner as Acquisition may, in its sole discretion, determine.
5
<PAGE>
Section 2.05. Conversion of Shares. (a) At the Effective Time, each
issued and outstanding share of Common Stock, par value $1.00 per share, of
Starrett (the "Starrett Shares," and each holder thereof, a "Starrett
Shareholder"), immediately prior to the Effective Time (other than the
Dissenting Shares) shall, by reason of the Merger and without any action by
the holders thereof, be converted into the right to receive $12.25 per share
in cash (the "Merger Consideration"), without interest. Each Starrett Share
which is held in the treasury of Starrett immediately prior to the Effective
Time shall, by virtue of the Merger, cease to be outstanding and shall be
canceled and retired without payment of any consideration therefor. At the
Effective Time, the stock transfer books of Starrett shall be closed, and no
transfer of Starrett Shares shall thereafter be made. All such Starrett
Shares, when converted as provided herein, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing such Starrett Shares shall thereafter
represent only the right to receive the Merger Consideration.
(b) Each share of the capital stock of Acquisition issued
and outstanding immediately prior to the Effective Time shall be converted
into one fully paid and nonassessable share of common stock, par value $1.00
per share, of the Surviving Corporation.
Section 2.06. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the
contrary, any Starrett Shares which are outstanding immediately prior to the
Effective Time and which are held by Starrett Shareholders who shall not have
voted such Shares in favor of the Merger or consented thereto in writing and
who shall have filed with Starrett a written objection to the Merger and a
demand for appraisal of such Shares in accordance with the BCL ("Dissenting
Shares") shall not be converted into the right to receive, or be exchangeable
for, the Merger Consideration, but, instead, such Starrett Shareholders shall
be entitled only to such rights as are granted by Section 910 of the BCL with
respect to Dissenting Shares held by them in accordance with the provisions of
the BCL, except that all Dissenting Shares held by Starrett Shareholders who
shall have failed to perfect or who effectively shall have withdrawn or lost
their rights to appraisal of such Dissenting Shares under the BCL shall
thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, upon surrender, in the manner
provided in Section 2.07, of the certificate or certificates that formerly
evidenced such shares.
(b) Starrett shall give Acquisition (i) prompt notice of any
demands for appraisal received by Starrett, withdrawals of such demands and
any other instruments served pursuant to the BCL and received by Starrett and
(ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the BCL. Starrett shall not, except with the
prior written consent of Acquisition, make any payment with respect to any
demands for appraisal or offer to settle or settle any such demands.
Section 2.07. Surrender and Payment. (a) At the Effective Time,
Acquisition shall deposit or cause to be deposited with a federally insured
bank with assets of not less than
6
<PAGE>
$1,000,000,000 selected by Acquisition and reasonably satisfactory to Starrett
(the "Exchange Agent"), cash in the amount sufficient to pay the Merger
Consideration.
(b) Promptly after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented Starrett Shares (the
"Certificates"), a letter of transmittal and instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration.
Within two business days after surrender of a Certificate to the Exchange
Agent, together with such letter of transmittal, duly executed, the Exchange
Agent shall, pursuant to irrevocable instructions, remit to the holder of such
Certificate in cash the Merger Consideration for each Starrett Share formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled. Until surrendered as contemplated by this Section
2.07(b), from and after the Effective Time each Certificate shall be deemed to
represent only the right to receive the Merger Consideration for each Starrett
Share formerly represented by such Certificate, and shall not evidence any
interest in, or any right to exercise the rights of a shareholder of, the
Surviving Corporation. If a cash payment is to be made to a person other than
the one in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition to such issuance or payment that such
Certificate be properly endorsed (or accompanied by an appropriate instrument
or transfer) and accompanied by evidence that any applicable stock transfer
taxes have been paid or provided for.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STARRETT
Starrett represents and warrants to Acquisition that:
Section 3.01. Organization and Good Standing. With immaterial
exceptions, each of Starrett and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and each has the corporate power and authority
to own, lease and operate all of the properties and assets owned or leased by
it and to carry on its business as it is now being conducted. Starrett has
heretofore made available to Acquisition true and complete copies of its
Certificate of Incorporation and By-laws and the Certificate of Incorporation
and By-laws (or comparable charter or organization documents) of each of the
Subsidiaries, each as currently in effect.
Section 3.02. Foreign Qualification. Each of Starrett and its
Subsidiaries is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to become so
qualified or to be in good standing would not individually or in the aggregate
have a Starrett Material Adverse Effect. As used herein, "Starrett Material
Adverse Effect" means any event, occurrence or condition which has or would be
reasonably likely to (i) have a material adverse effect on the business,
properties, assets, liabilities, results of operations or financial condition
of Starrett and its Subsidiaries taken
7
<PAGE>
as a whole or (ii) materially impair the ability of Starrett to perform its
obligations under this Agreement or consummate the transactions contemplated
herein.
Section 3.03. Capitalization. (a) Starrett is authorized to issue (i)
18,000,000 Starrett Shares, 6,260,960 of which are issued and outstanding as
of the date hereof and 305,442 of which have been previously issued and
reacquired by Starrett and are held as treasury shares and (ii) 1,000,000
Preferred Shares, none of which are issued or outstanding as of the date
hereof. There are no other series or classes of capital stock of Starrett
authorized to be issued, and there are no other shares of outstanding capital
stock of Starrett.
(b) There are no issued or outstanding bonds, debentures,
notes or other indebtedness of Starrett or any of the Subsidiaries which has
the right to vote (or which is convertible into or exchangeable for other
securities having the right to vote) on any matters on which Starrett
Shareholders may vote ("Voting Debt"). Except as set forth in SCHEDULE 3.03,
neither Starrett nor any Subsidiary is a party to any outstanding or
authorized subscriptions, warrants, options, contracts, rights (preemptive or
otherwise), calls, commitments or demands of any character relating to any
authorized and issued or unissued shares of capital stock of Starrett or any
of the Subsidiaries, including, without limitation, Starrett Shares, or
outstanding securities, obligations, rights, Voting Debt or other instruments
convertible into or exchangeable for such stock, or which obligate Starrett to
seek authorization to issue additional shares of any class of stock or Voting
Debt (collectively "Options"), nor will any be created by virtue of this
Agreement or the transactions hereby contemplated.
(c) All of the outstanding Starrett Shares have been duly
authorized and validly issued, are fully paid and nonassessable, and have been
listed for trading on The American Stock Exchange. None of the Starrett Shares
is subject to or has been issued in violation of any preemptive rights nor
have any such Shares been issued in violation of the Securities Act or the
securities or "blue sky" laws of any state or territory of the United States
of America.
(d) Except as set forth in SCHEDULE 3.03, Starrett does not
own any shares of stock or any other securities of any corporation or have any
interest in any firm, partnership, association or other Person. Except as set
forth in SCHEDULE 3.03, all of the outstanding shares of capital stock or
ownership interest of each corporation, partnership or other organization,
whether incorporated or unincorporated, which is consolidated with Starrett
for financial reporting purposes (a "Subsidiary") (i) have been duly
authorized and validly issued, (ii) in the case of each corporation, are fully
paid and nonassessable, (iii) are owned, directly or indirectly, by Starrett,
free and clear of any mortgage, charge, pledge, lien, security interest,
claim, encumbrance or restriction, of any kind or nature, other than liens of
the nature described in Section 630 of the BCL (a "Lien"), and (iv) are not
subject to, nor have they been issued in violation of, any preemptive rights.
Except as set forth in SCHEDULE 3.03, there are no outstanding or authorized
subscriptions, warrants, options, contracts, rights (preemptive or otherwise),
calls, commitments or demands of any character to which Starrett or any
Subsidiary is a party that, directly or indirectly, (i) call for or relate to
the sale, pledge, transfer or other
8
<PAGE>
disposition by Starrett or any Subsidiary of any shares of capital stock, any
partnership or other equity interests, or any Voting Debt of any Subsidiary or
(ii) relate to the voting or control of such capital stock, partnership or
other equity interests or Voting Debt. Except as set forth on SCHEDULE 3.03,
there are no stockholder agreements, voting trusts or other agreements or
understandings to which Starrett is a party or by which it is bound related to
the voting of or any other rights in or to, any shares of the capital stock of
Starrett which will limit in any way the tender and purchase of the Starrett
Shares pursuant to the Offer, or the solicitation of proxies by or on behalf
of Starrett from, or the casting of votes by, the Starrett Shareholders with
respect to the Merger. Except as set forth on SCHEDULE 3.03, there are no
restrictions on the right of Starrett to vote the stock of, or any other
equity interest in, any of its Subsidiaries.
Section 3.04. Authority of Starrett. Starrett has all requisite
corporate power and authority to execute and deliver this Agreement and all
other documents hereby contemplated, to consummate the transactions hereby and
thereby contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof and thereof. The execution, delivery and
performance of, and consummation of the transactions contemplated by, this
Agreement and all other documents hereby contemplated have been duly
authorized by Starrett's Board of Directors and, except for approval of this
Agreement and the transactions contemplated hereby by the holders of
outstanding Starrett Shares, no other corporate proceedings on the part of
Starrett are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement constitutes and, on the Closing Date, the
Certificate of Merger and all other documents hereby contemplated to be
executed by Starrett will constitute, legal, valid and binding obligations of
Starrett, enforceable against it in accordance with their respective terms.
Section 3.05. No Conflict; Required Filings and Consents. (a) Except
as set forth on SCHEDULE 3.05, the execution and delivery of this Agreement by
Starrett does not, and the consummation by Starrett of the transactions
contemplated hereby will not, (i) violate the Certificate of Incorporation or
By-laws of Starrett or any of the Subsidiaries, (ii) subject to making the
filings and obtaining the approvals identified in Section 3.05(b), violate any
law, rule, regulation, order, judgment or decree applicable to Starrett or any
of its Subsidiaries or by which any property or asset of Starrett or any of
its Subsidiaries is bound or affected, or (iii) subject to making the filings
and obtaining the approvals identified in Section 3.05(b), result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, result in the loss of a benefit
under, or give to others any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of,
or result in the creation of a Lien on any property or asset of Starrett or
any of the Subsidiaries pursuant to, any note, bond, mortgage, indenture,
Contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Starrett or any of the Subsidiaries is a party or by which
Starrett or any of the Subsidiaries or any property or asset of Starrett or
any of the Subsidiaries is bound or affected (any such conflict, violation,
breach, default or other occurrence, a "Violation"), except, in the case of
clauses (ii) and (iii), for any such Violations, which would not, individually
or in the aggregate, have a Starrett Material Adverse Effect.
9
<PAGE>
(b) The execution and delivery of this Agreement by Starrett
does not, and the performance of this Agreement and the consummation by
Starrett of the transactions contemplated hereby will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court, administrative agency or commission or other governmental or
regulatory authority, domestic or foreign (each a "Governmental Authority"),
except as set forth in SCHEDULE 3.05 and except for (A) applicable
requirements, if any, of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (B) the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act"), and (C) filing and
recordation of appropriate merger and similar documents as required by New
York law.
Section 3.06. SEC Reports. Starrett has filed all SEC Reports
required to be filed by it with the Securities and Exchange Commission (the
"Commission") since December 31, 1993, all of which have complied in all
material respects with all applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act and the rules and
regulations promulgated thereunder. As of their respective dates of filing in
final or definitive form (or, if amended or superseded by a subsequent filing,
then on the date of such subsequent filing), none of the SEC Reports of
Starrett, including, without limitation, any financial statements or schedules
included therein, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances in which they
were made, not misleading. The financial statements (including the related
notes) included in the SEC Reports of Starrett complied as to form in all
material respects with the published rules and regulations of the Commission
with respect thereto, were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the
periods involved, except as otherwise noted therein or, in the case of the
unaudited financial statements, as permitted by the applicable rules and
regulations of the Commission and fairly presented in all material respects in
accordance with applicable requirements of GAAP (subject, in the case of the
unaudited statements, to year-end audit adjustments, as permitted by Rule
10-01, and any other adjustments described therein) the consolidated financial
position of Starrett and its consolidated Subsidiaries as of their respective
dates and the consolidated results of operations and the consolidated cash
flows of Starrett and its consolidated Subsidiaries for the periods presented
therein. Except as and to the extent set forth or disclosed in the SEC Reports
or as set forth on SCHEDULE 3.06, (i) at March 31, 1997, neither Starrett nor
any Subsidiary had any material liabilities, absolute, accrued or contingent,
required by GAAP to be reflected on a balance sheet of Starrett or the notes
thereto, and (ii) since March 31, 1997, Starrett has not incurred any
liabilities (absolute, accrued or contingent) which are required by GAAP, to
be reflected on a balance sheet of Starrett and which individually or in the
aggregate, would have a Starrett Material Adverse Effect, except liabilities
incurred in the ordinary course of business.
Section 3.07. Title to Property. (a) Starrett and/or the Subsidiaries
and/or limited or general partnerships in which Starrett or its Subsidiaries
have a general partnership interest and the joint ventures described in Note 4
to the 1996 10-K (as hereinafter defined) have good, valid, marketable and
insurable title to, all real property owned by such entities which is material
to the
10
<PAGE>
business of Starrett and the Major Subsidiaries (as hereinafter defined) (the
"Owned Real Property"), free and clear of all Liens, except, (i) such as are
set forth on the balance sheet of Starrett as of December 31, 1996 (or the
notes thereto) included in the Starrett Annual Report on Form 10-K for the
year ended December 31, 1996 (the "1996 10-K") or on SCHEDULE 3.07, (ii)
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the ordinary course of business for amounts which are not yet due
or are being contested by appropriate proceedings which, individually or in
the aggregate, do not exceed $250,000, (iii) liens for Taxes that are not due
and payable or that may thereafter be paid without penalty, and (iv) other
imperfections of title, liens or encumbrances customary for projects of this
nature (other than liens in favor of lenders (i) given by Starrett or the
Subsidiaries or by joint ventures to which Levitt or a Subsidiary thereof are
parties and which are listed on SCHEDULE 3.07 or SCHEDULE 3.12 hereto or (ii)
given by limited or general partnerships in which Starrett or its Subsidiaries
(other than Levitt and its Subsidiaries) have a general partnership interest)
if any, that do not, individually or in the aggregate, materially impair the
continued use, value and operation of the properties to which they relate as
they are currently operated.
(b) Starrett and/or the Subsidiaries have good and valid
title to all personal property, tangible or intangible, material to the
business conducted by Starrett and the Subsidiaries reflected on the balance
sheet of Starrett as of December 31, 1996 included in the 1996 10-K or
acquired after such date excluding only those properties that have been
disposed of in the ordinary course of business after such date, free and clear
of all Liens, except (i) such as are set forth on SCHEDULE 3.07, (ii)
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the ordinary course of business, (iii) liens for Taxes that are
not due and payable or that may thereafter be paid without penalty, and (iv)
other imperfections of title or encumbrances, if any, that do not,
individually or in the aggregate, materially impair the continued use and
operation of the properties to which they relate.
(c) Each lease, sublease, material license or other material
agreement under which Starrett or any of its Subsidiaries uses or occupies or
has the right to use or occupy, now or in the future, any real property,
together with any and all amendments and modifications thereto and extensions
thereof, are herein referred to as the "Real Property Leases" (and SCHEDULE
3.07 attached hereto contains a true, complete and correct list of all Real
Property Leases). True, correct and complete copies of the Real Property
Leases have been made available to Acquisition. Except as set forth on
SCHEDULE 3.07, (a) Starrett and each of its Subsidiaries has exclusive use and
possession of, and the right to quiet enjoyment of, the real property leased
to it in accordance with the terms of the Real Property Leases, (b) each Real
Property Lease is valid, binding and in full force and effect, all material
amounts of rent, additional rent and other sums and charges payable by
Starrett or any of its Subsidiaries thereunder are current in all material
respects and no material uncured default or event which, with the giving of
notice or passage of time or both could become a material default, exists
under the Real Property Leases.
(d) Except as set forth in SCHEDULE 3.07, neither Starrett
nor any of its Subsidiaries has granted any rights, options or rights of first
refusal, or entered into any agreements of any kind that are currently in
effect or that have not been waived, to purchase or
11
<PAGE>
otherwise acquire all or any portion of the Owned Real Property or Starrett's
or the Subsidiaries' interests in the real property covered by Real Property
Leases, except the rights of Acquisition under this Agreement and except for
contracts of sale for individual housing units entered into in the ordinary
course of business and except for leases by Starrett or its Subsidiaries to
others. The number of housing units under contract and the dollar amounts of
the backlog of contracts for sale of individual housing units have not changed
materially adversely from that set forth in Starrett's quarterly report on
Form 10-Q for the quarterly period ended June 30, 1997.
Section 3.08. Compliance with Law. Except as set forth in SCHEDULE
3.08, each of Starrett and the Subsidiaries has complied with all laws, rules,
orders and regulations applicable to Starrett or any of the Subsidiaries or to
the Owned Real Property (or to real property leased pursuant to a Real
Property Lease that is a ground lease, a triple net lease, or a similar
lease), except where failure to do so would not have a Starrett Material
Adverse Effect. Each of Starrett and the Subsidiaries has maintained in full
force and effect and is in compliance with, all licenses, permits, variances,
exemptions, orders, franchises, approvals and consents for the lawful conduct
of its business, except where the failure to do so would not have a Starrett
Material Adverse Effect. No material Violation exists (and no event has
occurred which, with notice or lapse of time or both would constitute a
Violation) of any term, condition or provision of the Certificate of
Incorporation or By-laws (or comparable charter or organizational documents)
of Grenadier Realty Corporation, HRH Construction Corporation, Levitt
Corporation, or Levitt Homes Puerto Rico, Incorporated (the "Major
Subsidiaries") or Starrett.
Section 3.09. Litigation. Except as set forth in SCHEDULE 3.09 or in
the SEC Reports:
(a) Except for claims, suits, actions, proceedings, audits
or investigations covered (subject to deductibles) by insurance, there is no
claim, suit, action, proceeding, audit or investigation pending or, to the
best of Starrett's knowledge, threatened against, involving or affecting
Starrett or any of the Subsidiaries, the officers and directors of Starrett or
any of the Subsidiaries in such capacities or any of the properties or rights
of Starrett or any of the Subsidiaries seeking equitable relief or claiming
damages in excess of $300,000, nor is there any judgment, decree, injunction,
rule or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Starrett or any of the
Subsidiaries or the officers and directors of Starrett or any of the
Subsidiaries in such capacities which seeks to or would likely (i) result in
the material modification or any termination or suspension of any material
contract to which Starrett or any of the Subsidiaries is a party; (ii)
materially adversely affect the manner in which Starrett and the Subsidiaries
conduct their business; or (iii) materially adversely affect the ability of
Starrett or Acquisition to consummate the transactions contemplated hereby;
(b) neither Starrett nor any of the Subsidiaries has been
charged with or, to the best of Starrett's knowledge, threatened with a charge
of any Violation of, or, to the best of Starrett's knowledge, is under
investigation with respect to a possible Violation of, any provision of any
federal, state or local law or administrative ruling or regulation relating to
its business which Violation would have a Starrett Material Adverse Effect;
12
<PAGE>
(c) neither Starrett nor any of its Subsidiaries has
received any written notice of any pending or threatened action or proceeding,
in any court, before any arbitrator or arbitration tribunal or before or by
any Governmental Authority which if adversely determined would have a Starrett
Material Adverse Effect, nor to the best knowledge of senior management of
Starrett and the Major Subsidiaries, has any officer, director or employee of
Starrett or any of the Subsidiaries been served, within the 12-month period
prior to the date hereof, with a subpoena to testify before a Governmental
Authority with regard to a governmental investigation or governmental
proceeding with respect to matters relating to the business, operations or
activities of Starrett or any of the Subsidiaries; and
(d) neither Starrett nor any of the Subsidiaries is in
default under or with respect to any judgment, writ, injunction, order or
decree of any court, any arbitrator or arbitration tribunal or any
Governmental Authority against Starrett or any of the Subsidiaries or any of
Starrett's or any of the Subsidiaries' assets which default would have a
Starrett Material Adverse Effect.
Section 3.10. Taxes. (a) Each of Starrett and the Subsidiaries has
timely and duly filed, or will timely or duly file (giving effect to
extensions duly taken), all federal, state, local or foreign income tax
returns or reports ("Tax Returns") and other material Tax Returns and reports
required to be filed by, or with respect to, Starrett or any of the
Subsidiaries on or prior to the Closing Date. All such Tax Returns are, or
will be, correct and complete in all material respects. Starrett's federal
income tax returns were last audited more than 10 years ago.
(b) Each of Starrett and the Subsidiaries has paid or will
pay all taxes, charges, fees, levies or other assessments of any nature
whatsoever (including, without limitation, all federal, state, local and
foreign income taxes, alternative or add-on minimum taxes, withholding taxes,
estimated taxes, excise taxes, sales taxes, use taxes, transfer taxes, gross
receipt taxes, franchise taxes, employment and payroll related taxes, property
taxes and import duties, whether or not measured in whole or in part by net
income), together with any related penalties, interest and additions to taxes
(any of the foregoing being referred to herein as a "Tax") required to be paid
by it. All Taxes not yet due but incurred on or before the Closing Date (other
than Taxes, if any, arising out of the transactions hereby contemplated) are
adequately disclosed and fully provided for on the books and records and the
financial statements of Starrett or any of the Subsidiaries. Each of Starrett
and the Subsidiaries has fully collected, withheld and/or paid over all Taxes
required to be collected, withheld and/or paid over for material sales taxes,
wages or otherwise to a taxing authority.
(c) Except as set forth in SCHEDULE 3.10, neither Starrett
nor any of the Subsidiaries is currently being audited by any taxing authority
with respect to the returns and reports and there are no claims or assessments
pending against Starrett or any of the Subsidiaries. Except as set forth in
SCHEDULE 3.10, neither Starrett nor any of the Subsidiaries has agreed to
waive or extend the statute of limitations with respect to any Taxes or tax
returns and has filed any consent under Section 341(f) of the Internal Revenue
Code of 1986, as amended (the "Code"), (or any corresponding provision of
state, local or foreign tax law). Except as set forth
13
<PAGE>
on SCHEDULE 3.10, neither Starrett nor any of the Subsidiaries is liable for
the Taxes of any other Person or entity or is a party to any agreement
providing for the allocation or sharing of any Taxes and neither has a
contractual obligation to indemnify any other individual, firm, corporation,
partnership, limited liability company, trust, joint venture, Governmental
Authority or other Person with respect to any Taxes. No written claim has been
made in the last five years by a taxing authority in a jurisdiction in which
Starrett or any of the Subsidiaries does not presently file Tax returns that
Starrett or any of the Subsidiaries (other than inactive Subsidiaries) is or
may be subject to taxation by that jurisdiction. True and complete copies of
all tax returns and reports filed by Starrett or any of the Subsidiaries have
been made available to Acquisition. True and complete copies of any closing
agreements with respect to Starrett or any of the Subsidiaries which were
entered into with the Internal Revenue Service or any other taxing authority
in the last five years have heretofore been furnished to Acquisition.
