As filed with the Securities and Exchange Commission on May 8, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934, as amended
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
..............................CAPITAL TRUST, INC. ..............................
(Name of Registrant as Specified In Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies: ______
2) Aggregate number of securities to which transaction applies:
______
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined): ______
4) Proposed maximum aggregate value of transaction: ______
5) Total fee paid: ______
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ______
2) Form, Schedule or Registration Statement No.: ______
3) Filing Party: ______
4) Date Filed: ______
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CAPITAL TRUST, INC.
605 Third Avenue
26th Floor
New York, New York 10016
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on June 21, 2000
To our Shareholders:
We hereby notify you that we are holding a special meeting of
shareholders at The Penn Club of New York, 30 West 44th Street, New York, New
York 10036, on June 21, 2000 at 10:00 a.m., New York City time, for the
following purposes:
(1) To consider and vote upon a proposal to approve and ratify the
warrant transaction pursuant to which additional warrants may be issued
for ultimate ownership by one or more affiliates of Citigroup
Investments Inc., as described more fully in the attached proxy
statement.
(2) To consider and act upon a proposal to approve an amendment to
our charter that would effect a one (1) for three (3) reverse stock
split, as described more fully in the attached proxy statement.
(3) To consider and act upon such other business and matters or
proposals as may properly come before the special meeting.
You can vote your shares of class A common stock and class A preferred
stock if our records show that you owned the shares on May 18, 2000, the record
date for the meeting.
By Order of the Board of Directors
Samuel Zell
Chairman of the Board
DATE: May __, 2000
To assure your representation at the shareholders meeting, please vote.
Whether or not you plan to attend the meeting, please take the time to vote by
completing and mailing the enclosed proxy card to us. We have enclosed a return
envelope for that purpose, which requires no postage if mailed in the United
States. If you sign, date and mail your proxy card without indicating how you
wish to vote, your proxy will be counted as a vote in favor of approval and
ratification of the warrant transaction and approval of the reverse stock split.
If you fail to return your card, your vote will not be counted, unless you
attend the meeting and vote in person.
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CAPITAL TRUST, INC.
--------------------------------------------
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 21, 2000
-----------------------------------------------
INTRODUCTION
We are asking you to approve and ratify the warrant transaction and to
approve the reverse stock split, each as described below. We have scheduled a
special meeting of shareholders to vote on the approval and ratification of the
warrant transaction which is fully described commencing on page 11 and the
approval of the reverse stock split which is fully described commencing on page
23. The date, time and place of the meeting is:
Date: June 21, 2000
Time: 10:00 a.m. New York City time
Place: The Penn Club of New York,
30 West 44th Street,
New York, New York 10036
The record date for shareholders entitled to notice of and to vote at the
special meeting is May 18, 2000. If you were a shareholder at that time, you may
vote at the meeting.
We are sending you this proxy statement prepared by management for our
board of directors to solicit your vote in favor of approval and ratification of
the warrant transaction and approval of the reverse stock split. The warrant
transaction is governed by our recently signed venture agreement with affiliates
of Citigroup Investments Inc. ("Citigroup") pursuant to which we have begun our
new investment management business with Citigroup as our strategic partner. As
explained later on page 11, the rules of the New York Stock Exchange, or NYSE,
require our shareholders to approve and ratify the issuance of the warrants for
ultimate ownership by Citigroup in connection with the warrant transaction. If
the warrant transaction is approved and ratified, we will be able to issue
additional warrants for ultimate ownership by Citigroup pursuant to a formula
contained in the venture agreement which is outlined later in this proxy
statement.
See Risk Factors section beginning on page 6 for certain information that
should be considered by shareholders regarding the warrant transaction and our
new investment management business.
Members of management, entities controlled by certain of them and an entity
owned by a trust for the benefit of the family of one member, as well as other
shareholders associated with management, who own 9,443,531 shares of class A
common stock in total, or approximately 40.5% of the voting shares outstanding,
have agreed to vote in favor of the warrant transaction.
Our board of directors has unanimously approved the strategic venture with
Citigroup, and believes that the transactions governed by the venture agreement,
including the warrant transaction, are in our company's best interest. Our board
of directors unanimously recommends a vote in favor of approval and ratification
of the warrant transaction.
This proxy statement is dated May __, 2000 and was first mailed to our
shareholders on or about May __, 2000.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
FORWARD-LOOKING STATEMENTS......................................................................................... iii
SUMMARY............................................................................................................. 1
The Company.................................................................................................... 1
The Strategic Venture.......................................................................................... 1
Reasons for the Venture........................................................................................ 1
The Warrant Transaction........................................................................................ 1
Opinion of Morgan Stanley & Co. Incorporated................................................................... 2
Recommendation of our Board of Directors....................................................................... 2
Voting Agreement of Management and Associates.................................................................. 2
The Reverse Stock Split........................................................................................ 2
No Appraisal Rights............................................................................................ 3
GENERAL INFORMATION ABOUT THE SPECIAL MEETING AND VOTING............................................................ 4
RISK FACTORS........................................................................................................ 6
Risk Factors Relating to the Warrant Transaction............................................................... 6
Risk Factors Relating to our New Investment Management Business................................................ 6
BUSINESS............................................................................................................ 9
General........................................................................................................ 9
The Strategic Venture.......................................................................................... 9
THE WARRANT TRANSACTION............................................................................................. 11
General........................................................................................................ 11
Background of the Venture Agreement and Warrant Transaction.................................................... 12
Reasons for the Venture Agreement.............................................................................. 14
Opinion of Morgan Stanley & Co. Incorporated................................................................... 15
THE VENTURE AGREEMENT............................................................................................... 18
REVERSE STOCK SPLIT................................................................................................. 23
General........................................................................................................ 23
Purpose of Reverse Stock Split................................................................................. 23
Effects of the Reverse Split................................................................................... 24
Exchange of Stock Certificates and Elimination of Fractional Share Interests................................... 26
Federal Income Tax Consequences of Reverse Stock Split......................................................... 26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................... 28
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING....................................................................... 31
WHERE YOU CAN FIND MORE INFORMATION................................................................................. 31
</TABLE>
ANNEX A -- Venture Agreement
ANNEX B -- Morgan Stanley & Co. Incorporated Fairness Opinion
ANNEX C -- Form of Charter Amendment
936236.9
ii
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FORWARD-LOOKING STATEMENTS
This proxy statement contains statements that plan for or anticipate the
future. Forward-looking statements include statements about the future of our
new investment management business we have begun with Citigroup under the terms
of the venture agreement, statements about our future business plans and
strategies, and most other statements that are not historical in nature. When
used in this proxy statement, the words "anticipate," "plan," "intent,"
"believe," "estimate," and the like are generally considered forward-looking.
Because forward-looking statements involve future risks and uncertainties, there
are factors that could cause actual results to differ materially from those
expressed or implied. For example, a few of the uncertainties that could affect
the ultimate accuracy of the forward-looking statements, besides the specific
factors identified in the Risk Factors section on page 6, include:
o changes in the real estate market;
o changes in real estate capital markets;
o changes in our business strategies; and
o fluctuations in prevailing interest rates and spread compression.
936236.9
iii
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SUMMARY
The summary highlights selected information contained in this document and
may not contain all of the information that is important to you. To better
understand the venture agreement and the warrant transaction and the reverse
stock split, and for a more complete description of such subjects, you should
read carefully this entire document.
The Company
We are an investment management and real estate finance company designed to
take advantage of high-yielding lending and investment opportunities in
commercial real estate and related assets. We make investments, for our own
portfolio and as an investment manager for funds managed by us, in various types
of income-producing commercial real estate. Our current investment program
emphasizes senior and junior commercial mortgage loans, certificated mezzanine
investments, direct equity investments and subordinated interests in commercial
mortgage-backed securities. We also provide real estate advisory and asset
management services.
Our principal executive offices are located at:
Capital Trust, Inc.
605 Third Avenue,
26th Floor,
New York, New York 10016
The Strategic Venture
On March 8, 2000, we entered into a strategic venture with Citigroup,
pursuant to which, among other things, affiliates of the parties will co-
sponsor, commit to invest capital in and manage a series of high-yield
commercial real estate mezzanine investment funds. These funds will be referred
to in this proxy statement as "Mezzanine Funds". This venture, which is governed
by the venture agreement, represents a new strategic direction as we transition
from primarily a balance sheet lender to primarily an investment management firm
engaged in originating, structuring and managing high-yield real estate
financial assets for third party investment funds. We intend to invest in these
funds, to continue to aggressively manage our existing investment portfolio, and
to selectively add investments to our portfolio that do not conflict with our
role as exclusive investment manager to the Mezzanine Funds.
Reasons for the Venture
We believe our strategic venture with Citigroup positions us to increase
shareholder value for a number of reasons, including the following:
o the strategic venture provides us with the building blocks to create a
scalable platform for high quality earnings growth whereby we are paid
for our expertise, not just our capital;
o the strategic venture provides us with up to $400 million of private
capital from Citigroup to deploy into the Mezzanine Funds;
o the strategic venture provides us with access to third party equity
investors through Citigroup's worldwide franchise; and
o the strategic venture provides us with substantially improved operating
leverage allowing us to increase earnings and to increase return on
equity without otherwise incurring substantial portfolio risk.
The Warrant Transaction
On March 8, 2000, we issued an initial warrant to purchase 4,250,000 shares
of our
<PAGE>
class A common stock at $5.00 per share which was ultimately transferred to
an affiliate of Citigroup in accordance with the terms of the venture
agreement. We have also agreed, subject to shareholder approval, to issue
additional warrants to purchase up to 5,250,000 shares of our class A common
stock at $5.00 per share for ultimate ownership by Citigroup in accordance with
the formula for their issuance contained in the venture agreement.
The issuance of the additional warrants will terminate the contingent cash
rights that we granted to Citigroup concurrently with the signing of the venture
agreement. The contingent cash rights, which in the absence of shareholder
approval are meant to provide Citigroup with value equivalent to any warrants
that otherwise would have been issued to Citigroup, entitle Citigroup to receive
cash from us in an amount equal to the excess of the trading price of our class
A common stock over $5.00 for each right exercised.
We agreed in the venture agreement to seek shareholder approval of the
warrant transaction. Shareholder approval would:
o eliminate a potentially large contingent
cash payment obligation should our share
price increase significantly;
o further align Citigroup with our
shareholders because increases in
shareholder value would inure to them in
the same manner; Citigroup would profit
from its interest in the company through
the trading market and not pursuant to the
exercise of contingent cash rights which
would transfer equity in the company from
all shareholders to Citigroup.
Opinion of Morgan Stanley & Co.
Incorporated
In connection with the venture agreement, our board of directors received a
written opinion from Morgan Stanley & Co. Incorporated as to the fairness, from
a financial point of view, to the company of the consideration given in the
transactions relating to the strategic venture with Citigroup and the proposed
modification of our outstanding convertible trust preferred securities. The full
text of Morgan Stanley's written opinion, dated March 8, 2000, is attached to
the back of this proxy statement as Annex B, and should be read carefully in its
entirety for a description of the assumptions made, matters considered and the
limitations on the review undertaken.
Recommendation of our Board of Directors
Our board of directors has unanimously approved the strategic venture, and
believes that the transactions governed by the venture agreement, including the
warrant transaction, are in our company's best interest. Our board of directors
unanimously recommends a vote in favor of approval and ratification of the
warrant transaction.
Voting Agreement of Management and
Associates
Our vice chairmen, John R. Klopp and Craig M. Hatkoff, entities controlled
by them and an entity owned by a trust for the benefit of the family of our
chairman of the board, Samuel Zell, as well as other shareholders controlled by
certain directors or associated with Mr. Zell, who own 9,443,531 shares of class
A common stock in total, or approximately 40.5% of the voting shares
outstanding, have entered into separate voting agreements agreeing to vote in
favor of the warrant transaction.
The Reverse Stock Split
On May __, 2000, our board of directors approved and declared advisable an
amendment to our charter that would effect a one (1) for three (3) reverse stock
split whereby three shares of each outstanding class of our common and preferred
stock would be automatically converted into one share of each such class of
stock and we would pay cash in lieu of fractional shares that
2
<PAGE>
would otherwise be issued. Our board of directors believes that the reverse
stock split will enhance the marketability and liquidity of our class A common
stock, which trades on the New York Stock Exchange.
Upon the effective date of the reverse stock split, the number of shares of
our outstanding common stock will be reduced from 23,352,012 to 7,784,004 and
the number of shares of our outstanding preferred stock will be reduced from
6,320,833 to 2,106,944, subject in each case to further reduction upon the
elimination of fractional shares, but the par value and the voting and other
rights and preferences of our stock will not otherwise be altered by the reverse
stock split.
Our board of directors believes that the reverse stock split is advisable
and in our company's best interest. Our board of directors unanimously
recommends a vote in favor or approval of the reverse stock split.
No Appraisal Rights
Maryland corporate law does not provide for any dissenters' rights to elect
to have the fair value of your shares judicially appraised and paid to you in
cash in connection with the warrant transaction or the reverse stock split.
3
<PAGE>
GENERAL INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
In this section of the proxy statement, we answer some common questions
regarding the special shareholders meeting and the voting of shares at the
meeting.
Where and when will the special meeting be held?
The date, time and place of the meeting is:
o June 21, 2000
o 10:00 a.m. (New York City time)
o The Penn Club of New York,
30 West 44th Street,
New York, New York 10036
Why did you send me this proxy statement?
We sent you this proxy statement and the enclosed proxy card because our
board of directors is asking for your proxy to vote at the special meeting. This
proxy statement summarizes the information you need to know to vote
intelligently at the meeting. But you don't have to attend in order to vote your
shares. Instead, you may simply complete, sign, and return the enclosed proxy
card.
Who can vote?
You can vote your shares of class A common stock and class A preferred
stock if our records show that you owned the shares on May 18, 2000, the record
date for the special meeting. A total of 21,058,228 shares of our class A common
stock and 2,277,585 shares of our class A preferred stock, voting as a single
class, can vote at the special meeting. You get one vote for each share of class
A common stock or class A preferred stock that you own. The enclosed proxy card
shows the number of shares you can vote.
How are votes counted?
We will hold the special meeting if shareholders representing the required
quorum of shares of stock entitled to vote either sign and return their proxy
cards or attend the meeting. A majority of the shares of class A common stock
and class A preferred stock entitled to vote at the meeting present in person or
by proxy will constitute a quorum. If you sign and return your proxy card, your
shares will be counted to determine whether we have a quorum even if you abstain
or fail to vote as indicated on the proxy card.
The warrant transaction and the reverse stock split are non-routine
matters. As a result, if your shares are held in the name of a nominee, and you
do not tell the nominee by [date] how to vote your shares, the nominee cannot
vote them (giving rise to what is known as a broker non-vote) but if the nominee
signs and returns the proxy card, your shares will be counted as present to
determine if a quorum exists.
If you abstain or your shares are treated as broker non-votes, your
abstention or the broker non-votes will have the effect of:
o a vote against the warrant transaction, unless holders of over 50% of the
21,058,228 shares of class A common stock and 2,277,585 shares of class A
preferred stock, voting as a single class, entitled to vote as of the record
date cast votes, in which event neither your abstention nor your broker
non-votes will have any effect on the result of the votes or on that proposal;
o a vote against the reverse stock split.
What is the required vote for approval?
The warrant transaction will be approved and ratified in accordance with
the applicable NYSE rule if the proposal receives in its favor a majority of the
votes cast, provided that the total votes cast represent over 50% of the
21,058,228 shares of class A common stock and 2,277,585
4
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shares of class A preferred stock, voting as a single class, entitled to vote as
of the record date.
The reverse stock split will be approved if the proposal receives the
affirmative vote of a majority of all votes entitled to be cast on the matter.
How do I vote by proxy?
Follow the instructions on the enclosed proxy card to vote on the matters
to be considered at the special meeting. Sign and date the proxy card and mail
it back to us in the enclosed envelope. The proxyholders named on the proxy card
will vote your shares as you instruct. If you sign and return the proxy card but
do not vote on a proposal, the proxyholders will vote for you on that proposal.
Unless you instruct otherwise, the proxyholders will vote to approve and ratify
the warrant transaction and approve the reverse stock split.
What if other matters come up at the special
meeting?
The warrant transaction and the reverse stock split described in this proxy
statement are the only matters we now know of that will be voted on at the
special meeting. If other matters are properly presented at the meeting, the
proxyholders will vote your shares as they see fit.
Can I change my vote after I return my proxy card?
Yes. At any time before the vote on a proposal, you can change your vote
either by giving us a written notice revoking your proxy card or by signing,
dating, and returning to us a new proxy card or by attending the special meeting
and voting your shares in person. We will honor the proxy card with the latest
date.
Proxy revocation notices or new proxy cards
should be sent to Capital Trust, Inc. c/o American
Stock Transfer & Trust Company, 6201 Fifteenth
Avenue, Brooklyn, New York 11219, Attention:
Paula Caroppoli.
Can I vote in person at the special meeting rather than by completing the proxy
card?
Although we encourage you to complete and return the proxy card to ensure
that your vote is counted, you can attend the special meeting and vote your
shares in person.
What do I do if my shares are held in "street name"?
If your shares are held in the name of your broker, a bank, or other
nominee, that party should give you instructions for voting your shares.
Who pays for this proxy solicitation?
We do. In addition to sending you these materials, some of our employees
may contact you by telephone, by mail, or in person. None of these employees
will receive any extra compensation for doing this. We have retained MacKenzie
Partners, Inc. to assist us in soliciting your proxy for a fixed fee plus
reasonable expenses.
5
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RISK FACTORS
You should read the following risk factors carefully before voting your
stock. The risks and uncertainties relating to the warrant transaction and our
new investment management business are not the only ones you or we will face. If
the risks discussed below relating to the new investment management business
occur, we may fail to successfully develop and operate the new business which
may cause a decline in the trading price of our class A common stock.
Risk Factors Relating to the Warrant Transaction
If additional warrants are issued, shareholders will be subject to
potential significant dilution of their ownership interest and reduction of
voting power.
If additional warrants exercisable for the maximum number of shares are
issued and the initial warrant and additional warrants are exercised by
Citigroup, the number of shares of our class A common stock outstanding of after
such exercise will increase significantly by approximately 19.0% and the
percentage ownership interest and voting power of existing public shareholders
not associated with management will decrease significantly from 58.4% to 41.5%.
Shareholders are not entitled to appraisal rights in connection with the
warrant transaction.
Shareholders do not have any statutory dissenter's or appraisal rights
under Maryland corporate law to elect to have the fair value of their common
stock or preferred stock judicially appraised and paid in cash in connection
with or as a result of the warrant transaction.
Risk Factors Relating to the our New Investment Management Business
Because we have no prior operating history in the investment management
business, we may fail to successfully develop or operate that business so as to
achieve the investment returns that we expect.
Our new investment management business is new and unproven. In order to
achieve our goals for the business, we must:
o capitalize the second of our Mezzanine Funds with $350 million of third
party investor commitments, the minimum necessary to launch the funds,
before June 30, 2001, the outside date when the parties to the venture
agreement can terminate the venture agreement,
o convince third party investors that an investment in the Mezzanine
Funds will meet their investment objectives and will generate
attractive returns,
o deploy successfully the Mezzanine Funds' capital into suitable
investments that meet the fund's specified investment criteria,
o structure investment opportunities in the Mezzanine Funds so that they
are competitive with what is demanded in the private equity markets,
and
o reorient and incentivise our management and professional staff to the
task of developing and operating the investment management business.
6
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Our success in developing and operating the investment management business
will depend on the demand for private equity investment opportunities such as
the Mezzanine Funds.
Our ability to obtain third party investment in the Mezzanine Funds to
develop and operate the investment management business will depend on the
strength of the market for private equity investments generally and real estate
related private equity investments in particular. Those markets can be
materially and adversely affected by factors beyond our control including
volatility in the global capital markets, adverse changes in general economic
conditions, an unfavorable market for real estate and competition from other
investment opportunities available to third party investors.
We will face substantial competition from established participants in the
private equity market as we offer the Mezzanine Funds to third party investors.
We are a new entrant in the investment management business. As we offer the
Mezzanine Funds as investment opportunities to third party investors, we will
face significant competition from established Wall Street investment banking
firms and large financial institutions which have proven track records in
marketing and managing private equity investment funds and are otherwise
competitively advantaged by having access to their existing extensive third
party investor networks into which they can channel competing investment
opportunities. If our competitors offer investment products that are competitive
with the Mezzanine Fund investments offered by us, we will find it more
difficult to attract investors and to capitalize the Mezzanine Funds.
The success of our investment management business will depend on
Citigroup's ability to raise capital from its third party investor relationships
and Citigroup's continuing cooperation and agreement on certain major decisions
that we will decide jointly with them.
We are expecting to obtain substantial third party investment from
Citigroup's existing investor relationships in developing and operating our
investment management business and will need Citigroup's continuing cooperation
and agreement as we manage the Mezzanine Funds. We will therefore be subject to
the risk that Citigroup may develop economic and business interests and goals
that diverge from continuing with its commitment to the capital raising
function. We will also be subject to the risk that an impasse may develop on
certain major decisions in the management of the funds that are required to be
made by Citigroup and us jointly, including those relating to what investments
should be made or how much leverage should be incurred on behalf of the funds. A
failure to raise capital through Citigroup's investor relationships as expected
will adversely affect our investment management business, and if impasse in the
management of the funds arises on which we cannot reach agreement with
Citigroup, we will not be able to manage the fund's in a manner that we believe
will allow the fund to achieve optimal returns.
Our Mezzanine Funds will be subject to the risk of defaults by third party
investors on their capital commitments.
The capital commitments made by third party investors to Mezzanine Funds
represent promises by those investors to contribute cash to the funds from time
to time as investments are made by the funds. We will therefore be subject to
general credit risks that the investors may default on their capital
commitments. If defaults occur, we may not be able to close loans and
investments we have identified and negotiated which could materially and
adversely affect the fund's investment program or make us liable for breach of
contract to the detriment of our franchise in the private equity market.
7
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The performance of the loans and investments originated or acquired by our
Mezzanine Funds will be subject in varying degrees to the risks generally
associated with the ownership and operation of the underlying commercial
property.
Whether our Mezzanine Funds' loans and investments achieve the returns on
equity we expect or at least break even and return the capital invested will
depend ultimately on the property owner's ability to operate the property so
that it produces the cash flow necessary to pay the interest due to us on the
loans and investments. Commercial property revenues can be adversely affected by
adverse changes in the multitude of factors that impact the operation of
commercial property. If any of the properties underlying the fund's loans and
investments suffer such adverse changes, the value of and return on those assets
may be diminished.
8
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BUSINESS
General
We are an investment management and real estate finance company designed to
take advantage of high- yielding lending and investment opportunities in
commercial real estate and related assets. We make investments, for our own
portfolio and as an investment manager for funds managed by us, in various types
of income-producing commercial real estate. Our current investment program
emphasizes senior and junior commercial mortgage loans, certificated mezzanine
investments, direct equity investments and subordinated interests in commercial
mortgage-backed securities, or CMBS. Pursuant to our current business strategy,
we seek to manage our portfolio of loans and other assets so that a majority of
our investments are subordinate to third-party financing but senior to the
owner/operator's equity position and therefore represent "mezzanine" capital.
We recently entered into a venture agreement with Citigroup, pursuant to
which, among other things, affiliates of the parties will co-sponsor, commit to
invest capital in and manage Mezzanine Funds as outlined in the agreement. This
venture represents a new strategic direction as we transition our company from
primarily a balance sheet lender to primarily an investment management firm
engaged in originating, structuring and managing high-yield real estate
financial assets for third party investment funds. We intend to invest in these
funds, to continue to aggressively manage our existing investment portfolio, and
to selectively add investments to our portfolio that do not conflict with our
role as exclusive investment manager to the Mezzanine Funds.
We also provide real estate advisory and asset management services. We
otherwise remain positioned opportunistically to invest for our own balance
sheet in a diverse array of real estate and finance-related assets and
enterprises, including operating companies, which satisfy our investment
criteria. In executing our business plan, we utilize the extensive real estate
industry contacts and relationships of Equity Group Investments, L.L.C., or EGI.
EGI is a privately held real estate and corporate investment firm controlled by
Samuel Zell, our chairman of the board of directors. Mr. Zell is chairman of the
board of trustees of Equity Office Properties Trust and Equity Residential
Properties Trust, the largest U.S. real estate investment trusts, or REITs
operating in the office and multifamily residential sectors, respectively. We
also expect to realize origination synergies from our strategic relationship
with Citigroup, which constitutes the most global financial services company,
providing some 100 million consumers, corporations and institutions with a broad
array of financial products and services.
The Strategic Venture
We believe that our new strategic venture with Citigroup emphasizes our
strengths and provides us with the building blocks for a scalable platform for
high quality earnings growth. It also shifts our focus from that of a balance
sheet lender to that of an investment manager. The investment management
business, as structured with Citigroup, also allows us to tap the private equity
markets as a source of fresh capital to fund our business. The venture further
provides the potential for significant operating leverage allowing us to grow
earnings and to increase the return on equity without incurring additional
financial risk.
