THIS SETTLEMENT AGREEMENT (this "Agreement"), dated as of April 12,
2002, is by and among GYRODYNE COMPANY OF AMERICA, INC. (the "Company"), on the
one hand, and SPECIAL K CAPITAL OFFSHORE MASTER FUND (U.S. DOLLAR), L.P.
("Special K Fund"), K CAPITAL OFFSHORE MASTER FUND (U.S. DOLLAR), L.P. ("K
Capital Fund" and together with Special K Fund, the "K Capital Investment
Funds"), K CAPITAL PARTNERS, LLC ("K Capital"), HARWICH CAPITAL PARTNERS, LLC
("Harwich"), THOMAS KNOTT and ABNER KURTIN (each of Special K Fund, K Capital
Fund, K Capital, Harwich, Messrs. Knott and Kurtin, a "K Capital Party" and
collectively, the "K Capital Parties"), on the other hand.
WHEREAS, Special K Fund is the beneficial owner of 27,781 shares of
the common stock, par value $1.00 per share, of the Company (the "Common Stock")
and K Capital Fund is the beneficial owner of 181,569 shares of Common Stock;
WHEREAS, K Capital is principally engaged in the business of
providing investment management services to the K Capital Investment Funds and
Harwich's principal business is serving as managing member of K Capital.
WHEREAS, Messrs. Knott and Kurtin are managing members of Harwich;
WHEREAS, K Capital has notified the Company that it intends to
nominate Richard S. Frary and Marvin L. Olshan for election to the Company's
board of directors at the Company's 2002 annual meeting of stockholders (the
"Annual Meeting") and has filed preliminary proxy materials with the Securities
and Exchange Commission to solicit proxies in support of its nominees;
WHEREAS, the Company and the K Capital Parties have determined that
the interests of the Company and its shareholders would best be served by
avoiding the substantial expense and disruption that could be expected to result
from a proxy contest and any related litigation;
NOW, THEREFORE, in consideration of the covenants and conditions set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
SALE AND PURCHASE OF SHARES
Section 1.01 Transfer of Shares. Subject to the terms and conditions
of this Agreement, at the closing referred to in Section 2.1 (the "Closing"),
the K Capital Investment Funds shall, sell, assign, transfer, convey and deliver
to the Company, and the Company shall purchase, acquire and accept from the K
Capital Investment Funds, 111,000 shares of Common Stock (the "Shares"), free
and clear of all Encumbrances.
Section 1.02 Purchase Price. The purchase price per Share (the
"Purchase Price") shall be $20.25. The Purchase Price shall be paid by the
Company at the Closing by wire transfer of immediately available funds to
Citibank, New York, Account #388-90774.
Section 2.01 Date of Closing. The Closing shall take place and may
be effected through delivery of documents via facsimile transmission on the date
that this Agreement is executed and delivered by all parties hereto. The date on
which the Closing is held is referred to in this Agreement as the "Closing
Date". At the Closing, the parties shall execute and deliver the documents
referred to in Sections 2.2 and 2.3.
Section 2.02 Documents to Be Delivered by the K Capital Investment
Funds. At the Closing, the K Capital Investment Funds shall deliver, or cause to
be delivered, to the Company the following:
(a) a Notice of Guaranteed Delivery in the form of Exhibit A hereto,
duly executed and completed.
(b) a letter from the K Capital Investment Funds to the Company in
the form of Exhibit B hereto, duly executed by the K Capital Investment Funds
and dated as of the Closing Date.
Section 2.03 Documents to Be Delivered by the Company. At the
Closing, the Company shall deliver to the K Capital Investment Funds the
(a) payment and evidence of the wire transfer referred to in Section
REPRESENTATIONS AND WARRANTIES OF THE K CAPITAL PARTIES
The K Capital Parties jointly and severally represent and warrant to
the Company that:
Section 3.01 Legal Power; Organization; Qualification. Each K
Capital Party is a natural person or a legal entity of the type set forth
opposite such K Capital Party's name on Exhibit C hereto. Each K Capital Party
who is a natural person is competent and has all requisite power and authority
to execute and deliver this Agreement and to consummate the Transactions. Each K
Capital Party which is not a natural person has been duly organized, and is
validly existing and in good standing, under the laws of its jurisdiction of
formation, has all requisite power and authority to execute and deliver this
Agreement and to consummate the Transactions, and has taken all necessary
corporate or other action to authorize the execution, delivery and performance
of this Agreement.
Section 3.02 Authorization of Agreement. This Agreement has been
duly executed and delivered by each K Capital Party and, assuming due and valid