(d) Except as set forth in Schedule 3.10, neither Starrett
nor any of its Subsidiaries has agreed to make any material adjustment
pursuant to Section 481(a) of the Code (or any predecessor provision).
(e) Except as set forth in Schedule 3.10, neither Starrett
nor any of its Subsidiaries has made any payment, is obligated to make any
payment, or is a party to an agreement that could obligate it to make any
payments that are subject to Code Section 280G or are not (or will not) be
deductible under Section 162 of the Code.
(f) Except as set forth in Schedule 3.10, neither Starrett
nor any of its Subsidiaries has engaged in, or is a party to any transaction
that is characterized as, or subject to the deferred intercompany transactions
rules as set forth in Treas. Regs. Section 1.1502 et seq.
Section 3.11. Insurance. Each of Starrett and the Subsidiaries has
insurance coverage for the assets and operations of the business of Starrett
and the Subsidiaries which it believes is adequate. All policies of insurance
carried by Starrett or any of the Subsidiaries or pursuant to which Starrett
or any of the Subsidiaries is a named beneficiary or pursuant to which the
business or properties of Starrett and the Subsidiaries are insured are in
full force and effect; all premiums due and payable in respect of such
policies have been paid in full; and there exists no material default or other
circumstance which would create the substantial likelihood of the cancellation
or non-renewal of any such policy; provided, however, each such representation
with respect to policies maintained by others for Starrett's benefit is
limited to the best of Starrett's knowledge. Starrett or a Subsidiary has
notified such insurers of any material claim known to Starrett or any of the
Subsidiaries which it believes is covered by any such insurance policy.
Section 3.12. Contracts. Except as set forth in SCHEDULE 3.07 or
SCHEDULE 3.12, neither Starrett nor any of the Subsidiaries is a party to or
is bound by any contract, agreement, guarantee, commitment, instrument or
memorandum of understanding (a) to provide management services for real
property, (b) to provide construction management services for a fee in excess
of $100,000, or which is a guaranteed minimum price general construction
contract involving in excess of $100,000 or to lease real property as tenant,
(c) with respect to borrowed
14
<PAGE>
money, (d) which are of a type that would be required to be filed as an
exhibit to a Form 10-K for a fiscal year ended on the date of this Agreement
or (e) which would not be included in clauses (a), (b), (c) or (d) and which
involve payments by Starrett or any of the Subsidiaries in each case for its
own account in excess of $300,000 annually (collectively, the "Contracts"). A
true and complete copy of each written Material Contract (as hereinafter
defined), and any and all amendments and modifications thereto, and a true and
complete summary of each oral Material Contract have been made available to
Acquisition. Except as set forth on Schedule 3.12, each of Starrett and the
Subsidiaries has performed in all material respects all of its obligations
required to be performed by it, has paid all amounts required to be paid by it
and is not in default in any material respects under (a) any Contract, (b) The
Second Amended and Restated Memorandum of Understanding, dated March 29, 1996
(the "Gateway MOU") by and among the City, its Department of Housing
Preservation and Development and Gateway Housing Associates and Gateway
Estates Housing Development Fund Company, Inc. with respect to the development
of the site known as Spring Creek in the Fresh Creek Urban Renewal Area of
Brooklyn, New York, (c) the Managing Agency Agreement, dated July 1, 1979,
between Starrett City, Inc., predecessor-in-interest to Starrett City
Associates L.P., and Delmar Management Company, predecessor-in-interest to
Grenadier Realty Corp. (as amended, the "Starrett City Management Agreement"),
and (d) the 280 Broadway Designation Letter (the "Designation Letter") ((a),
(b), (c) and (d) being referred to herein collectively as the "Material
Contracts") and no event has occurred thereunder in each case which
individually or in the aggregate, with the lapse of time or the giving of
notice or both, would constitute such a material default and, to the best of
Starrett's knowledge, no other party to any Material Contract is in default in
any material respect thereunder. Each of the Material Contracts listed in
SCHEDULE 3.12 (other than the Gateway MOU and the Designation Letter which are
valid but which by their terms are not legally binding) constitutes a valid,
binding, enforceable and legal obligation of Starrett or the Subsidiaries and
the other parties thereto in accordance with its terms. Neither Starrett nor
any of the Subsidiaries has received notice that any other party to any of the
Material Contracts is in material default thereunder.
Except for the matters set forth in SCHEDULE 3.09, neither Starrett
nor any Subsidiary is currently liable with respect to liquidated damages or
similar penalty payments under any Material Contracts and there are no
obligations thereunder to obtain letters of credit or similar security. In
addition, Starrett has made available to Acquisition true, correct and
complete copies of the documents set forth on SCHEDULE 3.12Z; the documents
pertaining to Ronkonkoma listed in paragraph 2 of SCHEDULE 3.12Z are in full
force and effect and there are no material defaults thereunder or events
which, with the giving of notice or passage of time, or both, would constitute
a material default thereunder. Further (A) except as provided in SCHEDULE
3.12, none of the Material Contracts are terminable in the event that certain
key personnel are no longer involved in the work under such Material Contracts
or no longer employed by Starrett or any of its Subsidiaries, and (B) the Long
Island Railroad ("LIRR") and the Metropolitan Transportation Authority ("MTA")
have confirmed that, with respect to the redevelopment of the Ronkonkoma, New
York train station, Starrett RDC Corporation ("Starrett RDC") has achieved
substantial completion of the Phase IA as defined under the Development
Agreement, dated October 5, 1993, by and among the LIRR, MTA and Starrett RDC
and the Ground Lease of even date
15
<PAGE>
therewith. Except as set forth on SCHEDULE 3.12, neither Starrett nor any of
its Subsidiaries has received notification that it is or may become obligated
to pay any amounts under any payment or performance bonds furnished by such
entity. The estimated amounts of backlogged construction, and management and
general contracting fees set forth on SCHEDULE 3.12 are substantially correct
as of September 30, 1997.
Section 3.13. Employment Agreements. SCHEDULE 3.13 contains a
complete list of each management, employment, consulting or other agreement,
contract or commitment, in each case, in writing, between Starrett or any of
its Subsidiaries and any employee, officer or director thereof (a) providing
for the employment of any person or providing for retention of management,
executive or consulting services and providing for an obligation to pay or
accrue compensation of $50,000 or more per annum, or (b) except for severance
agreements or arrangements with an employee or officer of only a Subsidiary of
Starrett and which do not provide for any severance agreement or arrangement
in excess of $75,000, providing for the payment or accrual of any compensation
or severance upon (i) a change in control of Starrett or any of its
Subsidiaries or (ii) any termination of such management, employment,
consulting or other relationship.
Section 3.14. Intellectual Property. SCHEDULE 3.14 is a list of the
principal trademarks, trade names, patents, fictitious business names, service
marks and pending applications therefor that are owned by Starrett or the
Subsidiaries and a list of the principal trademarks, trade names, patents,
fictitious business names, service marks and pending applications therefor
that are used by Starrett or the Subsidiaries or which Starrett or the
Subsidiaries have the right to use. The trademarks, trade names, patents,
fictitious business names, service marks and pending applications appearing on
SCHEDULE 3.14, together with any other trademarks, trade names, patents,
fictitious business names and service marks owned or used by Starrett or the
Subsidiaries, are collectively herein referred to as the "Proprietary Rights".
Except as disclosed on SCHEDULE 3.14, to the best of Starrett's knowledge, no
Proprietary Right owned or used by Starrett or any of the Subsidiaries
infringes or violates any statutory or common law or any other rights of any
third parties (including, without limitation, copyright, trademark and the
rights of privacy and publicity), which violation would have a Starrett
Material Adverse Effect and, in the last five years, no written claim alleging
any such infringement or violation has been received by Starrett or any of the
Subsidiaries.
Section 3.15. Employees and Related Agreements: ERISA. (a) SCHEDULE
3.15 sets forth each Plan which Starrett or any of the Subsidiaries or any
ERISA Affiliate maintains or contributes to, or has any obligation to
contribute to, or during the six year period ending on the date hereof,
maintained, contributed to, or had any obligation to contribute to, and each
Plan as to which Starrett or any of the Subsidiaries has any material
liability (including, without limitation, a liability arising out of an
indemnification, guarantee, hold harmless or similar agreement) or obligation.
Except as set forth in SCHEDULE 3.15, none of these Plans is a Single Employer
Defined Benefit Plan, a Multiemployer Plan or a severance pay plan.
16
<PAGE>
(b) No event has occurred with respect to a Plan (other than
a Multiemployer Plan) in connection with which Starrett or any of the
Subsidiaries or any Plan identified in SCHEDULE 3.15 or any "plan
administrator" (as defined in Section 3(16) of ERISA) thereof, directly or
indirectly, is or, to the best of Starrett's knowledge, could be subject to
material liability, other than for routine claims for benefits, contingent or
otherwise, or any lien, whether or not perfected, under the terms of any Plan
or under ERISA, the Code or any other law, regulation or governmental order
applicable to any Plan at any time maintained or contributed to by Starrett or
any of the Subsidiaries or by any ERISA Affiliate or under any agreement,
instrument, statute, rule of law or regulation pursuant to or under which
Starrett or any of the Subsidiaries has agreed to indemnify or is required to
indemnify any person against liability incurred under, or for a violation or
failure to satisfy the requirements of, any such statute, regulation or order.
(c) Except as set forth in SCHEDULE 3.15, all payments and
contributions due from Starrett or any of the Subsidiaries under each Plan
identified in said SCHEDULE 3.15 with respect to all prior periods have been
made or properly recorded on the books of Starrett or the Subsidiaries.
(d) Except as set forth in SCHEDULE 3.15, and except for any
Multiemployer Plan, no "employee welfare benefit plan" as defined in Section
3(1) of ERISA or "multiple employer welfare arrangement" as defined in Section
3(40) of ERISA provides benefits, including, without limitation, death or
medical benefits (whether or not insured) with respect to any current or
former employee of Starrett or any of the Subsidiaries beyond his or her
retirement or other termination of service other than (1) coverage mandated by
applicable law or (2) disability benefits that have been fully provided for by
insurance or otherwise.
(e) Except as provided in SCHEDULE 3.15, the transactions
contemplated by this Agreement will not result in any payment or series of
payments by the Surviving Corporation under any Plan established by Starrett
or any of the Subsidiaries to any person of a parachute payment within the
meaning of Section 280G of the Code.
(f) Except as provided in SCHEDULE 3.15, the consummation of
the transactions contemplated by this Agreement will not (1) entitle any
employee or former employee of Starrett or any of the Subsidiaries to
severance pay, unemployment compensation or any other payment except as
expressly provided in this Agreement or (2) result in any prohibited
transaction described in Section 406 of ERISA or section 4975 of the Code for
which an exemption is not available.
(g) There has been delivered to Acquisition with respect to
each Plan identified in SCHEDULE 3.15 other than a Multiemployer Plan:
(1) A copy of the annual report (with accompanying
schedules and exhibits), if required under ERISA, which has
been filed with respect to such Plan for the two most
recently completed plan years. The information contained in
17
<PAGE>
such report (including such schedules and exhibits) is true
and complete in all material respects.
(2) A copy of the most recent summary plan
description, together with each Summary of Material
Modifications with respect thereto, required under ERISA
with respect to such Plan, and a true and complete copy of
such Plan;
(3) If such Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other
funding vehicle and the latest financial statements thereof;
(4) The most recent determination letter received
from the Internal Revenue Service with respect to each Plan
that is intended to qualify under Section 401 of the Code;
(5) A copy of the actuarial report, if any, with
respect to each such Plan for the last two years. The
information contained therein, and the information furnished
by the administrator of such Plan or by Starrett or any of
its subsidiaries or by any ERISA Affiliate in connection
with the preparation thereof, is true and complete in all
material respects; and
(6) A copy of each Plan, including all amendments
thereto, or in the cases where there is no formal Plan
document, a description of each such Plan.
(h) Neither Starrett nor any of the Subsidiaries nor any
ERISA Affiliate has made any agreement, understanding or promise, whether
written or oral, to create, establish, sponsor, maintain or contribute,
directly or indirectly, to or under any additional Plan for the benefit of
current or former employees of Starrett or any of the Subsidiaries nor, except
as set forth in SCHEDULE 3.15, to amend or modify any existing Plan identified
in SCHEDULE 3.15 in any manner not reflected in the plan documents of such
Plan delivered to Acquisition.
(i) Except as set forth in SCHEDULE 3.15, neither Starrett
nor any of the Subsidiaries is a party to any collective bargaining
agreements, whether or not expired. Starrett does not know of any activities
or proceedings of any labor organization (or representative thereof) to
organize any unorganized employees of Starrett or any of the Subsidiaries. A
copy of each such collective bargaining agreement has been delivered to
Acquisition.
(j) Neither Starrett nor any of the Subsidiaries has
violated any provision of federal or state law or any governmental rule or
regulation, or any order, ruling, decree, judgment or arbitration award of any
court, arbitrator or any government agency regarding the terms and conditions
of employment of employees or former employees or, without limitation, laws,
rules, regulations, orders, rulings, decrees, judgments and awards relating to
discrimination (including, without limitation, discrimination on the basis of
age, sex, race or religion), fair labor standards and occupational health and
safety, wrongful discharge or violation of the personal rights of
18
<PAGE>
employees, former employees or prospective employees or state temporary
disability laws, rules or regulations which violation would have a Starrett
Material Adverse Effect.
(k) There is and, for one year prior to the date hereof
there has been, no material unfair labor practice, charge or complaint pending
or, to the best of Starrett's knowledge, threatened against Starrett or any of
the Subsidiaries before the National Labor Relations Board or any State Labor
Relations Board. There are and, for one year prior to the date hereof, there
have been no material claims of discrimination of any kind pending or, to the
best of Starrett's knowledge, threatened against Starrett or any of the
Subsidiaries before any Governmental Body. Neither Starrett nor any of the
Subsidiaries has any liability to any or all of its employees under or arising
as a result of the Worker Adjustment and Retraining Act.
(l) Other than matters affecting generally the industries in
which Starrett or a Subsidiary is engaged, there is, and for one year prior to
the date hereof there has been, no labor strike, work stoppage or lockout, or
material dispute, slowdown, disturbance, grievance or claim pending or, to the
best of Starrett's knowledge, threatened against Starrett or any of the
Subsidiaries.
(m) Other than with respect to a Multiemployer Plan, each
Plan to which Starrett or any of the Subsidiaries contributes or has any
obligation to contribute and which is intended to be qualified under section
401 of the Code, has received a favorable determination letter from the
Internal Revenue Service with respect to such qualification and with respect
to the exemption from tax of the trusts created thereunder under section
501(a) of the Code, and, to the best of Starrett's knowledge, nothing has
occurred that has affected or is likely adversely to affect such qualification
or exemption since the date of such letter with respect to each Plan.
(n) Except as set forth in SCHEDULE 3.15, with respect to
each Plan other than a Multiemployer Plan, all reports and other information
required under ERISA or any other applicable law or regulation to be filed in
respect of any Plan by the administrator thereof or by Starrett or any of the
Subsidiaries on or prior to the date hereof with the relevant governmental
authority and/or distributed or made available to any Plan participant and
beneficiary (including "alternate payees", as such term is defined in Section
206(d)(3)(K) of ERISA), as the case may be, have been filed, distributed or
made available in accordance with ERISA or such other applicable law or
regulation, as the case may be, and all such reports and other information are
true and complete in all material respects as of the date given or, to the
extent not filed, distributed or made available, such violation would not have
a Starrett Material Adverse Effect.
(o) Except as set forth in SCHEDULE 3.15, other than with
respect to a Multiemployer Plan, neither Starrett nor any of the Subsidiaries
has entered into any agreement, written or otherwise, relating to any Plan
providing medical benefits obligating Starrett or any of the Subsidiaries or
its successor in interest to make any supplemental or retrospective premium
payments for the current or any prior contract period in the event of adverse
experience, termination of the minimum premium arrangement or termination of
an insurance contract
19
<PAGE>
relating to such Plan. To the extent reasonably available to a Starrett, a
disclosure of the attendant costs is set forth on SCHEDULE 3.15.
(p) With respect to each Multiemployer Plan identified in
SCHEDULE 3.15 which is subject to the provisions of Subtitle B of Title IV of
ERISA, (1) none of Starrett, any of the Subsidiaries nor any ERISA Affiliate
has received any notice of any claim or demand for complete or partial
withdrawal liability under ERISA Sections 4201 et seq. except as attached to
SCHEDULE 3.15; (2) none of Starrett, any of the Subsidiaries nor any ERISA
Affiliate has received any notice that such Multiemployer Plan is in
"reorganization" (within the meaning of Section 4241 of ERISA), that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of an excise tax, or that the Multiemployer Plan is or may become
"insolvent" (within the meaning of Section 4245 of ERISA) except as attached
to SCHEDULE 3.15; (3) except as set forth on SCHEDULE 3.15, to the best of
Starrett's knowledge, none of Starrett, any of the Subsidiaries nor any ERISA
Affiliate has incurred any withdrawal liability not set forth on SCHEDULE
3.15; and (4) Starrett, the Subsidiaries and each ERISA Affiliate have timely
made all required contributions or payments to each Multiemployer Plan or such
contributions or payments will be made prior to the Closing.
(q) With respect to each Single Employer Defined Benefit
Plan identified in SCHEDULE 3.15, (1) except with respect to the transactions
contemplated by this Agreement, there has not occurred any "reportable event"
within the meaning of Section 4043(b) of ERISA or the regulations thereunder
with respect to which the 30 day notice requirement has not been waived under
applicable regulations, (2) there exists no ground upon which the PBGC could
demand termination of any Single Employer Defined Benefit Plan or appointment
of itself or its nominee as trustee thereunder, (3) there has been no notice
given of intent to terminate any Single Employer Defined Benefit Plan under
Section 4041 of ERISA, (4) there has not been any proceeding instituted under
Section 4042 of ERISA to terminate any Single Employer Defined Benefit Plan,
and (5) there has been no termination, or except as set forth in SCHEDULE
3.15, a partial termination of any Single Employer Defined Benefit Plan within
the meaning of Section 411(d)(3) of the Code. The PBGC has not instituted or,
to the best of Starrett's knowledge, threatened a proceeding to terminate any
Single Employer Defined Benefit Plan. All PBGC premiums due on or before the
Closing with respect to each Single Employer Defined Benefit Plan have been,
or prior to the Closing will be, paid in full, including late fees, interest
and penalties, if and to the extent applicable.
(r) No funding waiver from the Internal Revenue Service has
been requested or received with respect to any Single Employer Defined Benefit
Plan identified in SCHEDULE 3.15, and no extension of the amortization period
within the meaning of Section 412 of the Code or Section 302 of ERISA has been
applied for.
(s) Neither Starrett, the Subsidiaries nor any ERISA
Affiliate has engaged in any transaction described under Section 4069 of ERISA
nor has any lien been imposed with respect to an amount on any such persons or
their assets under Section 4068 of ERISA.
20
<PAGE>
(t) With respect to any Single Employer Defined Benefit
Plan, any significant reduction in the rate of future benefit accrual was
preceded by an adequate and appropriate notice to the parties described in and
as required by Section 204(h) of ERISA.
(u) Concerning any Single Employer Defined Benefit Plan
maintained by Starrett or any ERISA Affiliate (A) since January 1, 1990, there
has been no cessation of operations at a facility so as to become subject to
the provisions of Sections 4062(e) of ERISA, (B) since January 1, 1990, there
has been no withdrawal of a substantial employer from any Single Employer
Defined Benefit Plan so as to become subject to the provisions of Section 4063
of ERISA.
(v) For the purposes of this Agreement:
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, any successor statute thereto and all
final or temporary regulations promulgated thereunder and generally applicable
published rulings entitled to precedential effect.
"ERISA Affiliate" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control and all other entities which, together with Starrett, are
treated as a single employer under any or all of Sections 414(b) or (c) of the
Code on either the date of this Agreement or the Closing Date.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 3(37) or Section 4001(a)(3) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation or any
person succeeding to the functions thereof.
"Single Employer Defined Benefit Plan" means a plan subject
to Subtitle B of Title IV of ERISA which is not a Multiemployer Plan.
"Plan" means any plan, program, arrangement, agreement or
commitment which is a pension, profit sharing, savings, thrift or other
retirement plan, life, health, accident or disability insurance plan
(including without limitation any "employee welfare benefit plan as defined in
Section 3(3) of ERISA), deferred compensation, stock purchase, stock option,
performance share, bonus or other executive plan or severance pay plan, policy
or procedure, or vacation or other employee benefit plan, program arrangement,
agreement or commitment.
Section 3.16. Absence of Certain Changes or Events. Since June 30,
1997, except as disclosed in SCHEDULE 3.16, Starrett and the Subsidiaries have
conducted their business, in all material respects, in the ordinary course and
in a manner consistent with past practice (except in connection with the
negotiation and execution and delivery of this Agreement), and since June 30,
1997, except as disclosed in SCHEDULE 3.16, and except as permitted in this
Agreement, there has not been (i) any event or events (whether or not covered
by insurance), individually or in the
21
<PAGE>
aggregate, having a Starrett Material Adverse Effect, (ii) any material change
by Starrett in its accounting methods, principles or practices, (iii) any
entry by Starrett or any Subsidiary into any commitment or transaction
material to Starrett, except in the ordinary course of business and consistent
with past practice or except in connection with the negotiation and execution
and delivery of this Agreement, (iv) any declaration, setting aside or payment
of any dividend or distribution in respect of any capital stock of Starrett or
any redemption, purchases or other acquisition of any of Starrett's or its
Subsidiaries' securities (except for cash dividends paid to Starrett by its
wholly-owned Subsidiaries with regard to their capital stock, and the
declaration and payment to the holders of Starrett Shares regular quarterly
dividends to stockholders of record with such record dates and payment dates
as are consistent with past practice), (v) other than pursuant to the Plans or
as required by law, any increase in, amendment to, or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option, stock purchase or other employee benefit plan
(other than a multiemployer plan), (vi) granted any general increase in
compensation, bonus or other benefits payable to the employees of Starrett or
its Subsidiaries, except for increases occurring in the ordinary course of
business in accordance with its customary practice, (vii) paid any bonus to
the employees of Starrett or its Subsidiaries except for bonuses accrued on
Starrett's unaudited balance sheet for the quarter ending June 30, 1997,
(viii) any incurrence of indebtedness for borrowed money or assumption or
guarantee of indebtedness or borrowed money by Starrett or any of its
Subsidiaries (other than loans from Starrett to any wholly-owned Subsidiary or
from any wholly-owned Subsidiary to Starrett or any other wholly-owned
Subsidiary), or the grant of any lien on the material assets of Starrett or
its Subsidiaries to secure indebtedness for borrowed money except, in any such
case, any drawdowns by Starrett under its revolving credit facility consistent
with past practice, (ix) any sale or transfer of any material assets of
Starrett or its Subsidiaries other than in the ordinary course of business and
consistent with past practice, or (x) any loan, advance or capital
contribution to or investment in any person in an aggregate amount in excess
of $100,000 by Starrett or any Subsidiary (excluding any loan, advance or
capital contribution to, or investment in, Starrett or any wholly-owned
Subsidiary and except for drawdowns by Starrett under its revolving credit
facility consistent with past practice).