In connection with our investment management operations, we and Citigroup
have jointly organized and capitalized with an aggregate of $200 million in
capital commitments the first of our venture's Mezzanine Funds that operates as
a joint venture pursuant to which each party approves the loans and investments
to be originated or acquired by the fund. We are currently in the process of
organizing and
9
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capitalizing the second Mezzanine Fund co-sponsored with Citigroup pursuant to
the venture agreement. In the future as the business develops, we may also
sponsor or co-sponsor with others alternative investment funds that invest in
assets that are excluded from the Mezzanine Funds' exclusive investment
criteria. Organizing and capitalizing investment funds entails obtaining capital
commitments from third party investors. We have engaged Citigroup's affiliate,
Salomon Smith Barney Inc., as the placement agent for the second Mezzanine Fund
to be capitalized with third party investor capital commitments as well as with
the capital commitments we and Citigroup agreed to make pursuant to the venture
agreement. Citigroup agreed to make up to an aggregate of $250 million and we
agreed to make up to an aggregate of $62.5 million in capital commitments to the
second and subsequent Mezzanine Funds sponsored pursuant to the venture
agreement that close prior to December 31, 2001.
Once capitalized with investor commitments, a special purpose wholly owned
subsidiary, which currently serves as an investment manager to the first
Mezzanine Fund, will serve as investment manager to the Mezzanine Funds or any
alternative funds sponsored by us. In connection with providing such investment
management services, we will earn investment management fees and will be
reimbursed for certain expenses. We will jointly control with Citigroup the
general partner or managing member of each fund and thereby will generally have
or share a promoted interest in the fund that will entitle us to distributions
of a portion of earnings that exceed certain performance thresholds.
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THE WARRANT TRANSACTION
General
We are providing this proxy statement to you in connection with our request
for shareholder approval and ratification of the warrant transaction which is
governed by our venture agreement with Citigroup. The warrant transaction is
defined for purposes of this proxy statement to include the issuance of the
initial and additional warrants to Citigroup pursuant to the venture agreement
as described below.
In connection with the organization of the first Mezzanine Fund pursuant to
the venture agreement on March 8, 2000, we issued an initial warrant to purchase
4,250,000 shares of our class A common stock at $5.00 per share that was
ultimately transferred to an affiliate of Citigroup in accordance with the terms
of the venture agreement. Pursuant to the venture agreement, we have agreed,
subject to shareholder approval, to issue additional warrants to purchase up to
5,250,000 shares of our class A common stock at $5.00 per share for ultimate
transfer to other Citigroup in accordance with the formula for their issuance
contained in the venture agreement.
We are seeking shareholder approval of the warrant transaction in order to
comply with applicable NYSE rules. The NYSE rules require a listed company like
us, as a condition to listing the shares of common stock issuable upon exercise
of warrants, to obtain shareholder approval if the number of shares issuable
upon exercise of the warrants equals or exceeds 20% of the outstanding shares
measured as of the time of issuance of the warrants.
The initial warrant provided its holder, as of the date of its issuance,
the right to purchase shares of class A common stock representing less than 20%
of the outstanding shares and, accordingly, did not require us to obtain
shareholder approval under NYSE rules. If we issue additional warrants to
purchase 2,483,333 shares, the minimum number of shares that may be subject to
warrants pursuant to the formula contained in the venture agreement, the
combined initial warrants and additional warrants issued by us will provide
their holders with the right to purchase collectively 28.9% of our outstanding
shares of class A common stock, which is why we need to obtain shareholder
approval of the warrant transaction. Pursuant to the warrant issuance formula,
we may issue additional warrants providing the right to purchase up to a maximum
of 5,250,000 shares, which when combined with the initial warrants, will provide
their holders with the right to purchase collectively 40.7% of our outstanding
shares of class A common stock.
We will only issue additional warrants if our shareholders approve and
ratify the warrant transaction. The issuance of the additional warrants will
terminate the contingent cash rights that we granted to Citigroup concurrently
with the signing of the venture agreement. The contingent cash rights which, in
the absence of shareholder approval are meant to provide Citigroup with value
equivalent to any additional warrants that otherwise would have been issued to
Citigroup pursuant to the formula contained in the venture agreement, entitle
Citigroup to receive cash from us in an amount equal to the excess of the
trading price of our class A common stock over $5.00 for each right exercised.
The initial warrant will not be affected by the outcome of the shareholder
vote and will continue to provide its holder the right to purchase 4,250,000
shares of class A common stock, which represented as of the date of issuance
approximately 19.0% of our then outstanding shares of class A common stock, and
now represents approximately 20.2% of our outstanding shares of class A common
stock after the reduction in the number of shares outstanding as a result of
share purchases pursuant to our stock buy back program.
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We agreed in the venture agreement to seek shareholder approval of the
warrant transaction so that we can issue additional warrants pursuant to the
venture agreement and thereby terminate the contingent cash rights. Shareholder
approval would result in the following benefits:
o It would eliminate a potentially large contingent cash payment
obligation should our share price increase significantly in relation to
the $5.00 base price. For example, assuming contingent cash rights are
exercised with respect to the maximum 5,250,000 shares that may be
subject to additional warrants are exercised, if the trading price of
our class A common stock increased to $10.00, we would be obligated to
pay approximately $26.3 million pursuant to the contingent cash rights.
If the price increased to $20.00, we would be obligated to pay
approximately $78.8 million.
o It would further align Citigroup with our shareholders because
increases in shareholder value would inure to them in the same manner.
Citigroup would profit from its interest in the company by exercising
the additional warrants and selling the underlying shares in the
trading market rather than by receiving a cash payment from us pursuant
to the contingent cash rights which would transfer equity in the
company from all shareholders to Citigroup.
Both the contingent cash rights $5.00 base price and the warrants $5.00
exercise price will be portionately increased to $15.00 upon the effectiveness
of the reverse stock split which is described below in the Reverse Stock Split
section.
Background of the Venture Agreement and Warrant Transaction
Following the commencement of our finance business in July 1997, we
undertook important capital raising initiatives in our efforts to grow the
business. Capital was then generally available to companies operating in our
sector and we raised approximately $240 million in new leverageable capital from
the December 1997 public offering of our class A common stock and the August
1998 private placement of convertible trust preferred securities. With that
capital and borrowings under our credit facilities, we were able to identify,
negotiate and originate approximately $600 million in new loans and investments
from January through October 1998.
Our rapid growth was affected by the significant volatility in the global
capital markets in October 1998 when we made the strategic decision to
temporarily suspend our origination activity. We re-entered the loan origination
and investment market in March 1999, but in view of the fact that the equity
market for real estate related finance companies was depressed as a result of
the market turmoil and the general inability of companies operating in the
sector to access new capital, we made the strategic decision in 1999 to manage
our portfolio of loans and investments at its current level of approximately
$800 million. We did this in order to preserve sufficient sources of liquidity
to facilitate potential strategic acquisitions and/or joint ventures.
During 1999, we explored various strategic acquisitions and joint ventures
in order to bolster our capital position and expand our business platform so
that we could grow our portfolio of loans and investments and take advantage of
consolidation opportunities in our sector. We first discussed the possibility of
a strategic relationship with representatives of Citigroup in April 1999 after
having dealt with them on a recently completed mezzanine transaction. We learned
that Citigroup had determined to deploy their resources and capital to exploit
opportunities in the commercial real estate mezzanine market at about the same
time we began actively to explore strategic alternatives to address our capital
and expansion goals. During the summer of 1999, we suggested to Citigroup that
we explore together the possibility of a
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mutually beneficial strategic relationship that aligns their capital with our
expertise in the commercial real estate mezzanine market.
In November 1999, our representatives discussed with representatives of
Citigroup the broad outlines of a strategic venture to co-sponsor real estate
mezzanine funds to which Citigroup would commit its capital and strategic
resources. We would provide the resources of our experienced management and
professional team and we would issue stock purchase warrants to Citigroup to
align their interest in the success of our business. The discussions occurred in
the context of a proposed consolidation transaction between us and a publicly
traded REIT with which we were then engaged in preliminary discussions.
Converting to a REIT, which our management had earlier determined was advisable,
would have made certain provisions of our convertible trust preferred securities
economically disadvantageous to us and to our shareholders because the yield on
the securities would increase and the conversion price would decrease
substantially when, as required of all REITs, we paid out current earnings as
dividends. The holders of the convertible trust preferred securities were also
parties to a co-investment agreement with us which, if not terminated, would
severely impede our ability to source loans and investments to the mezzanine
funds. Therefore, the transactions under discussion required as a condition that
the holders of the convertible trust preferred securities agree to modify the
terms of the securities to eliminate the disadvantageous provisions and
terminate the co-investment agreement.
While the discussions were ongoing, we agreed to engage Morgan Stanley &
Co. Incorporated as financial advisor to advise our board of directors with
respect to the transactions relating to the strategic venture and the
modification of the convertible trust preferred securities and related matters.
At the end of 1999, the discussions with the REIT terminated, but our
discussions with Citigroup continued. Our board of directors was apprized of the
developments and management was authorized to continue discussions with
Citigroup. In January 2000, the parties prepared a summary of terms detailing
the terms under which they would proceed to negotiation of definitive
documentation. The summary of terms was circulated to our board of directors.
The parties thereafter began negotiation of the definitive venture agreements,
while at the same time, as contemplated by the summary of terms, we began
negotiations with the holders of the convertible trust preferred securities to
modify the terms of the securities to eliminate the disadvantageous provisions
and to terminate the co-investment agreement.
During February 2000, drafts of the agreements relating to the strategic
venture and the modification of the convertible trust preferred securities and
termination of the co-investment agreement were circulated among the parties.
Various meetings and conferences were held during which the terms of the
agreements were negotiated. Ultimately, in early March 2000, Citigroup agreed
with us to finalize and sign the definitive venture agreement on the basis of a
term sheet signed by the holders of the convertible trust preferred securities
pursuant to which they agreed in principle to modify the terms of the securities
and terminate the co-investment agreement. The signed term sheet was then
circulated to our board of directors.
On March 8, 2000, a special meeting of our board of directors was held to
consider the approval of the strategic venture and the modification of the
convertible trust preferred securities and related matters. Management provided
an update on the status of the negotiations and reviewed for the board the terms
of the proposed transactions. Morgan Stanley & Co. Incorporated made a financial
presentation and rendered its oral opinion (subsequently confirmed in writing by
delivery of a written opinion dated March 8, 2000) to the effect that, as of
that date, based on and subject to the matters described in its opinion, the
consideration given by us in connection with the transactions relating to the
proposed strategic venture and the
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modification of the convertible trust preferred securities is fair from a
financial point of view to us. Counsel further described for the board the
matters to be acted upon in approving the transactions. Our board unanimously:
o determined that it was desirable and in our company's best interest
that we enter into the strategic venture with Citigroup,
o approved the strategic venture and authorized management to complete
the negotiation of and sign the venture agreement and related documents
on terms and conditions set forth in the summary of terms, and
o approved the modification of the convertible trust preferred securities
and authorized management to complete the negotiation of and sign the
modification agreement and related documents on terms and conditions
set forth in the related term sheet.
The parties thereafter completed negotiation of and signed and delivered
the venture agreement and related transaction documents.
On March 9, 2000, we issued with Citigroup a joint press release announcing
the venture agreement, the proposed modification of the trust preferred
securities and the commencement of our investment management business.
Reasons for the Venture Agreement
Our board of directors considered the following factors in reaching its
decision to approve the strategic venture and the proposed modification of the
trust preferred securities:
o the strategic venture provides us with the building blocks to create a
scalable platform for high quality earnings growth whereby we are
rewarded for our expertise in deploying not only our capital, but our
investors' capital as well;
o the strategic venture provides us with up to $400 million of private
capital from Citigroup to deploy into the Mezzanine Funds;
o the strategic venture provides us with substantially improved operating
leverage allowing us to increase earnings and to increase return on
equity without otherwise incurring substantial portfolio risk; and
o the strategic venture provides us with access to third party equity
investors through Citigroup's worldwide franchise.
Our board also consider the following additional factors:
o other strategic alternatives available to us at this time;
o the uncertainty as to whether the real estate equity capital markets
will recover and become an available source of capital; and
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o the opinion dated March 8, 2000 of Morgan Stanley & Co. Incorporated
described below under "Opinion of Morgan Stanley & Co. Incorporated" as
to the fairness to us, from a financial point of view, of the
consideration given by us in connection with the transactions relating
to the proposed strategic venture and the modification of the
convertible trust preferred securities.
Our board also considered the following negative factors:
o the interests of certain directors in the modification of the
convertible trust preferred securities;
o the impact of our potential failure to successfully develop and
operate our new investment management business; and
o our dependence on substantial support from Citigroup in developing and
managing our investment management business.
The foregoing discussion of the information and factors considered by our
board of directors is not intended to be exhaustive but we believe includes all
material factors considered by the board. In view of the complexity and wide
variety of information and factors, both positive and negative, considered by
the board, they did not find it practical to quantify, rank or otherwise assign
relative or specific weights to the factors considered. In addition, the board
did not reach any specific conclusion with respect to each of the factors
considered, or any aspect of any particular factor, but, rather, conducted an
overall analysis of the factors described above, including discussions with
management and legal, financial and accounting advisors. In considering the
factors described above, individual members of the board may have given
different weight to different factors. Our board of directors considered all
these factors as a whole and believed the factors supported its determination.
After taking into consideration all the factors set forth above, the board
concluded that the strategic venture and related transactions was in furtherance
of and consistent our long-term business strategies and in the best interest of
our shareholders.
Opinion of Morgan Stanley & Co. Incorporated
Pursuant to an engagement letter agreement dated as of January 10, 2000,
Morgan Stanley & Co. Incorporated was engaged to provide financial advisory
services and a financial fairness opinion in connection with the proposed
transaction to co-sponsor pooled investment vehicles that will originate and
hold primarily commercial real estate mezzanine loans with affiliates of
Citigroup Investments Inc, we refer to as the CIG Transaction. Morgan Stanley
was selected by our board of directors to act as our financial advisor based on
Morgan Stanley's qualifications, expertise, reputation and its knowledge of our
business and affairs. At the meeting of our board of directors on March 8, 2000,
Morgan Stanley rendered its oral opinion, subsequently confirmed in a letter
dated, March 13, 2000, and based upon and subject to the various considerations
set forth in the opinion, the consideration to be given by us in connection with
the CIG Transaction was fair from a financial point of view to us.
The CIG Transaction was defined as the following series of transactions
taken as a whole:
(1) the execution of a venture agreement between us and our affiliates,
which parties are referred to in this section as CT, and Citigroup, in
the form of the draft dated March 5, 2000, which provides for the
co-sponsorship by CT and Citigroup of pooled investment vehicles;
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(2) formation, pursuant to the venture agreement, of a $200 million joint
venture in which Citigroup shall contribute $150 million and CT shall
contribute $50 million and in which Citigroup and CT shall be the only
members and the only investors, which fund is referred to in this
section as Fund I;
(3) the planned formation of at least one other pooled investment vehicle
(the aggregate capital commitments of which will total at least $496
million, of which no more than $116.7 million and $62.5 million will be
required to come from Citigroup and CT respectively) co-sponsored by CT
and Citigroup that will offer interests to third parties, which fund or
funds are referred to in this section as Fund II and Subsequent Funds
and are referred to collectively with Fund I as the Funds;
(4) issuance to Citigroup of warrants to purchase 4.25 million shares of
class A common stock upon the closing of Fund I and warrants to
purchase up to 5.25 million shares of class A common stock upon the
closing of Fund II and Subsequent Funds contingent upon capital
commitments and shareholder approval;
(5) designation by Citigroup of two persons for which management agrees to
vote in favor of election to our board of directors;
(6) future modification of certain terms of the indenture with respect to
the bonds underlying our convertible trust preferred securities and the
declaration of trust pursuant to which the convertible trust preferred
securities were issued and certain other agreements ancillary thereto,
including the termination of the co-investment agreement to which we
and the holders of the convertible trust preferred securities are
parties; and
(7) our obligation to make an election to be treated as a real estate
investment trust, or a REIT, under Section 857 et seq. of the Internal
Revenue Code as soon as practicable including via a merger with an
existing REIT.
Morgan Stanley was not asked to, and did not, render an opinion as to the
fairness of any individual transaction, including the Warrant Transaction,
standing on its own. The Morgan Stanley opinion solely addressed the fairness of
the consideration offered pursuant to all of the transactions taken together.
Further, Morgan Stanley was not asked to, and did not, opine on the fairness of
the reverse stock split.
The full text of the written opinion of Morgan Stanley, dated March 13,
2000, which sets forth, among other things, assumptions made, procedures
followed, matters considered and limitations on the scope of the review
undertaken by Morgan Stanley in rendering its opinion, is attached as Annex B to
this proxy statement. Shareholders are urged to, and should, read the opinion
carefully and in its entirety. Morgan Stanley's opinion is directed solely to
our board of directors and relates only to the CIG Transaction in its entirety.
The written opinion does not constitute a recommendation to any holder of class
A common stock or class A preferred stock as to how to vote at the special
meeting of shareholders. The summary of the opinion of Morgan Stanley set forth
in this proxy statement is qualified in its entirety by reference to the full
text of such opinion.
Morgan Stanley relied upon and assumed, without independent verification,
the accuracy and completeness of all information that was publicly available or
that was furnished to it by us or otherwise reviewed by Morgan Stanley, and
Morgan Stanley did not assume any responsibility or liability therefore. Morgan
Stanley did not conduct any valuation or appraisal of any assets or liabilities,
nor were any
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valuations or appraisals provided to Morgan Stanley. In relying on financial
analyses and forecasts provided to it, Morgan Stanley assumed that they were
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by our management as to the expected future results of
operations and financial condition of the company to which such analyses or
forecasts relate. Morgan Stanley also assumed, among other things, that our
proposed conversion to a REIT would be successfully completed.
No representation or warranty was made by any party with respect to the
internal financial analysis and estimates referred to above. Financial
projections are subject to contingencies beyond our management's control and,
realization of the projections depends on numerous factors. All material events
and circumstances cannot be predicted, and unanticipated events and
circumstances are likely to occur. Accordingly, there may be differences between
the projected results of operations and the actual results of operations of the
company, and such differences could be material. In the event that the financial
projections prove to be materially different, the conclusions reached in the
opinion of Morgan Stanley could be materially affected.
Morgan Stanley's opinions are based on economic, market, and other
conditions as in effect on, and the information made available to Morgan Stanley
as of, the date of such opinion. Subsequent developments may affect the written
opinion dated March 13, 2000. Morgan Stanley expressed no opinion as to the
price at which our class A common stock will trade at any future time.
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THE VENTURE AGREEMENT
In this section of the proxy statement, we describe the material provisions
of the venture agreement. We have attached a copy of the venture agreement as
Annex A to this proxy statement and incorporate the venture agreement into this
proxy statement by reference. The summary of the venture agreement we provide
below is qualified in its entirety by reference to the venture agreement. We
encourage you to read the venture agreement.
We and the following parties signed the venture agreement:
o Travelers Limited Real Estate Mezzanine Investments I, LLC, which we
call Limited REMI I;
o Travelers General Real Estate Mezzanine Investments II, LLC, which we
call General REMI II;
o Travelers Limited Real Estate Mezzanine Investments II, LLC, which we
call Limited REMI II;
o CT-F1, LLC, which we call CT-F1;
o CT-F2-GP, LLC, which we call CT-F2-GP;
o CT-F2-LP, LLC, which we call CT-F2-LP;
o CT Investment Management Co., LLC, which we call CTIMCO
Limited REMI I, General REMI II and Limited REMI II are affiliates of
Citigroup and are referred to in this proxy statement as the CIG Parties. CT-F1,
CT-F2-GP, CT-F2-LP and CTIMCO are wholly owned subsidiaries of ours and are
referred to in this proxy statement as the CT Parties.
The venture agreement generally defines the circumstances under which the
CT Parties and the CIG Parties will organize, capitalize and manage Mezzanine
Funds. As called for by the venture agreement:
o CT-F1 and Limited REMI I entered into a limited liability company
agreement, dated as of March 8, 2000, to organize and capitalize the
first Mezzanine Fund, CT Mezzanine Partners I LLC, which we call Fund
I, and made capital commitments to Fund I of $50 million and $150
million, respectively, to be invested in stages upon approval by both
parties of each investment to be made by Fund I.
o CT-F2-GP and General REMI II entered into a limited liability company
agreement, dated as of March 8, 2000, to organize CT MP II LLC, which
we call the Fund II General Partner. The Fund II General Partner will
serve as the general partner of the second Mezzanine Fund, CT Mezzanine
Partners II LP, which we call Fund II. The venture agreement governs
how Fund II will be organized and managed as well as how the fund will
be capitalized by CT-F2-LP, Limited REMI II and third-party investors.
o The CIG Parties agreed to make up to an aggregate of $250 million and
the CT Parties agreed to make up to an aggregate of $62.5 million in
capital commitments to Fund II and subsequent Mezzanine Funds sponsored
pursuant to the venture agreement that close prior to December 31, 2001
which we will hereafter refer to as Subsequent Funds. The CIG Parties'
capital commitments will be made in a ratio of one dollar for every
three dollars of capital commitments made by third party investors and
the CT Parties' capital commitments will be made in a ratio of one
dollar for every four dollars of capital commitments made by the CIG
Parties or their designated affiliates.
o Fund II will not close unless the fund receives aggregate capital
commitments of at least approximately $495.8 million which means that
the co-sponsors must raise aggregate capital
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commitments from third party investors of at least approximately $350
million before Fund II can close.
o In connection with the organization of Fund I, we issued a warrant to
purchase 4,250,000 shares of our class A common stock at $5.00 per
share which was ultimately transferred to Limited REMI I. This warrant
has been previously described as the initial warrant issued as part of
the warrant transaction. We refer to this warrant as the Fund I
Warrant.
o The Fund I Warrant is a five year warrant that expires on March 8,
2005 and is not exercisable until March 8, 2001 whereupon it may be
exercised with cash or pursuant to a cash-less exercise feature. If
after March 8, 2004 the warrant is in-the-money for any 90 day
consecutive period and the number of shares of our outstanding class A
common stock held by shareholders other than the management and
related shareholders and the associated shareholders referred to below
at the time of measurement is not at least 25 million (as adjusted for
any stock splits), the warrant provides, if elected by the holder of
the warrant, that we either purchase the warrant at fair market value
or extend the exercise period until March 8, 2008. We may pay with
cash or an assignment of our interests in the Mezzanine Funds or the
general partner or managing member of such funds.
o In connection with the organization and capitalization of Fund II and
certain subsequent Mezzanine Funds that close before December 31,
2001, we have agreed, subject to shareholder approval, to issue
warrants to purchase up to 5,250,000 shares of our class A common
stock at $5.00 per share and on the same terms as the Fund I Warrant
for ultimate transfer to Limited REMI II or other Citigroup affiliate.
These warrants have been previously described as the additional
warrants issued as part of the warrant transaction. We refer to such
warrants as the Fund II Warrants and we refer to such warrants
together with the Fund I Warrants as the Warrants. The actual number
of shares covered by the Fund II Warrants will be determined pursuant
to a formula based on the aggregate dollar amount of capital
commitments made by the CIG Parties and the clients of Citibank's
private bank. The formula is as follows:
Share Number: Number of shares covered by the Fund II Warrants.
CIG AMT: Aggregate dollar amount of the CIG Parties' commitment.
PBC AMT: Aggregate dollar amount of Citibank's private bank
client commitments.
Share Number = 500,000 plus the product of 4,750,000 and the lesser
of: 1 or (CIG AMT plus PBC AMT) divided by $250,000,000
(not to exceed 5,250,000)
We will be required to issue the additional warrants only if our
shareholders approve and ratify the warrant transaction. The issuance
of the additional warrants will terminate the contingent cash rights
that we granted to Citigroup concurrently with the signing of the
venture agreement. The contingent cash rights, which in the absence of
shareholder approval are meant to provide Citigroup with value
equivalent to any additional warrants that otherwise would have been
issued to Citigroup pursuant to the above formula, entitle Citigroup to
receive cash from us equal to the excess of the trading price of our
class A common stock over $5.00 for each right exercised.
o We granted General REMI II a right of first refusal exercisable after
the initial closing of Fund II to co-sponsor any subsequent Mezzanine
Fund (which we refer to as an Other Fund) that we or any of
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our affiliates propose to organize and market to investors. If General
REMI II twice declines to co- sponsor an Other Fund that we proceed to
sponsor and close, CT shall have the right to terminate the right of
first refusal.
o During the period beginning on the initial closing of Fund II and
continuing through the respective investment periods of Fund II or any
Other Fund:
o The real estate division of Citigroup Investments Inc., which we
call CIG Real Estate, agrees not to sponsor or co-sponsor other
than as a co-sponsor with us any funds that invest in the classes
of high yield commercial real estate mezzanine investments
targeted for investment in Fund II (which we refer to as the
Business).
o CIG Real Estate is obligated to present to the general partner or
the managing member of the relevant fund such investments that
fall within the targeted classes of Business investments other
than CMBS.
o We agree that our sole involvement in the Business shall be as a
manager of, an advisor to and/or an investor in the funds formed
with the CIG Parties, provided that we may acquire any Business
investment that has been declined by the CIG Parties or their
relevant affiliates as an investment for any such fund.
o We agree that we will offer any Business investments acquired by
us for cash or equity securities for purchase at fair market value
by the relevant fund.
o We and The Travelers Insurance Company, an affiliate of Citigroup, each
agreed to guarantee certain obligations under the venture agreement of
our respective affiliates, including their capital commitments.
o CTIMCO was engaged by Fund I as the investment manager of Fund I and by
the Fund II General Partner as the investment manager for Fund II, and
CTIMCO will be engaged as the investment manager for each Other Fund.
Under those engagements, CTIMCO will earn cumulative investment
management fees according to a schedule set forth in the venture
agreement. CTIMCO's investment management fee will be determined in
relation to Fund II and each Other fund and payable quarterly on a
cumulative basis based on a fee base as determined below:
o During each fund's investment period, the fee base includes total
capital commitments and capital contributions without duplication
and
o After each fund's investment period, the fee base includes total
capital invested in the fund less the amount of capital returned.
If the fee base is less than $700 million, CTIMCO will be entitled to
an annual fee equal to 100% of the fees payable by the funds to the
general partners of Fund II and any Other Fund up to a maximum of $7
million (with a floor of $6.25 million). If the fee base exceeds $700
million but is less than $1.2 billion, CTIMCO will be entitled to an
annual fee equal to $7 million plus the amount equal to the amount over
$700 million multiplied by .75%. If the fee base exceeds $1.2 billion,
CTIMCO will be entitled to an annual fee equal to $10.75 million plus
the amount equal to
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the amount over $1.2 billion multiplied by .50%, subject to adjustment
to be mutually agreed upon in good faith.
o Our board of directors was increased in size by two directors, and
Marc Weill and Michael Watson, designees of the CIG Parties, were
appointed directors. Our vice chairmen, John R. Klopp and Craig M.
Hatkoff, entities controlled by them and an entity ultimately owned by
a trust for the benefit of the family of our chairman of the board of
directors, Samuel Zell (referred to in this proxy statement as the
management and related shareholders), who currently own in total
7,955,552 shares of class A common stock (representing approximately
34.1% of the 23,335,813 shares of voting stock outstanding), agreed to
vote in favor of the continued election of the CIG Parties' designees.
o Certain of our executive officers, were designated key individuals who
are required to devote specified professional time to the management
of the funds co-sponsored with the CIG Parties.
o We agreed as soon as possible to take the steps necessary for us to be
taxed as a REIT on terms mutually satisfactory to us and the CIG
Parties subject to changes in law, acts of God or force majeure, or
good faith inability to meet the requisite qualifications. The
management and related shareholders who, as discussed above, own 34.1%
of the shares of voting stock outstanding, and certain other
shareholders controlled by certain directors or associated with Mr.
Zell (referred to in this proxy statement as the associated
shareholders), who currently own in the aggregate 1,487,979 shares of
class A common stock (representing approximately 6.4% of the shares of
voting stock outstanding), agreed to vote in favor of all matters
necessary for REIT election submitted for shareholder approval.
o Salomon Smith Barney Inc., an affiliate of Citigroup, was engaged by
CT-F2-GP and by Limited REMI I, pursuant to advisory agreements, to
serve as financial advisor in connection with the planning and
structure of the transactions contemplated by the venture agreement
and was engaged by the Fund II General Partner, pursuant to a
placement agent agreement, to serve as the placement agent for Fund
II.
The venture agreement contains provisions governing the unwinding of the
Mezzanine Funds and termination of the venture agreement and related agreements
upon certain prescribed events of default, including Salomon Smith Barney's
termination of the Fund II placement agent agreement pursuant to its termination
provisions.
As a condition to the venture agreement, we and the holders of our
convertible trust preferred securities with an aggregate liquidation amount of
$150 million, issued by our consolidated Delaware statutory business trust
subsidiary, CT Convertible Trust I, entered into an agreement in principle,
subject to completion and execution of definitive documentation, to terminate
the co-investment agreement, dated as of July 28, 1998, to which we and the
holders of the convertible trust preferred securities are parties and to amend
the terms of the convertible trust preferred securities to, among other things:
o raise the current coupon rate payable by the trust to the holders of
the convertible trust preferred securities from 8.25% per annum to a
blended rate of 10.16% per annum;
o change the coupon step-up provisions such that the coupon applied to
approximately 60% in liquidation amount of the convertible trust
preferred securities steps up commencing on April 1,
21
<PAGE>
2002 to the greater of 10% (subject to an automatic step-up by 75
basis points on October 1, 2004 and on each October 1 thereafter) or
the dividend yield on the underlying class A common stock calculated
pursuant to a specified formula;
o change the coupon step-up provisions such that the coupon applied to
approximately 40% in liquidation amount of the convertible trust
preferred securities automatically steps up by 75 basis points on
October 1, 2004 and on each October 1 thereafter;
o change the redemption provisions such that approximately 40% in
liquidation amount of the convertible trust preferred securities is
redeemable by us, in whole or in part, at any time and such that the
remaining 60% balance in liquidation amount of the convertible trust
preferred securities is redeemable by us, in whole or in part, on or
after September 30, 2004; and
o eliminate the conversion provisions with respect to approximately 40%
in liquidation amount of the trust preferred securities and reduce the
conversion price (measured in liquidation amount of the trust
preferred securities) at which the balance in liquidation amount of
the convertible trust preferred securities can be converted into
shares of class A common stock from $11.70 to $7.00 per share of class
A common sock. As a result, the total number of shares of class A
common stock issuable on conversion of all of the amended convertible
trust preferred securities will not exceed 12,820,512, the number
issuable on conversion of the original convertible trust preferred
securities.
In connection with the venture agreement, we and the CIG Parties also
entered into a registration rights agreement, dated as of March 8, 2000,
pursuant to which we agreed to register for resale the shares of class A common
stock issuable upon exercise of the initial and additional warrants no later
than thirty days prior to the date upon which the warrants become exercisable in
accordance with their terms.
22
<PAGE>
REVERSE STOCK SPLIT
General
We are also providing this proxy statement to you in connection with our
request for shareholder approval of the reverse stock split. The reverse stock
split is defined for purposes of this proxy statement as the amendment to our
charter as described below.
On May __, 2000, our board of directors authorized an amendment to our
charter that would effect a one (1) for three (3) reverse stock split whereby
three (3) shares of each class of our outstanding common and preferred stock
would be automatically converted into one (1) share of each such class of stock
and a corresponding reduction of our stated capital. To avoid the existence of
fractional shares, any shareholder who would otherwise be entitled to receive a
fractional share will receive cash from us in lieu of such fractional share
based on the closing trading price of our class A common stock on the effective
date of the charter amendment, but the voting and other rights and preferences
of our stock will not otherwise be altered by the reverse stock split. A copy of
the charter amendment is attached as Annex C.
Purpose of Reverse Stock Split
Our board of directors authorized the reverse stock split with the purpose
of increasing the marketability and liquidity of our class A common stock which
trades on the New York Stock Exchange. Although we have not experienced problems
with the marketability and liquidity of our class A common stock, our board of
directors believes that the current low trading price for our class A common
stock may effectively limit the marketability of that stock for the following
reasons:
o there is a reluctance on the part of many brokerage firms and
institutional investors to recommend lower-priced stocks to their
clients or to hold them in their portfolios because they are viewed as
unduly speculative in nature;
o it is the policy of certain brokerage firms not to provide coverage
and research with respect to lower-priced stocks;
o brokerage firms often apply time-consuming procedures that function to
make the handling of orders for lower-priced stocks difficult for
investors and unattractive to brokers from an economic standpoint;
o brokerage firms often will not allow their customers to obtain margin
loans on lower-priced stocks; and
o the brokerage commission on a lower-priced stock may also represent a
higher percentage of the sale price as compared to the brokerage
commission on a higher-priced stock.
Our aim with the reverse stock split is to have the current trading price
per share of our class A common stock, which has averaged $[ ] per share over
the last 30 trading days, increase proportionately by three times. With such an
increase in price, we hope:
23
<PAGE>
o the shares become more attractive to a broader range of investors by
increasing the price per share so that institutional and other
investors with minimum price per share restrictions can purchase the
stock;
o brokerage firms will be able to recommend the stock to their clients
and avoid applying time- consuming procedures in the handling of
orders for the stock;
o the stock becomes more attractive to analysts, and, as a result,
produces greater analyst coverage and research regarding us;
o brokerage firms will be able to extend margin loans on the stock
thereby removing such impediment to ownership by investors who desire
to own only marginable stock; and
o trading commissions on a sale of the stock will represent a lower
percentage of the sales price.
However, we cannot assure you that the trading price of our class A common
stock will increase in proportion to the reduction in the number of outstanding
shares resulting from the reverse stock split or that the marketability or
liquidity of such stock will be improved.
Effects of the Reverse Split
If approved by our shareholders, upon the effective date of the charter
amendment the following will result:
o each three (3) shares of our outstanding class A common stock will be
converted automatically into one (1) share of our class A common
stock, resulting in a reduction of the number of outstanding shares of
such stock from 21,058,228 to 7,019,409 (subject to further reduction
upon the elimination of fractional shares);
o each three (3) shares of our outstanding class B common stock will be
converted automatically into one (1) share of our class B common
stock, resulting in a reduction of the number of outstanding shares of
such stock from 2,293,784 to 764,594 (subject to further reduction
upon the elimination of fractional shares);
o each three (3) shares of our outstanding class A preferred stock will
be converted automatically into one (1) share of our class A preferred
stock, resulting in a reduction of the number of outstanding shares of
such stock from 2,277,585 to 759,195 (subject to further reduction
upon the elimination of fractional shares);
o each three (3) shares of our outstanding class B preferred stock will
be converted automatically into one (1) share of our class B preferred
stock, resulting in a reduction of the number of outstanding shares of
such stock from 4,043,248 to 1,347,749 (subject to further reduction
upon the elimination of fractional shares);
o the total number of shares of common stock and preferred stock
authorized for issuance in our charter will remain;
24
<PAGE>
o the par value of our shares of stock will remain $0.01 per share and,
as a consequence, the aggregate stated capital of our outstanding
stock will be reduced, while the aggregate capital surplus in excess
of our stated capital attributable to our outstanding stock for
statutory and accounting purposes will be correspondingly increased;
o the number of shares of stock subject to our outstanding convertible
stock, stock options, warrants (including the warrants issued to
Citigroup) and convertible securities and authorized for issuance
pursuant to our stock plans will be proportionately reduced;
o the $5.00 exercise price contained in the warrants issued to Citigroup
and the $5.00 base price contained in the contingent cash rights
issued to Citigroup (to the extent the rights are not terminated as
discussed above in the Warrant Transaction section) will be
proportionately increased to $15.00;
o no fractional shares of stock will be issued for any fractional
interest resulting from the reverse stock split and we will pay cash
in lieu of such fractional shares based on the closing price on the
New York Stock Exchange on the day immediately preceding the effective
date of the reverse stock split;
o the rights, preferences, privileges or priorities of all our
outstanding classes of stock will remain unchanged;
o each shareholder's percentage ownership and voting power will remain
unchanged, except for minor differences resulting from the elimination
of fractional interests; and
o certain shareholders may be left with one or more "odd lots," or a
number of shares that is less than 100, and therefore may find it
difficult to sell such shares and in connection with any sale may have
to pay higher commissions and other transaction costs as compared to a
sale involving a "round lot," or a number that is in even multiplies
of 100.
We do not expect that the reverse stock split will affect the listing of
our shares of class A common stock on the New York Stock Exchange, nor the
registration of such stock under the Securities Exchange Act of 1934. We will,
however, need to file a supplemental listing application with the New York Stock
Exchange in connection with the reverse stock split. All fees incurred in
connection with the implementation of the proposed reverse stock split will be
borne by us.
The effective date of the charter amendment will occur upon the filing
with, and acceptance for record by, the State Department of Assessments and
Taxation of Maryland of appropriate articles of amendment. Although our board of
directors believes as of the date of this proxy statement that the reverse stock
split is advisable and in our company's best interest, our board of directors
may abandon the proposal at any time before, during or after the special meeting
and prior to filing the articles of amendment in Maryland, if, among other
things, our ability to raise capital or the liquidity of our class A common
stock would be impaired.
25
<PAGE>
Exchange of Stock Certificates and Elimination of Fractional Share Interests
The reverse stock split will become effective upon the filing and
acceptance for record of the articles of amendment in Maryland without any
action on the part our shareholders and without regard to the date or dates old
stock certificates formerly representing shares of our stock before the reverse
stock split are physically surrendered for new stock certificates representing
the number of shares of stock a shareholder is entitled to receive as a result
of the reverse stock split.
As soon as practicable after the date the charter amendment becomes
effective, we will send a letter of transmittal to each shareholder of record at
the effective time for use in transmitting old stock certificates to our
transfer agent, American Stock Transfer & Trust Company, who will be serving as
our exchange agent. The letter of transmittal will contain instructions for the
surrender of old certificates to the exchange agent in exchange for new
certificates representing the number of whole new shares of stock into which
such holders' shares represented by the old certificates have been converted as
a result of the reverse stock split and cash in lieu of fractional shares.
Shareholders should not send their old certificates to the exchange agent
until they have received the letter of transmittal. Old certificates not
presented for surrender as soon as is practicable after the letter of
transmittal is sent shall be exchanged for new certificates at the first time
they are otherwise presented for transfer or conversion. Until so surrendered,
each current certificate representing shares of our stock will be deemed for all
corporate purposes after the effective time of the charter amendment to evidence
ownership of shares in the appropriately reduced whole number of shares.
No fractional shares of stock will be issued for any fractional share
interest resulting from the reverse stock split. Rather, we will pay each
shareholder who would otherwise receive a fractional share of stock as a result
of the reverse stock split, in lieu of such fractional share interest, an amount
of cash equal to the closing sale price of a share of class A common stock on
the New York Stock Exchange on the date the charter amendment becomes effective
(or the preceding trading day if the stock was not traded that day) multiplied
by the number of shares of stock held by such holder that would otherwise have
been exchanged for such fractional share interest. We will use our existing cash
to fund such payments.
Federal Income Tax Consequences of the Reverse Stock Split
We have not sought and will not seek a ruling from the Internal Revenue
Service regarding the federal income tax consequences of the reverse stock
split. However, in the opinion of counsel, based upon the Internal Revenue Code
of 1986, Treasury Regulations promulgated thereunder, judicial authority and
administrative rulings and practices as in effect on the date of this proxy
statement, the reverse stock split will have the tax consequences explained
below. This discussion is for general information only, is applicable only to
shareholders who hold shares as capital assets, and does not discuss
consequences which may apply to special classes of taxpayers.
We will not recognize any gain or loss as a result of the reverse stock
split.
The exchange of three (3) shares of common stock for one (1) share of new
common stock will not result in the recognition of gain or loss to our common
shareholders. Common shareholders who receive cash in lieu of fractional shares
will recognize capital gain (except in any case in which the cash payment is
essentially equivalent to a dividend) to the extent the cash paid for the
fractional shares exceeds the shareholders' adjusted basis in the fractional
shares surrendered. The holding period of the shares of the
26
<PAGE>
new common stock will include the shareholders' holding period for the shares of
the common stock exchanged therefor. The adjusted basis of the shares of the new
common stock will be the same as the adjusted basis of the shares of the common
stock exchanged therefor, reduced by the portion of the adjusted basis of the
old common stock properly allocated to the fractional shares.
The exchange of three (3) shares of preferred stock for one (1) share of
new preferred stock will not result in the recognition of gain or loss to the
preferred stockholders. Preferred shareholders who receive cash in lieu of
fractional shares will recognize capital gain (except in any case in which the
cash payment is essentially equivalent to a dividend) to the extent the cash
paid for the fractional shares exceeds the shareholders' adjusted basis in the
fractional shares surrendered. The holding period of the shares of the new
preferred stock will include the shareholders' holding period for the shares of
the preferred stock exchanged therefor. The adjusted basis of the shares of the
new preferred stock will be the same as the adjusted basis of the shares of the
preferred stock exchanged therefor, reduced by the portion of the adjusted basis
of the old preferred stock properly allocated to the fractional shares.
27
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the record date for the shareholders meeting, May 18, 2000, there
were 21,058,228 shares of class A common stock and 2,277,585 shares of class A
preferred stock outstanding. The following table contains certain information
with respect to the beneficial ownership of voting stock, and the voting power
possessed thereby, by (i) each person we know to be the beneficial owner of more
than 5% of either the outstanding class A common stock or the outstanding class
A preferred stock, (ii) each director and executive officer and (iii) all
directors and executive officers as a group. Such information (other than with
respect to directors and executive officers and beneficial owners of class A
preferred stock) is based on a review of statements filed with the Securities
and Exchange Commission pursuant to Sections 13(d) and 13(g) of the Securities
and Exchange Act of 1934 with respect to the voting stock.
<TABLE>
<CAPTION>
Class A Common Stock Class A Preferred Stock
---------------------------- ------------------------------
Amount and Nature of Amount and Nature of
Beneficial Ownership(1) Beneficial Ownership(1)
---------------------------- ------------------------------
Five Percent Stockholders, Percent of Percent of
Trustee and Executive Officers Number Class Number Class Voting Power
- ------------------------------------------------- ------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Veqtor Finance Company, LLC (2) 3,192,288 15.2% -- --% 13.7%
EOP Operating Limited Partnership (3) 4,273,500(4) 16.9 -- -- 15.5
State Street Bank and Trust Company, as Trustee for 4,273,500(4) 16.9 -- -- 15.5
General Motors Employes Global Group Pension
Trust (5)
Vornado Realty, L.P. (6) 4,273,500(4) 16.9 -- -- 15.5
Wanger Asset Management, L.P. (7) 1,837,300 8.7 -- -- 7.9
FMR Corp. (8) 1,635,782 7.8 -- -- 7.0
BankAmerica Investment Corporation(9) 430,701 2.0 759,185 33.3 5.1
First Chicago Capital Corporation (9) 430,701 2.0 759,185 33.3 5.1
Wells Fargo & Company (9) 430,701 2.0 759,185 33.3 5.1
Jeffrey A. Altman 30,000 * -- -- *
Thomas E. Dobrowski --(10) -- -- -- --
Martin L. Edelman 71,631(11) * -- -- *
Gary R. Garrabrant 456,054(11)(12) 2.2 -- -- 2.0
Craig M. Hatkoff 2,489,799(13)(14) 11.7 -- -- 10.6
John R. Klopp 2,481,799(13)(14) 11.7 -- -- 10.6
Stephen D. Plavin 250,000(15) 1.2 -- -- 1.1
Sheli Z. Rosenberg 432,720(11)(16) 2.1 -- -- 1.9
Steven Roth --(17) -- -- -- --
Lynne B. Sagalyn 38,297(11) * -- -- *
Edward L. Shugrue III 252,607(15) 1.2 -- -- 1.1
Michael Watson -- -- -- -- --
Marc P. Weill -- -- -- -- --
Samuel Zell 168,297(11)(18) * -- -- *
All executive officers and directors as a group 6,671,204 30.6% -- -- 27.7%
(14 persons)
</TABLE>
* Represents less than 1%.
- -------------------
28
<PAGE>
(1) The number of shares owned are those beneficially owned as determined
under the rules of the Securities and Exchange Commission, and such
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which a person has sole or shared voting power or investment power
and any shares which the person has the right to acquire within 60 days
through the exercise of any option, warrant or right, through conversion
of any security or pursuant to the automatic termination of a power of
attorney or revocation of a trust, discretionary account or similar
arrangement.
(2) Zell General Partnership, Inc., or Zell GP, is the sole member of Veqtor.
The sole shareholder of Zell GP is the Samuel Investment Trust, a trust
established for the benefit of the family of Samuel Zell. Chai Trust
Company L.L.C., which is advised by Equity Group Investments, L.L.C. with
respect to its investments, serves as trustee of Chai Trust Company L.L.C.
Veqtor is located at c/o Equity Group Investments, L.L.C., Two North
Riverside Plaza, Chicago Illinois 60606.
(3) Beneficial ownership information is based on a statement filed pursuant to
Section 13(d) of the Exchange Act by EOP Operating Limited Partnership, or
EOP. EOP is located at Two North Riverside Plaza, Chicago, Illinois 60606.
(4) Represents shares which may be obtained upon conversion of $50,000,000 in
liquidation amount of 8.25% Step Up Convertible Trust Preferred Securities
issued by the Company's consolidated statutory trust subsidiary, CT
Convertible Trust I, to each of EOP, VNO and the GM Trust.
(5) Beneficial ownership information is based on statements filed pursuant to
Section 13(d) of the Exchange Act by General Motors Investment Management
Corporation, or GMIMCo, and State Street Bank and Trust Company, as
trustee for General Motors Employes Global Group Pension Trust, or the GM
Trust, as another reporting person named therein. State Street Bank and
Trust Company acts as the trustee for the GM Trust, a trust under and for
the benefit of certain employee benefit plans of GM and its subsidiaries.
These shares may be deemed to be owned beneficially by GMIMCo, a wholly
owned subsidiary of General Motors Corporation, or GM. GMIMCo's principal
business is providing investment advice and investment management services
with respect to the assets of certain employee benefit plans of GM and its
subsidiaries and with respect to the assets of certain direct and indirect
subsidiaries of GM and associated entities. GMIMCo is serving as the GM
Trust's investment manager with respect to these shares and in that
capacity it has sole power to direct the Trustee as to the voting and
disposition of these shares. Because of the Trustee's limited role,
beneficial ownership of the shares by the Trustee is disclaimed. GMIMCo is
located at 767 Fifth Avenue, New York, New York 10153.
(6) Beneficial ownership information is based on a statement filed pursuant to
Section 13(d) of the Exchange Act filed by Vornado Realty, L.P., or VNO.
VNO is located at c/o Vornado Realty Trust, Park 80 West, Plaza II, Saddle
Brook, New Jersey 07663.
(7) Beneficial ownership information is based on the Schedule 13G jointly
filed by Wanger Asset Management, L.P., its general partner, Wanger Asset
Management, Ltd. and its client, Acorn Investment Trust reporting
beneficial ownership of shares on behalf of discretionary clients,
including Acorn Investment Trust. They are located at 227 West Monroe
Street, Suite 3000, Chicago, Illinois 60606.
(8) Beneficial ownership information is based on a Schedule 13G jointly filed
by FMR Corp., Edward C. Johnson 3rd, Abigail P. Johnson, Fidelity
Management and Research Company and Fidelity Growth & Income Fund
reporting ownership of shares by such fund and other funds advised by
Fidelity Management and Research. They are located at 82 Devonshire
Street, Boston, Massachusetts 02109.
(9) BankAmerica Investment Corporation is located at c/o Bank of America, 231
S. LaSalle Street, 19th Floor, Chicago, Illinois 60697. First Chicago
Capital Corporation is located at One First National Plaza, Mail Suite
0597, Chicago, Illinois 60670-0597. Wells Fargo & Company is located at
333 S. Grand Avenue, 9th Floor, Los Angeles, California 90071.
(10) Does not include the shares that may be deemed beneficially owned by
GMIMCo, as to which Mr. Dobrowski disclaims beneficial ownership.
(11) Includes 13,297 shares which may be obtained upon conversion of vested
stock units and, in the case of Mr. Edelman, Dr. Sagalyn, Mr. Garrabrant
and Mr. Zell, 58,334, 25,000, 23,334 and 80,000, respectively, shares
issuable upon the exercise of vested stock options.
(12) Includes the 419,423 shares of class A common stock owned by GRG
Investment Partnership LP, for which Mr. Garrabrant serves as the general
partner.
(13) Includes, in the case of Mr. Hatkoff, the 2,330,132 shares of class A
common stock owned by CMH Investment Partnership LP, a family partnership
for which Mr. Hatkoff serves as general partner. Includes, in the case of
Mr. Klopp, 2,330,132 shares of class A common stock owned by JRK
Investment Partnership LP, a family partnership for which Mr. Klopp serves
as general partner.
(14) Includes 141,667 shares issuable upon the exercise of vested stock options
held by each of Messrs. Hatkoff and Klopp.
(15) Includes 108,384 shares for Mr. Shugrue that are the subject of restricted
stock awards for which he retains voting rights. Includes 128,334 and
100,000 shares issuable upon the exercise of vested stock options held by
Mr. Shugrue and Mr. Plavin, respectively.
29
<PAGE>
(16) Includes 419,423 shares of class A common stock owned by Rosenberg-- CT
General Partnership LP, for which Ms. Rosenberg serves as a general
partner.
(17) Does not include the shares that may be deemed beneficially owned by VNO,
as to which Mr. Roth disclaims beneficial ownership.