Section 3.17. Finder's Fee. Except as set forth on SCHEDULE 3.17,
neither Starrett nor any of the Subsidiaries has incurred any liability for
finder's or brokerage fees or commissions in connection with this Agreement or
the transactions hereby contemplated.
Section 3.18. Section 912. The approval of the Board of Directors of
Starrett of this Agreement, the Merger , the Shareholders Agreement (as
hereinafter defined) and the letter dated October 8, 1997 between Arre Star
Acquisition, LLC and Starrett (the "October 8 Letter") is sufficient to render
inapplicable to this Agreement, the Offer, the Merger, the Shareholders
Agreement and the October 8 Letter the provisions of Section 912 of the BCL.
Section 3.19. Environmental Matters. (a) Except as set forth in
SCHEDULE 3.19 Starrett and the Subsidiaries have obtained or caused to be
obtained and continue to maintain and will continue to maintain up to the
Closing Date or cause the maintenance of permits, licenses, consents and
approvals necessary for conducting the business of Starrett and the
Subsidiaries
22
<PAGE>
which are required under Environmental Laws (the "Environmental Approvals"),
and neither Starrett nor any of the Subsidiaries has operated in violation of
any Environmental Law or the terms of any Environmental Approval, except for
such violations which would not have a Starrett Material Adverse Effect. The
operations of Starrett and each of its Subsidiaries, as of the Closing Date,
will be in compliance in all respects with all Environmental Laws except for
any such noncompliance which would not result in a Starrett Material Adverse
Effect.
(b) Except as set forth in SCHEDULE 3.19 and except as would
not have a Starrett Material Adverse Effect:
(1) neither Starrett nor any of the Subsidiaries
has used, stored, generated, discharged, emitted,
transported, disposed of or treated Hazardous Substances
except in a manner which complies with the applicable
Environmental Laws and Environmental Approvals and to the
best of knowledge of Starrett and each of its Subsidiaries,
there are no Hazardous Substances present in, on or under
any Owned Real Property owned by Starrett or any of its
Subsidiaries or any real property leased or managed by
Starrett or any of its Subsidiaries, the nature, amount or
concentration of which would reasonably be expected to
result in any federal, state or local environmental
protection agency undertaking or requiring the removal or
Remediation of such Hazardous Substances if such agency were
aware of the presence of such Hazardous Substances.
(2) to the best of Starrett's knowledge, no prior
owner, occupant, tenant or user of any facility which is now
or has heretofore been owned or used by Starrett or any of
the Subsidiaries (a "Facility") has ever used, stored,
generated, discharged, emitted, transported, disposed of or
treated Hazardous Substances at, on or from any Facility
except in a manner which complies with all Environmental
Laws and Environmental Approvals;
(3) there is not, and there has not been, any
Environmental Condition (as defined herein) or release or
threat of release (as those terms are defined in Section 101
of the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. section 9601 et seq.)
("CERCLA")) of Hazardous Substances at, on or from any
Facility; and
(4) to the best knowledge of Starrett and each of
its Subsidiaries, there is not now nor has there ever been,
on or in any Owned Real Property or real property leased by
Starrett or any of its Subsidiaries, any underground storage
tanks or surface impoundments containing Hazardous
Substances.
(c) Except as set forth on SCHEDULE 3.19, neither Starrett
nor any of the Subsidiaries has received notice of any pending or threatened
investigation, claim, enforcement proceeding, cleanup order, citizen suit or
other action instituted by any private party, employee or Governmental Body
under any Environmental Laws arising out of the conduct or the
23
<PAGE>
operations of Starrett or any of the Subsidiaries or as a result of any
Environmental Condition at any Facility. Neither Starrett nor any of its
Subsidiaries is subject to any outstanding written orders from, or written
agreements with, any Governmental Entity respecting (A) violations or
liability pursuant to Environmental Laws, (B) Remedial Action or (C) any
Release or threatened Release of a Hazardous Substance. No judicial or
administrative proceedings or governmental investigations are pending, or to
the knowledge of Starrett or any of its Subsidiaries threatened against
Starrett or any of its Subsidiaries alleging the violation of or seeking to
impose liability pursuant to any Environmental Law or as the result of the
Release or alleged Release of a Hazardous Substance, except for any such
proceedings or investigations that would not result in a Starrett Material
Adverse Effect, and neither Starrett nor any of its Subsidiaries has received
any notice of any pending or threatened investigation, claim, enforcement
proceeding or other action instituted by any governmental agency or private
party under any Environmental Laws arising out of the conduct or operations of
Starrett or any of its Subsidiaries.
(d) For the purpose of this Agreement:
"Environment" means soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.
"Environmental Condition" means any condition with respect
to the Environment, whether or not yet discovered, at any Facility, including
any condition resulting from the operation of the business of Starrett or any
of the Subsidiaries or the operation of the business of any subtenant or
occupant of any Facility, which is reasonably likely to or does result in any
losses which are reasonably likely to have a Starrett Material Adverse Effect.
"Environmental Laws" means all statutes, laws, treatises,
rules, codes, ordinances, regulations, permits, certificates or orders
(collectively, "Governmental Rules") of any Governmental Authority or any
judgment, decree, injunction, writ or order of any Governmental Authority
relating to injury to, or the protection of, human health or the Environment
that are in effect prior to the Closing Date, including, without limitation,
all valid and lawful requirements of courts and other Governmental Authorities
pertaining to reporting, licensing, permitting, investigating, remediation and
removal of, emissions, discharges, releases or threatened releases of
Hazardous Substances, chemical substances, pesticides, petroleum or petroleum
products, pollutants, contaminants or hazardous or toxic substances, materials
or wastes, whether solid, liquid or gaseous in nature, into the Environment,
or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances, pollutants,
contaminants or hazardous or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature.
"Hazardous Substances" means any substance (a) the presence
of which requires notification, investigation or remediation under any
Environmental Law as in effect prior to the Closing Date; (b) which prior to
the Closing Date is or becomes defined under any Environmental Laws as
"hazardous waste", "hazardous material" or "hazardous substance", "extremely
hazardous waste", "restricted hazardous waste", "solid waste", "toxic waste",
"toxic
24
<PAGE>
substance" or "pollutant" or "contaminant" and is regulated under any
Environmental Law, (c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
or become regulated by any Governmental Authority under Environmental Laws
prior to the Closing Date; (d) which contains gasoline, diesel fuel or other
petroleum hydrocarbons or volatile organic compounds regulated under
Environmental Laws prior to the Closing Date; (e) which contains
polychlorinated byphenyls (PCBs) or friable asbestos or urea formaldehyde foam
insulation; or (f) which contains or emits radioactive particles, waves or
materials, including radon gas.
"RCRA" means the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.
"Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching, or migration into the environment; and
"Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a Governmental Authority or
required under any Environmental Law, or voluntarily undertaken to (1) clean
up, treat, or in any other way ameliorate or address any Hazardous Materials
or other substance in the environment, (2) prevent the Release or threat of
Release, or minimize the further Release of any Hazardous Material so it does
not endanger or threaten to endanger the public health or welfare or the
environment; (3) perform pre-remedial studies and investigations or
post-remedial monitoring and care pertaining or relating to a Release; or (4)
bring the applicable party into compliance with any Environmental Law.
Section 3.20. Opinion of Financial Advisor. Starrett has received the
opinion of the Financial Advisor to the effect that, as of the date hereof,
the cash consideration to be received by the holders of Starrett in the Offer
and the Merger is fair from a financial point of view to such holders.
Starrett has been authorized by the Financial Advisor to include the Fairness
Opinion in the Offer Documents and the Proxy Statement and such opinion has
not been withdrawn or modified. True and complete copies of all agreements and
understandings between Starrett or any of its Affiliates and the Financial
Advisor relating to the transactions contemplated by this Agreement are
attached hereto as SCHEDULE 3.20.
Section 3.21. Vote Required. The affirmative vote of the holders of
662/3% of the outstanding shares of the Starrett Common Stock is the only vote
of the holders of any class or series of Starrett's capital stock necessary
(under applicable law or otherwise) to approve the Merger.
Section 3.22. Employment Relations; Compliance. There are no
administrative proceedings, audits or investigations pending or, to the best
of Starrett's knowledge, threatened and no written or, to the best of
Starrett's knowledge, oral or threatened complaints against Starrett or any of
its Subsidiaries concerning the employment or term of employment of any
employee of Starrett or any of its Subsidiaries, or any violation of any
federal, state or local law, executive order or regulation relating to
employment relations, collective bargaining,
25
<PAGE>
employment discrimination, employee benefits, occupational safety and health,
wages and hours of employees, immigration, medical and family leave and the
collection and payment of withholding and/or social security taxes and any
similar tax (an "Employment Law") that, individually or in the aggregate,
would have a Starrett Material Adverse Effect. To the best knowledge of
Starrett, each of Starrett and its Subsidiaries is in compliance in all
material respects with all Employment Laws, except for such noncompliance
that, individually or in the aggregate, would not have a Starrett Material
Adverse Effect.
Section 3.23. Indemnification of Employees, Etc. Except in connection
with matters set forth on SCHEDULE 3.09 hereto, and except for matters covered
by insurance (subject to deductibles) as of the date hereof, there is no
proceeding, claim, suit, action or governmental investigation pending or, to
the best knowledge of Starrett or any of its Subsidiaries, threatened, with
respect to which any current or former director, officer, employee or agent of
Starrett or any of its Subsidiaries is entitled, or has asserted he is
entitled, to claim indemnification from Starrett or any of its Subsidiaries
pursuant to the Certificate of Incorporation or By-Laws of Starrett or any
provisions of the comparable charter or organizational documents of any of its
Subsidiaries, as provided in any indemnification agreement to which Starrett
or any Subsidiary of Starrett is a party, or pursuant to applicable law, that
has a Starrett Material Adverse Effect.
Section 3.24. Labor Relations. Except as set forth in SCHEDULE 3.24,
there are or were, at any time in the three (3) year period preceding the date
of this Agreement, no collective bargaining agreements, memoranda of
understanding, side letters, or other agreements with any labor union or
organization in effect to which Starrett or any of its Subsidiaries are or
were a party or otherwise bound and which materially affect Starrett's
business (collectively, the "Labor Agreements"), including agreements referred
to or incorporated by reference into any of the Labor Agreements, and no
employees of Starrett or any of its Subsidiaries are represented by any labor
organization. There are no provisions in any of the Labor Agreements that
would materially interfere with Starrett's ability to consummate the Offer or
Merger hereunder.
Section 3.25. Tangible Property. All of the assets of Starrett and
its Subsidiaries have been maintained and repaired for their continued
operation and are in good operating condition, reasonable wear and tear
excepted, and usable in the ordinary course of business, except where the
failure to be in such repair or condition or so usable would not individually
or in the aggregate have a Starrett Material Adverse Effect.
Section 3.26. Board Recommendation. On or prior to the date hereof,
the Board of Directors of Starrett, at a meeting duly called and held, has by
the vote of those directors present (i) determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, taken
together, are fair and in the best interests of the stockholders of Starrett
and has approved the same and (ii) resolved to recommend that the holders of
the Starrett Shares accept the Offer and approve the Merger.
Section 3.27. Related Party Transactions. Since January 1, 1997
except as set forth on SCHEDULE 3.27 and except for the Plans or as otherwise
disclosed hereunder, no director
26
<PAGE>
hereunder, no director, officer, "affiliate" or "associate" (as such terms are
defined in Rule 12b-2 under the Exchange Act) of Starrett or any of its
Subsidiaries (i) has borrowed any monies from or has outstanding any
indebtedness or other similar obligations to Starrett or any of its
Subsidiaries for indebtedness or similar obligations incurred in the ordinary
course of business or (ii) is otherwise a party to any contract, arrangement
or understanding with Starrett or any of its Subsidiaries of a nature that
would be required to be disclosed under Item 404 of Regulation S-K of the
Securities Act.
Section 3.28. Schedule 14D-9, Offer Documents and Schedule 14D-1. The
Schedule 14D-9 and any amendments and supplements thereto will, when filed
with the Commission and when published, sent or given to holders of Starrett
Common Stock, comply as to form in all material respects with the Exchange Act
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by Starrett with
respect to information supplied by Acquisition in writing for inclusion
therein. None of the information supplied by Starrett for inclusion in the
Offer Documents or the Schedule 14D-1, and any amendments thereof, or
supplements thereto, will, when such materials are filed with the Commission
and when published, sent or given to holders of Starrett Common Stock, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUISITION
Acquisition represents and warrants to Starrett that:
Section 4.01. Organization and Good Standing. Acquisition is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New York and it has the corporate power and authority to
own or lease all of the properties and assets owned or leased by it and to
carry on its business as it is now being conducted.
Section 4.02. Authority of Acquisition. Acquisition has the corporate
power to execute and deliver this Agreement and all other documents hereby
contemplated, to consummate the transactions hereby contemplated and to take
all other actions required to be taken by it pursuant to the provisions
hereof. The execution, delivery and performance of, and consummation of the
transactions contemplated by, this Agreement and all other documents hereby
contemplated have been duly authorized by Acquisition's Board of Directors and
shareholders and no other corporate proceedings on the part of Acquisition are
necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement constitutes the legal, valid and binding obligation of
Acquisition enforceable against it in accordance with its terms.
27
<PAGE>
Section 4.03. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Acquisition does not, and the
consummation by Acquisition of the transactions contemplated hereby will not,
(i) violate the Certificate of Incorporation or By-laws of Acquisition, or
(ii), subject to making the filings and obtaining the approvals identified in
Section 4.03(b), violate any law, rule, regulation, order, judgment or decree
applicable to Acquisition or by which any property or asset of Acquisition is
bound or affected, or (iii) subject to making the filings and obtaining the
approvals identified in SCHEDULE 4.04(A), result in any Violation pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Acquisition is a
party or by which Acquisition or any property or assets of Acquisition is
bound or affected, except, in the case of clause (ii) or (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not
prevent or delay consummation of the Offer or Merger in any material respect,
or otherwise prevent Acquisition from performing its material obligations
under this Agreement, or would not, individually or in the aggregate, limit
Acquisition's ability to consummate the transactions hereby contemplated or
have a material adverse effect on the business, properties, assets,
liabilities, results of operations or financial condition of Acquisition (an
"Acquisition Material Adverse Effect").
(b) The execution and delivery of this Agreement by
Acquisition does not, and the performance of this Agreement and the
consummation by Acquisition of the transactions contemplated hereby will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for (A) the pre-merger
notification requirements of the HSR Act, and (B) filing and recordation of
appropriate merger and similar documents as required by New York law.
Section 4.04. Finder's Fees. Except as set forth on SCHEDULE 4.04,
Acquisition has not incurred any liability for finder's, brokerage or similar
fees or commissions in connection with this Agreement or the transactions
hereby contemplated.
Section 4.05. Litigation. There is on the date hereof no claim, suit,
action, proceeding, audit or investigation pending or, to the best of
Acquisition's knowledge, threatened against, involving or affecting
Acquisition, which seeks to or would likely materially adversely affect the
ability of Starrett or Acquisition to consummate the transactions contemplated
hereby.
Section 4.06. HUD. Except as described or set forth in SCHEDULE 4.06,
neither Acquisition, nor any of its officers or directors nor any shareholder
having more than a 10% direct or indirect interest in Acquisition, nor any of
their affiliates, as defined in 24 CFR ss.200.215(a) (collectively referred to
as "Acquisition Principals"), have been convicted of a felony or are the
subject of a complaint or indictment charging a felony debarred, suspended or
received a full or limited denial of participation or otherwise disqualified
or sanctioned by the United States Department of Housing and Urban Development
("HUD") or by any other department or agency of the federal government or of
any state or local government, nor have any of the Acquisition Principals
served as an officer or director of, or been a shareholder, partner or member
of an entity having a 10% direct or indirect interest, or general partner
interest
28
<PAGE>
(regardless of percentage) in, nor acted as sponsor, prime contractor, turnkey
developer, management agent, nursing home administrator or operator, packager
or consultant, or architect or attorney in or for, any federal, state or local
governmentally assisted development (other than as an architect or attorney
with an arm's-length fee arrangement for professional services) that has been
the subject of a mortgage foreclosure, mortgage default, or mortgage work-out
arrangement, or regulatory agreement default and neither Acquisition nor any
of the Acquisition Principals nor any entity controlled by them or real
property owned by them (collectively referred to as "Property") are delinquent
in the payment of New York State or New York City taxes nor are there
outstanding unsatisfied notices of violations issued against the Property.
Section 4.07. Financing. Acquisition has received the written
commitment for the debt portion of the financing for the consummation of the
Offer and the Merger annexed hereto as SCHEDULE 4.07. The financing provided
under such commitment, together with the $5 Million Deposit described below
and equity to be contributed by Acquisition's principals, are sufficient in
amount to provide sufficient funds to Acquisition for consummation of the
Offer and the Merger and all transactions contemplated by Acquisition to be
consummated in connection therewith, and all fees and expenses to be incurred
by Acquisition in connection with the foregoing. Such commitment is in full
force and effect in the form annexed hereto.
ARTICLE V
COVENANTS
Section 5.01. Acquisition Transactions. Prior to the date on which
designees of Acquisition constitute a majority of the directors of Starrett,
Starrett agrees (a) that neither it nor any of the Subsidiaries shall, nor
shall it or any of the Subsidiaries permit their respective officers,
directors, executive employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or
any of the Subsidiaries) to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its
shareholders) with respect to a merger, consolidation or other business
combination, sale of a material amount of assets outside of the ordinary
course of business or the issuance of Voting Debt or Options, sale of shares
of capital stock outside of the ordinary course of business or similar
transaction involving Starrett or any of the Subsidiaries (any such
transaction being hereinafter referred to as an "Acquisition Transaction") or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an
Acquisition Transaction (excluding the Offer and the Merger contemplated by
this Agreement and excluding any such matter described on SCHEDULE 5.02), or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Transaction; and (b) that it will notify Acquisition promptly with all
relevant details if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it, and if said inquiry or proposal
is in writing it will deliver to Acquisition a copy of such inquiry or
proposal as promptly as is practicable; provided, however, that nothing
contained in this Section 5.01 shall prohibit the Board of Directors or
29
<PAGE>
officers of Starrett from furnishing information to or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited bona fide proposal relating to an Acquisition Transaction, if, and
only to the extent that, (A) the Board of Directors of Starrett, based upon
advice of outside counsel, determines in good faith that such action is
required for the Board of Directors to comply with its fiduciary duties to
shareholders under applicable law, (B) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity,
Starrett provides written notice to Acquisition to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity, which notice shall (to the extent consistent with the
fiduciary duties of the Board of Directors to shareholders under applicable
law) include the identity of the person or entity engaging in such discussions
or negotiations, requesting such information or making such proposal, and the
material terms and conditions of any proposed Acquisition Transaction, and (C)
Starrett keeps Acquisition reasonably informed of the status and all material
information with respect to any such discussions or negotiations. Nothing in
this Section 5.01 shall (x) permit Starrett to terminate this Agreement
(except as provided in Section 8.02 hereof), (y) permit Starrett to enter into
any agreement with respect to an Acquisition Transaction for as long as this
Agreement remains in effect (it being agreed that for as long as this
Agreement remains in effect, Starrett shall not enter into any agreement with
any person that provides for, or in any way facilitates, an Acquisition
Transaction (other than a confidentiality agreement in customary form)), or
(z) affect any other obligation of Starrett under this Agreement. The Company
shall immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any
parties conducted heretofore by Starrett or any employee, agent or
representative of any kind with respect to any Acquisition Proposal existing
on the date hereof.