(18) Does not include the shares that may be deemed beneficially owned by EOP,
as to which Mr. Zell disclaims beneficial ownership.
30
<PAGE>
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Pursuant to SEC Rule 14a-8, if you want to include a shareholder proposal
in the proxy statement for our 2000 annual meeting of shareholders, it must be
delivered to our corporate secretary at the company's executive offices before
July 19, 2000.
In addition, if you desire to bring business (including director
nominations) before our 2000 annual meeting, our bylaws currently require that
written notice of such business must be received by our secretary between
September 17, 2000 and October 17, 2000. For additional requirements, a
shareholders should refer to our bylaws, article II, section 12, "Nominations
and Proposals by Stockholders," a current copy of which may be obtained from our
secretary. If we do not receive timely notice pursuant to our bylaws, any
proposal will be excluded from consideration at the meeting, regardless of any
earlier notice provided in accord with SEC Rule 14a-8.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, or SEC. You may read
and copy any materials we have filed with the SEC at the SEC's public reference
rooms. The SEC also maintains a web site (http://www.sec.gov) that contains
reports, proxy statements and other information concerning us. Please call the
SEC at 1-800-SEC- 0330 for information concerning the operations of the public
reference rooms or visit the SEC at the following locations:
Public Reference Room Northeast Regional Office Midwest Regional Office
450 Fifth Street 7 World Trade center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
We have authorized no one to give you any information or to make any
representation about the venture agreement and the warrant transaction and the
reverse stock split that differs from or adds to the information contained in
this proxy statement or in the documents we have publicly filed with the SEC.
You should not rely on any different or additional information.
The information contained in this proxy statement speaks only as of the
date indicated on the cover page.
31
<PAGE>
ANNEX A
VENTURE AGREEMENT
amongst
TRAVELERS LIMITED REAL ESTATE MEZZANINE INVESTMENTS I, LLC
TRAVELERS LIMITED REAL ESTATE MEZZANINE INVESTMENTS II, LLC
TRAVELERS GENERAL REAL ESTATE MEZZANINE INVESTMENTS II, LLC
AND
CAPITAL TRUST, INC.
CT-F1, LLC
CT-F2-GP, LLC
CT-F2-LP, LLC
CT INVESTMENT MANAGEMENT CO., LLC
MARCH 8, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINED TERMS........................................................4
1.1. Definitions......................................................4
1.2. General References..............................................15
ARTICLE II THE VENTURE........................................................16
2.1. Agreements Executed and Delivered Simultaneously with this
Agreement.......................................................16
2.2. Agreements to be Executed and Delivered in Connection with the
Closings of Fund II and Subsequent Funds........................16
2.3. Approval by CT's Stockholders...................................19
2.4. Business Plan...................................................20
2.5. The CIG Parties Commitment; CT Parties Commitment...............20
2.6. General REMI II's Right of First Refusal........................21
2.7. CIG Real Estate Exclusivity.....................................23
2.8. CT Exclusivity..................................................24
2.9. Mutual Cooperation..............................................25
2.10. CIG Parties' Representation on CT's Board of Directors..........25
2.11. Investment Management Fees......................................26
2.12. Unwind Right; Unwind............................................28
2.13. Key Individuals.................................................30
2.14. REIT Status.....................................................31
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PARTIES.....................32
3.1. Reciprocal Representations and Warranties.......................32
3.2. Representations and Warranties of CT............................33
ARTICLE IV DISPUTE RESOLUTION.................................................34
4.1. Appraisal Procedure.............................................34
4.2. Arbitration.....................................................35
ARTICLE V INDEMNIFICATION.....................................................36
5.1. Indemnification.................................................36
ARTICLE VI CONFIDENTIALITY AND NON-DISCLOSURE.................................37
6.1. Confidentiality.................................................37
i
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Page
----
ARTICLE VII TERMINATION AND SURVIVAL..........................................38
7.1. Termination.....................................................38
7.2. Survival........................................................38
ARTICLE VIII MISCELLANEOUS....................................................39
8.1. Expenses of the Transaction.....................................39
8.2. Notices........................................................ 39
8.3. Entire Agreement................................................41
8.4. Modification....................................................41
8.5. Waivers and Consents............................................41
8.6. Severability....................................................41
8.7. Further Assurances..............................................41
8.8. Governing Law...................................................41
8.9. Counterparts....................................................42
8.10. Brokers and Finders.............................................42
8.11. Construction and Interpretation.................................42
8.12. Successors and Assigns..........................................42
8.13. Cumulative Remedies.............................................42
ii
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
EXHIBITS
A. Business Plan
B. Fund I Agreement
C. Fund I Warrant Agreement
D. Fund I Promissory Note
E. Fund I Investment Management Agreement
F. Fund II General Partner Agreement
G. Fund II Management Agreement
H. Fund II Investment Management Agreement
I. CT-F2-GP Capital Formation Agreement
J. Limited REMI I Capital Formation Agreement
K. Placement Agent Agreement
L. Stockholder Approval Agreement
M. Stockholder Voting and Lock-Up Agreement
N. CTP Term Sheet
O. CT's Business Plan
P. CT Guaranty
Q. TIC Guaranty
R. CT Board Certificate
S. CT D&O Certificate
T. Fund IIWarrant Purchase Agreement
U. Registration Rights Agreement
i
<PAGE>
VENTURE AGREEMENT
This VENTURE AGREEMENT ("Agreement") is entered into this 8th day of
March 2000, amongst Travelers Limited Real Estate Mezzanine Investments I, LLC,
a Delaware limited liability company ("Limited REMI I"), Travelers General Real
Estate Mezzanine Investments II, LLC, a Delaware limited liability company
("General REMI II"), Travelers Limited Real Estate Mezzanine Investments II,
LLC, a Delaware limited liability company ("Limited REMI II") (collectively, the
"CIG Parties"), CT-F1, LLC, a Delaware limited liability company ("CT-F1"),
CT-F2-GP, LLC, a Delaware limited liability company ("CT-F2-GP"), CT-F2-LP, LLC,
a Delaware limited liability company ("CT-F2-LP"), CT Investment Management Co.,
LLC, a Delaware limited liability company ("CTIMCO") (collectively, the "CT
Parties"), and Capital Trust, Inc., a Maryland corporation ("CT").
WITNESSETH:
-----------
WHEREAS, the CIG Parties, the CT Parties and CT wish to jointly engage
in the Business (as herein defined) through a series of co-sponsored pooled
investment vehicles and have jointly adopted the business plan attached hereto
as Exhibit A (the "Business Plan") relating to such co-sponsored pooled
investment vehicles other than Fund I (singly a "Fund", and collectively
"Funds");
WHEREAS, the CIG Parties and CT wish to commence their venture by
forming CT Mezzanine Partners I LLC, a Delaware limited liability company ("Fund
I") in which Limited REMI I and CT-F1 shall be the only members and the only
investors as set forth more fully in the limited liability company agreement of
Fund I entered into between Limited REMI I and CT-F1 on the date hereof, a copy
of which is attached hereto as Exhibit B (the "Fund I Agreement");
WHEREAS, in connection with the formation of Fund I, CT has on the date
hereof issued to CT-F1 a warrant to purchase 4,250,000 shares of CT's class A
common stock, par value $.01 per share ("CT Class A Common Stock"), at $5.00 per
share (the "Fund I Warrant"), pursuant to the terms and conditions of the
warrant agreement attached hereto as Exhibit C (the "Fund I Warrant Agreement");
WHEREAS, CT-F1 has on the date hereof contributed the Fund I Warrant to
Fund I as part of its capital contribution to Fund I pursuant to the Fund I
Agreement;
WHEREAS, Limited REMI I has on the date hereof purchased the Fund I
Warrant from Fund I pursuant to the Fund I Warrant Purchase Agreement and in
consideration thereof has delivered to Fund I a promissory note in the form
attached hereto as Exhibit D (the "Fund I Promissory Note");
WHEREAS, CTIMCO and Fund I have on the date hereof entered into the
management agreement attached hereto as Exhibit E (the "Fund I Investment
Management Agreement") setting forth the terms and conditions pursuant to which
CTIMCO will manage certain matters for Fund I;
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WHEREAS, General REMI II and CT-F2-GP wish to co-sponsor a second
pooled investment vehicle, CT Mezzanine Partners II LP, a Delaware limited
partnership ("Fund II"), to engage in the Business and to offer limited
partnership interests to third parties, including Citibank Private Banking
Clients (as herein defined);
WHEREAS, the parties hereto also wish to co-sponsor other pooled
investment vehicles to engage in the Business (collectively, "Other Funds" or
singly, an "Other Fund"), the terms, conditions and structure of which shall be
the same as those of Fund II unless the parties otherwise mutually agree as
provided herein; Other Funds the initial closing of which occur on or before
December 31, 2001 are hereinafter collectively referred to as "Subsequent Funds"
and singly as a "Subsequent Fund";
WHEREAS, General REMI II and CT-F2-GP have on the date hereof entered
into the limited liability company agreement attached hereto as Exhibit F (the
"Fund II General Partner Agreement") relating to CT MP II LLC, a Delaware
limited liability company, to form the entity that will serve as the general
partner of Fund II (the "Fund II General Partner");
WHEREAS, pursuant to the provisions of this Agreement, the parties
hereto have agreed on the form of the general partner management agreement
attached hereto as Exhibit G (the "Fund II Management Agreement") to be entered
into between the Fund II General Partner and Fund II relating to the management
of Fund II by the Fund II General Partner, subject to modification pursuant to
the mutual agreement of General REMI II and CT-F2-GP based on market conditions
and other factors present at the time of the formation and marketing of Fund II;
WHEREAS, pursuant to the provisions of this Agreement, the parties have
agreed on the form of investment management agreement attached hereto as Exhibit
H (the "Fund II Investment Management Agreement") to be entered into between the
Fund II General Partner, Fund II and CTIMCO pursuant to which CTIMCO will
provide the services and receive the fees set forth in the Fund II Investment
Management Agreement;
WHEREAS, CT-F2-GP and Salomon Smith Barney Inc. ("SSB") have on the
date hereof executed and delivered to each other the capital formation agreement
attached hereto as Exhibit I (the "CT-F2-GP Capital Formation Agreement");
WHEREAS, Limited REMI I and SSB have on the date hereof executed and
delivered to each other the capital formation agreement attached hereto as
Exhibit J (the "Limited REMI I Capital Formation Agreement");
WHEREAS, the Fund II General Partner and SSB have on the date hereof
executed and delivered to each other the placement agent agreement attached
hereto as Exhibit K (the "Placement Agent Agreement");
WHEREAS, in connection with the formation of Fund II and Subsequent
Funds and in consideration of the CIG Parties Commitment (as defined herein) and
Limited REMI II's procuring Private Banking Client Commitments, CT has on the
date hereof agreed to issue, concurrently with the Fund II Initial Closing (as
defined herein), to CT-F2-GP with respect to the Fund II General Partner, and,
as applicable, concurrently with any Subsequent Closing (as
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defined herein), to CT-F2-GP with respect to the Fund II General Partner or to
any CT Fund Control Person Member (as defined herein) of each Subsequent Fund,
as the case may be (and in each case subject to the procedures and limitations
set forth in Section 2.2 hereof), certain warrants containing the right to
purchase an aggregate number of shares of CT Class A Common Stock at $5.00 per
share determined in accordance with the formula set forth in Section 2.2 hereof,
each to be issued pursuant to a form of warrant agreement substantially in the
form of the Fund I Warrant Agreement (any such warrant constituting either a
Fund II Purchase Warrant, a Fund II Service Warrant, a Subsequent Funds Purchase
Warrant or a Subsequent Funds Service Warrant (as each term is defined herein),
as the case may be);
WHEREAS, CT-F2-GP has agreed to contribute the Fund II Purchase Warrant
and the Fund II, Service Warrant or the Subsequent Funds Purchase Warrant and
the Subsequent Funds Service Warrant, as the case may be, when, as and if issued
and contributed to it in accordance with the foregoing, containing the right to
purchase a number of shares of CT Class A Common Stock equal to the applicable
number of shares of CT Class A Common Stock as set forth in Section 2.2 hereof,
to the Fund II General Partner as part of its capital contribution to the Fund
II General Partner pursuant to the Fund II General Partner Agreement, and the CT
Parties will cause each CT Fund Control Person Member of a Subsequent Fund's
Fund Control Person (as defined herein) to contribute the Subsequent Funds
Purchase Warrant and the Subsequent Funds Service Warrant when, as and if issued
and contributed to it in accordance with the foregoing, containing the right to
purchase a number of shares of CT Class A Common Stock equal to the applicable
number of shares of CT Class A Common Stock as set forth in Section 2.2 hereof,
to such Fund Control Person as part of its capital contribution to such Fund
Control Person pursuant to the applicable agreement governing such Fund Control
Person;
WHEREAS, the Fund II General Partner and each Fund Control Person, as
the case may be, will sell pursuant to the Fund II Warrant Purchase Agreement
(as herein defined), as the case may be, to General REMI II or its Affiliates
(as defined herein) any Fund II Purchase Warrant or Subsequent Funds Purchase
Warrant, as the case may be, contributed to it in accordance with the foregoing,
containing the right to purchase a number of shares of CT Class A Common Stock
equal to the Initial Closing Purchase Warrant Number and the Subsequent Closing
Purchase Warrant Number, as the case may be, as set forth in Section 2.2 hereof;
WHEREAS, in connection with services to be rendered by Limited REMI II
or its Affiliates for the Fund II General Partner and each Subsequent Fund's
Fund Control Person, as the case may be, in connection with raising Private
Banking Client Commitments to Fund II or any Subsequent Fund, as the case may
be, the Fund II General Partner and each Fund Control Person, as the case may
be, will transfer to Limited REMI II or its Affiliates any Fund II Service
Warrant or Subsequent Funds Service Warrant contributed to it in accordance with
the foregoing, containing the right to purchase a number of shares of CT Class A
Common Stock equal to the Initial Closing Service Warrant Number and the
Subsequent Closing Service Warrant Number, as the case may be, as set forth in
Section 2.2 hereof.
WHEREAS, since the Warrant Issuance (as defined herein) is subject to
the approval of CT stockholders in accordance with the rules of the New York
Stock Exchange ("NYSE"), CT has agreed to certain covenants herein with respect
to obtaining such approval and certain members of CT's management and/or
entities controlled by and/or for the benefit of their
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family's ("CT Management Stockholders") and certain other persons who are
associates of CT's chairman of the board ("Associated Stockholders") who are
listed in and who each have on the date hereof separately entered into a
stockholder approval agreement with General REMI II attached hereto as Exhibit L
(the "Stockholder Approval Agreement") pursuant to which they agree to vote
their shares of CT Class A Common Stock in favor of the Warrant Issuance;
WHEREAS, each CT Management Stockholder has on the date hereof entered
into an agreement with Limited REMI I attached as Exhibit M hereto (the
"Stockholder Voting and Lock-Up Agreement") pursuant to which each such
stockholder agrees, among other things, to vote its shares of CT Class A Common
Stock in favor of the election of the CIG Parties Designees (as herein defined)
as directors of CT and to be bound by certain restrictions and limitations on
sales of CT Class A Common Stock owned by such stockholder as of the date
hereof;
WHEREAS, in order to obtain a termination of the co-investment right
held by the CTP Holders (as herein defined), and alter certain terms of the CTP
Securities (as herein defined) to provide CT with significantly greater
flexibility with respect to electing to be taxed as a REIT (as herein defined),
all of the CTP Holders have on the date hereof signed a term sheet attached
hereto as Exhibit N (the "CTP Term Sheet") setting forth the general terms on
which the CTP Holders and CT will negotiate with a view toward entering into (i)
a modification agreement (the "CTP Modification Agreement") pursuant to which
the CTP Holders will agree to amend or restate the indenture underlying, and the
declaration of trust governing, the CTP Securities as provided in the CTP Term
Sheet; and (ii) a termination agreement pursuant to which the CTP Holders will
agree to terminate that certain co-investment agreement with CT (the
"Co-Investment Termination Agreement");
WHEREAS, CT's current corporate business plan adopted by CT's board of
directors is attached hereto as Exhibit O ("CT's Business Plan");
WHEREAS, CT has on the date hereof executed and delivered to the CIG
Parties the guaranty of payment attached hereto as Exhibit P (the "CT
Guaranty");
WHEREAS, The Travelers Insurance Company ("TIC") has on the date hereof
executed and delivered to CT and the CT Parties the guaranty of payment attached
hereto as Exhibit Q (the "TIC Guaranty");
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereby agree as follows:
ARTICLE I
DEFINED TERMS
1.1. Definitions. Unless the context otherwise requires, the following
terms shall have the following meanings:
"Acquisition Notice" shall have the meaning specified in Section 2.8
of this Agreement.
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"Affiliate" shall mean, with respect to any Person, a Person which,
directly or indirectly, Controls or is Controlled by or is under common Control
with that Person or is Controlled by a principal executive officer of that
Person.
"Appraisal Procedures" shall have the meaning given to such term in
Section 4.1 hereof.
"Associate" when used to indicate the relationship with any person,
means (i) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a similar
capacity, and (ii) any relative or spouse of such person, or any relative of
such spouse, who has the same home as such person or who is a director or
officer of such person if such person is a corporation or other juridical
entity.
"Associated Stockholders" shall have the meaning given to such term in
the Whereas clauses hereof.
"Bankruptcy" of a party means the institution of any proceedings under
any federal or state law for the relief of debtors, including the filing by or
against that party of a voluntary or involuntary case under the United States
Bankruptcy Code, which proceedings, if involuntary, are not dismissed within
sixty (60) days after their filing; an assignment of the property of that party
for the benefit of creditors; the appointment of a receiver, trustee or
conservator of any substantial portion of the assets of that party, which
appointment, if obtained ex parte, is not dismissed within sixty (60) days
thereafter; the seizure by a sheriff, receiver, trustee or conservator of any
substantial portion of the assets of that party; the failure by that party
generally to pay its debts as they become due within the meaning of Section
303(h)(1) of the United States Bankruptcy Code, as determined by the Bankruptcy
Court; or that party's admission in writing of its inability to pay its debts as
they become due.
"Base Share Number" shall have the meaning given to such term in
Section 2.2 of this Agreement.
"Board Right Shares" shall mean without duplication the total number
of shares of CT Class A Common Stock issued upon exercise of the Warrants, the
total number of shares of CT Class A Common Stock issuable upon exercise of the
Warrants and the total number of shares related to any contingent cash rights
that may be granted by CT in connection with the transactions contemplated
herein.
"Business" shall mean the making or acquisition of Mortgage Loans,
Mezzanine Investments and the making of or acquisition of investments in
Subordinated Interests.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
applicable law to close.
"Business Plan" shall have the meaning given to such term in the
Whereas clauses of this Agreement.
"Candidate Mezzanine Business Transaction" shall have the meaning
given to such term in Section 2.7 hereof.
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"CIG" shall mean Citigroup Investments Inc., a Delaware corporation,
an Affiliate of Citigroup Inc.
"CIG Parties" shall have the meaning given such term in the preamble
of this Agreement.
"CIG Parties Board Right" shall have the meaning given to such term in
Section 2.10 of this Agreement.
"CIG Parties Commitment" shall have the meaning specified in Section
2.5 of this Agreement.
"CIG Parties Designee" or "CIG Parties Designees" shall have the
respective meanings given to such terms in Section 2.10 hereof.
"CIG Parties Initial Board Designees" shall mean Mr. Marc Weill and
Mr. Michael Watson.
"CIG Parties Ownership Requirement" shall mean the requirement that
the CIG Parties and/or their Affiliates shall be the legal and beneficial owners
of at least 4,250,000 Board Right Shares.
"CIG Real Estate" shall mean the real estate division of CIG.
"Citibank Private Banking Clients" shall mean high net worth
individuals or institutions who are clients of Citibank's private bank.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Co-Investment Termination Agreement" shall have the meaning given to
such term in the Whereas clauses of this Agreement.
"Competing Fund Restriction" shall have the meaning given to such term
in Section 2.7(a)(ii) of this Agreement.
"Control" or "Controlled" means possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting interests, by contract or
otherwise.
"CT" shall have the meaning given to such term in the preamble of this
Agreement.
"CT Board Certificate" shall mean the certificate and attached copy of
the applicable resolutions of CT's board of directors, in the form of Exhibit R
hereto, signed by the Vice Chairman and Chief Executive Officer of CT and dated
the date hereof certifying to General REMI II that the Board of Directors of CT
at a meeting duly called and held has created two vacancies on CT's Board of
Directors as provided in the By-Laws of CT and has filled such vacancies by
nominating the CIG Parties Initial Board Designees as directors to serve until
the
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next annual meeting of the stockholders of CT or until their successors have
been elected and have qualified.
"CT's Business Plan" shall have the meaning given to such term in the
Whereas clauses of this Agreement.
"CT-F2-GP Capital Formation Agreement" shall have the meaning given to
such term in the Whereas clauses of this Agreement.
"CT Class A Common Stock" shall have the meaning given to such term in
the Whereas clauses of this Agreement.
"CT D&O Certificate" shall mean the certificate in the form of Exhibit
S hereto signed by the Vice Chairman and Chief Executive Officer of CT and dated
the date hereof certifying to the CIG Parties that the directors' and officers'
liability insurance policies attached to such certificate are in full force and
effect and that they cover the CIG Parties Designees as provided in Section 2.10
hereof.
"CT Fund Control Person Member" shall mean the Affiliate of CT that is
a member of a Fund Control Person of a Subsequent Fund.
"CT Guaranty" shall have the meaning given to such term in the Whereas
clause hereof.
"CT Management Stockholders" shall have the meaning given to such term
in the Whereas clauses of this Agreement.
"CT Parties Commitment" shall have the meaning given to such term in
Section 2.5(b) of this Agreement.
"CT-F1" shall have the meaning given to such term in the preamble of
this Agreement.
"CT-F2-GP" shall have the meaning given to such term in the preamble
of this Agreement.
"CT-F2-LP" shall have the meaning given to such term in the preamble
of this Agreement.
"CT Parties" shall have the meaning given to such term in the preamble
of this Agreement.
"CTIMCO" shall have the meaning given to such term in the preamble of
this Agreement.
"CTP" shall mean the $150,000,000 in the aggregate liquidation amount
of 8.25% step up convertible trust preferred securities representing undivided
beneficial interest in the assets of the CT Convertible Trust I, a Delaware
statutory business trust and consolidated
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subsidiary of CT (the "Trust"), which was organized pursuant to that certain
declaration of trust, dated and effective as of July 28, 1998, as amended, by CT
and the Trustees as defined therein and the holders, from time to time, of
undivided beneficial interest in the Trust and commonly referred to by CT as the
"CTP."
"CTP Holders" shall mean the holders of one hundred percent (100%) of
the aggregate liquidation amount of the CTP.
"CTP Modification Agreement" shall have the meaning given to such term
in the Whereas clauses of this Agreement.
"CTP Securities" shall have the meaning given to such term in the CTP
Modification Agreement.
"CTP Term Sheet" has the meaning given to such term in the Whereas
clauses hereof.
"Cumulative Investment Management Fee" shall have the meaning given to
such term in Section 2.11 hereof.
"Cumulative Investment Management Fee Base" shall mean the aggregate
Investment Management Fee Base for all the Investment Management Fee Base Funds
determined as at a date that is five (5) Business Days prior to the end of each
calendar quarter and applicable with respect to the then next succeeding
calendar quarter calculated as provided in Section 2.11 hereof.
"Cumulative Investment Management Fee Base Certificate" shall have the
meaning given to such term in Section 2.11 hereof.
"Cumulative Investment Management Fee Deficiency Amount" shall have
the meaning given to such term in Section 2.11 of this Agreement.
"Cumulative Management Fee" shall mean the aggregate Management Fee
payable by each of the Investment Management Fee Base Funds to its respective
Fund Control Person on the first day of a calendar quarter with respect to that
calendar quarter.
"Definitive Proposed Fund Acceptance" shall have the meaning given to
such term in Section 2.6 of this Agreement.
"Definitive Proposed Fund Offer" shall have the meaning given to such
term in Section 2.6 of this Agreement.
"Definitive Proposed Fund Rejection" shall have the meaning given to
such term in Section 2.6 of this Agreement.
"Disability" or "Disabled" with respect to any Key Individual shall
mean the determination of a qualified licensed physician reasonably acceptable
to the subject Key Individual having admission privileges at a hospital located
in the Borough of Manhattan in New
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York City that such Key Individual is unable to engage in substantially all of
the activities required by him under the Fund I Investment Management Agreement,
the Fund II Investment Management Agreement and all similar investment
management agreements entered into between CTIMCO (or affiliated investment
manager) and Fund Control Persons and/or Funds by reason of any medically
determined physical or mental impairment which has lasted or can be expected to
last for a continuous period of not less than five months.
"Equity Securities" shall have the meaning given to such term in
Section 2.8(b) hereof.
"Experienced Appraiser" shall have the meaning given to such term in
Section 4.1 hereof.