Section 5.02. Interim Operations. Subsequent to the date hereof and
prior to the date on which a majority of Starrett's directors are designees of
Acquisition, unless Acquisition has consented in writing thereto (which
consent shall not be unreasonably withheld), except as set forth on SCHEDULE
5.02, Starrett agrees that it:
(a) shall, and shall cause its Major Subsidiaries to,
conduct their operations in all material respects according to their
usual, regular and ordinary course in substantially the same manner
as heretofore conducted;
(b) shall use its reasonable efforts, and shall cause its
Subsidiaries other than inactive Subsidiaries to use its reasonable
efforts, to preserve intact their business organizations and
goodwill, keep available the services of their respective officers
and employees and maintain satisfactory relationships with those
persons having business relationships with them (Acquisition agreeing
to reasonably cooperate with Starrett in such efforts);
(c) shall promptly deliver to Acquisition true and correct
copies of any report, statement or schedule filed with the SEC or any
other state or federal Governmental Authority in connection with this
Agreement and the transactions contemplated hereby;
30
<PAGE>
(d) shall not, and shall not permit any of the Subsidiaries
to, amend its Certificate of Incorporation or By-laws;
(e) shall not, and shall cause each of the Subsidiaries to
not, (w) issue, transfer, deliver or sell any shares of its capital
stock, effect any stock split or otherwise change its capitalization
as it existed on the date hereof, (x) grant, confer or award any
Option, Voting Debt, conversion right or other right not existing on
the date hereof to acquire any share of its capital stock, or amend
the terms of or reprice any outstanding option, warrant, or
conversion right, or grant, confer or award any bonuses or other
forms of cash incentives to any officer, director or employee except
consistent with past practice, (y) increase any compensation under
any employment agreement with any of its present or future officers,
directors or employees, except for normal increases consistent with
past practice, grant any severance or termination pay to, or, except
on a basis consistent with the letter of even date herewith from
Acquisition to Starrett, enter into any employment or severance
agreement with, or extend any loan or advance to any officer,
director or employee or amend any such agreement in any material
respect other than severance arrangements which are consistent with
past practice with respect to employees terminated by Starrett, or
(z) adopt any new employee benefit plan (including, without
limitation, any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option, stock benefit or
stock purchase plan) or amend any existing employee benefit plan
(other than a multiemployer plan) in any material respect, without
Acquisition's written consent, not to be unreasonably withheld;
(f) shall not (i) declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of
its capital stock or other ownership interests other than the regular
quarterly cash dividend of $0.0625 per share payable to shareholders
of record at September 30, 1997, or (ii) directly or indirectly
redeem, purchase or otherwise acquire any shares or its capital stock
or capital stock of any of the Subsidiaries, or make any commitment
for any such action;
(g) shall not, and shall not permit any of the Subsidiaries
to, acquire, sell, lease, encumber or otherwise dispose of any assets
for its own account (including, without limitation, capital stock of
or other equity interests in Subsidiaries or other entities) in the
aggregate for an amount exceeding $250,000 except in the ordinary
course of business or as set forth on SCHEDULE 5.02;
(h) shall not, and shall not permit any of the Subsidiaries
to, incur or assume any indebtedness for borrowed money, except in
the ordinary course of business consistent with past practice or as
set forth on SCHEDULE 5.02, or guarantee any such indebtedness or
make any loans, advances or capital contributions to, or investments
in, any other person other than wholly-owned subsidiary, except in
compliance with any partnership agreement or joint venture agreement
to which Starrett or a Subsidiary is a party, or otherwise or sell
any debt securities, in the aggregate exceeding $250,000;
31
<PAGE>
(i) shall not, nor shall it permit any of its Subsidiaries
to, (i) merge or consolidate with, or acquire any equity interest in,
any corporation, partnership, association or other business
organization, or enter into an agreement with respect thereto or (ii)
acquire or agree to acquire any assets of any corporation,
partnership, association or other business organization or division
thereof, except for the purchase of inventory and supplies in the
ordinary course of business;
(j) shall not authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation or
dissolution of Starrett or any of its Subsidiaries;
(k) shall not, nor shall Starrett permit any of its
Subsidiaries to, (A) enter into any contracts involving in any
individual case, aggregate annual payments by Starrett or any of its
Subsidiaries in each case for its own account in excess of $250,000
or (B) modify, rescind, terminate, waive, release or otherwise amend
in any material respect any of the terms or provisions of any
material contract in any manner that is material and adverse to the
Starrett or the respective Subsidiary of Starrett party thereto;
(l) not settle or compromise any claim for appraisal rights
in respect of the Merger without the prior written consent of
Acquisition;
(m) shall not, and shall not permit any of the Subsidiaries
to, authorize or make capital expenditures in excess of $250,000 in
the aggregate, except for, (1) in the case of Levitt, the purchase
and development of land described on SCHEDULE 5.02 in the ordinary
course of business and (2) capital expenditures in an aggregate
amount not exceeding $2,000,000 in connection with moving Starrett's
corporate offices;
(n) shall not and shall not permit any of the Subsidiaries
to, mortgage or otherwise encumber or subject to any Lien any
properties or assets except as would not materially adversely affect
the business of Starrett or any Major Subsidiary;
(o) shall not make any material change to its accounting
(including tax accounting) methods, principles or practices, except
as may be required by generally accepted accounting principles or by
applicable tax laws; and
(p) shall not, and shall not permit any of the Subsidiaries
to, do or agree to do any of the foregoing set forth in clauses (d),
(e), (f), (g), (h), (i), (j), (k), (l), (m), (n) and (o).
Section 5.03. Shareholder Approval. (a) To the extent shareholder
approval of this Agreement is required by law, Starrett will take (and
Acquisition shall use all reasonable efforts to cause Starrett to take) all
action necessary in accordance with New York law, Starrett's Certificate of
Incorporation, as amended, its By-laws and the requirements of the American
Stock Exchange, to convene a special meeting of the Starrett Shareholders (the
"Starrett
32
<PAGE>
Shareholders Meeting") as promptly as practicable following the expiration of
the Offer to consider and vote upon the approval of the Merger, this Agreement
and the transactions contemplated hereby.
(b) Starrett's Board of Directors shall, subject to its good
faith judgment as to its fiduciary obligations to the Starrett Shareholders
imposed by law, recommend that the Starrett Shareholders vote in favor of the
Merger, this Agreement and the transactions hereby contemplated and cause
Starrett to take all lawful actions to solicit from the Starrett Shareholders
proxies in favor of such approval.
(c) Notwithstanding the foregoing, if Acquisition and its
affiliates shall own at least 90% of the outstanding Starrett Shares, the
parties shall take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after the expiration of the Offer
without a meeting of shareholders in accordance with Section 905 of the BCL.
(d) To the extent shareholder approval of this Agreement is
required by law, Starrett shall prepare (and Acquisition shall assist where
reasonable and appropriate), a proxy statement relating to the Starrett
Shareholders Meeting (the "Starrett Proxy Statement") and a form of proxy for
use at the Starrett Shareholders Meeting relating to the vote of the Starrett
Shareholders with respect to the Merger, this Agreement and the transactions
hereby contemplated (together with any amendments or supplements thereto, in
each case in the form or forms mailed to the Starrett Shareholders). Starrett
shall cause (and Acquisition shall use all reasonable efforts to cause) the
Starrett Proxy Statement to be mailed to Starrett Shareholders at the earliest
practicable date following consummation of the Offer. Acquisition shall
promptly furnish to Starrett such information regarding each of Acquisition
and heir respective officers and directors as may be reasonably requested by
Starrett for inclusion in the Starrett Proxy Statement as required by any law
or by the Commission.
(e) Starrett covenants that none of the information
supplied, or to be supplied, by Starrett specifically for inclusion or
incorporation by reference in the Starrett Proxy Statement, including, without
limitation, information concerning Starrett or any of its affiliates,
directors, officers, employees, agents or representatives in the Starrett
Proxy Statement will, at the time of mailing of the Starrett Proxy Statement
or any amendment or supplement thereto to the Starrett Shareholders, contain
any untrue statement of any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If, at any time
prior to the date of the Starrett Shareholders' Meeting, any event with
respect to Starrett or any of its Subsidiaries, or with respect to other
information supplied by Starrett specifically for inclusion in the Starrett
Proxy Statement, shall occur which is required to be described in an amendment
of, or a supplement to, the Starrett Proxy Statement, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
Commission and, as required by law, disseminated to the Starrett Shareholders.
All documents that Starrett is responsible for filing with the Commission in
connection with the transactions contemplated herein, including the Schedule
14D-9 or the Starrett Proxy Statement, insofar as it relates to Starrett or
its Subsidiaries or other
33
<PAGE>
information supplied by Starrett specifically for inclusion therein, will
comply as to form, in all material respects, with the provisions of the
Securities Act, the Exchange Act or the rules and regulations thereunder, and
each such document required to be filed with any Governmental Authority other
than the Commission will comply in all material respects with the provisions
of applicable law as to the information required to be contained therein,
except that no covenant is made by Starrett with respect to statements made
therein based on information supplied by Acquisition or any of their
affiliates, directors, officers, employees, agents or representatives in
writing for inclusion therein.
(f) Acquisition covenants that none of the information
supplied, or to be supplied, by Acquisition specifically for inclusion or
incorporation by reference in the Starrett Proxy Statement, including, without
limitation, information concerning Acquisition or any of its affiliates,
directors, officers, employees, agents or representatives supplied by
Acquisition in connection with Starrett's preparation of the Starrett Proxy
Statement will, at the time of mailing of the Starrett Proxy Statement or any
amendment or supplement thereto to the Starrett Shareholders, contain any
untrue statement of any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If, at any time
prior to the date of the Starrett Shareholders' Meeting, any event with
respect to Acquisition, or with respect to other information supplied by
Acquisition for inclusion in the Starrett Proxy Statement, shall occur which
is required to be described in an amendment of, or a supplement to, the
Starrett Proxy Statement, such event shall be so described, and the
information required to be filed in such amendment or supplement shall be
promptly delivered to Starrett for filing with the Commission and, as required
by law, dissemination to the Starrett Shareholders. All documents that
Acquisition is responsible for filing with the Commission in connection with
the transactions contemplated herein, including the Schedule 14D-1, insofar as
it relates to Acquisition or other information supplied by Acquisition
specifically for inclusion therein, will comply as to form, in all material
respects, with the provisions of the Securities Act, Exchange Act or the rules
and regulations thereunder, and each such document required to be filed with
any Governmental Authority other than the Commission will comply in all
material respects with the provisions of applicable law as to the information
required to be contained therein, except that no covenant is made by
Acquisition with respect to statements made therein based on information
supplied by Starrett or any of the Subsidiaries or any of their respective
affiliates, directors, officers, employees, agents or representatives in
writing for inclusion therein.
(g) Acquisition agrees to cause all Starrett Shares
purchased pursuant to the Offer and all other Starrett Shares owned by
Acquisition or any affiliate of Acquisition to be voted in favor of the
approval and adoption of this Agreement.
Section 5.04. Access by Acquisition. The directors, officers,
employees, lenders, accountants, counsel and other representatives of
Acquisition (collectively, the "Representatives") shall be permitted
reasonable access, during usual business hours during the period prior to the
Closing Date to the properties, accounts, books, contracts, commitments, tax
returns and records of Starrett and the Subsidiaries, and such other
information relating to
34
<PAGE>
Starrett and the Subsidiaries as Acquisition shall reasonably request. The
Representatives shall be permitted to discuss the business affairs, finances
and accounts of Starrett and the Subsidiaries with the officers, directors,
executives, counsel, auditors and actuaries of Starrett and the Subsidiaries..
Section 5.05. Hart Scott Rodino Filing. Each party hereto shall file
or cause to be filed with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") any
notification required to be filed by their respective "ultimate parent"
companies under the HSR Act and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Such parties
will use all reasonable efforts to make such filings within five business days
after commencement of the Offer, and to respond on a timely basis to any
requests for additional information made by either of such agencies. Each of
the parties hereto agrees to furnish the other with copies of all
correspondence, filings and communications (and memoranda setting forth the
substance thereof) between it and its affiliates and their respective
representatives, on the one hand, and the FTC, the Antitrust Division or any
other Governmental Authority or members or their respective staffs, on the
other hand, with respect to this Agreement and the transactions contemplated
hereby, other than personal financial information filed therewith. Each party
hereto agrees to furnish the others with such necessary information and
reasonable assistance as such other parties and their respective affiliates
may reasonably request in connection with their preparation of necessary
filings, registrations or submissions of information to any Governmental
Authorities, including without limitation any filings necessary under the
provisions of the HSR Act.
Section 5.06. No Breach of Representations and Warranties. Each of
Starrett and Acquisition shall not knowingly and Starrett shall not knowingly
permit any Subsidiary to take any action which would be reasonably likely to
cause or constitute a material breach, or knowingly take any action which, if
it had been taken prior to the date hereof, would have caused or constituted a
material breach of, any of its representations and warranties set forth in
Articles III and IV, respectively. Each of Starrett and Acquisition shall, in
the event of, or promptly after the occurrence of, or promptly after obtaining
knowledge of the occurrence of or the impending or threatened occurrence of,
any fact or event which would cause or constitute a breach of any of the
representations and warranties set forth in Articles III and IV, respectively,
as of the Closing Date, give detailed notice thereof to each other
non-breaching party; and each of Starrett and Acquisition shall use its
reasonable efforts to prevent or promptly to remedy such breach whether or not
caused by any action knowingly taken.
Section 5.07. Consents; Notices. Each of Starrett and Acquisition
shall use its reasonable efforts to obtain and deliver to each other party all
written consents, in form and substance satisfactory to each other party,
required in connection with this Agreement or the transactions hereby
contemplated. Each of Starrett and Acquisition shall also deliver all notices
to Governmental Authorities and third parties required to be delivered in
connection with the execution of this Agreement and the transactions hereby
contemplated.
35
<PAGE>
Section 5.08. Reasonable Efforts. Subject to the fiduciary duties of
the Board of Directors of Starrett and on the terms and subject to the
conditions of this Agreement, each of Starrett and Acquisition shall use its
reasonable efforts to effectuate the transactions hereby contemplated and to
fulfill the conditions to the obligations of each under this Agreement,
including cooperating fully with the other party, including by provision of
information and making of all necessary filings in connection with, among
other things, approvals under the HSR Act. Starrett will use all reasonable
efforts to obtain any consent from third parties necessary to allow Starrett
and its Subsidiaries to continue operating their business as presently
conducted as a result of the consummation of the transactions contemplated
hereby. In case at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement of to vest
the Surviving Corporation with full title to all properties, assets, rights,
approval, immunities and franchises of either of Starrett or Acquisition, the
proper officers and directors of each party to this Agreement shall take all
such necessary action.
Section 5.09. Indemnification; Officers' and Directors' Insurance.
(a) Acquisition agrees that all rights to indemnification
existing as of the date hereof in favor of the present or former directors,
officers, employees, fiduciaries and agents of Starrett or any of the
Subsidiaries as provided in Starrett's certificate of incorporation or by-laws
or pursuant to other agreements, arrangements or the certificate of
incorporation, by-laws or similar documents of any of the Subsidiaries as in
effect on the date hereof with respect to matters occurring prior to the
Effective Time shall survive the Merger and shall continue in full force and
effect pursuant to the terms thereof. The Surviving Corporation shall cause to
be maintained in effect for not less than six years from the Effective Time
the policies of directors' and officers' liability insurance and the Starrett
employed lawyers liability insurance maintained by Starrett and its
Subsidiaries, each as in effect on the date hereof (provided that they may
substitute therefor policies of at least the same coverage containing terms
and conditions which are no less advantageous), with respect to matters
occurring prior to the Effective Time.
(b) It is understood and agreed that Starrett shall, to the
fullest extent permitted under applicable law and regardless of whether the
Merger becomes effective, indemnify and hold harmless, and after the Effective
Time, the Surviving Corporation shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each present and former director,
officer and fiduciary of Starrett or any of the Subsidiaries (collectively,
the "Indemnified Parties") against any fees, costs or expenses (including
reasonable attorneys' fees) and judgments, fines, losses, damages, liabilities
and amounts paid in settlement (collectively, "Losses"), in connection with
any pending, threatened or completed claim, action, suit, proceeding or
investigation arising out of any actions or omissions occurring at or prior to
the Effective Time that are in whole or in part based on or arising out of the
fact that such person is or was a director, officer or fiduciary of Starrett
or pertaining to any of the transactions contemplated hereby. In no event
shall Starrett or the Surviving Corporation be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld). Any Indemnified Party wishing to claim indemnification under this
Section 5.09(b), upon learning of any such claim, action, suit, proceeding or
investigation, shall notify Starrett (or
36
<PAGE>
after the Effective Time, the Surviving Corporation) (but the failure so to
notify shall not relieve a party from any liability which it may have under
this Section 5.09(b) except to the extent such failure prejudices such party's
position with respect to such claims) and shall deliver to Starrett (or after
the Effective Time, the Surviving Corporation) the undertaking contemplated by
Section 723(c) of the BCL. Starrett (or, after the Effective Time, the
Surviving Corporation) shall be entitled to assume and control the defense of
any such action or proceeding, including the employment of counsel reasonably
satisfactory to the Indemnified Party; provided, however, that any Indemnified
Party may at its own expense retain separate counsel to participate in such
defense. If Starrett or the Surviving Corporation does not elect to assume
such defense, then the Indemnified Parties may assume such defense with one
counsel (and, if required, one local counsel) of their own choosing reasonably
acceptable to Starrett or the Surviving Corporation.
(c) If any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated hereby is commenced,
whether before or after the Effective Time, Starrett and, after the Effective
Time, the Surviving Corporation, shall agree to use their commercially
reasonable efforts to defend against and respond thereto.
(d) This Section 5.09 shall survive for a period of six
years (and thereafter with respect to claims then pending) following the
Effective Time and is intended to benefit Starrett, the Surviving Corporation
and the Indemnified Parties. In the event Starrett or the Surviving
Corporation or any of their respective successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation of such consolidation or merger, or (ii) transfers all
or substantially all of its properties to any person, then, and in each case,
proper provision shall be made so that the successors and assigns of Starrett
and the Surviving Corporation, as the case may be, shall assume the
obligations set forth in this Section 5.09.
Section 5.10. Government Agency Cooperation. Acquisition shall
provide, and shall cause the Acquisition Principals to provide, any and all
information that may be required by HUD, or any other federal, state or local
governmental entity in connection with the transactions contemplated by this
Agreement and in connection with any approval that may be required for the
transfer of interests in any governmentally assisted development in which
Starrett or any of its Subsidiaries has had an interest, and shall pay all
reasonable fees and expenses (including the reasonable fees and expenses of
Starrett's counsel) incurred in connection with obtaining any such approval.
Section 5.11. Directors. (a) Promptly upon the acceptance for payment
of, and payment by Acquisition for, all Starrett Shares tendered and not
withdrawn pursuant to the Offer, Acquisition shall be entitled to designate
such number of directors on the Board of Directors of Starrett as will give
Acquisition, subject to compliance with Section 14(f) of the Exchange Act,
representation on such Board of Directors equal to at least that number of
directors, rounded up to the next whole number (and in no event less than a
majority of the Board of Directors), which is the product of (a) the total
number of directors on such Board of Directors (giving effect to the directors
elected pursuant to this sentence) multiplied by (b) the percentage that (i)
such number
37
<PAGE>
of Starrett Shares so accepted for payment and paid for by Acquisition or
otherwise owned by Acquisition and its affiliates bears to (ii) the number of
such Starrett Shares outstanding, and Starrett shall, at such time, cause
Acquisition's designees to be so elected; provided, however, that in the event
that Acquisition's designees are appointed or elected to the Board of
Directors of the Company, until the Effective Time of the Merger such Board of
Directors shall have at least two directors who are directors on the date
hereof or who are otherwise not officers, directors or affiliates of
Acquisition and are independent directors under the rules of the American
Stock Exchange (the "Independent Directors") and provided further that, in
such event, if the number of Independent Directors shall be reduced below two
for any reason whatsoever, any remaining Independent Directors (or Independent
Director, if there shall be only one remaining) shall be entitled to designate
persons to fill such vacancies who shall be deemed to be Independent Directors
for purposes of this Agreement or, if no Independent Directors then remain,
the other directors shall designate two persons to fill such vacancies who
shall not be officers, stockholders or affiliates of Acquisition and who shall
be independent directors under the rules of the American Stock Exchange, and
such persons shall be deemed to be Independent Directors for purposes of this
Agreement. Subject to applicable law, Starrett shall take all action requested
by Acquisition necessary to effect any such election, including mailing to its
shareholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
Starrett agrees to make such mailing with the mailing of the Schedule 14D-9
(provided that Acquisition shall have provided to Starrett on a timely basis
all information required to be included in the Information Statement with
respect to Acquisition's designees). In connection with the foregoing,
Starrett will promptly, at the option of Acquisition, either increase the size
of Starrett's Board of Directors or obtain the resignation of such number of
its current directors as is necessary to enable Acquisition's designees to be
elected to Starrett's Board of Directors as provided above.
(b) Following the election or appointment of Acquisition's
designees pursuant to this Section 5.11 and prior to the Effective Time of the
Merger, if requested by a majority of the Independent Directors, Acquisition's
designees shall abstain from acting upon, and the approval of a majority of
the Independent Directors shall be required to authorize, any matter relating
to this Agreement or the Merger, including without limitation any termination
of this Agreement by Starrett, any amendment of this Agreement requiring
action by the Board of Directors of Starrett, any extension of time for the
performance of any obligation or any other act of Acquisition under this
Agreement and any waiver of compliance by Acquisition with any provision of
this Agreement for the benefit of Starrett or the Starrett Shareholders.
Section 5.12. Certain Agreements of Acquisition. If requested by
Starrett, unless other arrangements are entered into by Acquisition and Irving
R. Fischer, Acquisition shall provide Starrett prior to consummation of the
Offer with sufficient funds to pay the "Sale Payment" to Mr. Fischer, as such
term is defined in the agreement between Mr. Fischer and Starrett dated
November 7, 1996.
Section 5.13. Notification of Certain Matters. Each party shall give
prompt written notice to the other of (a) the failure of such party to comply
with or satisfy in any material
38
<PAGE>
respect any covenant, condition or agreement to be complied with or satisfied
by it hereunder and (b) in the case of Starrett, the occurrence of any threat
by any executive officer or senior management employee of Starrett or any of
its Major Subsidiaries to resign or otherwise terminate their employment
relationship with Starrett or any of its Major Subsidiaries.
ARTICLE VI
CONDITIONS TO ACQUISITION'S OBLIGATIONS
All obligations of Acquisition under this Agreement to effect the
Merger are subject solely to the fulfillment at or prior to the Closing Time
of each of the following conditions (any of which may be waived in writing by
Acquisition):
Section 6.01. Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent the performance of any of Acquisition's material obligations under
Article II and no statute, rule, regulation, executive order, decree or
injunction shall have after the date of this Agreement been enacted, entered,
promulgated or enforced by any United States court or Governmental Authority
of competent jurisdiction which prohibits the consummation of the Merger;
provided, however, that Acquisition shall have used its commercially
reasonable best efforts to prevent the entry of any such injunction or other
order and to appeal as promptly as possible any injunction or other order that
may be entered.
Section 6.02. Shareholder Approval. The Merger, this Agreement and
the transactions contemplated hereby shall have been approved in a manner
required by applicable law, and by the applicable regulations of any stock
exchange or other regulatory body, provided, that Acquisition and its
affiliates shall have voted all Starrett Shares owned by them in favor of this
Agreement and provided further, that each of Acquisition and Starrett shall
have used its commercially reasonable efforts to cause such approval to be
obtained.
Section 6.03. Consummation of the Offer. Acquisition shall have
accepted for purchase and paid for Starrett Shares tendered pursuant to the
Offer; provided, however, that this condition will be deemed satisfied with
respect to Acquisition if Acquisition shall have failed to purchase Starrett
Shares pursuant to the Offer in violation of the terms of the Offer or this
Agreement.
ARTICLE VII
CONDITIONS TO STARRETT'S OBLIGATIONS
All obligations of Starrett under this Agreement to effect the Merger
are subject solely to the fulfillment, at the Closing Time, of each of the
following conditions (any of which may, subject to the provisions of Section
5.11, be waived in writing by Starrett):
Section 7.01. Injunctions. No, court, agency or other authority shall
have issued any order, decree or judgment to set aside, retrain, enjoin or
prevent the performance of Starrett's
39
<PAGE>
obligations under Article II hereof. No statute, rule, regulation, executive
order, degree or injunction shall have after the date of this Agreement been
enacted, entered, promulgated or enforced by any United States court or
Governmental Body of competent jurisdiction which prohibits the consummation
of the Merger.
Section 7.02. Shareholder Approval. The Merger, this Agreement and
the transactions contemplated hereby shall have been approved in a manner
required by applicable law, and by the applicable regulations of any stock
exchange or other regulatory body.
ARTICLE VIII
ESCROW DEPOSITS; TERMINATION
Section 8.01. Escrow Deposits. Simultaneously with the execution and
delivery of this Agreement, Acquisition has deposited with Proskauer Rose LLP
(the "Escrow Agent") the cash sum of $5 million (the "$5 Million Deposit")
under an Escrow Agreement (the "Deposit Escrow Agreement") among the Escrow
Agent, Acquisition and Starrett. The $5 Million Deposit shall be paid by the
Escrow Agent as prescribed under Section 8.03 below.
Section 8.02. Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the Shareholders of
Starrett or by Acquisition, subject, in the case of Starrett, to the
provisions of Section 5.11:
(a) by the mutual consent of Acquisition and Starrett;
(b) by Acquisition, if prior to consummation of the Offer
(i) the Board of Directors of Starrett fails to make, or withdraws or
materially modifies or changes in a manner adverse to Acquisition its
recommendation to the Starrett Shareholders to accept the Offer, the Merger or
this Agreement and the transactions contemplated hereby, or resolves to do the
foregoing or (ii) the Board of Directors of Starrett shall have recommended
that the Starrett Shareholders accept or approve an Acquisition Transaction
with a person other than Acquisition, or resolves to do the foregoing or (iii)
a tender or exchange offer for any of the outstanding shares of capital stock
of Starrett is commenced (other than by Acquisition or its affiliates) and the
Board of Directors of Starrett fails to timely recommend against Starrett
Shareholders' tendering their shares into such tender or exchange offer;
(c) by Starrett, if in the exercise of its judgment as to
its fiduciary duties to its shareholders, after consultation with outside
counsel, the Board of Directors of Starrett determines that such termination
is required by reason of a proposal relating to an Acquisition Transaction
being made;
(d) by Starrett, if the Offer shall not have been
consummated on or before November 20, 1997 or such later expiration date for
the Offer as may be expressly permitted
40
<PAGE>
under Section 1.01(a) (provided that the conditions to consummation of the
Offer set forth on EXHIBIT A have been satisfied on such date);
(e) by Starrett, if there has been a violation or breach by
Acquisition of any representation, warranty or agreement contained in this
Agreement specifically qualified by materiality, or a material violation or
breach by Acquisition of any material representation, warranty or agreement
not so qualified contained in this Agreement (which violation or breach is not
cured by Acquisition within 30 days after written notice by Starrett to
Acquisition reasonably describing such breach);
(f) by Acquisition prior to consummation of the Offer, if
there has been a violation or breach by Starrett of any representation,
warranty or agreement contained in this Agreement as though such
representations, warranties and agreements were made without reference to a
Starrett Material Adverse Effect (which violation or breach is not cured by
Starrett within 30 days after written notice by Acquisition to Starrett
reasonably describing such breach), except in all cases where the failure or
failures of such representations and warranties to be so true and correct or
such agreements to be performed or complied with would not have, singly or in
the aggregate, a Starrett Material Adverse Effect;
(g) by Acquisition or Starrett, if the Offer shall not have
been consummated on or before December 31, 1997, or if prior to such day a
reasonable, well-informed person would conclude that any condition set forth
in EXHIBIT A shall be incapable of being satisfied by such date (except that a
party whose breach of covenant has caused such failure to consummate shall not
be entitled to so terminate this Agreement), or the Merger has not been
consummated by October 16, 1998; or
(h) by Starrett if Starrett is not in material breach of
this Agreement and if the Offer has not been timely commenced in accordance
with Section 1.01 hereof.
Section 8.03. Effect of Termination. (a) In the event of the
termination of this Agreement pursuant to Section 8.02, all obligations of the
parties hereto shall terminate, except obligations of the parties pursuant to
Sections 8.01, 9.03, 9.05, 9.06, 9.09, 9.10, 9.11 and this Section 8.03.
(b) If this Agreement is terminated pursuant to Section
8.02(d), Section 8.02(e), Section 8.02(g) (as a result of the breach of this
Agreement by Acquisition) or Section 8.02(h), the $5 Million Deposit shall be
forthwith paid to Starrett as liquidated damages, which remedy shall represent
the only damages that may be sought by Starrett or any Starrett Shareholder
under this Agreement in the event of a termination of this Agreement as
aforesaid or any violation or breach of this Agreement which gave rise
thereto.
(c) If this Agreement is terminated prior to consummation of
the Offer pursuant to Section 8.02(b), Section 8.02(c) or (as a result of the
willful breach of covenant or agreement under this Agreement by Starrett,
which breach is not cured by Starrett within 30 days
41
<PAGE>
after written notice by Acquisition to Starrett reasonably describing such
breach) Section 8.02(f) or Section 8.02(g), Starrett shall pay to Acquisition
a fee (the "Fee") equal to $2,500,000 and shall reimburse Acquisition for its
reasonable out-of-pocket expenses up to a maximum amount of $500,000 incurred
in connection with the transactions contemplated by this Agreement, the
payment of such Fee to be made simultaneously with the termination of this
Agreement and the reimbursement of such expenses to be made promptly upon
presentation of invoices therefor. In addition, if a More Favorable
Transaction (as such term is defined below) is consummated within one year
after the effective date of the termination of this Agreement as described in
this Section 8.03(c) prior to consummation of the Offer, the Fee shall be
increased to an amount equal to the excess, if any, of (A) the (i) the
aggregate value of the consideration received by the Starrett Shareholders in
the More Favorable Transaction minus the amount of the Original Consideration
(as such term is defined below), multiplied by (ii) 25%, over (B) $2,500,000.
The Fee shall represent liquidated damages and the only damages that may be
sought by Acquisition in the event of a termination of this Agreement as
aforesaid or any violation or breach of this Agreement which gave rise
thereto. As used herein, (i) a "More Favorable Transaction" shall mean any
Acquisition Transaction under which the holders of more than 50% of the
Starrett Shares receive consideration equal to a value in excess of $12.25 per
Starrett Share, and (ii) the "Original Consideration" shall mean the product
of $12.25 multiplied by the number of Starrett Shares sold or otherwise
disposed of by Starrett Shareholders in the More Favorable Transaction and for
which the Starrett Shareholders receive consideration in such More Favorable
Transaction.
(d) If this Agreement is terminated prior to consummation of
the Offer pursuant to Section 8.02(f) (as a result of the non-willful breach
of representation, warranty, covenant or agreement under this Agreement by
Starrett, which breach is not cured by Starrett within 30 days after written
notice by Acquisition to Starrett reasonably describing such breach) Starrett
shall reimburse Acquisition for its reasonable out-of-pocket expenses up to a
maximum amount of $1,000,000 incurred in connection with the transactions
contemplated by this Agreement, the reimbursement of such expenses to be made
promptly upon presentation of invoices therefor. Such expense reimbursement
shall represent liquidated damages and the only damages that may be sought by
Acquisition in the event of a termination of this Agreement as aforesaid or
any violation or breach of this Agreement which gave rise thereto.
(e) If this Agreement is terminated for any reason other
than as set forth in Section 8.03(b) the $5 Million Deposit shall be returned
to Acquisition and no party shall have any further liability under this
Agreement.
42
<PAGE>
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval of the matters presented in
connection with the Merger by the Starrett Shareholders, subject in the case
of approval by Starrett to Section 5.11, but, after any such approval, no
amendment shall be made which by law requires further approval by the Starrett
Shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.02. Extension: Waiver. At any time prior to the Effective
Time, Acquisition and Starrett may, subject in the case of approval by
Starrett to Section 5.11, to the extent legally allowed (i) extend the time
for the performance of any of the obligations or other acts of the other party
hereto, (ii) waive any inaccuracies in the representation and warranties of
the other party contained herein or in any document delivered pursuant hereto
and (iii) waive compliance by the other party with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of Acquisition and Starrett. The failure of any
party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
Section 9.03. Non-Survival. The representations, warranties,
covenants and agreements in this Agreement shall terminate at the Effective
Time, except that the agreements set forth in Article II, Section 5.09 and in
this Article IX, except for the first sentence of Section 9.05, and any other
covenant or agreement that contemplates performance after the Effective Date
shall survive the Effective Time, and no claim may be brought after the
Effective Time against any person alleging a breach of any representation or
warranty or a failure to comply with the terms and provisions of this
Agreement except those agreements set forth in Article II, Section 5.09 and in
this Article IX. No shareholder of Starrett nor any officer, director,
employee, agent or representative of Starrett or any Starrett Subsidiary shall
have personal liability for breach of any representation, warranty or
agreement of Starrett in this Agreement.
Section 9.04. Further Assurances. Each of the parties agrees and
covenants promptly to execute and deliver, or cause to be executed and
delivered, to the other party such documents or instruments, in addition to
those expressly required by this Agreement to be executed and delivered, as
the other party may reasonably deem necessary or desirable to carry out or
implement any provision of this Agreement and the transaction contemplated
hereby.
Section 9.05. Entire Agreement. All prior or contemporaneous
agreements, contracts, promises, representations and statements, if any,
between the parties hereto as to the subject matter hereof, are merged into
this Agreement. This Agreement, together with all agreements, Schedules,
documents and other instruments to be attached hereto or delivered hereunder
sets forth the entire understanding between the parties, and there are no
terms, conditions, representations, warranties or covenants other than those
contained herein and in such
43
<PAGE>
agreements, Schedules, documents and other instruments to be attached hereto
or delivered hereunder.
Section 9.06. Notices. All notices, consents, demands or other
communications required or permitted to be given pursuant to the Agreement
shall be in writing and shall be deemed sufficiently given on (i) the day on
which delivered personally during a business day to the appropriate location
listed as the address below, (ii) three business days after the posting
thereof by United States registered or certified first class mail, return
receipt requested with postage and fees prepaid, or (iii) one business day
after deposit thereof for overnight delivery. Such notices, consents, demands
or other communications shall be addressed respectively:
As to Starrett: Starrett Corporation
909 Third Avenue
New York, New York 10022
Attention: Mr. Irving R. Fischer
with a copy to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Peter G. Samuels, Esq.
As to Acquisition: Startt Acquisition, Inc.
c/o Lawrence Ruben Company, Inc.
600 Madison Avenue
20th Floor
New York, New York 10022
Attention: Mr. Jonathan I. Mayblum
with a copy to: Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Alan S. Katz, Esq.
or to any other address which such party may have subsequently communicated to
the other parties in writing.
Section 9.07. Successors and Assigns. Each and every representation,
warranty, covenant, agreement, indemnification, and provision of the Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto. Except as otherwise
expressly provided herein, this Agreement may not be assigned by either party
hereto without the prior written consent of the other party hereto. Any
purported assignment in violation of this Agreement shall be void.
44
<PAGE>
Section 9.08. Governing Law. This Agreement and any other agreement
entered into in connection herewith shall be governed by, and construed under
and in accordance with, the laws of the State of New York applicable to
contracts made and wholly to be performed therein by residents thereof,
without giving effect to the conflict of law principles thereof.
Section 9.09. Gender and Person. Wherever the context so requires,
the masculine pronoun shall include the feminine and the neuter, and the
singular shall include the plural.
Section 9.10. Captions. The captions and the table of contents
appearing in this Agreement are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope or intent of
this Agreement or any of the provisions hereof.
Section 9.11. Confidentiality of Disclosures. Any corporate
information, records, documents, descriptions or other disclosures of
whatsoever nature or kind made or disclosed by either of the parties to the
other party, or to the authorized representatives thereof, or learned or
discovered by such other party or by any representatives thereof in connection
with the transactions contemplated by this Agreement (whether prior to or
after the date of the execution of this Agreement) and not known by or
available to the public at large, shall be received in confidence and neither
of the parties nor any such authorized representative shall disclose or make
use of such information or authorize anyone else to disclose or make use
thereof without the written consent of the other party hereto, except (a) as
necessary to consummate the transactions contemplated hereby or (b) as
compelled by judicial or administrative process or by other requirements of
applicable law including any disclosure under federal securities laws;
provided, however, that in the case of any disclosure contemplated pursuant to
this clause (b), the party seeking to disclose such information shall give the
other party reasonable prior written notice thereof in order to afford such
other party reasonable opportunity to seek a protective order or other
limitation under such disclosure.
Section 9.12. Publicity. Any communications and notices to third
parties and all other publicity concerning the transactions contemplated by
the Agreement (other than governmental or regulatory filings) shall be planned
and coordinated by and between the parties. Unless required by applicable law
or the rules of the American Stock Exchange, neither of the parties shall
disseminate or make public or cause to be disseminated or made public any
information regarding the transactions contemplated hereunder without the
prior approval of the other party, which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, either party to this Agreement may,
without the prior approval of the other, make public statements that are not
inconsistent with public documents filed with the Commission in connection
therewith.
Section 9.13. Fees and Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with the
negotiation and execution of this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses except as otherwise
provided in Section 5.10 and Section 8.03.
45
<PAGE>
Section 9.14. Third Parties. Other than the parties hereto and as
provided in Section 5.09, no person shall have any right under or to enforce
any provision of this Agreement.
Section 9.15. Counterparts. The Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
taken together shall constitute a single agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
STARTT ACQUISITION, INC.
By: /s/ Jonathan I. Mayblum
______________________________
Name: Jonathan I. Mayblum
Title: President
STARRETT CORPORATION
By: /s/ Paul Milstein
______________________________
Name: Paul Milstein
Title: Chairman of the Board
46
<PAGE>
EXHIBIT A
Conditions of the Offer
Reference is made to the Agreement and Plan of Merger, dated
as of October 16, 1997 (the "Agreement"), by and between Acquisition and
Starrett Corporation ("Starrett"). Capitalized terms defined in the Agreement
and not otherwise defined herein are used herein with the meanings so defined.
Notwithstanding any other term of the Offer or this
Agreement, Acquisition shall not be required to accept for payment or, subject
to any applicable rules and regulations of the Commission, including Rule
14e-1(c) under the Exchange Act (relating to Acquisition's obligation to pay
for or return tendered Starrett Shares after the termination or withdrawal of
the Offer), to pay for any Starrett Shares tendered pursuant to the Offer
unless (x) there shall have been validly tendered and not withdrawn prior to
the expiration of the Offer a number of Starrett Shares which, when added to
any other Starrett Shares owned by Acquisition or its affiliates, shall equal
at least 66 2/3% of the number of Starrett Shares outstanding on a
fully-diluted basis immediately after the termination of the Offer (the
"Minimum Tender Condition") and (y) all waiting periods under the HSR Act
applicable to the purchase of Starrett Shares pursuant to the Offer shall have
expired or have been terminated. Furthermore, notwithstanding any other term
of the Offer or this Agreement, but subject to the provisions of Section
1.01(a), Acquisition shall not be required to accept for payment or, subject
as aforesaid, to pay for any Starrett Shares not theretofore accepted for
payment or paid for, and may, subject to Section 1.01, amend the Offer, if
upon the expiration date of the Offer, any of the following conditions exists
and shall be continuing:
(a) Representations and Warranties. The representations and
warranties contained in Article III shall not be true and correct in all
respects in each case at and as of such time as though such representations
and warranties were made at and as of such time without reference to a
Starrett Material Adverse Effect, and except for those representations and
warranties which are expressly made as of a specified earlier date, in which
case such representations and warranties shall be true and correct as of such
specified date in all respects without reference to a Starrett Material
Adverse Effect, except in all cases where the failure or failures of such
representations and warranties to be so true and correct would not have,
singly or in the aggregate, a Starrett Material Adverse Effect.
(b) Covenants. Starrett shall have not performed and
complied with any agreement or condition on its part required by this
Agreement to be performed or complied with prior to or at such time, which
failure of performance or compliance, singly or in the aggregate, has a
Starrett Material Adverse Effect.
(c) Absence of Changes. From the date of this Agreement
through such time, there shall have occurred any event or events, or change or
changes in the financial condition,
47
<PAGE>
business or operations of Starrett that, singly or in the aggregate, has a
Starrett Material Adverse Effect.
(d) Actions or Proceedings. There shall be any action or
proceeding by or before any Governmental Authority which has resulted in the
issuance of an injunction or order which (i) restrains, prohibits or
materially delays the consummation of the Offer or the Merger, (ii) makes the
purchase of, or payment for, some or all of the Starrett Shares pursuant to
the Offer or the Merger illegal, or results in a material delay in the ability
of Acquisition to accept for payment or pay for some or all of the Starrett
Shares, (iii) compels Acquisition to dispose of or hold separately all or any
material portion of Starrett's and its Subsidiaries' business or assets, (iv)
makes illegal or otherwise directly or indirectly restrains or prohibits or
imposes material financial burdens, penalties or fines, or requires the
payment of material damages (other than financial burdens or damages resulting
from any claim, action, suit or proceeding arising from the agreements and
other documents set forth on Schedule D hereto or any circumstances relating
thereto) in connection with the making of, the Offer, the acceptance for
payment of, payment for, or ownership, directly or indirectly, of some of or
all the Starrett Shares by Acquisition, the consummation of the Offer or the
Merger, (v) otherwise prevents consummation of the Offer or the Merger, or
(vi) imposes material limitations on the ability of Acquisition effectively
(A) to acquire, hold or operate the business of Starrett and its Subsidiaries
taken as a whole or (B) to exercise full rights of ownership of the Starrett
Shares acquired by it, including, but not limited to, the right to vote the
Starrett Shares purchased by it on all matters properly presented to the
stockholders of Starrett, which, in either case, would effect a material
diminution in the value of Starrett or the Starrett Shares.
(e) Injunctions. There shall have been any statute, rule,
regulation, order, decree or injunction enacted, promulgated or entered by any
Governmental Authority or any other action shall have been taken by any
Governmental Authority, in any such case on or after the date of the Offer,
that has resulted in any of the consequences referred to in clauses (i)
through (v) of the paragraph (d) above.
(f) Force Majeure. There shall have occurred and be
continuing (i) any general suspension of trading in, or general limitation on
prices for, securities on the New York Stock Exchange, Inc. or the American
Stock Exchange (other than suspensions of not more than one business day),
(ii) the declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) the
commencement of a war, armed hostilities or other international or national
calamity involving the United States and having a Starrett Material Adverse
Effect, or (iv) any material limitation by any Governmental Authority that
materially adversely affects generally the extension of credit by banks or
other financial institutions.
(g) Consents. Starrett shall have failed to obtain the
consents of Chase and HUD set forth in Schedule 3.05.
48
<PAGE>
(h) Shareholders Agreement. The Shareholders Agreement of
even date herewith, among Acquisition and Messrs. Milstein, Benach, Fischer
and Aboodi (the "Principal Shareholders") shall no longer be in full force and
effect, or any of the Principal Shareholders shall have breached any material
obligation thereunder.
(i) Gateway / Starrett City. Either the Gateway MOU or the
Starrett City Management Agreement shall not be in full force and effect.
The foregoing conditions are for the sole benefit of
Acquisition and may be asserted by Acquisition regardless of the circumstances
giving rise to any such condition (other than a breach by Acquisition of the
Agreement) and may be waived by Acquisition, in whole or in part, at any time
and from time to time, in the sole discretion of Acquisition. The failure by
Acquisition at any time to exercise any of the foregoing rights will not be
deemed a waiver of any right and each right will be deemed an ongoing right
which may be asserted at any time and from time to time.
49
<PAGE>
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT, dated as of October 16, 1997 (the
"Agreement"), is made and entered into by Startt Acquisition, LLC, a Delaware
limited liability company ("Parent"), Startt Acquisition, Inc., a New York
corporation and a wholly-owned subsidiary of Parent ("Acquisition"), and the
parties listed on Schedule A (the "Milstein Parties"), the parties listed on
Schedule B (the "Benach Parties"), the parties listed on Schedule C (the
"Aboodi Parties"), the party listed on Schedule D (the "Fischer Party") (each
party on Schedule A, B, C and D shall be referred to individually as a
"Shareholder" and collectively as the "Shareholders", and each of the Milstein
Parties, as a group, the Benach Parties, as a group, the Aboodi Parties, as a
group, and the Fischer party shall be referred to as a "Group of Shareholders"
or Shareholder Group").
WITNESSETH:
WHEREAS, on October 16, 1997, Acquisition and Starrett Corporation, a
New York corporation (the "Company"), entered into an Agreement and Plan of
Merger (as such agreement may hereafter be amended, restated or renewed from
time to time, the "Merger Agreement"), pursuant to which Acquisition will
commence a cash tender offer to purchase any and all outstanding shares of
common stock, par value $1.00 per share, of the Company (the "Company Common
Stock"), including all of the shares, and Acquisition will be merged with and
into the Company. Capitalized terms used and not defined herein shall have the
respective meanings ascribed to them in the Merger Agreement;
WHEREAS, set forth opposite each Shareholder's name on Schedule A, B,
C or D, as the case may be, is the number of shares of Common Stock owned by
such Shareholder; and
WHEREAS, the Shareholders are executing this Agreement as an
inducement to Parent and Acquisition to facilitate the Offer and the Merger and
the financing thereof.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing but excluding any shares deemed to
be beneficially owned by a Person as a result of the participation of such
Person in a "group" within the meanings of Section 13(d)(3) of the Exchange
Act.
<PAGE>
(b) "Merger" shall mean the merger contemplated by the Merger
Agreement.
(c) "Offer" shall mean the cash tender offer contemplated by the
Merger Agreement for all of the outstanding shares of Company Common Stock.
(d) "Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
(e) "Termination Event " shall mean the first to occur of (i) the
termination of the Merger Agreement by any party thereto, or (ii) the
termination, withdrawal, abandonment or expiration of the Offer without the
shares of each Shareholder as set forth on Schedule A, B, C or D hereto being
accepted for purchase thereunder (an "Offer Termination Event").
2. THE ACQUISITION OFFER.
(a) Provided that Acquisition is not then in material breach of
the Merger Agreement and provided that there has not been issued an injunction
which would prohibit the Shareholders from tendering their respective shares,
the Milstein Parties, the Benach Parties, the Aboodi Parties and the Fischer
Party hereby, severally and not jointly and severally, agree to validly tender
(and not to withdraw), pursuant to and in accordance with the terms of the
Offer, not later than the fifth business day after the receipt by the
respective Shareholders of the offer to purchase, transmittal letter and other
relevant Offer Documents, 2,169,063, 688,748, 387,360 and 72,040 shares,
respectively (the "Existing Shares" and, together with any shares of Company
Common Stock acquired by such Shareholder after the date hereof and prior to
the termination of the Agreement, whether upon exercise of options, warrants or
rights, the conversion or exchange of convertible or exchangeable securities,
or by means of purchase, dividend, distribution or otherwise, the "Shares"),
Beneficially Owned by the Shareholder. Each Shareholder hereby acknowledges and
agrees that Acquisition's obligation to accept for payment Shares purchased
pursuant to the Offer, including the Shares Beneficially Owned by such
Shareholder, is subject to the terms and conditions of the Offer.