"Extension Date" shall mean the later of the three-month period ended
on March 31, 2001 if the Extension Right is exercised to extend the date on
which the Unwind Right becomes exercisable for one three-month period, or the
three-month period ended on June 30, 2001 if the Extension Right is exercised to
extend the date upon which the Unwind Right becomes exercisable for a second
three-month period.
"Extension Right" shall mean the right of each of Limited REMI I and
CT-F1 to extend the date upon which the Fund II Initial Closing must have
occurred before either Limited REMI I or CT-F1 shall have the right to exercise
the Unwind Right pursuant to Section 2.12 hereof for two successive three-month
periods following December 31, 2000, which may not be exercised by either
Limited REMI I or CT-F1 to extend such date upon which the Unwind Right becomes
exercisable past June 30, 2001.
"Fair Market Value" shall mean, with respect to an asset, the price at
which that asset would be sold between a willing buyer and a willing seller,
each having reasonable knowledge of all relevant facts concerning the asset and
neither acting under any compulsion to buy or sell.
"Fiscal Year" shall mean any twelve month period ended December 31.
"Fund" or "Funds" shall have the meaning given to such terms,
respectively, in the Whereas clauses of this Agreement.
"Fund Control Person" shall mean the general partner of Fund II and
each Other Fund or if an Other Fund shall not be structured as a partnership
then the managing member of an Other Fund if structured as a limited liability
company or such other Person as may have effective Control of an Other Fund if
such Other Fund is structured in a manner other than as a partnership or limited
liability company.
"Fund I" shall have the meaning given to such term in the Whereas
clauses of this Agreement.
"Fund I Agreement" shall have the meaning given to such term in the
Whereas clauses of this Agreement.
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"Fund I Investment Management Agreement" shall have the meaning given
to such term in the Whereas clauses of this Agreement.
"Fund I Promissory Note" shall have the meaning given to such term in
the Whereas clauses of this Agreement.
"Fund I Warrant" shall have the meaning given to such term in the
Whereas clauses of this Agreement.
"Fund I Warrant Agreement" shall have the meaning given to such term
in the Whereas clauses of this Agreement.
"Fund I Warrant Purchase Agreement" shall mean the Warrant Purchase
Agreement pursuant to which Limited REMI I shall purchase the Fund I Warrant
from Fund I in consideration of the delivery of the Fund I Promissory Note to
Fund I.
"Fund II" shall have the meaning given to such term in the Whereas
clauses of this Agreement.
"Fund II General Partner" shall have the meaning given to such term in
the Whereas clauses of this Agreement.
"Fund II General Partner Agreement" shall have the meaning given to
such term in the Whereas clauses of this Agreement.
"Fund II Initial Closing" shall have the meaning given to such term in
Section 2.2 of this Agreement.
"Fund II Investment Management Agreement" shall have the meaning given
to such term in the Whereas clauses of this Agreement.
"Fund II Management Agreement" shall have the meaning given to such
term in the Whereas clauses of this Agreement.
"Fund II Partnership Agreement" shall mean the amended and restated
agreement of limited partnership of Fund II.
"Fund II PPM" shall mean the confidential private placement memorandum
of Fund II to be prepared by General REMI II and CT-F2-GP.
"Fund II Purchase Warrant" shall mean the warrant which, as set forth
in Section 2.2(b) hereof and subject to the conditions described in Section
2.2(b) hereof, shall be (i) executed and delivered by CT to CT-F2-GP, (ii)
contributed by CT-F2-GP to the Fund II General Partner, and (iii) sold by the
Fund II General Partner to General REMI II concurrently with the Initial Closing
of Fund II, and which shall contain the right to purchase a number of shares of
CT Class A Common Stock as set forth in Section 2.2(b)(iv) hereof.
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"Fund II Purchase Warrant Promissory Note" shall have the meaning
given to such term in Section 2.2 hereof.
"Fund II Service Warrant" shall mean that warrant which, as set forth
in Section 2.2(b) hereof and subject to the conditions described in Section
2.2(b) hereof, shall be (i) executed and delivered by CT to CT-F2-GP, (ii)
contributed by CT-F2-GP to the Fund II General Partner, and (iii) assigned by
the Fund II General Partner to Limited REMI II concurrently with the Initial
Closing of Fund II, and which shall contain the right to purchase a number of
shares of CT Class A Common Stock as set forth in Section 2.2(b)(iv) hereof.
"Fund II Warrant Purchase Agreement" shall mean the Warrant Purchase
Agreement entered into on the date hereof pursuant to which General REMI II or
its Affiliate shall purchase forward the Fund II Purchase Warrant or the
Subsequent Funds Purchase Warrant, as the case may be, from the Fund II General
Partner or Subsequent Fund's Fund Control Person, as the case may be, in
consideration of the delivery of, or an adjustment to, the Fund II Purchase
Warrant Promissory Note in the form of Exhibit T hereto.
"GAAP" shall mean generally accepted accounting principles in effect
from time to time in the United States, applied on a consistent basis throughout
the term of this Agreement.
"General REMI II" shall have the meaning given to such term in the
preamble of this Agreement.
"Initial Closing Purchase Warrant Number" shall have the meaning given
to such term in Section 2.2 hereof.
"Initial Closing Service Warrant Number" shall have the meaning given
to such term in Section 2.2 hereof.
"Initial Share Number" shall have the meaning given to such term in
Section 2.2 hereof.
"Invested Capital" shall mean with respect to any Fund the aggregate
capital invested by partners or members in the Fund net of that portion of
distributions made to such partners or members constituting the cost basis
return of capital and net of realized losses.
"Investment Management Fee" shall have the meaning given to such term
in Section 2.11 of this Agreement.
"Investment Management Fee Base" with respect to any Fund (i) during
such Fund's Investment Period shall mean (y) the aggregate capital commitments
to such Fund, and, without duplication, (z) aggregate capital contributions made
by investors pursuant to their capital commitments to such Fund, and (ii) after
such Fund's Investment Period shall mean Invested Capital.
"Investment Management Fee Base Funds" shall mean Fund II and each
Subsequent Fund or Other Fund.
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"Investment Period" with respect to any Fund shall mean the period
commencing on the first closing of such Fund and ending on such date as is
provided in such Fund's partnership agreement or other governing instrument
during which the Fund shall be permitted to invest the capital of such Fund in
Business assets.
"Key Individuals" shall have the meaning given to such term in Section
2.13 of this Agreement.
"Key Individuals Requirement" shall mean the covenants of CTIMCO set
forth in Section 1.3 of the Fund I Investment Management Agreement, Section 1.4
of the Fund II Investment Management Agreement, and substantially the same
covenants relating to Key Individuals to be set forth in each investment
management agreement between CTIMCO (or its affiliated investment management
company) and each Fund Control Person and each Fund.
"LIBOR" shall mean, with respect to the Cumulative Management Fee
Deficiency Amount outstanding at the time of payment thereof pursuant to Section
2.11(c)(i) of this Agreement, an interest rate per annum (calculated as simple
interest, not compounded) equal to the rate of the offered quotation, if any, to
first class banks in the 30 day London Interbank Offer Rate market for US dollar
deposits of amounts in immediately available funds comparable to the principal
amount of the Cumulative Management Fee Deficiency Amount outstanding at the
time of payment thereof pursuant to Section 2.11(c)(i) of this Agreement with
maturities comparable to the period of time from the initial determination of
the Cumulative Management Fee Deficiency Amount until the payment thereof in
accordance with Section 2.11(c)(i) of this Agreement as of 10:00 a.m. (New York
time) on the date of the such initial determination.
"Limited REMI I" shall have the meaning given to such term in the
preamble of this Agreement.
"Limited REMI I Capital Formation Agreement" shall have the meaning
given to such term in the Whereas clauses of this Agreement.
"Limited REMI II" shall have the meaning given to such term in the
preamble of this Agreement.
"Management Fee" shall mean the management fee payable by each Fund
other than Fund I to its respective Fund Control Person or affiliated management
company.
"Mezzanine Business" shall mean the making of Mezzanine Investments.
"Mezzanine Investments" shall mean high-yielding loans to commercial
real estate owners and property developers that are subordinate to senior
financing and are evidenced by a subordinate mortgage, a subordinate
participation in an integrated whole loan, or a pledge of the ownership
interests in the borrowing property owner. In some cases, the investment may
take the form of certificates in a trust or a preferred equity interest in the
property owning entity.
"Mortgage Loans" shall mean senior and subordinated loans, whether
interim, mid-term or long-term or a combination of the foregoing, to commercial
real estate owners and property developers.
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"Notice" shall have the meaning given to such term in Section 8.2
hereof.
"NYSE" shall mean the New York Stock Exchange.
"Option Period" shall have the meaning given to such term in Section
2.6 of this Agreement.
"Other Funds" or "Other Fund" shall have the respective meanings given
to such terms in the Whereas clauses of this Agreement.
"Placement Agent Agreement" shall have the meaning given to such term
in the Whereas clauses of this Agreement.
"Private Banking Client Commitments" shall mean any capital
commitments made by Citibank Private Banking Clients to Fund II, Subsequent
Funds or any Other Funds, as the case may be.
"Person" shall mean any entity, corporation, company, association,
joint venture, joint stock company, partnership, trust, limited liability
company, limited liability partnership, real estate investment trust,
organization, individual (including personal representatives, executors and
heirs of a deceased individual), nation, state, government (including agencies,
departments, bureaus, boards, divisions and instrumentalities thereof), trustee,
receiver or liquidator.
"Proposed Fund" shall have the meaning given to such term in Section
2.6 of this Agreement.
"Proposed Fund Key Items" shall have the meaning given to such term in
Section 2.6 hereof.
"Proposed Fund Notice" shall have the meaning given to such term in
Section 2.6 of this Agreement.
"Proposed Fund Offer" shall have the meaning given to such term in
Section 2.6 of this Agreement.
"Pro Rata Share" shall have the meaning given to such term in Section
2.11 of this Agreement.
"Registration Rights Agreement" shall mean the agreement pursuant to
which CT agrees to register the CT Class A Common Stock issuable pursuant to the
Fund I Warrant, the Fund II Purchase Warrant, the Fund II Service Warrant, the
Subsequent Funds Purchase Warrant and the Subsequent Funds Service Warrant
substantially in the form of Exhibit U hereto (the "Registration Rights
Agreement").
"REIT" shall mean a real estate investment trust within the meaning of
Section 856 of the Code.
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"REIT Tax Matters" shall have the meaning given to such term in
Section 2.14 of this Agreement.
"SEC" shall mean the United States Securities and Exchange Commission.
"SSB" shall have the meaning given to such term in the Whereas clauses
of this Agreement.
"Shortfall Amount" shall have the meaning given such term in Section
2.11 hereof.
"Stockholder Approval Agreement" shall have the meaning given to such
term in the Whereas clauses of this Agreement.
"Stockholder Voting and Lock-Up Agreement" shall have the meaning
given to such term in the Whereas clauses of this Agreement.
"Subordinated Interests" shall mean rated and unrated interests in
public and private commercial mortgage backed securities.
"Subsequent Closing" shall have the meaning given to such term in
Section 2.2 hereof.
"Subsequent Closing Purchase Warrant Number" shall have the meaning
given to such term in Section 2.2 hereof.
"Subsequent Closing Service Warrant Number" shall have the meaning
given to such term in Section 2.2 hereof.
"Subsequent Funds" shall have the meaning given to such term in the
Whereas clauses of this Agreement.
"Subsequent Funds Purchase Warrant" shall mean any warrant which, as
set forth in Section 2.2(c) hereof and subject to the conditions described in
Section 2.2(c) hereof, shall be (i) executed and delivered by CT to either
CT-F2-GP or the applicable CT Fund Control Person Member, as the case may be,
(ii) contributed by either CT-F2-GP or the applicable CT Fund Control Person
Member, as the case may be, to the Fund II General Partner or the Fund Control
Person of the applicable Subsequent Fund, as the case may be, and (iii) sold by
the Fund II General Partner or the Fund Control Person of the applicable
Subsequent Fund, as the case may be, to General REMI II or its Affiliate,
concurrently with a subsequent closing of Fund II or a closing of a Subsequent
Fund, as the case may be, and which shall contain the right to purchase a number
of shares of CT Class A Common Stock pursuant to Section 2.2(c)(ii) hereof.
"Subsequent Funds Purchase Warrant Promissory Note" shall have the
meaning given to such term in Section 2.2(c)(ii) hereof.
"Subsequent Funds Service Warrant" shall mean any warrant which, as
set forth in Section 2.2(c) hereof and subject to the conditions described in
Section 2.2(c) hereof, shall be
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(i) executed and delivered by CT to either CT-F2-GP or the applicable CT Fund
Control Person Member, as the case may be, (ii) contributed by either CT-F2-GP
or the applicable CT Fund Control Person Member, as the case may be, to the Fund
II General Partner or the Fund Control Person of the applicable Subsequent Fund,
as the case may be, and (iii) assigned by the Fund II General Partner or the
Fund Control Person of the applicable Subsequent Fund, as the case may be, to
Limited REMI II or its Affiliate, concurrently with a Subsequent Closing and
which shall contain the right to purchase a number of shares of CT Class A
Common Stock pursuant to Section 2.2(c)(ii) hereof.
"Subsequent Share Number" shall have the meaning given to such term in
Section 2.2 hereof.
"Termination Right" shall have the meaning given to such term in
Section 2.12(e) hereof.
"Transaction Documents" shall mean all of the documents attached
hereto as Exhibit A through Exhibit U hereof.
"Unwind" shall have the meaning given to such term in the Fund I
Agreement.
"Unwind Right" shall mean the respective rights of Limited REMI I and
CT-F1 set forth in Section 2.12 of this Agreement to cause the Unwind to occur
pursuant to the Fund I Agreement.
"Warrant Issuance" shall mean the issuance of the Fund II Purchase
Warrant, the Fund II Service Warrant, the Subsequent Funds Purchase Warrant, and
the Subsequent Fund Service Warrant by CT to CT-F2-GP for subsequent
contribution to the Fund II General Partner with respect to Fund II and to
C2-F2-GP or its Affiliate for subsequent contribution to the Fund Control
Persons in connection with any Subsequent Funds as provided herein.
"Warrant Purchase Agreement" shall mean the Fund II Warrant Purchase
Agreement as such may be modified and assigned from time to time as contemplated
in Section 2.2 hereof.
1.2. General References. References in this Agreement to "Articles,"
"Sections," "Exhibits" and "Schedules," shall be to the Articles, Sections,
Exhibits and Schedules of this Agreement, unless otherwise specifically
provided; any of the terms defined in this Agreement may, unless the context
otherwise requires, be used in the singular or the plural and in any gender
depending on the reference; the words "herein", "hereof" and "hereunder" and
words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
except as otherwise specified in this Agreement, all references in this
Agreement (a) to any Person shall be deemed to include such Person's permitted
heirs, personal representatives, successors and assigns; and (b) to any
agreement, any document or any other written instrument shall be a reference to
such agreement, document or instrument together with all exhibits, schedules,
attachments and appendices thereto, and in each case as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof; and (c) to any law, statute or regulation shall be deemed
references to such law, statute or regulation as the same may be supplemented,
amended, consolidated,
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superseded or modified from time to time with an effective date rendering such
change applicable to the event or transaction in question.
ARTICLE II
THE VENTURE
2.1. Agreements Executed and Delivered Simultaneously with this Agreement.
Simultaneously with the execution and delivery of this Agreement, the respective
parties to the following agreements have executed and delivered such agreements
to the respective other parties to such agreements: the CT-F2-GP Capital
Formation Agreement, the CT Guaranty, the Fund I Agreement, the Fund I
Investment Management Agreement, the Fund I Promissory Note, the Fund I Warrant
Agreement, the Fund I Warrant Purchase Agreement, the Fund II Investment
Management Agreement, the Fund II General Partner Agreement, the Fund II Warrant
Purchase Agreement, the Limited REMI I Capital Formation Agreement, the
Placement Agent Agreement, the Stockholder Voting and Lock-Up Agreement, the
Stockholder Approval Agreement and the TIC Guaranty. As soon as practicable
after the date hereof, (i) CT shall deliver to the CIG Parties copies of the
fully executed Co-Investment Termination Agreement, the CTP Modification
Agreement (and the documents and agreements referenced therein), and (ii) CT and
the CIG Parties shall cooperate in good faith to finalize the Registration
Rights Agreement and to execute and deliver the same to each other.
2.2. Agreements to be Executed and Delivered in Connection with the
Closings of Fund II and Subsequent Funds.(a) The parties hereby agree that
promptly after the date hereof each will cooperate with the other and SSB in
good faith to prepare the Fund II PPM and the Fund II Partnership Agreement. The
parties hereby agree to use their reasonable commercial efforts to market and
promote Fund II to potential third party investors (including Citibank Private
Banking Clients) and to effectuate the Fund II Initial Closing on or prior to
December 31, 2000 (or the Extension Date), or earlier if practicable.
(b) The initial closing of Fund II (the "Fund II Initial Closing")
shall take place promptly after the capital commitments to Fund II aggregate at
least $495,833,334, which sum shall include the capital commitment pursuant to
the CIG Parties Commitment and shall include the capital commitment of the CT
Parties pursuant to the CT Parties Commitment. If the Fund II Initial Closing
occurs on or prior to December 31, 2000, or any Extension Date, then at the Fund
II Initial Closing:
(i) Limited REMI II shall execute and deliver the Fund II
Partnership Agreement to the Fund II General Partner and shall commit to
contribute to the capital of Fund II pursuant to the CIG Parties Commitment, and
CT-F2-LP shall execute and deliver the Fund II Partnership Agreement to the Fund
II General Partner and shall commit to contribute to the capital of Fund II
pursuant to the CT Parties Commitment;
(ii) General REMI II and CT-F2-GP shall cause the Fund II General
Partner to execute and deliver the Fund II Partnership Agreement and all related
subscription agreements and other agreements and documents to be executed by the
Fund II General Partner pursuant to the Fund II Partnership Agreement (other
than the Fund II Investment Management
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Agreement which shall be executed and delivered by and between the parties
thereto pursuant to Section 2.1 hereof);
(iii) If the approval by CT's stockholders of the Warrant
Issuance as provided in Section 2.3 has been obtained, CT shall execute and
deliver a Fund II Purchase Warrant and a Fund II Service Warrant as set forth in
this Section 2.2(b) to CT-F2-GP, in which case CT-F2-GP shall contribute the
Fund II Purchase Warrant and the Fund II Service Warrant to the Fund II General
Partner, that contain the right to purchase an aggregate number of shares of CT
Class A Common Stock (subject to adjustment as provided therein) equal to (w)
500,000 (the "Base Share Number") plus (x) the number (the "Initial Share
Number") obtained by multiplying 4,750,000 by the lesser of (a) one (1) or (b)
the fraction obtained by dividing the sum of the aggregate dollar amount
committed by the CIG Parties and the aggregate Private Banking Client
Commitments made at the Fund II Initial Closing by $250,000,000; provided
however, CT shall not be obligated to issue pursuant to Sections 2.2(b) and
2.2(c) warrants to purchase more than 5,250,000 shares of CT Class A Common
Stock in the aggregate. CT shall issue a Fund II Purchase Warrant and a Fund II
Service Warrant for subsequent purchase or assignment, as the case may be, as
follows. The number of shares issuable upon exercise of the Fund II Purchase
Warrant that may be purchased by General REMI II from the Fund II General
Partner pursuant to the Fund II Warrant Purchase Agreement at the Fund II
Initial Closing shall be the sum of (y) the Base Share Number and (z) a number
determined by multiplying the Initial Share Number by a fraction the numerator
of which is the dollar amount committed by the CIG Parties at the Fund II
Initial Closing and the denominator of which is the sum of the aggregate dollar
amount committed by the CIG Parties and the aggregate Private Banking Client
Commitments at the Fund II Initial Closing (the "Initial Closing Purchase
Warrant Number"). The number of shares issuable upon exercise of the Fund II
Service Warrant to which Limited REMI II shall be entitled to have the Fund II
General Partner assign to it at the Fund II Initial Closing shall be determined
by multiplying the Initial Share Number by a fraction the numerator of which is
the aggregate Private Banking Client Commitments made at the Fund II Initial
Closing and the denominator of which is the sum of the aggregate Private Banking
Client Commitments and the aggregate dollar amount committed by the CIG Parties
at the Fund II Initial Closing (the "Initial Closing Service Warrant Number");
(iv) General REMI II and CT-F2-GP shall cause the Fund II General
Partner to sell and assign to General REMI II pursuant to the Fund II Warrant
Purchase Agreement the Fund II Purchase Warrant containing the right to purchase
a number of shares of CT Class A Common Stock equal to the Initial Closing
Purchase Warrant Number in consideration of the execution and delivery to the
Fund II General Partner of a promissory note substantially in the form of the
Fund I Promissory Note in a principal amount equal to $0.32 per share of CT
Class A Common Stock times the Initial Closing Purchase Warrant Number (the
"Fund II Purchase Warrant Promissory Note"). General REMI II and CT-F2-GP shall
also cause the Fund II General Partner to assign and deliver to Limited REMI II
the Fund II Service Warrant containing the right to purchase a number of shares
of CT Class A Common Stock equal to the Initial Closing Service Warrant Number.
CT hereby consents to such sales and/or assignments and agrees to enter General
REMI II as the record owner of such Fund II Purchase Warrant and Limited REMI II
as the record owner of such Fund II Service Warrant on its books and records as
the record holders thereof.
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(v) General REMI II and the Fund II General Partner shall execute
and deliver to each other the Fund II Warrant Purchase Agreement, and General
REMI II shall execute and deliver the Fund II Initial Closing Purchase Warrant
Promissory Note to the Fund II General Partner;
(vi) General REMI II and CT-F2-GP shall cause the Fund II General
Partner to execute and deliver, and the Fund II General Partner shall cause Fund
II to execute and deliver, the Fund II Management Agreement; and
(vii) General REMI II and CT-F2-GP shall execute and deliver to
each other, and shall cause their Affiliates, agents and counsel to execute and
deliver, customary documentation, certificates, schedules and opinions related
to the Fund II Initial Closing.
(c) (i) At each subsequent closing of Fund II and each closing of each
Subsequent Fund (each a "Subsequent Closing") until the aggregate CIG Parties
Commitment has been made in accordance with Section 2.5, if the approval by CT's
stockholders of the Warrant Issuance as provided in Section 2.3 has been
obtained, CT shall execute and deliver a Subsequent Funds Purchase Warrant and a
Subsequent Funds Service Warrant to either CT-F2-GP or the applicable CT Fund
Control Person Member, as the case may be, in which case CT-F2-GP or the CT Fund
Control Person Member shall contribute the Subsequent Funds Purchase Warrant and
the Subsequent Funds Service Warrant to the Fund II General Partner or the Fund
Control Person of the applicable Subsequent Fund, as the case may be, that
contain the right to purchase an aggregate number of shares of CT Class A Common
Stock (subject to adjustment as provided therein) equal to the number obtained
by multiplying 4,750,000 by the lesser of (a) one (1) or (b) the fraction
obtained by dividing the additional aggregate dollar amount committed by the CIG
Parties and the Private Banking Client Commitments at such Subsequent Closing
(i.e., excluding commitments made at prior closings) by $250,000,000 (each a
"Subsequent Share Number"). CT shall issue a Subsequent Funds Purchase Warrant
and a Subsequent Funds Service Warrant for subsequent purchase and/or assignment
as follows. The number of shares issuable upon exercise of the Subsequent Funds
Purchase Warrant that may be purchased pursuant to a Warrant Purchase Agreement
at each such Subsequent Closing shall be determined by multiplying the
Subsequent Share Number by a fraction the numerator of which is the additional
dollar amount committed by the CIG Parties at such Subsequent Closing (i.e.,
excluding commitments made at prior closings) and the denominator of which is
the sum of the aggregate dollar amount committed by the CIG Parties and the
additional aggregate Private Banking Client Commitments at such Subsequent
Closing (i.e., excluding commitments made at prior closings) (the "Subsequent
Closing Purchase Warrant Number"). The number of shares issuable upon exercise
of the Subsequent Funds Service Warrant to which Limited REMI II or its
Affiliates shall be entitled to have assigned and delivered to it at such
Subsequent Closing shall be determined by multiplying the Subsequent Share
Number by a fraction the numerator of which is the aggregate additional Private
Banking Client Commitments made at such Subsequent Closing (i.e., excluding
commitments made at prior closings) and the denominator of which is the sum of
the additional aggregate Private Banking Client Commitments and the additional
aggregate dollar amount committed by the CIG Parties at such Subsequent Closing
(the "Subsequent Closing Service Warrant Number").