(b) Each Shareholder hereby agrees to permit Acquisition to
publish and disclose in the Offer Documents and, if shareholder approval is
required under applicable law, the Proxy Statement, if any (including all
documents and schedules filed with the Commission), such Shareholder's identity
and ownership of Company Common Stock and the nature of such Shareholder's
commitments, arrangements and understandings under this Agreement.
3. TERMINATION. All obligations of the Shareholders under this
Agreement shall terminate upon a Termination Event.
2
<PAGE>
4. COVENANTS, REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER.
(a) Each Group of Shareholders hereby, severally and not jointly
and severally, represents and warrants, subject to the matters set forth on
Schedule E hereto, to Parent and Acquisition as follows:
(i) OWNERSHIP BY SHARES. Each Shareholder within such Group
of Shareholders is either (A) the record and Beneficial Owner of, or (B) the
Beneficial Owner but not the record holder of, the number of Shares set forth
opposite the Shareholder's name on Schedule A, B, C or D hereto, as the case
may be. As of October 16, 1997, the Shares set forth opposite such
Shareholder's name on Schedule A, B, C or D hereto constitute all of the Shares
owned of record or Beneficially Owned by such Shareholder. Such Shareholder has
sole power to issue instructions with respect to the matters set forth in
Section 2 hereof, sole power of disposition, sole power of conversion, sole
power to demand appraisal rights and sole power to agree to all of the matters
set forth in this Agreement, in each case with respect to all of the shares set
forth opposite such Shareholder's name on Schedule A, B, C or D hereto, as the
case may be, with no material limitations, qualifications or restrictions on
such rights, subject to applicable securities laws and the terms of this
Agreement.
(ii) POWER; BINDING AGREEMENT. Each Shareholder within such
Group of Shareholders has the legal capacity, power and authority to enter into
and perform all of such Shareholder's obligations under this Agreement. The
execution, delivery and performance of this Agreement by such Shareholder will
not violate any other agreement to which such Shareholder is a party,
including, without limitation, any voting agreement, stockholder's agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by such Shareholder and constitutes a valid and binding agreement of such
Shareholder, enforceable against such Shareholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which such Shareholder is trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Shareholder of the transactions contemplated hereby. If such
Shareholder is married and such Shareholder's Shares constitute community
property, this Agreement has been duly authorized, executed and delivered by,
and constitutes a valid and binding agreement of, such Shareholder's spouse,
enforceable against such person in accordance with its terms.
(iii) NO CONFLICTS. Except for filings under the Exchange
Act or if applicable the HSR Act and any necessary approval of HUD (A) no
filing with, and no permit, authorization, consent or approval of, any state or
federal public body or authority is necessary for the execution of this
Agreement by each Shareholder within such Group of Shareholders and the
consummation by such Shareholder of the transactions contemplated hereby,
except where the failure to obtain such consent, permit, authorization,
approval or filing would not interfere with such Shareholder's ability to
perform its obligations hereunder, and (B) none of the execution and delivery
of this Agreement by such Shareholder, the consummation by such Shareholder of
the transactions contemplated hereby or compliance by such Shareholder with any
of the provisions hereof shall (1) conflict with or result in any breach of any
applicable organizational documents applicable to such Shareholder, (2) result
in a violation or breach of, or constitute (with or without notice or lapse of
3
<PAGE>
time or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which such Shareholder is a party or by which such
Shareholder or any of such Shareholder's properties or assets may be bound, or
(3) violate any order, writ, injunction, decree, judgment, order, statute, rule
or regulation applicable to such Shareholder or any of such Shareholder's
properties or assets, in each such case except to the extent that any conflict,
breach, default or violation would not interfere with the ability of such
Shareholder to perform its obligations hereunder.
(iv) NO ENCUMBRANCES. Except as required by Sections 2 and
3, the Shares of each Shareholder within such Group of Shareholders and the
certificates representing such Shares are now, and at all times during the term
hereof will be, held by such Shareholder, or by a nominee or custodian for the
benefit of such Shareholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever.
(v) NO FINDER'S FEES. Except pursuant to the engagement
letter with Goldman, Sachs & Co. dated October 16, 1997, no broker, investment
banker, financial adviser or other person is entitled to any broker's,
finder's, financial adviser's or other similar fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of any Shareholder in such Shareholder Group.
(vi) NO SOLICITATION. Each Shareholder in such Shareholder
Group shall, in its capacity as such, comply with the terms of Section 5.01 of
the Merger Agreement.
(vii) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE.
Prior to the occurrence of a Termination Event, except as required by this
Agreement, no Shareholder in such Shareholder Group shall directly or
indirectly without the consent of Acquisition: (A) offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or
other disposition of, any or all of such Shareholder's Shares, or any interest
therein, (B) grant any proxies or powers of attorney, deposit any shares into a
voting trust or enter into a voting agreement with respect to any Shares, or
(C) take any action that could reasonably be expected to have the effect of
preventing or disabling such Shareholder from performing such Shareholder's
obligations under this Agreement.
(viii) WAIVER OF APPRAISAL RIGHTS. Each Shareholder in such
Shareholder Group hereby waives any rights of appraisal or rights to dissent
from the Merger that the Shareholder may have.
(b) Parent and Acquisition hereby represents and warrants to each
of the Shareholders as follows:
4
<PAGE>
(i) ORGANIZATION, STANDING AND CORPORATE POWER. Parent is a
limited liability company duly organized, validly existing and in good standing
under the laws of the state of Delaware and Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, and each has adequate corporate power and authority to own its
properties and carry on its business as presently conducted. Each of Parent and
Acquisition has the corporate or limited liability company power and authority
to enter into and perform all of its obligations under this Agreement and to
consummate the transactions contemplated hereby.
(ii) NO CONFLICTS. Except, if applicable, for filings under
the Exchange Act and the HSR Act, (A) no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by either Parent or
Acquisition and the consummation by Parent and Acquisition of the transactions
contemplated hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with its ability to
perform its obligations hereunder, and (B) none of the execution and delivery
of this Agreement by Parent or Acquisition, the consummation by Parent or
Acquisition of the transactions contemplated hereby or compliance by Parent and
Acquisition with any of the provisions hereof shall (1) conflict with or result
in any breach of any applicable organizational documents applicable to Parent
or Acquisition, (2) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
Parent or Acquisition is a party or by which Parent or Acquisition or any of
Parent's or Acquisition's properties or assets may be bound, or (3) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to Parent or Acquisition or any of Parent's or Acquisition's
properties or assets, in each such case except to the extent that any conflict,
breach, default or violation would not interfere with the ability of Parent or
Acquisition to perform its obligations hereunder.
(iii) EXECUTION, DELIVERY AND PERFORMANCE BY PARENT AND
ACQUISITION. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Parent and Acquisition, and each of Parent and
Acquisition has taken all other actions required by law, its Certificate of
Incorporation and its Bylaws or other organizational documents in order to
consummate the transactions contemplated by this Agreement. This Agreement
constitutes the valid and binding obligations of Parent and Acquisition and is
enforceable in accordance with its terms, except as enforceability may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally.
5. STOP TRANSFER. Each Shareholder agrees with, and covenants to,
Acquisition that prior to a Termination Event such Shareholder shall not
request that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of such Shareholder's
Shares, unless such transfer is made in compliance with this Agreement.
6. RECAPITALIZATION. In the event of a stock dividend or
distribution, or any change in the shares by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares
5
<PAGE>
or the like, the term "Shares" shall be deemed to refer to and include the
Shares as well as all such stock dividends and distributions and any shares
into which or for which any or all of the Shares may be changed or exchanged
and the Purchase Price shall be amended as may be appropriate to reflect such
event.
7. SHAREHOLDER CAPACITY. No person executing this Agreement who is
or becomes during the term hereof a director or officer of the Company makes
any agreement or understanding herein in his or her capacity as such director
or officer and nothing herein shall limit or affect any action taken by such
person in his or her capacity as a director or officer. Each Shareholder signs
solely in his or her capacity as the record and beneficial owner of, or the
trustee of a trust whose beneficiaries are the beneficial owners of, such
Shareholder's Shares.
8. SHAREHOLDERS' OBLIGATIONS. All obligations and liabilities of
each Shareholder under this Agreement shall be several and not joint and no
Shareholder shall have any liability for any obligations or liabilities under
this Agreement of any other Shareholder, except that all obligations specified
under this Agreement as an obligation of a Group of Shareholders or Shareholder
Group shall be joint and several obligations of the Sellers within such Group
of Shareholders.
9. FURTHER ASSURANCES. From time to time, at the other parties'
reasonable request and without further consideration, each Shareholder and
Acquisition and Parent shall execute and deliver such additional documents as
may be reasonably necessary or desirable to consummate and make effective, in
the most expeditious manner practicable, the tender of shares by any such
Shareholder contemplated by Section 2 of this Agreement.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Each Shareholder agrees that this Agreement
and the obligations hereunder shall attach to such Shareholder's Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or otherwise,
including, without limitation, such Shareholder's heirs, guardians,
administrators or successors. Notwithstanding any transfer of Shares, the
transferor shall remain liable for the performance of all obligations under
this Agreement of the transferor.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise without the prior written consent of the other parties.
(d) AMENDMENT, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto; provided, that after a Termination Event, this Agreement may be
amended, changed, supplemented, waived or otherwise modified or terminated
without the consent of, or the execution of any written agreement on the part
of, Parent and
6
<PAGE>
Acquisition, so long as such amendment, change, supplement, waiver or
modification does not increase the obligations of either Parent and Acquisition
hereunder.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, or by mail
(registered or certified mail, postage prepaid, return receipt requested) or by
any courier service, such as Federal Express, providing proof of delivery. All
communications hereunder shall be delivered to the respective parties at the
following addresses or the addresses set forth on the signature pages hereto:
If to Parent or Acquisition: Startt Acquisition, LLC
and
Startt Acquisition, Inc.
c/o Lawrence Ruben Company
600 Madison Avenue
New York, New York 10022
Attn: Jonathan Mayblum
copies to: Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attn: Alan Katz, Esq.
If to the Company: Starrett Corporation
909 Third Avenue
New York, New York 10022
Attn: Irving R. Fischer
copies to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attn: Peter Samuels, Esq.
7
<PAGE>
If to Shareholder: At the addresses set forth on the
signature pages
copies to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attn: Peter Samuels, Esq.
and Edwin V. Petz, Esq.
Millstein Properties Corp.
1271 Avenue of the Americas
Suite 4200
New York, New York 10020
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained
in this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such breach the aggrieved
party shall be entitled to the remedy of specific performance of such covenants
and agreements and injunctive and other equitable relief in addition to any
other remedy to which it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy or
to demand such compliance.
8
<PAGE>
(j) NO THIRD-PARTY BENEFICIARIES. This Agreement is not intended
to be for the benefit of, and shall not be enforceable by, any person or entity
who or which is not a party hereto; provided that, in the event of a
Shareholder's death, the benefits to be received by the Shareholder hereunder
shall inure to his successors and heirs.
(k) GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of New York, without giving effect to
the principles of conflicts of law thereof.
(l) JURISDICTION. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Supreme Court in the State of New York in any
action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non conveniens or any other
objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (1) and
shall not be deemed to be a general submission to the jurisdiction of said
Court or in the State of New York other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any such
action, suit or proceeding.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement. This Agreement shall not
be effective as to any party hereto until such time as this Agreement or a
counterpart thereof has been executed and delivered by each party hereto.
(o) TRUST FUNDS. In the event that any party hereto should
receive any funds that are to be paid to another party pursuant to the terms of
this Agreement, then the receiving party shall hold such funds in trust for the
benefit of the party entitled to receive such funds and shall promptly pay such
funds to the party entitled to receive such funds in accordance with this
Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on this 16th day of October, 1997.
ON BEHALF OF EACH OF THE
MILSTEIN PARTIES
c/o Milstein Properties Corp.
1271 Avenue of the Americas
Suite 4200
New York, New York 10020
Attention: Edwin V. Petz, Esq.
By: /s/ Paul Milstein
---------------------------
Paul Milstein
By: /s/ Seymour Milstein
---------------------------
Seymour Milstein
ON BEHALF OF EACH OF THE
BENACH PARTIES
c/o Henry Benach
3110 Miro Drive North
Palm Beach Gardens, Florida 33410
By: /s/ Henry Benach
---------------------------
Henry Benach
OEA PARTNERS
c/o Alpine Capital Group
1285 Avenue of the Americas
21st Floor
New York, New York 10019
Attention: Mr. Oded Aboodi
By: /s/ Oded Aboodi
---------------------------
Name: Oded Aboodi
----------------------
Title: General Partner
---------------------
10
<PAGE>
KADIMA PARTNERS
c/o Alpine Capital Group
1285 Avenue of the Americas
21st Floor
New York, New York 10019
Attention: Mr. Oded Aboodi
By: /s/ Oded Aboodi
---------------------------
Name: Oded Aboodi
----------------------
Title: General Partner
---------------------
/s/ Oded Aboodi
------------------------------
ODED ABOODI
Alpine Capital Group
1285 Avenue of the Americas
21st Floor
New York, New York 10019
/s/ Irving R. Fischer
------------------------------
IRVING R. FISCHER
171 Succabone Road
Bedford Hills, New York 10507
STARTT ACQUISITION, LLC
By: /s/ Jonathan I. Mayblum
---------------------------
Name: Jonathan I. Mayblum
----------------------
Title: President
---------------------
STARTT ACQUISITION, INC.
By: /s/ Jonathan I. Mayblum
---------------------------
Name: Jonathan I. Mayblum
----------------------
Title: President
---------------------
11
<PAGE>
INDEMNITY AGREEMENT
AGREEMENT dated as of October 16, 1997, among Startt
Acquisition, LLC, a Delaware limited liability company ("Parent"), Startt
Acquisition, Inc., a New York corporation ("Sub" and collectively with Parent,
"Acquisition"), the parties listed on SCHEDULE I (the "Milstein
Shareholders"), the parties listed on SCHEDULE II (the "Benach Shareholders"),
the parties listed on SCHEDULE III (the "Aboodi Shareholders") and the party
listed on SCHEDULE IV (the "Fischer Shareholder"). Each party listed on
SCHEDULES I, II, III AND IV shall be referred to individually as a
"Shareholder" and collectively as the "Shareholders" and each of the Milstein
Shareholders, collectively as a group, the Benach Shareholders, collectively
as a group, the Aboodi Shareholders, collectively as a group, and the Fischer
Shareholder shall be referred to as a "Group of Shareholders" or "Shareholder
Group."
RECITALS
WHEREAS, the Shareholders are the beneficial owners of
shares of Common Stock, par value $1.00 per share (the "Common Stock"), of
Starrett Corporation, a New York corporation (the "Company"), and in order to
benefit the Company and its public shareholders, the Shareholders entered into
a certain agreement dated as of June 26, 1997, as amended on July 14, 1997 and
August 11, 1997 (the "Frydman Shareholders Agreement"), with Starrett
Acquisition, Inc. ("SAI"), a corporation controlled by Jacob Frydman
("Frydman"), in connection with which, among other things, the Company entered
into an agreement and plan of merger (the "Frydman Merger Agreement") dated as
of August 11, 1997 with SAI and Stonemerger, Inc. ("MergerSub") and prior to
entering into the Frydman Merger Agreement (and in connection therewith), SAI
and/or Frydman agreed to cause a substitute letter of credit to be posted;
WHEREAS, on August 21, 1997 the Company delivered a notice
to SAI and MergerSub terminating the Frydman Merger Agreement as a result of
the failure of SAI to receive a financing commitment reasonably acceptable to
the Company and to deliver a substitute letter of credit as required;
WHEREAS, Starrett and Sub have concurrently herewith entered
into that certain Agreement and Plan of Merger (the "Merger Agreement"),
pursuant to which, among other things, subject to the terms and conditions of
the Merger Agreement, Sub will make a tender offer (the "Offer") to purchase
all of the issued and outstanding shares of Common Stock of the Company and,
following consummation of the Offer, Sub will merge with and into the Company
(the "Merger"), which will be the surviving corporation ("Surviving
Corporation") of the Merger (capitalized terms herein not otherwise defined
herein shall have the meanings ascribed thereto in the Merger Agreement);
WHEREAS, in order to benefit the Company and its public
shareholders by inducing Acquisition to enter into the Merger Agreement, the
Shareholders have agreed to bear 50% of any
<PAGE>
Losses and Permitted Expenses over $1,000,000 arising out of a Frydman Claim
(as such terms are defined below);
WHEREAS, the Shareholders and Acquisition have consequently
agreed that the first $1,000,000 of any Losses and Permitted Expenses shall be
borne by Acquisition and that any Losses and Permitted Expenses over
$1,000,000 shall be borne 50% by the Shareholders and 50% by Acquisition; and
WHEREAS, this Agreement shall become effective only upon the
consummation of the Offer under the Merger Agreement, and from and after
consummation of the Merger under the Merger Agreement all obligations and
liabilities of Acquisition hereunder shall be obligations and liabilities of
the Surviving Corporation;
NOW, THEREFORE, the parties hereby agree as follows,
effective upon consummation of the Offer:
1. Certain Definitions.
For purposes of this Agreement, the following terms
shall have the meanings ascribed to them below:
(a) "Losses" shall mean any and all liabilities,
losses, costs, damages or Permitted Expenses incurred by or imposed upon any
Party from and after the date hereof resulting from or arising out of a
Frydman Claim and all amounts paid in a Permitted Settlement of a Frydman
Claim. Any amount actually reimbursed by insurance shall not be a Loss or a
Permitted Expense (as such term is defined below); the Acquisition Parties
shall use reasonable efforts to collect any available insurance but shall have
no obligation to use litigation or other extraordinary measures to collect
such insurance.
(b) "Permitted Expenses" shall mean all reasonable
attorneys' fees and expenses and other reasonable expenses incurred by any
Party from and after the date hereof in the defense, investigation,
prosecution or settlement of a Frydman Claim; provided, however, that for all
periods from and after consummation of the Offer the selection of the
attorneys to undertake the defense, prosecution or settlement of a Frydman
Claim shall (except as provided in Section 3(c) below) be made only upon the
joint approval of the Shareholders on the one hand and Acquisition (or, after
consummation of the Merger, the Surviving Corporation) on the other hand.
(c) A "Frydman Claim" shall mean any claim, demand,
action or proceeding (including a claim in arbitration) brought against any
Party by Jacob Frydman, SAI or MergerSub or any of their respective
affiliates, shareholders, successors or assigns resulting from or arising out
of, or alleged to arise from, any matter relating to any of the Frydman
Documents or the facts or alleged facts relating to the Frydman Documents,
including, without limitation, a tort claim.
2
<PAGE>
(d) The "Frydman Documents" shall mean the
documents listed on SCHEDULE V hereto.
(e) The "Shareholder Parties" shall mean the
Shareholders and their respective affiliates, partners, shareholders,
directors, officers, employees, counsel, financial advisors, agents and
representatives and all of their respective successors and assigns. The
"Acquisition Parties" shall mean Acquisition, the Company and the Surviving
Corporation, the respective affiliates, shareholders, members, directors,
officers, employees, counsel, financial advisors, agents and representatives
of Acquisition, and insofar as the Company or the Surviving Corporation is
liable for any Losses and Permitted Expenses thereof, the affiliates,
shareholders, directors, officers, employees, counsel, financial advisors,
agents and representatives of the Company and the Surviving Corporation, and
all of their respective successors and assigns, but shall exclude the
Shareholder Parties. The Shareholder Parties and the Acquisition Parties are
collectively referred to as the "Parties."
(f) A "Permitted Settlement" shall mean any
settlement of a Frydman Claim permitted under Section 3(d) below.
2. Indemnification and Expense Reimbursement.
(a) Acquisition and, following the Merger, the
Surviving Corporation shall indemnify and save the Shareholder Parties
harmless and defend each of them from and against, and pay or reimburse the
Shareholder Parties promptly as incurred or imposed for any and all Losses and
Permitted Expenses incurred by or imposed upon any Shareholder Party until the
Losses and Permitted Expenses incurred by or imposed upon all Parties (whether
Shareholder Parties or Acquisition Parties) shall equal $1,000,000 in the
aggregate (the "First $1,000,000 of Losses and Expenses").
(b) In the event that the Losses and Permitted
Expenses incurred by or imposed upon all Parties exceed $1,000,000 in the
aggregate, the Shareholders, on the one hand, shall bear 50% and Acquisition
and, following the Merger, the Surviving Corporation, on the other hand, shall
bear 50% of such aggregate Losses and Permitted Expenses in excess of
$1,000,000 ("Excess Losses and Expenses"). In order to effectuate the
foregoing and Section 2(a) above, the Shareholder Groups (in the fashion set
forth under Section 2(c) below) shall promptly make such payments to the
Acquisition Parties, and Acquisition shall promptly make such payments to the
Shareholder Parties, so that at any given time (i) the First $1,000,000 of
Losses and Expenses shall have been borne entirely by Acquisition and (ii) any
Excess Losses and Expenses have been borne 50% by the Shareholders and 50% by
Acquisition. In order to appropriately allocate among the respective
Shareholder Parties any payments provided by Section 2(a) above and this
Section 2(b) to be made to the Shareholder Parties, the Shareholders shall
designate the proportions or dollar amounts of the payments provided under
Section 2(a) above and this Section 2(b) to be made by Acquisition to the
respective Shareholder Parties. In order to appropriately allocate among the
respective Acquisition Parties any payments provided under this Section 2(b)
to be made to the Acquisition Parties, Acquisition (or, after consummation of
the Merger, the Surviving Corporation)
3
<PAGE>
shall designate the proportions or dollar amounts of the payments provided
under this Section 2(b) to be made by the Shareholder Groups to the respective
Acquisition Parties. Such designations by the Shareholders may be conclusively
relied upon by Acquisition and the Surviving Corporation, and such
designations by Acquisition or the Surviving Corporation may be conclusively
relied upon by the Shareholders.
(c) All liabilities and obligations of the
Shareholder Groups under this Agreement shall, notwithstanding anything to the
contrary contained in this Agreement but subject to the last sentence of this
Section 2(c), be borne severally and not jointly among the Shareholder Groups
pro rata in accordance with the percentage amounts set forth on SCHEDULE VI
hereto. Within each Shareholder Group, the Shareholders of such Shareholder
Group shall be jointly and severally liable for such Shareholder Group's
proportionate share of the liabilities and obligations of such Shareholder
Group under this Agreement. No member of a Shareholder Group shall have any
liability for any liability or obligation under this Agreement of any member
of another Shareholder Group, except that Paul and Seymour Milstein shall,
notwithstanding anything to the contrary contained in this Agreement, be
jointly and severally liable for all liabilities under this Agreement of all
Shareholders (whether Milstein Shareholders or otherwise).