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(ii) At each such closing, the Fund II General Partner or each
Subsequent Fund's Fund Control Person, as the case may be, shall sell and assign
to General REMI II or, in the case of a subsequent Fund, to its designated
Affiliate pursuant to a Warrant Purchase Agreement the Subsequent Funds Purchase
Warrant containing the right to purchase a number of shares of CT Class A Common
Stock equal to the Subsequent Closing Purchase Warrant Number in consideration
of, in the case of Fund II, an adjustment by the Fund II General Partner and
General REMI II of Exhibit A to the Fund II Purchase Warrant Promissory Note as
set forth in the Fund II Warrant Purchase Agreement and, in the case of a
Subsequent Fund, the execution and delivery to such Subsequent Fund's Fund
Control Person of a promissory note substantially in the form of the Fund II
Purchase Warrant Promissory Note in the principal amount equal to $0.32 per
share (the "Subsequent Funds Purchase Warrant Promissory Note") and shall assign
and deliver the Subsequent Funds Service Warrant containing the right to
purchase a number of shares of CT Class A Common Stock equal to the Subsequent
Closing Service Warrant Number to Limited REMI II or, in the case of a
Subsequent Fund, to its designated Affiliate. CT hereby consents to such sale
and/or assignments and agrees to enter on its books and records General REMI II
or, in the case of a Subsequent Fund, to its Affiliate as the record owner of
such Subsequent Funds Purchase Warrant and Limited REMI II or, in the case of a
Subsequent Fund, its Affiliate as the record owner of such Subsequent Funds
Service Warrant. In addition, General REMI II in the case of Fund II shall
execute and deliver the Fund II Purchase Warrant Promissory Note to the Fund II
General Partner and, in the case of a Subsequent Fund, General REMI II's
Affiliate shall execute and deliver the Subsequent Funds Purchase Warrant
Promissory Note to each Subsequent Fund's Fund Control Person. Furthermore,
General REMI II shall cause each Subsequent Fund's Fund Control Person from
which General REMI II's Affiliate shall have purchased such Subsequent Funds
Purchase Warrant to treat the effect of the foregoing on the books and records
of each such Fund Control Person in substantially the same manner as the
purchase and assignment of the Fund I Warrant are treated in the Fund I
Agreement.
(d) The Fund II General Partner and Limited REMI II, for themselves
and on behalf of each such Fund Control Person, acknowledge that the Fund II
Service Warrants and the Subsequent Funds Service Warrants issuable pursuant to
Section 2.2(b) and 2.2(c) are the only compensation to which Limited REMI II (or
with respect to Subsequent Funds, its Affiliates) shall be entitled in
consideration of its raising capital from the Citibank Private Banking Clients.
2.3. Approval by CT's Stockholders. The CIG Parties acknowledge that the
Warrant Issuance is subject to the prior approval by CT's stockholders. CT,
acting through its board of directors, shall in accordance with Maryland law,
duly call, give notice of, and convene and hold a special meeting of
stockholders (the "Special Meeting") to be held as soon as reasonably
practicable for the purpose of voting on the approval of the Warrant Issuance.
Subject to any duties of directors under Maryland law based on advice of
counsel, CT's board of directors shall, in connection with such meeting,
unanimously recommend that CT's stockholders approve the Warrant Issuance and
shall take all other commercially reasonable action necessary or advisable to
secure the vote or consent of the stockholders in favor of the Warrant Issuance.
Without limiting the foregoing, CT shall: (i) within thirty (30) days (subject
to extension for an additional fifteen (15) days upon request by CT to General
REMI II and General REMI II's consent thereto, which consent shall not be
withheld if CT is diligently pursuing such preparation and filing) of the date
of this Agreement prepare and file a preliminary proxy statement and form of
proxy
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relating to the approval of the Warrant Issuance with the SEC in compliance with
applicable securities laws and regulations (ii) as soon as practicable after the
date any SEC comments thereon or on any revised materials have been cleared,
shall mail to CT's stockholders definitive proxy materials and (iii) as soon as
practicable after the date of mailing shall hold the Special Meeting.
2.4. Business Plan. General REMI II and CT-F2-GP hereby approve the
Business Plan for the Funds. The Business Plan may be modified or amended, and
variances therefrom may be made, only with the prior written consent of both
General REMI II and CT-F2-GP, which consent may be withheld or granted in each
party's sole discretion. The Business Plan shall be applicable to all of the
Funds other than Fund I, it being agreed between the parties that the business
of Fund I shall be determined as set forth in the Fund I Agreement. The
respective definitions of "Business" and "Mezzanine Business" as used in this
Agreement may not be modified or amended, whether by modifications or amendments
to the Business Plan or otherwise, except by an amendment to this Agreement as
provided in this Agreement and no usage of such terms in the Business Plan or
other documents or agreements amongst the parties shall affect or modify, or be
interpreted to affect or modify, the respective definitions of such terms in
this Agreement or in any amendment to this Agreement.
2.5. The CIG Parties Commitment; CT Parties Commitment. (a) The CIG Parties
hereby commit to contribute to the capital of Fund II (including any capital
commitment to the Fund II General Partner or to the Fund Control Person of any
Subsequent Fund necessary to permit the Fund II General Partner or such Fund
Control Person to make its capital commitments to Fund II or to such Subsequent
Fund and to pay any placement fees and any organizational costs not paid by the
applicable Fund) at the Fund II Initial Closing and at each subsequent closing
of Fund II, one dollar for every three dollars committed by third party
investors (excluding commitments made by CT or its Affiliates, but including
Private Banking Client Commitments) at such closing, provided, however, that the
CIG Parties shall have no obligation to make aggregate capital commitments to
Fund II in an amount greater than $250,000,000. To the extent that the CIG
Parties' aggregate capital commitments to Fund II pursuant to the foregoing
sentence are less than $250,000,000, at each successive closing of each
Subsequent Fund proposed by CT pursuant to the procedures set forth in Section
2.6 (a) hereof that occurs on or prior to December 31, 2001, the CIG Parties in
the aggregate shall commit, or cause one or more of their Affiliates to commit,
to contribute to the capital of such Subsequent Fund (either directly or through
the applicable Fund Control Person) one dollar for every three dollars committed
by third party investors (excluding commitments made by CT or its Affiliates,
but including Private Banking Client Commitments) at such closing until the
aggregate capital commitments of the CIG Parties and/or their Affiliates to Fund
II and such Subsequent Fund shall equal $250,000,000. Any capital commitments
made by the CIG Parties or any of their Affiliates shall first be made in an
amount sufficient (together with the commitments made by the CT Parties or their
Affiliates) to permit the Fund II General Partner or the Fund Control Person of
each Subsequent Fund, as the case may be, to meet its capital commitment to Fund
II or such Subsequent Fund and then as limited partners in Fund II or as limited
partners or members in any Subsequent Funds. Any commitment made by the CIG
Parties or their Affiliates as a limited partner or member to any Fund shall be
made on the same basis and same terms and conditions as those made by third
party investors in the applicable Fund. The aggregate capital commitments by the
CIG Parties and its Affiliates at the Fund II Initial Closing, each subsequent
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closing of Fund II and each closing of each Subsequent Fund made in accordance
with the foregoing are collectively referred to herein as the "CIG Parties
Commitment."
(b) The CT Parties hereby agree that for each four dollars committed
by the CIG Parties or their Affiliates in the aggregate pursuant to the CIG
Parties Commitment, the CT Parties will commit one dollar to the capital of Fund
II and any Subsequent Funds (including any capital commitment to the Fund II
General Partner or to the Fund Control Person of any Subsequent Fund necessary
to permit the Fund II General Partner or such Fund Control Person to make its
capital commitments to Fund II or to such Subsequent Fund and to pay any
placement fees and any organizational costs not paid by the applicable Fund)
proposed by CT pursuant to Section 2.6 hereof at the same time as the CIG
Parties or their Affiliates invest pursuant to Section 2.5(a) hereof; provided,
however that CT will have no obligation to make aggregate capital commitments in
an amount greater than $62,500,000. Any capital commitments made by the CT
Parties shall first be made in an amount sufficient (together with the
commitments made by the CIG Parties and their Affiliates) to permit the Fund II
General Partner or the Fund Control Person of each Subsequent Fund, as the case
may be, to meet its capital commitment to Fund II or such Subsequent Fund and
then as a limited partner in Fund II or as a limited partner or member in any
Subsequent Funds. Any commitment made by the CT Parties as a limited partner or
member to any Fund shall be made on the same terms and conditions as the CIG
Parties as provided in Section 2.5(a) hereof. The aggregate capital commitments
by the CT Parties at the Fund II Initial Closing, each subsequent closing of
Fund II and each closing of each Subsequent Fund made in accordance with the
foregoing are collectively referred to herein as the "CT Parties Commitment."
2.6. General REMI II's Right of First Refusal. (a) Subject to Section 2.7
below, if at any time after the Fund II Initial Closing, CT or any of its
Affiliates desires to form an Other Fund (a "Proposed Fund"), it shall deliver
notice (the "Proposed Fund Notice") thereof to General REMI II which sets forth
a term sheet summary of the material terms and conditions of the Proposed Fund
(providing particular details with respect to (i) the proposed management fee
payable by the Proposed Fund to the Fund Control Person, (ii) the "promote" or
"carried interest" to be distributed to the Fund Control Person, (iii) the
preferred return to the limited partners or members, (iv) the Investment Period,
(v) the term of the Proposed Fund, (vi) the Proposed Fund's investment strategy
and business plan, (vii) the anticipated timing of the offering, (viii) the
proposed placement agent(s), (ix) the minimum dollar size of the Proposed Fund,
(x) the amount of the CT Parties commitment, if any, to the Proposed Fund, and
(xi) such other items as the parties may from time to time mutually agree -- all
of the foregoing are herein after referred to collectively as the "Proposed Fund
Key Items" or individually as a "Proposed Fund Key Item"). The Proposed Fund
Notice shall be deemed an offer by CT to General REMI II or its designated
Affiliate to co-sponsor the Proposed Fund, to share ownership of the Fund
Control Person on a 50/50 basis, to share in the "promote" or "carried interest"
to be distributed to the Fund Control Person of the Proposed Fund on a 50/50
basis, and share on a 50/50 basis the net management profits (after payment of
the applicable Investment Management Fee and any other costs) (the "Proposed
Fund Offer"). Except as provided below, General REMI II shall have sixty days
from the date of its receipt of the Proposed Fund Notice (the "Option Period")
to consider such Proposed Fund Offer. During such period, CT shall afford
General REMI II or its Affiliates, as well as any prospective placement agents,
full opportunity to conduct customary due diligence with respect to CT and such
Proposed Fund. During such sixty-day period the
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parties shall cooperate in good faith to agree on the Proposed Fund Key Items.
If after 30 days from the date of the Proposed Fund Notice the parties are
unable to agree on the Proposed Fund Key Items, and any one of the investment
banking firms listed on Schedule 2.6 hereof selected by CT informs the parties
in writing that it believes the Proposed Fund Key Items, as modified, if at all,
pursuant to such good faith discussions between the parties, are then "market"
terms and that such investment banking firm is willing to serve as placement
agent of the Proposed Fund on a contingent and success fee basis in accordance
with such Proposed Fund Key Items, then upon the parties receipt of such written
notice from the investment banking firm the Proposed Fund Offer shall be deemed
definitive (a "Definitive Proposed Fund Offer"). On or before the expiration of
a ten-day period from the date the Proposed Fund is first deemed a Definitive
Proposed Fund Offer, General REMI II shall deliver to CT either a notice of
acceptance of the Definitive Proposed Fund Offer (a "Definitive Proposed Fund
Acceptance") or a notice of rejection of the Definitive Proposed Fund Offer (a
"Definitive Proposed Fund Rejection"). If General REMI II shall fail to deliver
either a Definitive Proposed Fund Acceptance or a Definitive Proposed Fund
Rejection within the Option Period, it shall be deemed to have delivered a
Definitive Proposed Fund Rejection as at the last day of the Option Period.
(b) A Proposed Fund with respect to which General REMI II shall have
delivered a Definitive Proposed Fund Acceptance shall be deemed to be an Other
Fund. If General REMI II delivers to CT a Definitive Proposed Fund Acceptance
within the Option Period, CT and General REMI II or its designated Affiliate
shall cooperate in good faith to prepare all offering materials, forms of
agreements and all other materials related to the Proposed Fund and to market
the Proposed Fund in as expeditious a manner as is practicable under the
circumstances. Subject to Section 2.5(a), the Definitive Proposed Fund
Acceptance shall be deemed to constitute the obligation of General REMI II or
its Affiliate to commit to contribute to the capital of the Proposed Fund at
each closing of the Proposed Fund one dollar for every four dollars committed by
third party investors (excluding commitments made by CT or its Affiliates, but
including Private Banking Client Commitments) at such closing, provided,
however, that neither General REMI II nor its Affiliates shall be obligated to
make aggregate capital commitments to the Proposed Fund in an amount greater
than $200,000,000, including 50% of any capital commitment to such Proposed
Fund's Fund Control Person necessary to permit such Fund Control Person to make
its capital commitment to such Proposed Fund and to pay any placement fees and
any organizational costs not paid by such Proposed Fund. CT shall not be
required to make any capital commitment to such Proposed Fund other than 50% of
any capital commitment to such Proposed Fund's Fund Control Person necessary to
permit such Fund Control Person to make its capital commitment to such Proposed
Fund and to pay any placement fees and any organizational costs not paid by such
Proposed Fund. All additional capital commitments made by General REMI II or any
of its Affiliates pursuant to the foregoing provisions of this Section 2.6(b),
and any additional capital commitments made by CT or its Affiliates in a
Proposed Fund, shall be made on the same basis and same terms and conditions as
those made by the third party investors in the Proposed Fund.
(c) If General REMI II delivers or is deemed to have delivered a
Definitive Proposed Fund Rejection with respect to a Definitive Proposed Fund
Offer, CT shall have the right to sponsor the Proposed Fund (even where the
Proposed Fund Key Items of the Proposed Fund are modified). If pursuant to the
foregoing procedures of this Section 2.6, General REMI II shall have delivered
or shall be deemed to have delivered a Definitive Proposed Fund Rejection
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with respect to two Proposed Funds, CT shall have the right to terminate General
REMI II's right of first refusal set forth in this Section 2.6 and CT may
exercise such right by providing General REMI II with written notice of such
termination; provided, however, if the CT Parties or their Affiliates are unable
to close a Proposed Fund (whether or not on the same or different Proposed Fund
Key Items for which General REMI II delivered or was deemed to have delivered a
Definitive Proposed Fund Rejection) then any such rejection by General REMI II
shall not constitute a Definitive Proposed Fund Rejection for purposes of this
sentence.
2.7. CIG Real Estate Exclusivity. (a) During the period commencing on the
date of the Fund II Initial Closing and continuing through the respective
Investment Periods of Fund II, Subsequent Funds and any Other Funds, the
following shall apply:
(i) During the applicable Fund's Investment Period, if CIG Real
Estate is presented with a candidate transaction relating directly to the
Mezzanine Business in the United States and CIG Real Estate has developed enough
information about the candidate transaction to conclude preliminarily that it is
interested in pursuing it (a "Candidate Mezzanine Business Transaction"), CIG
Real Estate shall provide notice (a "Candidate Transaction Notice") thereof to
CT, with a copy to the applicable Fund Control Person, for consideration by CT
and the applicable Fund Control Person on behalf of the applicable Fund. To the
extent such information is known to CIG Real Estate, the Candidate Transaction
Notice shall set forth (v) the particular property that is the subject of the
Candidate Mezzanine Business Transaction, (w) the name of the owner or developer
of the particular property, (x) the name or names of the persons who CT should
contact in order for CT to pursue the Candidate Mezzanine Business Transaction
on behalf of the applicable Fund, (y) the name of the lead senior lender, and
(z) the terms and conditions of the Candidate Mezzanine Business Transaction and
shall take reasonable efforts to cooperate with CT in its pursuit of the
candidate transaction. CT shall have until the close of business on the second
Business Day after the date of its receipt of a Candidate Transaction Notice
(the "Candidate Transaction Notice Period") to elect by notice to General REMI
II whether or not it wishes to pursue the Candidate Mezzanine Business
Transaction on behalf of the applicable Fund (the "Election Notice"). If CT
shall fail to deliver the Election Notice within the Candidate Transaction
Notice Period, CT, on behalf of the applicable Fund, shall be deemed to have
rejected the Candidate Mezzanine Transaction as of the last day of the Candidate
Transaction Notice Period. If CT, on behalf of the applicable Fund, shall have
elected or shall be deemed to have elected not to pursue the Candidate Mezzanine
Business Transaction, General REMI II or any of its Affiliates shall have the
right to pursue and conclude such Candidate Mezzanine Business Transaction on
substantially the same terms. If CT on behalf of the applicable Fund shall have
elected to pursue the Candidate Mezzanine Transaction, but later shall elect to
abandon such transaction, it shall promptly provide written notice to General
REMI II thereof and General REMI II or any of its Affiliates after receipt of
such notice shall have the right to pursue such Candidate Mezzanine Business
Transaction.
(ii) CIG Real Estate shall not sponsor or co-sponsor any pooled
investment vehicle primarily engaged in the Business other than as a co-sponsor
of such vehicle along with CT; provided, however, that the foregoing shall not
limit or restrict General REMI II or its Affiliates from in any manner investing
in, or allowing its customers to invest in any manner in, Business assets other
than investments in the Mezzanine Business; and provided further, that if any
Affiliate of General REMI II acquires any entity that sponsors or co-sponsors
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pooled investment vehicles engaged in the Business and if the management of any
such pooled investment vehicles is subsequently assigned to and undertaken by
CIG Real Estate, CIG Real Estate shall have a twelve-month period following the
effective date of such assignment and undertaking to cause the entity to cease
investing new capital in Business assets and to cease raising capital in any
such pooled investment vehicle. The restrictions contained in this clause (ii)
of Section 2.7(a) are referred to herein as the "Competing Fund Restriction".
(b) In the event that CIG Real Estate shall not have complied with
Section 2.7(a)(i) or 2.7(a)(ii), CT's exclusive remedy shall be the right to
terminate General REMI II's right of first refusal set forth in Section 2.6
hereof with respect to subsequent Proposed Funds. If CT desires to terminate
General REMI II's right of first refusal with respect to subsequent Proposed
Funds, it shall provide thirty days' notice thereof to General REMI II stating
the specific grounds for such termination provided, however, that such notice of
termination shall be of no effect if CIG Real Estate shall have cured such
failure to comply to the reasonable satisfaction of CT within 30 days of General
REMI II's receipt of such notice of termination or if such failure to comply is
not susceptible to cure within such 30-day period, CIG Real Estate has commenced
within such 30-day period reasonable steps to cure such failure to the
reasonable satisfaction of CT and General REMI II actually cures such failure
within 60 days of receipt of such notice.
2.8. CT Exclusivity. (a) During the period commencing on the date of the
Fund II Initial Closing and continuing through the respective Investment Periods
of Fund II, Subsequent Funds and any Other Funds, the CT Parties and their
Affiliates' sole involvement (except as otherwise provided in this Agreement) in
the Business shall be as a manager of, an advisor to and/or an investor in such
Funds jointly with the CIG Parties and/or their Affiliates as provided herein
and in the agreements and documents applicable to a particular Fund; provided,
however, that the CT Parties may acquire any Business asset that has been
declined by the CIG Parties or their affiliated member or partner of the
applicable Fund Control Person as an investment for the applicable Fund.
(b) In the event that CT shall propose to acquire Business assets in
consideration of the issuance by CT of its equity or equity-related securities
("Equity Securities") or for cash or part Equity Securities/part cash, CT shall
notify General REMI II as soon as practicable in advance of its intended
acquisition of such Business assets but in any event no later than the date on
which a term sheet is submitted to the target entity (an "Acquisition Notice").
The Acquisition Notice shall describe such Business assets in reasonable detail,
include a preliminary due diligence package with respect to such Business
assets, state the name(s) of the proposed seller or other transferor, state the
purchase price for such Business assets, state the number and type of CT's
Equity Securities and/or cash to be delivered in consideration for the sale or
other transfer of such Business assets, describe any liens or other encumbrances
that burden such Business assets, state CT's estimate of the Fair Market Value
of any such Equity Securities, state the basis for any allocation of the
estimated Fair Market Value of any such Equity Securities as between such
Business assets and any other assets to be acquired by CT in connection with
such transaction, state that CT is willing to sell such Business assets to the
applicable Fund at CT's cost therefor (which cost may include CT's expenses
allocable to its acquisition of such Business assets and their transfer to the
applicable Fund), state the manner in which the foregoing expenses were
determined, and state CT's intention to temporarily hold title to such Business
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assets with the purpose of transferring such Business assets to the applicable
Fund as promptly as practicable after CT's acquisition thereof. Within 10 days
of the Acquisition Notice, General REMI II shall have the right in its sole
discretion to require additional due diligence materials with respect to such
Business assets and the Equity Securities to be delivered to the seller or
transferor in consideration thereof and the manner of determining the Fair
Market Value of such Business assets and such Equity Securities. Within 30 days
of General REMI II's receipt of all such due diligence materials, General REMI
II shall notify CT whether General REMI II approves or rejects CT's proposed
transfer of such Business assets to the applicable Fund at the stated purchase
price (together with CT's expenses related thereto). If General REMI II shall
reject such proposed sale of such Business assets to the applicable Fund, CT
shall have the right to acquire such Business assets for its own account on
substantially the same terms as set forth in the Acquisition Notice. If General
REMI II shall approve such sale of such Business assets to the applicable Fund,
then, subject to any restrictions or limitations set forth in the documentation
relating to the applicable Fund, as soon as practicable after CT's acquisition
of such Business assets, CT shall sell, convey and transfer such Business assets
to the applicable Fund for the purchase price (together with CT's expenses
related thereto) stated in the Acquisition Notice, payable in cash. Upon the
closing of such transfer of such Business assets to the applicable Fund, CT
shall, in form reasonably satisfactory to General REMI II, transfer good and
marketable title to such Business assets free and clear of all liens, claims and
encumbrances (other than any liens or encumbrances set forth in the Acquisition
Notice), and shall assign all the rights and remedies that CT may have vis-a-vis
its seller or transferor to the applicable Fund.
2.9. Mutual Cooperation. Each of the CIG Parties and CT shall use their
reasonable commercial efforts to structure each Fund so that they are able to
comply with the provisions of Section 2.7 and 2.8 hereof, respectively.
2.10. CIG Parties' Representation on CT's Board of Directors. (a) CT has on
the date hereof delivered to General REMI II the CT Board Certificate and each
of the CIG Parties Initial Board Designees has delivered to CT a letter
accepting his appointment to CT's board of directors. The CIG Parties Initial
Board Designees and all subsequent CIG Designees designated pursuant to the
Stockholder Voting and Lock-Up Agreement who serve on CT's board of directors
are hereinafter sometimes referred to collectively as the "CIG Parties
Designees" and singly as a "CIG Parties Designee." In the event that one or both
of the CIG Parties' Designees shall not be elected by CT's stockholders to CT's
board of directors, such CIG Parties Designee(s) shall have (subject to mutually
acceptable confidentiality agreements) the right to receive notices of meetings
of CT's board of directors, to attend and participate in such meetings, and to
receive all materials sent to members of CT's board of directors when and as
sent to such members. The right to designate persons for election as directors
pursuant to the Stockholder Voting and Lock-Up Agreement and, if not so elected,
to attend and participate in board of directors meetings pursuant to this
Section 2.10(a) are referred to herein as the "CIG Parties Board Right."
(b) Upon request from CT from time to time, General REMI II shall
certify to CT that the CIG Parties and/or their Affiliates are the legal and
beneficial owners of at least 4,250,000 of the Board Right Shares. In the event
that (i) the CIG Parties and/or their Affiliates shall cease to comply with the
CIG Parties Ownership Requirement, (ii) CIG Real Estate shall have breached the
provisions of Section 2.7(a)(ii) hereof, (iii) the Fund II Initial Closing shall
not
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have occurred by the latter of December 31, 2000 or, if applicable, any
Extension Date, or (iv) either Limited REMI I or CT-F1 shall have exercised the
Termination Right pursuant to Section 2.12(e) hereof, CT shall have the right to
terminate the CIG Parties Board Right upon notice thereof to General REMI II
stating the effective date of such termination. Thereupon, the CIG Parties Board
Right shall terminate as at such effective date and the CIG Parties shall cause
their designees on CT's board of directors to resign therefrom as at such date
provided, however, (A) that in the event of a termination by CT or CT-F1 of the
CIG Parties Board Right pursuant to the foregoing clause (iii), or clause (iv),
CT or CT-F1 shall only have such right to terminate if CT or CT-F1 or Limited
REMI I shall have exercised the Unwind Right and (B) that in the event of a
termination pursuant to the Termination Right under Section 2.12(e) hereof then
such termination of the CIG Parties Board Right shall take effect only upon
completion of the Unwind or the liquidation or dissolution of Fund I pursuant to
the provisions of the Fund I Agreement.