(d) All liabilities and obligations of Acquisition
under this Agreement shall be joint and several liabilities of Parent and Sub.
3. Indemnification Procedures.
(a) The rights and obligations of each Party
claiming a right to indemnification hereunder ("Indemnitee") from the another
party or parties ("Indemnitor") shall be governed by the following rules.
(b) The Indemnitee shall give prompt written notice
to the Indemnitor upon any receipt of a Frydman Claim, providing a copy
thereof or, if the Frydman Claim is oral, a reasonable description thereof. No
failure to give such notice shall affect the indemnification obligations of
Indemnitor hereunder, except to the extent such failure materially prejudices
such Indemnitor's ability successfully to defend the matter giving rise to the
indemnification claim.
(c) In the event any Frydman Claim is brought
against a Party, then the selection of attorneys to undertake the defense of
all Parties and for the settlement of claims against all Parties shall be made
only upon the joint approval of the Shareholders on the one hand and
Acquisition (or, after consummation of the Merger, the Surviving Corporation)
on the other hand. Each Party shall have the right to employ his, her or its
own counsel in addition to the jointly selected counsel provided for in the
immediately preceding sentence in any such case, but the fees and expenses of
such counsel shall be at such Party's own expense unless there has been a
failure of jointly selected counsel to undertake the defense of such case
against such Party.
(d) No settlement of any Frydman Claim may be made
by any Party without the joint written approval of the Shareholders and
Acquisition (or, after consummation of
4
<PAGE>
the Merger, the Surviving Corporation) (which, with respect to money payments
only, shall not be unreasonably withheld), except that any settlement
providing for payments (when added to all other Losses and Permitted Expenses)
by all Parties equal to or less than an aggregate of $1,000,000 may be entered
into by Acquisition (or, after consummation of the Merger, the Surviving
Corporation) on behalf of all Parties; provided that such settlement entered
into by Acquisition on behalf of all Parties (i) provides for no relief or
remedy against any Shareholder Party, (ii) contains no admission of any
wrongdoing by any Shareholder Party, and (iii) contains an unconditional
release reasonably acceptable to the Shareholders of all Frydman Claims in
favor of all Shareholder Parties.
(e) The Shareholders on the one hand and
Acquisition (and, after consummation of the Merger, the Surviving Corporation)
on the other hand shall reasonably cooperate with the other in the defense and
settlement of any such Claim, shall consult together at reasonable intervals
as to matters pertaining to matters pertaining to any Frydman Claim, shall
keep each other fully informed as to any such Claim, shall make available to
the other all books and records of such Party relating to any such Claim, and
shall render to each other such assistance as may be reasonably required by
the other in order to ensure the proper and adequate defense of any such
Claim. Except as provided in Section 3(d) above with respect to certain
settlements, all decisions with respect to the defense and settlement of any
Frydman Claim shall be jointly made by the Shareholders on the one hand and
Acquisition (or, after consummation of the Merger, the Surviving Corporation)
on the other hand.
(f) Either of Paul or Seymour Milstein (each a
"Shareholder Representative") may, but need not, give all notices, make all
determinations and give all approvals on behalf of all Shareholder Parties,
which notices, designations, determinations and approvals, so made or given by
a Shareholder Representative (all of which notices, designations,
determinations or approvals are hereby ratified and approved by all
Shareholders) shall be conclusive and binding upon all Shareholder Parties and
may be conclusively relied upon by Acquisition (and, after consummation of the
Merger, the Surviving Corporation). Neither Shareholder Representative shall
have any liability to any Shareholder Party for any act or omission in
connection with the immediately preceding sentence.
4. Miscellaneous.
(a) No Waiver. The failure of any party to exercise
any right, power or remedy under this Agreement or otherwise available in
respect of this Agreement at law or in equity, or to insist upon compliance by
any other party with that party's obligations under this Agreement, shall not
constitute a waiver of any right to exercise any such or other right, power or
remedy or to demand such compliance.
(b) Notices. All notices and other communications
hereunder shall be in writing and shall be delivered personally or by next-day
courier, to the parties at the addresses specified below (or at such other
address for a party as shall be specified by like notice; provided that
notices of a change of address shall be effective only upon receipt thereof).
Any such notice shall
5
<PAGE>
be effective upon receipt, if personally delivered or one day after delivery
to a courier for next-day delivery.
(i) If to any or all of the Milstein Shareholders, to:
Milstein Properties Corp.
1271 Avenue of the Americas, Suite 4200
New York, New York 10020
Attention: Edwin V. Petz, Esq.
(ii) If to any or all of the Benach Shareholders, to:
Mr. Henry Benach
3110 Miro Drive North
Palm Beach Gardens, Florida 33410
(iii) If to any or all of the Aboodi Shareholders, to:
Alpine Capital Group
1285 Avenue of the Americas, 21st Floor
New York, New York 10019
Attention: Mr. Oded Aboodi
(iv) If to the Fischer Shareholder, to:
Irving R. Fischer
171 Succabone Road
Bedford Hills, New York 10507
in each case, with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Peter G. Samuels, Esq.
(v) if to Acquisition or the Surviving Corporation, to:
c/o Lawrence Ruben Company
600 Madison Avenue, 20th Floor
New York, New York 10022
Attention: Mr. Jonathan I. Mayblum
6
<PAGE>
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Alan S. Katz, Esq.
(c) Descriptive Headings; Interpretation. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
References in this Agreement to Sections or Schedules mean a Section or
Schedule of this Agreement unless otherwise indicated.
(d) Entire Agreement; Assignment. This Agreement
(including the schedule and other documents and instruments referred to
herein), together with the Merger Agreement, constitute the entire agreement
and supersede all other prior agreements and understandings, both written and
oral, among the parties or any of them, with respect to the subject matter
hereof. This Agreement is not intended to confer upon any person not a party
hereto (other than Shareholder Parties and Acquisition Parties) any rights or
remedies hereunder. Except as otherwise expressly provided herein, this
Agreement shall not be assigned by operation of law or otherwise; provided
that from and after consummation of the Merger the obligations and liabilities
of Acquisition hereunder shall be obligations and liabilities of the Surviving
Corporation.
(e) Remedies Cumulative. No remedy conferred upon
or reserved to any party herein is intended to be exclusive of any other
remedy and every remedy shall be cumulative and in addition to every other
remedy herein or now or hereafter existing at law, in equity or by statute.
(f) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
giving effect to the provisions thereof relating to conflicts of laws.
(g) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
(h) Exclusive Arbitration. All disputes or
controversies arising hereunder shall be settled exclusively by arbitration,
conducted in New York, New York, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The prevailing party
shall be entitled to reimbursement by the non-prevailing parties of all
expenses, including reasonable attorneys' fees and expenses incurred in
connection with any such arbitration proceeding (including, any demand
thereon).
7
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the
parties as of the date first above written.
STARTT ACQUISITION, INC.
By: /s/ Jonathan I. Mayblum
__________________________________
Name: Jonathan I. Mayblum
Title: President
On behalf of each of the
MILSTEIN SHAREHOLDERS
c/o Milstein Properties Corp.
1271 Avenue of the Americas, Suite 4200
New York, New York 10020
Attention: Edwin V. Petz, Esq.
By: /s/ Paul Milstein
___________________________________
Paul Milstein
By: /s/ Seymour Milstein
____________________________________
Seymour Milstein
On behalf of each of the
BENACH SHAREHOLDERS c/o
Henry Benach
3110 Miro Drive North
Palm Beach Gardens, Florida 33410
By: /s/ Henry Benach
___________________________________
Henry Benach
8
<PAGE>
OEA PARTNERS
c/o Alpine Capital Group
1285 Avenue of the Americas, 21st Floor
New York, New York 10019
Attention: Mr. Oded Aboodi
By: /s/ Oded Aboodi
_________________________________
Name: Oded Aboodi
Title: General Partner
KADIMA PARTNERS
c/o Alpine Capital Group
1285 Avenue of the Americas, 21st Floor
New York, New York 10019
Attention: Mr. Oded Aboodi
By: /s/ Oded Aboodi
__________________________________
Name: Oded Aboodi
Title: General Partner
/s/ Oded Aboodi
___________________________________
ODED ABOODI
Alpine Capital Group
1285 Avenue of the Americas, 21st Floor
New York, New York 10019
/s/ Irving R. Fischer
___________________________________
IRVING R. FISCHER
171 Succabone Road
Bedford Hills, New York 10507
9
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of October 16, 1997, among
STARRETT CORPORATION, a New York corporation ("Starrett"), STARTT ACQUISITION,
INC., a New York corporation ("Acquisition"), and PROSKAUER ROSE LLP, a New
York limited liability partnership (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Starrett and Acquisition have entered into an
Agreement and Plan of Merger dated as of even date herewith (the "Agreement")
(capitalized terms used but not defined herein shall have the meanings given
to them in the Agreement);
WHEREAS, pursuant to Section 8.01 of the Agreement,
Acquisition is today delivering to the Escrow Agent the cash sum of $5 million
into escrow, with the Escrow Agent to hold and deliver such amount pursuant to
this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Appointment of Escrow Agent.
The Escrow Agent agrees to act as the Escrow Agent as set
forth herein, and as such Escrow Agent to receive, hold, administer and
dispose of the $5 million deposited simultaneously herewith by Acquisition
with the Escrow Agent as set forth herein (the "Escrow Deposit") and the
Escrow Agent hereby acknowledges receipt of such Escrow Deposit. All interest
and other proceeds earned on the Escrow Deposit, as well as interest and
proceeds earned thereon, are hereinafter referred to as the "Interest." The
Escrow Deposit and the Interest are hereinafter collectively referred to as
the "Escrow Amount."
2. Deposit of Escrow Deposit; General Intention.
Acquisition herewith deposits the Escrow Deposit with the
Escrow Agent. The Escrow Agent hereby acknowledges receipt of $5 million as
the Escrow Deposit and agrees to hold, administer and deliver the same in
accordance with this Escrow Agreement. The Escrow Agent shall have no
responsibility with respect to the sufficiency of the arrangements
contemplated by this Escrow Agreement to accomplish the intentions of the
parties hereto. The parties agree that the Escrow Amount may be held on behalf
of the Escrow Agent by Morgan Guaranty Trust Company, Citibank, N.A. or the
Bank of New York (each, an "Eligible Bank" and collectively, the "Eligible
Banks"). The provisions of this Section 2 are subject to the provisions of
Section 4 hereof.
3. Investment.
The Escrow Agent shall invest the Escrow Deposit in an
interest-bearing account. The Escrow Agent is hereby authorized to invest and
reinvest the Escrow Amount in any of the
<PAGE>
following forms of investment as the Escrow Agent shall select: U.S. Treasury
Notes or interest bearing accounts of an Eligible Bank or "money market"
accounts of an Eligible Bank in each case with maturity dates not later than
30 days after the date of investment.
4. Release of Escrow Amount.
The Escrow Agent shall hold the Escrow Amount until it
delivers the Escrow Amount as provided in this Section 4 as follows:
(a) Upon the receipt, by Escrow Agent, of written
instructions signed by both Starrett and Acquisition directing delivery of the
Escrow Amount, then the Escrow Agent shall deliver the Escrow Amount as so
directed in such instructions.
(b) If the Escrow Agent receives written notice
signed by Starrett alone stating that Starrett is entitled to the Escrow
Deposit, the Escrow Agent shall deliver personally or by overnight delivery or
by United States certified or registered mail, return receipt received, a copy
thereof to Acquisition and, unless the Escrow Agent has received a written
objection from Acquisition within 10 business days after Acquisition's receipt
of such delivery, the Escrow Agent shall deliver the Escrow Deposit to
Starrett. If the Escrow Agent so receives a written objection from
Acquisition, the Escrow Agent shall send a copy of such written objection to
Starrett by overnight delivery and shall continue to hold the Escrow Deposit
until it shall have received written instruction signed by both Starrett and
Acquisition or a final non-appealable order of a court of competent
jurisdiction directing delivery of the Escrow Amount, in which case the Escrow
Agent shall deliver the Escrow Deposit in accordance with such instructions or
such order.
(c) If the Escrow Agent receives written notice
signed by Acquisition alone stating that Acquisition is entitled to the Escrow
Amount, the Escrow Agent shall deliver personally or by overnight delivery or
by United States certified or registered mail, return receipt received, a copy
thereof to Starrett and, unless the Escrow Agent has received a written
objection from Starrett within 10 business days after Starrett's receipt of
such delivery, the Escrow Agent shall deliver the Escrow Amount to
Acquisition. If the Escrow Agent so receives a written objection from
Starrett, the Escrow Agent shall send a copy of such written objection to
Acquisition by overnight delivery and shall continue to hold the Escrow Amount
until it shall have received written instructions signed by both Starrett and
Acquisition or a final non-appealable order of a court of competent
jurisdiction directing delivery of the Escrow Amount, in which case the Escrow
Agent shall deliver the Escrow Amount in accordance with such instructions or
such order.
(d) Upon delivery of the Escrow Deposit to Starrett
pursuant to this Section 4, the Escrow Agent shall deliver the Interest
thereon to Acquisition in accordance with written instructions signed by
Acquisition.
(e) Anything in this Escrow Agreement to the
contrary notwithstanding, the Escrow Agent may at any time deposit the Escrow
Amount with the clerk of any court of
2
<PAGE>
competent jurisdiction upon commencement of an action in the nature of
interpleader or in the course of any court proceedings.
Upon any delivery or deposit of the Escrow Amount as provided in this Section
4, the Escrow Agent shall thereupon be released and discharged from any and
all further obligations arising in connection with this Escrow Agreement. In
the event that any investment matures at a date later than the date upon which
either Starrett or Acquisition may be entitled to the proceeds thereof, the
party entitled to such proceeds shall have the option either: (i) to compel
delivery of the proceeds thereof and bear the risk of loss of interest thereon
or the cost of arranging for the sale or repurchase of any investment or (ii)
permit the Escrow Agent to retain the investment until the maturity thereof.
5. Concerning the Escrow Agent
The Escrow Agent has been induced to accept its duties under
this Escrow Agreement by the following terms and conditions:
(a) The Escrow Agent shall not be liable, except
for its own gross negligence or willful misconduct and, except with respect to
claims based upon such gross negligence or willful misconduct that are
successfully asserted against the Escrow Agent. Starrett and Acquisition
jointly and severally shall indemnify and hold harmless the Escrow Agent (and
any successor escrow agent) from and against any and all claims, liabilities,
losses, damages, costs, taxes (including, without limitation, interest and
penalties thereon), reasonable attorneys' fees (which term, as used in this
Escrow Agreement shall include, without limitation, such Escrow Agent's normal
hourly charges when acting as attorneys for the Escrow Agent) and other
expenses whatsoever arising out of or in connection with this Escrow
Agreement. Without limiting the foregoing, in no event shall the Escrow Agent
be liable for any matter or thing relating to its investment or reinvestment
of the Escrow Amount in accordance with the provisions of this Escrow
Agreement, including without limitation, any loss of principal or failure to
earn interest on the Escrow Amount, any claim that a higher rate of return
could have been obtained, any delays in the investment or reinvestment of the
Escrow Amount or any loss of principal or interest incident to any such delays
or to the repurchase or sale of any certificate of deposit or Treasury Bill or
Note.
(b) In the event of any disagreement among the
parties to this Escrow Agreement, or among them or any one of them and any
other person, resulting in adverse claims or demands being made in connection
with the Escrow Amount, or in the event that the Escrow Agent in good faith is
in doubt as to what action it should take hereunder, the Escrow Agent may, at
its option, refuse to comply with any claims or demands on it (but nothing
herein shall obligate the Escrow Agent so to do).
(c) The Escrow Agent shall be entitled to rely upon
any judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof and irrespective of any facts the Escrow Agent may know or
be deemed to know in any other capacity. The Escrow Agent may act in reliance
upon any instrument
3
<PAGE>
or signature believed by it to be genuine and may assume that any person
purporting to give any notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
(d) The Escrow Agent shall have no duties or
responsibilities except those expressly set forth in this Escrow Agreement.
The Escrow Agent shall not have any obligations arising out of or be bound by
the provisions of any other agreement, written or oral, including without
limitation the Agreement.
(e) Starrett and Acquisition acknowledge that the
Escrow Agent has represented Starrett and its affiliates in connection with
the Agreement and this Escrow Agreement and may continue to represent Starrett
or its affiliates in connection with the Agreement and this Escrow Agreement
and the transactions contemplated pursuant to each such Agreement, including,
without limitation in the event of disputes arising thereunder. Starrett and
Acquisition expressly agree that the Escrow Agent shall not be precluded from
or restricted in any manner whatsoever from representing Starrett or any of
its affiliates or otherwise acting as attorneys for Starrett or any of its
affiliates in any matter, including without limitation any court proceeding or
other matter related to the Agreement or the transactions contemplated
thereby, or this Escrow Agreement, or the Escrow Amount, whether or not there
is a dispute between Starrett and Acquisition with respect thereto. Starrett
and Acquisition hereby irrevocably consent to any such representation and
waive any conflict or appearance of conflict with respect thereto.
(f) Acquisition shall report as taxable income any
taxable income resulting from the investment of the Escrow Amount. At the
option of the Escrow Agent, the account in which the Escrow Amount is held may
indicate Acquisition's name and/or its Federal taxpayer I.D. number
(13-397-0392). The Escrow Agent may deduct or withhold from the Escrow Amount
or any payment hereunder any amount that it in good faith estimates is owed to
the Internal Revenue Service or to any other taxing authority by either the
Escrow Amount or by any party that has an interest in the Escrow Amount, and
may in its discretion pay over to the Internal Revenue Service or such other
taxing authority all or part of any such amount that it has deducted or
withheld. To the extent that the Escrow Agent may become liable for the
payment of taxes in respect of income resulting from the investment of the
Escrow Amount, or any payment made hereunder, the Escrow Agent may pay such
taxes from the Escrow Amount. Starrett and Acquisition, jointly and severally,
shall indemnify and hold harmless the Escrow Agent from and against any
liability for taxes (including, without limitation, any interest or penalties
in respect thereof) arising out of or relating to any income or gain earned on
or attributable to the Escrow Amount.
(g) All rights of indemnification provided for the
Escrow Agent in this Escrow Agreement shall survive the resignation of the
Escrow Agent, its replacement by a successor Escrow Agent, its delivery or
deposit of the Escrow Amount in accordance with this Escrow Agreement, the
termination of this Escrow Agreement, and any other circumstances whatsoever.
4
<PAGE>
6. Representations.
To induce the Escrow Agent to enter into this Escrow
Agreement and serve as Escrow Agent hereunder, Starrett and Acquisition each
represents and warrants that it has full power and authority to enter into and
perform this Escrow Agreement; that the execution and delivery of this Escrow
Agreement was duly authorized by all necessary corporate action; and that this
Escrow Agreement is enforceable against it in accordance with its terms.
7. Successor Escrow Agent.
(a) The Escrow Agent (and any successor escrow
agent) may at any time resign as such by delivering the Escrow Amount to any
successor escrow agent mutually designated by Starrett and Acquisition in
writing, or to any court of competent jurisdiction, whereupon the Escrow Agent
shall be discharged from any and all further obligations arising in connection
with this Escrow Agreement. The Escrow Agent may, at any time, take such
actions as it shall elect in order to terminate its duties as escrow agent
hereunder, including, without limitation, depositing the Escrow Fund with a
court of competent jurisdiction upon commencement of an action in the nature
of interpleader or during the course of any court proceedings. The costs
incurred by the Escrow Agent in connection with taking any such actions
(including the reasonable attorneys' fees of the Escrow Agent) shall be borne
by Starrett and Acquisition, jointly and severally.
8. Notices.
Unless otherwise specifically provided herein, all notices,
consents, demands or other communications required or permitted to be given
pursuant to the Agreement shall be in writing and shall be deemed sufficiently
given on (a) the day on which delivered personally during a business day to
the appropriate location listed as the address below, (b) three business days
after the posting thereof by United States registered or certified first class
mail, return receipt requested with postage and fees prepaid, or (c) one
business day after deposit thereof for overnight delivery. Such notices,
consents, demands or other communications shall be addressed respectively:
If to Starrett, to:
Starrett Corporation
909 Third Avenue
New York, New York 10022
Attn: Mr. Irving R. Fischer
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attn: Peter G. Samuels, Esq.
5
<PAGE>
If to Acquisition to:
Startt Acquisition, Inc.
c/o Lawrence Ruben Company, Inc.
600 Madison Avenue, 20th Floor
New York, New York 10022
Attn: Mr. Jonathan I. Mayblum
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attn: Alan S. Katz, Esq.
If to the Escrow Agent:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attn: Peter G. Samuels, Esq.
or to any other address which such party may have subsequently communicated to
the other parties in writing.
9. Miscellaneous.
(a) Any provision of this Escrow Agreement which
may be determined by any court of competent authority to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. It is expressly
understood, however, that the parties hereto intend each and every provision
of this Escrow Agreement to be valid and enforceable and hereby knowingly
waive all rights to object to any provision of this Escrow Agreement.
(b) This Escrow Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their respective
successors and permitted assigns, and shall not be enforceable by or inure to
the benefit of any third party. No party may assign its rights or obligations
under this Escrow Agreement or any interest in the Escrow Amount without the
written consent of the other parties. In no event shall the Escrow Agent be
required to act upon, or be bound by, any notice, instruction, objection or
other communication given by a person other than, nor shall the Escrow Agent
be required to deliver the Escrow Amount to any person other than, Starrett or
Acquisition.
6
<PAGE>
(c) This Escrow Agreement shall be construed in
accordance with and governed by the laws of the State of New York, without
giving effect to conflict of law rules.
(d) The parties hereby irrevocably submit to the
jurisdiction of any New York State or Federal court sitting in New York City
in any action or proceeding arising out of or relating to this Escrow
Agreement, and the parties hereby irrevocably agree that all claims in respect
of such action or proceeding shall be heard and determined in such a New York
State or Federal court. The parties hereby consent to and grant to any such
court jurisdiction over the persons of the parties and over the subject matter
of any such dispute and agree that delivery or mailing of any process or other
papers in connection with any such action or proceeding in the manner provided
in Section 8 hereof, or in such other manner as may be permitted by law, shall
be valid and sufficient service thereof.
(e) This Escrow Agreement constitutes the entire
understanding among the parties with respect to the subject matter hereof.
This Escrow Agreement may only be modified or terminated by a writing signed
by all of the parties hereto, and no waiver hereunder shall be effective
unless in writing signed by the party to be charged.