(c) CT shall indemnify and hold harmless the CIG Parties and every CIG
Parties Designee from any and all liabilities arising from or related to the CIG
Parties Designee's or the CIG Parties Designees' having served on CT's board of
directors in the same manner and to the same extent as other persons who serve
on CT's board of directors as set forth in CT's Certificate of Incorporation,
and CT's By-Laws and to the fullest extent provided by Maryland law. CT has on
the date hereof delivered the CT D&O Certificate to General REMI II. CT hereby
agrees that it shall maintain the directors' and officers' liability insurance
policy or policies referenced in the CT D&O Certificate (or comparable policies
issued by comparable insurance companies) in a face amount or face amounts at
least equal to the current amount of directors' and officers' insurance
maintained by CT at all times from the date hereof through the effective date of
termination of the CIG Parties Board Right insuring the CIG Parties Designees
and the CIG Parties as named insured parties thereunder. In the event that a
policy or policies are on a "claims made" basis, CT shall purchase an "Extended
Reporting" policy following the effective termination date of any such policy.
Such Extended Reporting policy shall have the same policy limits and extend
coverage for a minimum of three years following the original date of the
cancellation of the foregoing policy or policies and for a minimum of three
years following the effective date of termination of the CIG Parties Board
Right. Upon request from General REMI II from time to time, CT shall (i) certify
to General REMI II that such policies are in full force and effect, (ii) certify
the face amount(s) of such policy or policies, and (iii) deliver copies of such
policy or policies and all riders and amendments thereto to General REMI II.
2.11. Investment Management Fees. (a) CTIMCO, the Fund II General Partner
and Fund II have on the date hereof entered into the Fund II Investment
Management Agreement applicable to Fund II from and after the Fund II Initial
Closing. The parties hereto agree that with respect to each Subsequent Fund and
each Other Fund, CTIMCO and the applicable Fund Control Person shall enter into
an investment management agreement in the form of the Fund II Investment
Management Agreement pursuant to which CTIMCO shall perform the investment
management services referenced therein and the applicable Fund Control Person
shall pay to CTIMCO its Pro Rata Share of the Cumulative Investment Management
Fee determined in accordance with the provisions of this Section 2.11.
(b) The Investment Management Fee with respect to all Investment
Management Fee Base Funds shall be paid to CTIMCO quarterly in advance promptly
after receipt by the Fund Control Persons of each Investment Management Fee Base
Fund of their respective
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Management Fee from their respective Funds. With respect to each quarter, CTIMCO
shall deliver to General REMI II and to each Fund Control Person of each
Investment Management Fee Base Fund a certificate (the "Cumulative Investment
Management Fee Base Certificate") setting forth the Cumulative Investment
Management Fee Base and an explanation of the breakdown of the Cumulative
Investment Management Fee amongst the Investment Management Fee Base Funds. The
CIG Parties and the CT Parties shall cause the Fund Control Persons of each of
the Investment Management Fee Base Funds to pay their Pro Rata Share (as defined
herein) of Cumulative Investment Management Fees (the "Investment Management
Fee") to CTIMCO within three (3) Business Days of the delivery of and
certificate to the CIG Parties and such Fund Control Persons. Each Fund Control
Person's pro rata share of the Cumulative Investment Management Fee for the
applicable quarter shall be determined by multiplying (i) the Cumulative
Investment Management Fee by (ii) a fraction, expressed as a percentage, the
numerator of which is the Investment Management Fee Base of that Fund Control
Person's respective Fund, and the denominator of which is the Cumulative
Investment Management Fee Base (the "Pro Rata Share").
(c) The Cumulative Investment Management Fee (the "Cumulative
Investment Management Fee") shall be determined annually and payable
prospectively on a quarterly basis with appropriate adjustments for partial
quarters as follows:
(i) if at the date of a Cumulative Investment Management Fee Base
Certificate the Cumulative Investment Management Fee Base is less than
$700,000,000, each Fund Control Person shall pay to CTIMCO 100% of such Fund
Control Person's Management Fee for the applicable quarter to the extent
necessary to cause CTIMCO to receive Cumulative Investment Management Fees for
such quarter equal to $1,750,000 plus any Shortfall Amounts, provided that the
amount of Cumulative Management Fees payable by the Fund Control Persons of all
the Investment Management Fee Base Funds shall not in any Fiscal Year exceed
$7,000,000 plus any amounts required to cover any Shortfall Amounts. In the
event and to the extent that Cumulative Investment Management Fees payable to
CTIMCO in any Fiscal Year are less than $6,250,000 (the "Shortfall Amount"), the
Shortfall Amount shall accrue simple interest at LIBOR and each Fund Control
Person shall pay its Pro Rata Share of the Shortfall Amount, together with
interest thereon, on a priority basis in subsequent periods; provided, however,
that if and to the extent Cumulative Investment Management Fees in such
subsequent periods are not sufficient to permit the Fund Control Persons of the
Investment Management Fee Base Funds to pay the Shortfall Amount together with
interest thereon in full (the "Cumulative Investment Management Fee Deficiency
Amount"), then each Fund Control Person shall pay its Pro Rata Share of the
Cumulative Investment Management Fee Deficiency Amount as a priority payment
from such Fund Control Person's "carried interest" or "promote" from its
respective Fund as such "carried interest" or "promote" is realized by the
respective Fund Control Person and from its respective Management Fee; provided,
further, however, that the parties shall cause the Fund Control Persons of the
Investment Management Fee Base Funds to make such adjustments and payments as
between them necessary to assure that no Fund Control Person pays more than its
Pro Rata Share of any Cumulative Investment Management Deficiency Amount.
(ii) if at the date of a Cumulative Investment Management Fee
Base Certificate the Cumulative Investment Management Fee Base is $700,000,000
or more but less than $1,200,000,000, the Cumulative Investment Management Fee
for the next succeeding
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quarter shall be one-fourth the sum of (A) $7,000,000 plus (B) with respect to
the amount of Cumulative Investment Management Fee Base exceeding $700,000,000
the product of such excess amount times 0.75% (75 basis points) and each Fund
Control Person shall promptly pay CTIMCO its Pro Rata Share thereof;
(iii) if at the date of a Cumulative Investment Management Fee
Base Certificate the Cumulative Investment Management Fee Base is $1,200,000,000
or more, the Cumulative Investment Management Fee for the next succeeding
quarter shall be one-fourth the sum of (A) $10,750,000 plus (B) with respect to
the amount of Cumulative Investment Management Fee Base exceeding $1,200,000,000
the product of such excess amount times 0.50% (50 basis points) and each Fund
Control Person shall promptly pay CTIMCO its Pro Rata Share thereof; provided,
however, that the CIG Parties and CTIMCO shall cooperate in good faith to adjust
the Cumulative Investment Management Fee under clause (B) of the foregoing
clause (iii), upwards or downwards, to take into account the actual services
rendered by CTIMCO pursuant to the various investment management agreements with
the Fund Control Persons of the Investment Management Fee Base Funds, provided
further that if the parties are unable to agree on any such adjustment, the
formula set forth in clause (B) of the foregoing clause (iii) shall continue to
apply until such time as the parties agree on any such adjustment; provided
further, that within 90 days of the end of each Fiscal Year, Cumulative
Investment Management Fees shall be adjusted to take into account any
overpayments or underpayments during the prior Fiscal Year. Overpayments shall
be deducted from, and underpayments shall be added to, Cumulative Investment
Management Fees payable in the then next succeeding quarter after such annual
adjustment.
For the avoidance of doubt, until the aggregate Cumulative Investment
Management Fee paid to CTIMCO by all Fund Control Persons in any Fiscal Year
equals $7,000,000 plus any amount required to pay any Shortfall Amounts, the
quarterly Investment Management Fee paid by each Fund Control Person shall equal
100% of such Fund Control Person's Management Fee for the applicable quarter to
the extent necessary to cause CTIMCO to receive in such quarter a Cumulative
Investment Management Fee equal to $1,750,000.
2.12. Unwind Right; Unwind. (a) In the event that the Fund II Initial
Closing shall not have occurred by the later of December 31, 2000 or any
Extension Date resulting from an exercise of the Extension Right, either Limited
REMI I or CT-F1 shall have the right to exercise the Unwind Right. Either
Limited REMI I or CT-F1 may exercise the Extension Right upon notice to the
other provided that such notice is given at least 60 days prior to December 31,
2000 or 30 days prior to any Extension Date. Neither Limited REMI I nor CT-F1
may exercise the Unwind Right as a result of the failure of the Fund II Initial
Closing to occur on or before December 31, 2000 or by the failure of the Fund II
Initial Closing to occur on or before any Extension Date if the other has
already given notice to it of its exercise of the Extension Right.
(b) In the event that there shall have been a failure to comply with
the Key Individuals Requirement set forth in the Fund I Investment Management
Agreement or in the event that CT-F1 shall have breached the Fund I Investment
Management Agreement, Limited REMI I shall have the right to exercise the Unwind
Right. In the event that Limited REMI I elects to exercise the Unwind Right
pursuant to this Section 2.12(b), it shall give written notice thereof to CT-F1
stating the specific grounds therefor; provided, however, that such notice shall
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be of no effect if CT-F1 shall have cured such failure to comply to the
reasonable satisfaction of Limited REMI I within 30 days of CT-F1's receipt of
such notice or if such failure to comply is not susceptible to cure within such
30-day period, CT-F1 has commenced within such 30-day period reasonable steps to
cure such failure to the reasonable satisfaction of Limited REMI I, and CT-F1
actually cures such failure within 60 days of receipt of such notice.
(c) Upon receipt by either Limited REMI I or CT-F1 of the other's
notice that it is exercising the Unwind Right pursuant to Section 2.12(a)
hereof:
(i) Limited REMI I and CT-F1 shall carry out the Unwind as set
forth in the Fund I Agreement;
(ii) the Fund I Warrant Agreement shall remain in full force and
effect;
(iii) General REMI II shall have no right to purchase the Fund II
Purchase Warrant or the Subsequent Funds Purchase Warrant, and Limited REMI II
shall have no right to receive the Fund II Service Warrant or the Subsequent
Funds Service Warrant;
(iv) as of the date of the completion of the Unwind, the CT-F2-GP
Capital Formation Agreement, the Fund I Agreement, the Fund I Investment
Management Agreement, the Fund II General Partner Agreement, the Stockholder
Voting and Lock-Up Agreement, the Placement Agent Agreement, and this Agreement
shall terminate automatically, except that the respective provisions of the
foregoing agreements which by their terms survive the termination of such
agreement shall survive; and
(v) the members of Fund I shall cause a Certificate of
Cancellation to be filed with the State of Delaware, and in each state where
Fund I has been qualified to do business, canceling Fund I in accordance with
the Delaware Limited Liability Company Act and in accordance with the laws of
each state where Fund I has been qualified to do business, respectively.
(d) Upon receipt by CT-F1 of Limited REMI I's notice that it is
exercising the Unwind Right pursuant to Section 2.12(b) hereof:
(i) Limited REMI I and CT-F1 shall carry out the Unwind as set
forth in the Fund I Agreement;
(ii) the Fund I Warrant Agreement shall remain in full force and
effect;
(iii) the Fund II Purchase Warrant and Subsequent Funds Purchase
Warrant and the Fund II Service Warrant and Subsequent Funds Service Warrant if,
and to the extent, issued shall remain in full force and effect;
(iv) as of the date of the completion of the Unwind, the CT-F2-GP
Capital Formation Agreement, the Fund I Agreement, the Fund I Investment
Management Agreement, the Stockholder Voting and Lock-Up Agreement, the
Placement Agent Agreement, this Agreement, and (if the Fund II Initial Closing
has not occurred as of the date of completion of the Unwind) the Fund II General
Partner Agreement shall terminate automatically, except that
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the respective provisions of the foregoing agreements which by their terms
survive the termination of such agreement shall survive; and
(v) the members of Fund I shall cause a Certificate of
Cancellation to be filed with the State of Delaware, and in each state where
Fund I has been qualified to do business, canceling Fund I in accordance with
the Delaware Limited Liability Company Act and in accordance with the laws of
each state where Fund I has been qualified to do business, respectively.
(e) Termination by SSB. Notwithstanding anything contained in this
Agreement to the contrary, if within 30 days of the date hereof SSB shall have
delivered a notice of termination to CT terminating the placement agent
engagement pursuant to Section 5 of the Placement Agent Agreement (a "SSB
Termination Notice"), Limited REMI I or CT-F1 shall have the right (the
"Termination Right") to terminate this Agreement as provided below upon notice
to the other within 5 days of the date of the SSB Termination Notice. The
Termination Right may be exercised by either Limited REMI I or CT-F1 by delivery
to the other of notice that it is exercising the Termination Right whereupon
this Agreement and the Transaction Documents shall terminate except as provided
below:
(i) (A) Limited REMI I and CT-F1 shall carry out the Unwind as
set forth in the Fund I Agreement if Fund I has prior to the date of such
exercise made Investments (as defined in the Fund I Agreement) and dissolve Fund
I pursuant to Delaware law upon completion of the Unwind or (B) if Fund I has
made no Investments prior to such exercise, dissolve Fund I pursuant to Delaware
law promptly after such exercise of the Termination Right;
(ii) The CIG Parties Initial Board Designees shall resign from
CT's board of directors upon completion of the Unwind or if Fund I has made no
Investments then promptly after the exercise of the Termination Right;
(iii) (A) The Fund I Warrant Agreement, (B) Section 2.10(c) and
Articles IV, V and VIII of this Agreement, (C) the respective provisions of the
Fund I Agreement and the Fund I Investment Management Agreement (but only if
Fund I shall have made Investments prior to the date of the Exercise of the
Termination Right) which by their express terms survive a termination thereof,
and (D) the provisions of the Placement Agent Agreement which by their express
terms survive any termination of the placement agent engagement thereunder shall
remain in full force and effect; and
(iv) Upon completion of any such Unwind, or immediately upon the
exercise of the Termination Right if Fund I has made no Investments, the
parties' respective obligations under Article II of this Agreement and under
each Transaction Document shall terminate other than as set forth in clause
(iii) of this Section 2.12(e).
2.13. Key Individuals. The "Key Individuals" of CT are John R. Klopp, Vice
Chairman and Chief Executive Officer; and Craig M. Hatkoff, Vice Chairman and
Chairman of the Executive Committee. CT hereby represents and warrants to the
CIG Parties and CIG that it has delivered true and correct copies of the
respective employment agreements of the Key Individuals to General REMI II. CT
hereby agrees that it shall not amend or modify any such
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employment agreement in any manner that would, or could reasonably, decrease the
term thereof. CT hereby covenants that it shall cause CTIMCO and any other
entity that CT elects to serve as investment manager to any Fund to agree to the
Key Individuals Requirement in its investment management agreement unless at the
time of the formation of any such Fund and the entering into any such investment
management agreement the Key Individuals Requirement could not be met.
2.14. REIT Status. CT shall take such steps as are necessary for it to be
taxed as a REIT under Part II of Subchapter M of Chapter 1 of Subtitle A of the
Code whether through merger, election or otherwise on terms mutually acceptable
to CT and the CIG Parties as soon as possible after the date hereof. Such steps
shall include, but shall not be limited to, the submission to CT's stockholders
of any matters customarily necessary for them to approve in order for CT to be
so taxed as a REIT. Unless there shall have (i) been a change in the Code or
formally published administrative or judicial interpretations of the Code the
result of which is that election of REIT status would have a material adverse
effect on CT as is evidenced by a written opinion of tax counsel to CT
reasonably acceptable to the CIG Parties, (ii) occurred an Act of God or other
force majeure that prevents CT from electing to be taxed as a REIT under Part II
of Subchapter M of Chapter 1 of Subtitle A of the Code or (iii) despite good
faith efforts on the part of CT, it is not able to comply with the conditions
required by the Code to qualify as a REIT (by way of example and not limitation,
income/asset tests, concentration of ownership, and other such tests and
conditions), CT shall submit to its stockholders all matters necessary for them
to approve in order for CT to be taxed as a REIT ("REIT Tax Matters") and CT
shall actively solicit the adoption of such matters by CT's stockholders. If
there shall not have occurred any event or act described in the foregoing
clauses (i) and (ii) of this Section 2.14 and CT shall have met the conditions
described in clause (iii) of this Section 2.14 and CT shall nevertheless not
have submitted the foregoing matters to its stockholders for approval in a
manner timely enough for CT to elect to be taxed as a REIT under the Code for
the period beginning January 1, 2002 or has otherwise not become a REIT through
merger or otherwise by January 1, 2002, General REMI II shall have the right to
invoke the Appraisal Procedures set forth in Section 4.1 hereof pursuant to
which the Experienced Appraiser shall determine (x) the Fair Market Value of the
CIG Parties' and their Affiliates' Board Right Shares with CT being valued as a
"C" corporation under the Code and (y) the Fair Market Value of the CIG Parties'
and their Affiliates' Board Right Shares with CT being valued as a REIT. To the
extent that (x) is less than (y), CT shall promptly pay such amount to the
respective CIG Parties and their Affiliates in proportion to their respective
holdings of Board Right Shares. The above notwithstanding, if the REIT Tax
Matters shall have been submitted to the stockholders of CT and the stockholders
of CT do not approve the REIT Tax Matters, the CIG Parties shall not have the
foregoing right to invoke the Appraisal Procedures or to receive such payment.
2.15. Fees. (a) The CIG Parties and the CT Parties, as the case may be, for
themselves and their Affiliates, agree that in the event that any of them or
their Affiliates propose to earn any fee, whether directly related to a Business
transaction to be conducted by any Fund (including Fund I) or ancillary to any
such Business transaction, it shall notify the CT Parties or the CIG Parties, as
the case may be, of such fee and the circumstances related to such fee. All fees
directly related to a Business transaction (by way of example and not
limitation, a commitment fee to be received in connection with a Mortgage Loan
to be made by a Fund, including Fund I) to be conducted by a Fund (including
Fund I) shall be for the account of such fund, and shall be
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<PAGE>
promptly paid over to such fund upon such party's receipt thereof. All fees that
are ancillary to a Business transaction (by way of example and not limitation,
an advisory fee to be earned by an Affiliate pursuant to an engagement entered
into prior to a Business transaction being proposed to such fund or pursuant to
an engagement that is broader than the Business) to be conducted by a Fund
(including Fund I) shall not be for the account of such fund but instead shall
be for the account of such party or its Affiliate. In each instance where a
party is to receive any such direct or ancillary fee, such fee shall be on
reasonable commercial terms determined on an arm's-length basis to the
reasonable satisfaction of the CT Parties or the CIG Parties, as the case may
be. Any dispute with respect to whether a fee is direct or ancillary to a
Business transaction being conducted by a Fund (including Fund I) and any
dispute as to whether a fee is on reasonable commercial terms determined on an
arm's-length basis shall be resolved pursuant to Section 4.2 hereof.
(b) The parties agree that each fee required to be paid pursuant to this
Venture Agreement, including without limitation, the fees payable to Limited
REMI II or its Affiliates for raising funds, are considered ancillary,
commercially reasonable and arm's-length, and may be retained by the recipient.
Such fees constitute reasonable compensation and are the only fees to be
received for the services specified herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
3.1. Reciprocal Representations and Warranties. Each of Limited REMI I,
General REMI II, Limited REMI II, CT-F1, CT-F2-GP, CT-F2-LP, CTIMCO and CT
hereby represent and warrant to each other that:
(a) Organization; Authority; Due Authorization.
(i) Organization and Good Standing. It is a limited liability
company (in the case of Limited REMI I, General REMI II, Limited REMI II, CT-F1,
CT-F2-GP, and CT-F2-LP) duly organized, validly existing and in good standing
under the applicable laws of its jurisdiction of formation/incorporation or is a
corporation (in the case of CT) duly incorporated and existing under and by
virtue of the laws of the State of Maryland and is in good standing with the
State Department of Assessments and Taxation of Maryland; has all requisite
power to own, lease and operate its assets, properties and business and to carry
on its business as now conducted; and is in good standing in every jurisdiction
in which the nature of its business or the location of its properties requires
such qualification, except for such jurisdictions where the failure to so
qualify would not have a material adverse effect upon its ability to perform
fully its obligations under this Agreement or the Transaction Documents.
(ii) Authority to Execute and Perform Agreements. It has all
requisite limited liability company power and authority (in the case of Limited
REMI I, General REMI II, Limited REMI II, CT-F1, CT-F2-GP, and CT-F2-LP) to
enter into, execute and deliver this Agreement, and each Transaction Document to
which it is a party, and to perform fully its obligations hereunder and
thereunder, or has the requisite corporate power (in the case of CT) to execute
and deliver this Agreement and each Transaction Document to which it is a party,
and to carry out the terms and conditions thereof applicable to it.
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<PAGE>
(iii) Due Authorization; Enforceability. In the case of Limited
REMI I, General REMI II, Limited REMI II, CT-F1, CT-F2-GP, and CT-F2-LP, it has
taken all limited liability company actions necessary to authorize it to enter
into and perform fully its obligations under this Agreement and the Transaction
Documents to be executed by it and to consummate the transactions contemplated
herein and therein. In the case of CT, the execution, delivery and performance
by CT of this Agreement and the Transaction Documents have been duly authorized
by all necessary corporate action on the part of the Company.
(iv) Enforceability. This Agreement has been duly and validly
executed by it and constitutes the legal, valid and binding obligation of it,
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
applicable laws affecting creditors' rights generally or by general equitable
principles affecting the enforcement of contracts.
(b) No Violation. Neither its execution or delivery of this Agreement
nor the consummation of the transactions contemplated herein will: (a) violate
any provision of its limited liability company operating agreement, certificate
of incorporation, by-laws or other charter documents; or (b) violate in any
material respect any applicable law or order.
(c) Regulatory and Other Approvals. No consent, approval,
authorization, notice, filing, exemption or other requirement must be obtained
by it from any authority or Person or must otherwise be satisfied by it in order
that the consummation of the transactions contemplated in this Agreement or any
related documents will not violate in any material respect any applicable law or
order or any material contract to which it is a party.
(d) Litigation. It is not (i) subject to any outstanding injunction,
judgment, order, decree, ruling, or charge, and (ii) there is no material claim,
action, proceeding or investigation pending or, to its knowledge, threatened
against or relating to it before any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction or before any
arbitrator which challenges the ability or legality of such party's entering
into this Agreement or any Transaction Documents to which it is a party.
3.2. Representations and Warranties of CT. CT hereby represents and
warrants to the other parties hereto that: The parties to the various
Stockholder Approval Agreements and the Stockholder Voting and Lock-Up
Agreements who are CT Management Stockholders or Associated Stockholders are the
record owners of the number of shares of CT Class A Common Stock set forth in
the respective Stockholder Approval Agreements or Stockholder Voting and Lock-Up
Agreement and are not the record owners of any other shares of CT Class A Common
Stock. To the best of CT's knowledge, after reasonable inquiry, CT Management
Stockholders and Associated Stockholders as well as their respective Affiliates,
Associates, family members or trusts for the benefit of family members do not
beneficially own any shares of CT Class A Common Stock other than those set
forth in the respective Stockholder Approval Agreements and in the Stockholder
Voting and Lock-Up Agreement.
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ARTICLE IV
DISPUTE RESOLUTION
4.1. Appraisal Procedure.(a) In the event of a dispute between the parties
hereto or between the parties to any Transaction Document as to the Fair Market
Value of a particular asset or assets, interest or right of a party hereto and
such dispute has not been resolved after good faith discussions amongst the
concerned parties after 30 days notice of such dispute from one party to the
other parties, either party may invoke the Appraisal Procedures.
(b) "Appraisal Procedures" means the following procedures, by which
the Fair Market Value of a particular asset or assets, interest or right of a
party hereto shall be determined. If a party (the "Notifying Party") wishes to
invoke the Appraisal Procedures it shall provide notice (the "Appraisal Notice")
of such election to the other party (the "Other Party") and the Notifying
Party's determination of the Fair Market Value of the particular asset or
assets, interest or right. Within 15 days of the Other Party's receipt of the
Appraisal Notice, it shall notify the Notifying Party whether it accepts or
rejects the Notifying Party's determination of Fair Market Value. In the event
the Other Party fails to notify the Notifying Party within the foregoing 15 day
period that it rejects said determination, the Other Party shall be deemed to
have accepted the Notifying Party's determination of Fair Market Value. If the
Other Party gives the Notifying Party timely notice of its rejection of the
Notifying Party's determination, the Notifying Party and the Other Party
acknowledge and agree that the appraisal process hereinafter set forth shall
determine the Fair Market Value. Each party, at its own expense, shall then
designate an Experienced Appraiser who shall determine and promptly report (and
in no event later than the thirtieth (30th) day following the Other Party's
receipt of the Appraisal Notice) to both parties in writing the Fair Market
Value. If the report indicates proposed values that are within five (5%) percent
of each other, the Notifying Party and the Other Party agree that the Fair
Market Value shall be an average of such amounts. However, if after receiving
the report, the parties are unable to agree on the Fair Market Value (and the
amounts are not within five (5%) percent of each other) within five (5) days,
both parties shall jointly appoint an Experienced Appraiser who shall determine
the Fair Market Value by selecting either the Fair Market Value as reported by
the Notifying Party's Experienced Appraiser or the Fair Market Value as reported
by the Other Party's Experienced Appraiser, according to whichever of the two
valuations is closer to the actual Fair Market Value in the opinion of such
third Experienced Appraiser. The third Experienced Appraiser shall have no
discretion other than to select one or the other report as aforesaid. The costs
of such third Experienced Appraiser shall be shared equally by the Notifying
Party and the Other Party. The parties shall work together and coordinate
efforts to obtain such third Experienced Appraiser's report in writing no later
than the forty-fifth (45th) day following the latter of the Other Party's
receipt of the Appraisal Notice. The parties shall be obligated to enter into
engagement agreements with the foregoing Experienced Appraisers containing
customary terms and conditions, including customary indemnification provisions.