(f) The Escrow Agent shall serve hereunder without
fee; however, Starrett and Acquisition, jointly and severally agree to pay to
the Escrow Agent on demand all costs and expenses incurred by the Escrow Agent
in performing its duties hereunder, including without limitation reasonable
attorneys fees.
(g) This Escrow Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which counterparts of this Escrow
Agreement taken together shall constitute but one and the same instrument.
(h) The Section headings used herein are for
convenience of reference only and shall not define or limit the provisions of
this Escrow Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Escrow Agreement as of the date first above written.
STARRETT CORPORATION
By: /s/ Jonathan I. Mayblum
___________________________
Name: Jonathan I. Mayblum
Title: President
STARTT ACQUISITION, INC.
By: /s/ Jonathan I. Mayblum
____________________________
Name: Jonathan I. Mayblum
Title: President
PROSKAUER ROSE LLP
By: /s/ Peter G. Samuels
_____________________________
Peter G. Samuels, a Partner
8
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made on this 16th day of
October 1997 ("Effective Date") by and between Starrett Corporation, a New York
Corporation having its principal office at 909 Third Avenue, New York, New York
10022 (the "Company") and FRANK ROSS, SR. whose residence address is 2318
Demeyer Street, New York, New York 10469 (the "Employee").
WHEREAS, the Company desires to employ the Employee as the Chairman
and Chief Executive Officer of HRH Construction Corporation and Employee is
desirous of being so employed.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
1. EMPLOYMENT: The Company hereby hires Employee as the Chairman and
Chief Executive Officer of HRH Construction Corporation and Employee accepts
such employment upon the terms and conditions set forth herein. The Employee
shall report directly to the Company's Board of Directors.
2. TERM: The term of Employee's employment with the Company pursuant
to this Agreement shall be from the Effective Date and continue until December
31, 1999 during which time the Employee agrees to remain in the exclusive
employ of the Company. This Agreement may be extended and/or modified only by
written agreement of the parties.
3. DUTIES: The Employee shall devote his best efforts, knowledge,
skill and full working time and attention to the performance of his duties for
the Company. The Employee's duties shall include but not be limited to:
(a) Being fully responsible for the management and supervision of
the Company's operations and offices including supervision of
the Company's employees.
(b) Performing such other functions and duties as may be assigned
by the Company's Board of Directors.
(c) The Company may change, increase or decrease the Employee's
duties at any time upon oral or written notice to him.
4. COMPENSATION: During the Agreement Term, while he is employed by
the Company, the Company shall compensate the Employee for the Employee's
services as follows:
(a) BASE SALARY: The Company shall pay to the Employee, in
bi-weekly installments, an annual Base Salary of $300,000.
<PAGE>
(b) PERFORMANCE BONUS: In addition to the Base Salary, the
Employee shall be eligible to receive an annual bonus under
the Company's incentive compensation plan (the "Plan")
attached as Exhibit A, based on a number of factors including
but not limited to the Company's and the Employee's
performance.
(c) BENEFITS: The Employee shall be entitled to participate in
and be covered by any executive Company insurance plans
(including but not limited to family medical and dental), to
the same extent and on the same terms as such benefits are or
may be provided to all other full time executive employees of
the Company. The Company may modify, supplement or eliminate
such plans at its discretion. The Company shall continue
contributions to the Employee's annuity at the same rate and
conditions as exist on the Effective Date. If however, the
Company's Pension Fund is unfrozen at any time during the
term of this Agreement, the Company's obligation to
contribute to the Employee's annuity shall cease and the
Company shall commence making contributions to the Pension
Fund at the same amount as contributions to Employee's
annuity.
(d) WITHHOLDING: The Company shall withhold from any amounts
payable under Section 4(a) of this Agreement all mandatory
and authorized deductions.
5. EXPENSES INCIDENT TO EMPLOYMENT. The Company shall reimburse the
Employee for out-of-pocket business-related expenses provided that: (a) such
expenses are incurred by the Employee in or about the performance of his duties
hereunder; (b) the Employee provides the Company with appropriate documentation
reflecting those expenses; and (c) subject to any reasonable limitations set by
the Company's Board of Directors.
6. VACATION AND HOLIDAYS: The Employee is entitled to take vacation
and holidays in accordance with the policies of the Company.
7. TERMINATION.
(a) BY EMPLOYEE: The Employee may terminate this Agreement
without cause upon thirty (30) days advance written notice to
the Company.
2
<PAGE>
(b) WITHOUT CAUSE BY COMPANY: The Employee acknowledges and
agrees that he is an Employee-at-will and that the Company
may terminate his employment at any time for any reason or
for no reason, and the Company shall not be required to
specify a reason for the termination, provided that
termination of the Employee's employment shall be deemed to
have occurred under this Paragraph 7(b) only if it is not
for reasons described in Paragraph 7(c) or 7(d).
(c) DEATH OR DISABILITY: The Employee's employment and the
Company's obligations pursuant to this Agreement shall
automatically terminate upon the occurrence of the following
events:
(i) The death of the Employee; or
(ii) If the Employee shall at any time be prevented by illness,
accident or disability from performing the duties customarily
assigned him by the Company for a consecutive period of more
than twelve (12) weeks, or if he shall be absent from his
duties by reason of illness, accident or disability for any
twelve (12) weeks during any six (6) month period.
(d) WITH CAUSE BY COMPANY: The Company may also immediately
terminate this Agreement "for cause" by written notice to the
Employee. Any one or more of the following events shall
constitute "cause" for termination of this Agreement:
(i) The failure by Employee to substantially perform his duties
for the Company (other than because of illness, accident or
disability) or to abide by the policies, rules and
regulations of the Company;
(ii) Any conduct of the Employee which, in the reasonable opinion
of the Company, is materially detrimental to the reputation
of the Company or its stockholders;
(iii) Theft, fraud, embezzlement, dishonesty, or the Employee being
convicted of a crime;
(iv) The engaging by Employee in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise;
3
<PAGE>
(v) If the Employee resigns without providing the Company with
thirty (30) days advance written notice;
(vi) Employee's breach of any of the provisions set forth in this
Agreement, or breach of any of the representations and
warranties set forth in this Agreement.
(vii) Breach of the Employee's fiduciary duties and duty of loyalty
to the Company.
(e) SEVERANCE PAYMENT: If the Company terminates this Agreement
pursuant to Paragraph 7(b), the Company shall pay to the
Employee the amount of twelve (12) months of his Base Salary
(as defined in Section 4 (a)), less applicable federal, state
and local taxes, ("Severance Payment") . The Severance
Payment shall be paid to Employee in twelve (12) monthly
installments. The Employee shall also be entitled to
continuation of his health insurance benefits for a period of
twelve (12) months following his termination pursuant to
Paragraph 7(b) under the same terms and conditions as during
his employment. Employee shall also be entitled to
compensation as set forth in the Plan, except that payments
under the Plan for the year in which the termination occurs
shall be made during the second twelve months following the
termination in twelve (12) monthly installments. If, however,
the Agreement is terminated pursuant to any other provision
herein, including without limitation, paragraphs 7(a) , 7(c)
or 7(d), the Company shall not be obligated to pay severance
or any further remuneration to the Employee under this
Agreement, except, if any, as set forth in the Plan and
Paragraph 7(f)
(f) DISABILITY SEVERANCE: In the event the Company terminates the
Employee pursuant to Paragraph 7(c) (ii) , the Company shall
continue to compensate the Employee at a rate of fifty
percent of his Base Salary for a period of twenty-four (24)
months from the date of termination. The Employee shall also
be entitled to compensation pursuant to the Plan for the year
in which the termination occurs, which payments shall be made
during the second twelve months following the termination in
twelve monthly installments.
4
<PAGE>
(g) All determinations pursuant to paragraphs 7(b), 7(c) (ii)
and 7(d) of this Agreement shall be made by the Company, in
its sole discretion.
(h) The Severance Payment provided for in section 7(e) above
shall be contingent upon and in consideration of the Employee
fully releasing the Company and its officers and Directors
from any and all claims and liabilities arising out of his
employment.
(I) The Company may immediately terminate the Employee's
employment under this Agreement following the delivery of the
Employee's written notice of termination providing for the
Employee's resignation pursuant to Paragraph 7(a), and the
Company shall have no other obligations under this Agreement,
nor shall the Employee receive any benefits, except those to
which he is legally entitled.
8. LOYALTY, NON-COMPETITION, AND CONFIDENTIALITY. The Employee
acknowledges that his services are unique and that in the course of his
employment with the Company he will have dealings with and develop special
relationships with the clients of the Company and its subsidiaries and
affiliates. The Employee further acknowledges that in the course of his
employment with the Company, he has obtained and will continue to obtain
confidential and proprietary information or material relating to the Company,
its principals and shareholders, its subsidiaries and affiliates, and its and
their clients and potential clients. The Employee also acknowledges that if the
Employee were to compete with the Company through the use of the confidential
and proprietary information obtained through his employment, the Company would
be severely and irreparably injured.
Therefore, in consideration of the employment provided by this
Agreement, including the payments described herein, and in order to protect the
Company's legitimate business interests, goodwill, relationships with clients
and employees, and confidential and proprietary information and material
relating to the Company, its principals and shareholders, its subsidiaries and
affiliates and its and their clients and potential clients, the Employee agrees
with the Company as follows:
(a) CONFIDENTIALITY: The Employee agrees to keep secret and
confidential indefinitely all non-public information
concerning the Company, its principals and shareholders, and
its subsidiaries and affiliates which was acquired by
5
<PAGE>
or disclosed to the Employee during the course of his
employment with the Company, and not to disclose the same,
either directly or indirectly, to any other person, firm, or
business entity, or to use it in any way. To the extent that
the Employee obtains information on behalf of the Company,
its principals or shareholders, or any subsidiary and
affiliate that may be subject to attorney-client privilege,
the Employee shall take reasonable steps to maintain the
confidentiality of such information and to preserve such
privilege.
The confidential information and documents containing that information
in which the Company and/or its clients have a proprietary interest includes,
but is not limited to: the identity of clients; the identity of client contact
persons; rates and fees charged to clients; market research; the identity of
potential business opportunities; the means and methods of obtaining business;
the specifics of transactions; costs/fees/and rents; all financial records
including but not limited to accounts payable and receivable ledgers,
checkbooks, tax returns, W-2's, 1099's, payroll records; blue
prints/plans/sketches; written strategies/internal memoranda; proposals; all
documents and records which the Company regularly uses in the normal course of
business.
(b) COMPELLED DISCLOSURE: In the event that the Employee is
compelled by any form of legal process to reveal any of the
confidential and/or proprietary information of the Company,
Employee shall provide immediate notice to the Company and
allow the Company an opportunity, prior to disclosure, to
challenge the requirement of disclosure should it so desire.
(c) RETURN OF MATERIALS: The Employee agrees that all materials,
books, files, reports, records, correspondence and other
documents, papers and property ("Company Materials") used,
prepared or made available to the Employee in the course of
rendering his services to the Company or subsidiary or
affiliate hereunder shall remain the property of the Company.
Upon termination, the Employee shall immediately return all
Company materials (and copies thereof) to the Company.
(d) COVENANTS NOT TO COMPETE: The Employee covenants that during
the term of his employment and for a period of one year
following termination thereof
6
<PAGE>
pursuant to paragraphs 7(a), (b) and (d) he shall not:
(1) engage or be interested, whether alone or together
with or on behalf or through any other person, firm,
association, trust, venture, or corporation, whether
as sole proprietor, partner, shareholder, agent,
officer, director, employee, adviser, consultant,
trustee, beneficiary or otherwise, in any business
principally and directly engaged in construction or
real estate development in New York City and its
Metropolitan Area (a "competing business");
(2) assist others in conducting any competing business;
(3) directly or indirectly recruit or induce or hire any
person who is an employee of the Company or any of
its subsidiaries, or solicit any of the Company's
customers, clients or providers; or
(4) own any capital stock or any other securities of, or
have any other direct or indirect interest in, any
entity which own or operates a competing business;
other than (i) the ownership of less than five
percent (5%) of any such entity whose stock is
listed on a national securities exchange or traded
in the over-the-counter market and which is not
controlled by the Employee or any affiliate of the
Employee or (ii) the ownership of any limited
partnership interest in such an entity.
(e) NON-SOLICITATION:
(i) Following the termination of Employee's employment
with the Company or any subsidiary or affiliate
pursuant to paragraphs 7(a), (b) or (d), the
Employee agrees not to solicit or in anyway
interfere with any business or business opportunity
for which the Company has received a Request For
Proposal or for which the Company has made a bid or
pitch to receive business during the Employee's
employment with the Company.
7
<PAGE>
(ii) For eighteen (18) months following the
cessation of his employment with the Company
pursuant to paragraphs 7 (a), (b) or (d), the
Employee shall not (whether on his own
account or on behalf of any person,
corporation, partnership, or other business
entity, and whether directly or indirectly)
solicit or endeavor to entice away from the
Company or any subsidiary or affiliate any
employee or group of employees thereof.
(f) NON-DISPARAGEMENT. During and after the expiration
of this Agreement, the Employee agrees that he shall
not make any false, defamatory or disparaging
statements about the Company, its subsidiaries and
affiliates, or their officers and directors.
(g) REMEDIES. The Employee has reviewed the provisions
of paragraph 8 with his legal counsel, and he
acknowledges that the Company would be irreparably
injured by a violation of paragraph 8, that the
provisions of that paragraph are reasonable and
that the Company could not adequately be compensated
in damages if the Employee fails to comply with any
of the provisions of paragraph 8. Accordingly, the
Employee agrees that the Company, in addition to any
other remedies available to it for such breach or
threatened breach, shall be entitled to a preliminary
injunction, temporary restraining order, permanent
injunction, or other equivalent relief, restraining
the Employee from any actual or threatened breach of
paragraph 8 of this Agreement. In the event the Company
brings an action to enforce the provisions of paragraph 8
of this Agreement, the Employee expressly consents to
the jurisdiction of the state and federal courts in
New York, New York.
9. APPLICABLE LAW. The provisions of this Agreement shall be
construed in accordance with the laws of the State of New York, without regard
to the conflict of law provisions of any state.
10. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement will not affect the validity or enforceability
of any other provision of this Agreement, and this Agreement.
8
<PAGE>
11. WAIVER OF BREACH. No waiver by any party hereto of a breach
of any provision of this Agreement by any other party, or of compliance with
any condition or provision of this Agreement to be performed by such other
party, will operate or be construed as a waiver of any subsequent breach by
such other party.
12. SUCCESSORS. This Agreement shall be binding upon, and inure
to the benefit of, the Company and its successors and assigns and upon any
person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business.
13. NOTICES. All notices and all other communications hereunder
shall be in writing and shall be given by either party by personal delivery
or facsimile transmission addressed to the other party as follows:
If to the Company, to: Jonathan I. Mayblum Lawrence Ruben
Company, Inc. 600 Madison Avenue, New York, New York
If to the Employee, to: Frank Ross, Sr. HRH Construction
Corporation One Park Avenue, New York, New York
or to any of them at such other address as shall have been
specified in a notice similarly given.
14. BLUE-PENCILLING. If any court determines that any covenant
contained in this Agreement, including, without limitation, any provision
in paragraph 8 of this Agreement, or any part thereof is unenforceable
because of the duration or geographical scope of such provision, or for
any other reason, the duration or scope of such provision, as the case
may be, shall be reduced so that such provision becomes enforceable and,
in its reduced form, such provision shall then be enforceable and shall be
enforced.
15. SURVIVAL OF AGREEMENT. Except as otherwise expressly provided
in this Agreement, the rights and obligations of the parties to this Agreement
shall survive the termination of the Employee's employment with the Company
and the termination of this Agreement.
16. ENTIRE AGREEMENT. Except as otherwise noted herein this
Agreement, including Exhibits annexed hereto, constitutes the entire agreement
between the parties concerning the employee's employment with the Company.
9
<PAGE>
17. ARBITRATION: The parties expressly agree that any controversy
or claim arising out of or relating to this Agreement, or breach thereof,
or the Employee's employment with or termination from the Company shall be
exclusively subject to arbitration in accordance with the rules of the
American Arbitration Association ("AAA") except as to any claim arising
out of Paragraph 8 of this Agreement. Venue of the arbitration shall be
in New York City. Any controversy or claim shall be submitted to one (1)
arbitrator selected pursuant to the rules and procedures of AAA. Each party
shall bear all costs associated with their counsel and the presentation
of their evidence, and each party shall share equally the costs of the
proceeding itself.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
/s/ Frank Ross Sr.
------------------------
(Employee)
Starrett Corporation
By: /s/ Paul Milstein
------------------------
Paul Milstein
Chairman of the Board
10
<PAGE>
EXHIBIT A
INCENTIVE COMPENSATION PLAN
This Incentive Compensation Plan (the "Plan") is incorporated by
reference into the Employment Agreement between Starrett Corporation
(the "Company") and Frank Ross, Sr. (the "Employee") dated October 15, 1997.
The Employee shall be entitled to ten (10%) percent of HRH Construction
Corporation and its subsidiaries' first $3 Million of pre-tax net income on
an annual basis and five (5%) percent of all pre-tax net income on an annual
basis thereafter.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement
as of the day and year first above written.
Starrett Corporation
/s/ Frank Ross, Sr. by: /s/ Paul Milstein
- ---------------------- --------------------
Frank Ross, Sr. Paul Milstein
Chairman of the Board
<PAGE>
April 10, 1996
Mr. Irving R. Fischer
909 Third Avenue
New York, New York 10022
Dear Irving:
We are pleased to confirm our agreement that you shall serve as
President and Chief Operating Officer of Starrett Corporation ("Starrett" or
the "Company") with a base salary at the rate of $500,000 per annum, all
effective August 1, 1995.
You shall also be entitled to Incentive Compensation for 1996, as
calculated and paid (subject to the following) in your prior Incentive
Compensation Agreement. In the event your employment with the Company terminates
for any reason during 1996, your Incentive Compensation shall be prorated on
the basis of the number of days elapsed during 1996 prior to such termination;
provided, however, that you shall be entitled to Incentive Compensation for all
of 1996 if your termination of employment results from or follows a failure
by Starrett to continue you in your present positions with the Company, a
Change in Control (as defined below), your termination by the Company not for
cause (as defined in your prior Employment Agreement) or your death or permanent
incapacity (as defined in your prior Employment Agreement); with any payment
of Incentive Compensation under this sentence being based solely on the actual
Adjusted Pre-tax Income of Starrett for 1996. A Change in Control shall mean
the acquisition by any individual, entity or group (as such term is defined in
the Securities Exchange Act of 1934 ("Exchange Act")) (a "Person"), other than
any Person who is currently the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of 5% or more of the Company's outstanding Common
Stock, as a result of which such acquiring Person is the beneficial owner of
25% or more of the Company's outstanding Common Stock; a change in the Company's
Board of Directors such that the existing directors cease to constitute a
majority of the members of such Board; or a sale of all or substantially all
of the assets, a merger or consolidation, or a similar transaction of or
involving the Company.
Very truly yours,
STARRETT CORPORATION
By: /s/ Paul Milstein
----------------------------------
Paul Milstein
Chairman of the Board
AGREED:
/s/ Irving R. Fischer
- -------------------------------
Irving R. Fischer
<PAGE>
December 30, 1992
Mr. Irving R. Fischer
Starrett Housing Corporation
909 Third Avenue
New York, New York 10022
Dear Irving:
I am writing to provide assurance that assuming you continue to provide
services to the Company even though your employment agreement terminates on
January 5, 1993, the rights under paragraph 10 of such agreement (including
without limitation your right to two years of consulting payments after the
time you actually cease to work full time for the Company) will continue in
effect as provided in such agreement.
Very truly yours,
STARRETT HOUSING CORPORATION
By: /s/ Henry Barach
----------------------------------
AGREED:
/s/ Irving R. Fischer
- -----------------------------------
IRVING R. FISCHER
<PAGE>
MEMORANDUM TO: Irv Fischer
FROM: Dick Leder
RE: Maximum Payment to You Pursuant to
November 7, 1996 Agreement with Starrett
Without Causing a "Parachute Payment"
------------------------------------------
1. Maximum Payment equals Fischer total compensation for the years 1992
through 1996 ("Base Period"), divided by 5, minus $1.00.
2. Base Period Compensation (including Incentive Payment paid during
year):
1992 $373,929
1993 384,948
1994 447,280
1995 620,000
1996 963,000
----------
$2,789,157
==========
$2,789,157
3. Average Annual Comp (----------) $557,831
5 --------
4. Three times Average Annual Comp $1,673,494
----------
5. Maximum Payment (cash and F.M.V. of stock) $1,673,493
----------
VIA FAX
cc: Peter Samuels, Esq.
<PAGE>
STARTT ACQUISITION, INC.
c/o LAWRENCE RUBEN COMPANY
600 MADISON AVENUE
NEW YORK, NEW YORK 10022
October 16, 1997
Starrett Corporation
909 Third Avenue
New York, New York 10022
Ladies and Gentlemen:
Reference is made to Section 5.02(e) of the Agreement and Plan of
Merger (the "Merger Agreement") dated October 16, 1997 by and between Startt
Acquisition, Inc. ("Acquisition") and Starrett Corporation (the "Company").
Defined terms used herein shall have the meanings ascribed to them in the
Merger Agreement.
Acquisition hereby grants consent to the Company to enter into a
severance letter with the employee listed below on the terms (and only those
terms) specified below:
Following consummation of the Offer, if the Company or the Surviving
Corporation (a) terminates Lewis Weinfeld (the "Employee") "without cause" (as
such term is defined in Section 7(b)of that certain Employment Agreement dated
October 15, 1997 between the Company and Frank Ross), or (b) demotes the
Employee from a senior executive position, or (c) changes any of the respective
base salary, bonus or benefits package of the Employee in a manner so that any
of such items is less favorable to the Employee than the base salary, bonus or
benefits package to which the Employee was entitled as of September 30, 1997
(which base salary, bonus and benefits package shall be confirmed in writing to
Acquisition within five (5) business days from the date hereof), the Employee
shall be entitled to severance as follows:
<PAGE>
Lewis Weinfeld - If the Employee is terminated prior to the second
anniversary of consummation of the Offer, he shall be entitled to severance
equal to two times his annual base salary. If the Employee is terminated at any
time following the second anniversary of consummation of the Offer, he shall be
entitled to severance equal to his annual base salary.
In addition, the Employee's severance letter may provide that he is
entitled to severance equal to his annual base salary if he terminates his
employment with the Surviving Corporation for any reason at any time subsequent
to the second anniversary of consummation of the Offer.
STARTT ACQUISITION, INC.
By: /s/ Jonathan I. Mayblum
-------------------------
Name: Jonathan I. Mayblum
Title: President