(c) "Experienced Appraiser" means a nationally recognized "bulge
bracket" independent investment banking firm (other than Salomon Smith Barney)
experienced in the valuation of businesses engaged in the Business and their
securities.
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4.2. Arbitration. Should any dispute arise under this Agreement that is not
subject to the provisions of Section 4.1 hereof; then the parties shall meet to
attempt to resolve such dispute before any proceeding, including arbitration, is
commenced, and neither party shall seek other relief prior to such meeting. In
the event such a meeting does not resolve such dispute and such dispute shall
remain unresolved for a period of thirty (30) days, then the following shall
apply:
(a) Dispute Resolution. Subject to the provisions of Section 4.1
hereof, the parties shall submit any dispute, claim or controversy arising out
of or relating to this Agreement or any Transaction Document (including, without
limitation, with respect to the meaning, effect, validity, termination,
interpretation, performance or enforcement of this Agreement or any Transaction
Document) or any alleged breach (including any action in tort, contract equity
or otherwise) to binding arbitration before an arbitrator (the "Arbitrator"), to
be heard pursuant to the provisions of the Commercial Arbitration Rules of the
American Arbitration Association. The parties agree that, except as otherwise
provided herein respecting temporary or preliminary injunctive relief, binding
arbitration shall be the sole means of resolving any dispute, claim, or
controversy arising out of or relating to this Agreement or the Transaction
Documents (including, without limitation, with respect to the meaning, effect,
validity, termination, interpretation, performance or enforcement of this
Agreement or the Transaction Documents) or any alleged breach (including any
claim in tort, contract, equity or otherwise).
(b) Location. Any arbitration shall be held in New York County, New
York.
(c) Costs. The CIG Parties, on the one hand, and the CT Parties, on
the other hand, shall equally bear any arbitration fees and administrative costs
associated with the arbitration. No party shall be entitled to recover costs or
attorneys' fees incurred during the course of arbitration.
(d) Award. The Arbitrator's award may not include punitive damages.
The arbitration award in any such arbitration may be confirmed by any court of
competent jurisdiction.
(e) Submission to Jurisdiction, Waiver of Jury Trial. In the event
that the parties waive the foregoing arbitration provisions or in the event that
such provisions shall for any reason not be available or enforceable, the
parties hereby submit to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York and of any New York State
court sitting in New York County. In any such event, each party hereto hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum. Each party irrevocably consents
to service of process in the manner provided for notices in Section 8.2 hereof,
but nothing in this sentence shall affect the right of any party to serve
process in any other manner permitted by law. EACH OF THE PARTIES HEREBY WAIVES
ITS RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS
AGREEMENT OR ANY TRANSACTION DOCUMENT.
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ARTICLE V
INDEMNIFICATION
5.1. Indemnification.(a) Each party (an "Indemnifying Party") hereto hereby
agrees to indemnify and hold harmless the other parties and their directors,
officers, members, employees and agents and its Affiliates and its directors,
officers, members, employees and agents and each other Person, if any,
controlling any of the foregoing (collectively, "Indemnitees"), to the full
extent lawful, from and against any and all losses, penalties, actions,
judgments, suits, claims, costs, expenses, disbursements and damages of any kind
or nature whatsoever (including fees and disbursements of counsel for such
Indemnitee) (collectively, "Losses") caused by, arising from or in connection
with (i) any false or misleading misrepresentation or warranty contained in this
Agreement or in any Transaction Document, (ii) any breach of this Agreement or
any Transaction Document, or (iii) (A) any untrue statement or alleged untrue
statement of a material fact contained in the Fund II PPM or related offering
materials or any subsequent offering memorandum or related offering materials
related to any Other Funds or the omission or alleged omission to state therein
a material fact necessary in order to make the statements made therein not
misleading, in light of the circumstances under which they were made, or (B) any
other action or failure to act by an Indemnitee undertaken at the Indemnifying
Party's request except that this clause (B) shall not apply to the extent that
any Damages are finally judicially determined to have resulted primarily from
the Indemnitee's bad faith or gross negligence.
(b) In the event that the foregoing indemnity in clause (iii) of
Section 5.1(a) is unavailable to an Indemnitee for any reason, the parties agree
to contribute to any Losses related to or arising out of the Fund II PPM and the
related offering of securities and any subsequent offering memorandum and the
related offering with respect to an Other Fund or any transaction or conduct in
connection therewith as follows. For Losses referred to in clause (iii) of the
preceding paragraph, each party involved in the particular offering shall
contribute in such proportion as is appropriate to reflect the relative fault of
each such party in connection with the statements, omissions or other conduct
which resulted in such Losses, as well as any other relevant equitable
considerations. For any other Losses, or for Losses referred to in clause (iii)
of the preceding paragraph, if the allocation provided by the immediately
preceding sentence is unavailable or can not be reasonably determined for any
reason, each party involved in the particular offering shall contribute in such
proportion as is appropriate to reflect the relative benefits received (or
anticipated to be received) by it from the actual or proposed offering or
transaction. Relative fault with respect to Losses arising out of or based upon
an untrue statement or alleged untrue statement of a material fact or an
omission or alleged omission to state a material fact in the Fund II PPM or
related offering materials or any subsequent offering memorandum or related
materials related to any Other Funds shall be determined by reference to, among
other things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
relative benefits of the CIG Parties, on the one hand, and the CT Parties, on
the other hand, shall be 50/50. The parties agree that it would not be just and
equitable if contribution were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to above.
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(c) Each party, for itself and on behalf of its affiliated Indemnitee,
will not, without the prior written consent of the Indemnifying Party, settle
any pending or threatened claim or proceeding related to any Losses referenced
in Section 5.1(a) hereof unless such settlement includes a provision
unconditionally releasing the Indemnifying Party and its directors, officers,
members, employees and agents and its Affiliates and their directors, officers,
members, employees and agents and each other Person, if any, controlling any of
the foregoing from and holding the Indemnifying Party and its directors,
officers, members, employees and agents and its Affiliates and their directors,
officers, members, employees and agents and each other Person, if any,
controlling any of the foregoing harmless against all liability in respect of
claims by any releasing party related to or arising out of the matters referred
to in clauses (i) through (ii) of Section 5.1(a) hereof. The Indemnifying Party
shall also promptly reimburse each Indemnitee for all expenses (including
counsel fees) as they are incurred by an Indemnitee in connection with
investigating, preparing or defending, or providing evidence in, any pending or
threatened claim or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the Indemnitee is a party
to such claim or proceeding) or in enforcing this Agreement.
ARTICLE VI
CONFIDENTIALITY AND NON-DISCLOSURE
6.1. Confidentiality.(a) Except as otherwise provided in this Article VI,
each of the parties to this Agreement for itself and on behalf of its Affiliates
shall keep confidential and shall not disclose the transactions contemplated
herein, including, but not limited to, any information relating to the
Investment Management Fee, the Business Plan, any Candidate Mezzanine Business
Transaction, the CT Business Plan, any Proposed Fund, the Appraisal Procedures,
any arbitration under Section 4.2 hereof, and any confidential information
conveyed by one party to another in connection with a party's due diligence with
respect to the transactions contemplated herein.
(b) The obligation of confidentiality and non-disclosure set forth in
Section 6.1(a) hereof shall not apply to any information that (i) was in the
public domain prior to the date of this Agreement or prior to its conveyance by
one party to another party hereunder as contemplated herein or subsequently came
into the public domain through no fault of such party or its Affiliates, (ii)
was disclosed without restriction by, or with the prior approval of, the other
party, (iii) was lawfully obtained by the party without a binder of
confidentiality from a source other than a party, (iv) to the extent a party has
been advised by counsel that such disclosure or delivery is necessary for such
party to comply with applicable laws and regulations or to comply with any rules
of any applicable stock exchange or over-the-counter market, (v) is required to
be disclosed in order to enforce the provisions of this Agreement or any
Transaction Document, (vi) is compelled by legal or regulatory process, (vii)
has been approved by General REMI II and CT jointly for dissemination to the
public, or (viii) to the extent reasonably necessary to the conduct of such
party's business to disclose to auditors, attorneys, agents and advisers
provided each party notifies such person of the confidentiality provisions
hereof.
(c) Each party shall give the other party reasonable advance notice of
any proposed written disclosure by it under Section 6.2(b) hereof, shall use its
reasonable commercial efforts to secure confidential treatment of such
information and shall cooperate in
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good faith with the other parties to limit or restrict such disclosure upon
notice from a party to another that it wishes to so limit or restrict such
disclosure. The parties agree that notwithstanding the provisions of Section
4.2, the remedies afforded in Section 4.2 and afforded by law may be inadequate
to protect against breach of this Article VI, and hereby agree to the granting
of injunctive relief in favor of a party seeking to prevent any breach of this
Article VI without the posting of any bond or other security. For purposes of
this Article VI, Limited REMI I, General REMI II and Limited REMI II and their
respective Affiliates shall be treated as one party, and CT, CT-F1, CT-F2-GP,
CTIMCO, and CT-F2-LP and their Affiliates shall be treated as one party, so
that, by way of example and not limitation, disclosure of confidential
information by Limited REMI I to General REMI II or Limited REMI II or any of
their Affiliates shall not constitute a disclosure by General REMI II under
clauses (i) through (iii) of Section 6.2(b) hereof that shall give rise to a
disclosure by Limited REMI I, General REMI II or Limited REMI II or their
Affiliates as a lawful disclosure under such clauses (i) through (iii).
Likewise, a consent to disclose by one of the CIG Parties shall be deemed to be
a consent to such disclosure by all the CIG Parties.
(d) The parties hereto have agreed on the form, content and timing of
a mutual press release announcing the execution and delivery of this Agreement
by them and disclosing the general terms of the transactions contemplated herein
and in the Transaction Documents. The parties hereto will not, and will not
permit any of their Affiliates to, issue any other press release or make any
written public announcement relating to this Agreement or the transactions
contemplated herein or in the Transaction Documents without the prior consent of
the other parties unless such disclosure is permitted pursuant to clauses (i)
through (iv) of Section 6.1(b) hereof. Subject to the provisions of such clauses
(i) through (iv) of Section 6.1(b) hereof, no party hereto shall issue any
subsequent press releases relating to the transactions contemplated herein or in
the Transaction Documents without the prior consent of the other parties, which
consent shall not be unreasonably withheld. The CT Parties and CT shall use
reasonable efforts to preview with the CIG Parties any scripts for interviews
and the like in connection with analysts meetings, real estate industry
conferences and conventions at least 24 hours prior to their use.
ARTICLE VII
TERMINATION AND SURVIVAL
7.1. Termination. This Agreement may be terminated by the CIG Parties, on
the one hand, and by the CT Parties, on the other hand, (i) if the Fund II
Initial Closing shall not have occurred, then upon the completion of the Unwind
or upon any other liquidation/dissolution of Fund I, (ii) if the Fund II Initial
Closing shall have occurred, then upon the liquidation and dissolution of the
last to exist of all of the Funds (including Fund I), or (iii) pursuant to
Section 2.12(e) hereof.
7.2. Survival. Section 2.10(c) and Articles IV, V and VIII shall survive
the termination of this Agreement.
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ARTICLE VIII
MISCELLANEOUS
8.1. Expenses of the Transaction. Each party shall pay its own legal fees
and other expenses in connection with this Agreement and all agreements and
documents related to Fund I. Expenses with respect to final documentation
related to Fund II (e.g., the Fund II PPM, the Fund II General Partner
Agreement, the Fund II Management Agreement and the Fund II Investment
Management Agreement) will generally be borne by Fund II, provided that any
expenses not reimbursed by Fund II will be borne by the parties equally. If the
Fund II Initial Closing does not occur or if and to the extent Fund II does not
otherwise reimburse the parties' expenses incurred on behalf of Fund II,
expenses with respect to Fund II will be borne equally by the CIG Parties, on
the one hand, and the CT Parties, on the other hand.
7.2. Notices.
(a) Form and Addresses. All notices, consents, approvals, waivers,
elections and other communications (collectively, "Notices") required to be
given pursuant to this Agreement shall be given in writing and,
If to Limited REMI I: Travelers Limited Real Estate Mezzanine
--------------------- Investments I, LLC
205 Columbus Blvd., 9PB
Hartford, CT 06183-2030
Attn: Duane Nelson, Esq.
Real Estate Investment Number: 12832
With Copies to: Citigroup Investments Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attn: Mr. Michael Watson
Real Estate Investment Number: 12832
Loeb & Loeb LLP
1000 Wilshire Boulevard, Suite 1900
Los Angeles, California 90017
Attn: Andrew S. Clare, Esq.
If to General REMI II: Travelers General Real Estate Mezzanine
---------------------- Investments II, LLC
205 Columbus Blvd., 9PB
Hartford, CT 06183-2030
Attn: Duane Nelson, Esq.
Real Estate Investment Number: 12833
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With Copies to: Citigroup Investments Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attn: Mr. Michael Watson
Real Estate Investment Number: 12833
Loeb & Loeb LLP
1000 Wilshire Boulevard, Suite 1900
Los Angeles, California 90017
Attn: Andrew S. Clare, Esq.
If to Limited REMI II: Travelers Limited Real Estate Mezzanine
---------------------- Investments II, LLC
205 Columbus Blvd., 9PB
Hartford, CT 06183-2030
Attn: Duane Nelson, Esq.
Real Estate Investment Number: 12833
With Copies to: Citigroup Investments Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attn: Mr. Michael Watson
Real Estate Investment Number: 12833
Loeb & Loeb LLP
1000 Wilshire Boulevard, Suite 1900
Los Angeles, California 90017
Attn: Andrew S. Clare, Esq.
If to Capital Trust: Capital Trust, Inc.
-------------------- 605 Third Avenue, 26th Floor
New York, New York 10016
Attn: Chief Executive Officer
With Copies to: Battle Fowler LLP
--------------- 75 East 55th Street
New York, New York 10022
Attn: Thomas E. Kruger, Esq.
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If to a CT Party
----------------- c/o Capital Trust, Inc.
to such party: 605 Third Avenue, 26th Floor
-------------- New York, New York 10016
Attn: Chief Executive Officer
With Copies to: Battle Fowler LLP
--------------- 75 East 55th Street
New York, New York 10022
Attn: Thomas E. Kruger, Esq.
(b) Delivery. All notices and other communications required or
permitted by this Agreement shall be deemed to have been duly given if
personally delivered to the intended recipient at the proper address determined
pursuant to this Section 8.2 or sent to such recipient at such address by air
courier, or by hand and will be deemed given, unless earlier received: (a) if
sent by courier when recorded on the records of the courier as received by the
receiving party; and (b) if delivered by hand, on the date of receipt.
8.3. Entire Agreement. This Agreement and the Transaction Documents
supersede all prior and contemporaneous agreements and understandings among the
parties with respect to the subject matter hereof.
8.4. Modification. No change or modification of this Agreement shall be of
any force unless such change or modification is in writing and has been signed
by all of the parties hereto.
8.5. Waivers and Consents. No waiver of any breach of any of the terms of
this Agreement shall be effective unless such waiver is in writing and signed by
the Member against whom such waiver is claimed. No waiver of any breach shall be
deemed to be a waiver of any other or subsequent breach. Any consent of a party
required hereunder must be in writing and signed by such party to be effective.
No consent given by a party in any one instance shall be deemed to waive the
requirement for such party's consent in any other or future instance.
8.6. Severability. If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
8.7. Further Assurances. Each party shall execute such deeds, assignments,
endorsements, evidences of transfer and other instruments and documents and
shall give such further assurances as shall be consistent with the provisions of
this Agreement and necessary to perform its obligations hereunder.
8.8. Governing Law. This Agreement shall be governed by and be construed in
accordance with the laws of the State of New York without regard to its conflict
of laws principles.
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8.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
8.10. Brokers and Finders. Except as set forth in the Placement Agent
Agreement, the CT-F2-GP Capital Formation Agreement and the Limited REMI I
Capital Formation Agreement, each party shall indemnify and hold the other party
harmless from and against any commission, fee or other payment due any broker,
finder or other Person in connection herewith.
8.11. Construction and Interpretation. This Agreement shall not be
construed more strictly against one party than against another by reason of the
fact that it may have been prepared by counsel for one of the parties.
8.12. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each party and their respective successors and permitted
assigns.
8.13. Cumulative Remedies. Except as otherwise expressly provided in this
Agreement, the rights and remedies provided by this Agreement are cumulative and
the use of any one right or remedy by any party shall not preclude or waive its
right to use any or all other remedies. Said rights and remedies are given in
addition to any other rights the parties may have by law, statute, ordinance or
otherwise.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above stated.
CAPITAL TRUST, INC. TRAVELERS LIMITED REAL ESTATE
MEZZANINE INVESTMENTS I, LLC
By: /s/ John R. Klopp
-------------------------------
John R. Klopp By: /s/ Michael Watson
Chief Executive Officer ------------------------------
Michael Watson
Vice President
CT-F1, LLC TRAVELERS GENERAL REAL ESTATE
By: Capital Trust, Inc., sole Member MEZZANINE INVESTMENTS II, LLC
By: /s/ John R. Klopp By: /s/ Michael Wztson
------------------------------- -------------------------------
John R. Klopp Michael Watson
Chief Executive Officer Vice President
CT-F2-GP, LLC TRAVELERS LIMITED REAL ESTATE
By: Capital Trust, Inc., sole Member MEZZANINE INVESTMENTS II, LLC
By: /s/ John R. Klopp By: /s/ Michael Watson
------------------------------- ------------------------------
John R. Klopp Michael Watson
Chief Executive Officer Vice President
CT-F2-LP, LLC
By: Capital Trust, Inc., sole Member
By: /s/ John R. Klopp
-------------------------------
John R. Klopp
Chief Executive Officer
CT INVESTMENT MANAGEMENT CO., LLC
By: Capital Trust, Inc., sole Member
By: /s/ John R. Klopp
-------------------------------
John R. Klopp
Chief Executive Officer
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AMENDMENT NO. 1
TO THE
VENTURE AGREEMENT
and
CONSENT
This AMENDMENT NO. 1 TO THE VENTURE AGREEMENT and CONSENT ("Agreement
and Consent") is entered into this 7th day of April 2000, amongst Travelers
Limited Real Estate Mezzanine Investments I, LLC, a Delaware limited liability
company ("Limited REMI I"), Travelers General Real Estate Mezzanine Investments
II, LLC, a Delaware limited liability company ("General REMI II"), Travelers
Limited Real Estate Mezzanine Investments II, LLC, a Delaware limited liability
company, CT-F1, LLC, a Delaware limited liability company ("CT-F1"), CT-F2-GP,
LLC, a Delaware limited liability company, CT-F2-LP, LLC, a Delaware limited
liability company, CT Investment Management Co., LLC, a Delaware limited
liability company, and Capital Trust, Inc., a Maryland corporation.
WITNESSETH:
WHEREAS, the parties hereto are parties to that certain Venture
Agreement dated as of March 8, 2000 (the "Venture Agreement");
WHEREAS, the parties hereto desire to amend the Venture Agreement to
extend the time period within which each of Limited REMI I and CT-F1 have to
exercise their right to terminate the Venture Agreement pursuant to Section
2.12(e) of the Venture Agreement; and
WHEREAS, CT has requested that General REMI II consent to an extension
of the 30-day period referenced in Section 2.3 of the Venture Agreement for the
filing by CT with the SEC of its preliminary proxy and form of proxy relating to
the approval by CT's stockholders of the Warrant Issuance, and General REMI II
wishes to consent to such extension;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Certain Definitions. Capitalized terms used in this
Agreement and Consent without definition shall have the meanings set forth in
the Venture Agreement.
Section 2. Amendment. The first sentence of Section 2.12(e) of the
Venture Agreement is hereby amended to delete the words "if within 30 days of
the date hereof" and replacing them with the words "if within 48 days of the
date hereof (i.e., April 24, 2000)".
<PAGE>
Section 3. Consent. Pursuant to Section 2.3 of the Venture Agreement,
CT hereby requests that General REMI II consent, and General REMI II hereby
consents, to an extension for an additional fifteen (15) days of the period
during which CT shall prepare and file with the SEC its preliminary proxy
statement and form of proxy relating to the approval by CT's stockholders of the
Warrant Issuance.
Section 4. Miscellaneous.
(a) Ratification. Except as expressly amended hereby, all of the
terms, provisions and conditions of the Venture Agreement are hereby
ratified and confirmed in all respects by each party hereto and, except as
expressly amended hereby, are, and hereafter shall continue, in full force
and effect.
(b) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each party and their respective successors and
permitted assigns.
(c)Governing Law. This Agreement shall be governed by and be construed
in accordance with the laws of the State of New York without regard to its
conflict of laws principles.
(d) Counterparts . This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above stated.
CAPITAL TRUST, INC. TRAVELERS LIMITED REAL ESTATE
MEZZANINE INVESTMENTS I, LLC
By:/s/ John R. Klopp
---------------------------- By: /s/ Michael Watson
John R. Klopp ------------------------------
Chief Executive Officer Michael Watson
Vice President
CT-F1-GP,LLC
By: Capital Trust, Inc., sole Member TRAVELERS GENERAL REAL ESTATE
MEZZANINE INVESTMENTS II, LLC
By: /s/ John R. Klopp
---------------------------- By: /s/ Michael Watson
John R. Klopp ------------------------------
Chief Executive Officer Michael Watson
CT-F2-GP,LLC
By: Capital Trust, Inc., sole Member TRAVELERS LIMITED REAL ESTATE
MEZZANINE INVESTMENTS II, LLC
By: /s/ John R. Klopp
---------------------------- By: /s/ Michael Watson
John R. Klopp ------------------------------
Chief Executive Officer Michael Watson
Vice President
CT-F2-LP,LLC
By: Capital Trust, Inc.,sole Member
By: /s/ John R. Klopp
----------------------------
John R. Klopp
Chief Executive Officer
CT INVESTMENT MANAGEMENT CO.,
LLC
By: Capital Trust, Inc.,sole Member
By: /s/ John R. Klopp
----------------------------
John R. Klopp
Chief Executive Officer
<PAGE>
AMENDMENT NO. 2
TO THE
VENTURE AGREEMENT
and
CONSENT
This AMENDMENT NO. 2 TO THE VENTURE AGREEMENT and CONSENT ("Agreement
and Consent") is entered into this 21st day of April 2000, amongst Travelers
Limited Real Estate Mezzanine Investments I, LLC, a Delaware limited liability
company ("Limited REMI I"), Travelers General Real Estate Mezzanine Investments
II, LLC, a Delaware limited liability company ("General REMI II"), Travelers
Limited Real Estate Mezzanine Investments II, LLC, a Delaware limited liability
company, CT-F1, LLC, a Delaware limited liability company ("CT-F1"), CT-F2-GP,
LLC, a Delaware limited liability company, CT-F2-LP, LLC, a Delaware limited
liability company, CT Investment Management Co., LLC, a Delaware limited
liability company, and Capital Trust, Inc., a Maryland corporation.
WITNESSETH:
WHEREAS, the parties hereto are parties to that certain Venture
Agreement dated as of March 8, 2000 (the "Venture Agreement");
WHEREAS, the parties hereto desire to amend the Venture Agreement to
extend the time period within which each of Limited REMI I and CT-F1 have to
exercise their right to terminate the Venture Agreement pursuant to Section
2.12(e) of the Venture Agreement; and
WHEREAS, CT has requested that General REMI II consent to an extension
of the 30-day period referenced in Section 2.3 of the Venture Agreement for the
filing by CT with the SEC of its preliminary proxy and form of proxy relating to
the approval by CT's stockholders of the Warrant Issuance, and General REMI II
wishes to consent to such extension;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Certain Definitions. Capitalized terms used in this Agreement
and Consent without definition shall have the meanings set forth in the Venture
Agreement.
Section 2. Amendment.
2.1. The first sentence of Section 2.12(e) of the Venture Agreement is
hereby amended to delete the words "if within 48 days of the date hereof" and
replacing them with the words "if within 64 days of the date hereof (i.e., May
10, 2000)".
2.2. The fourth sentence of Section 2.3 of the Venture Agreement is hereby
amended to delete the words "subject to extension for an additional fifteen (15)
days" and replacing them with the words "subject to extension for an additional
thirty-one (31) days".
Section 3. Consent. Pursuant to Section 2.3 of the Venture Agreement, as
amended, CT hereby requests that General REMI II consent, and General REMI II
hereby consents, to an
<PAGE>
extension for an additional thirty-one (31) days (i.e., until May 10, 2000) of
the period during which CT shall prepare and file with the SEC its preliminary
proxy statement and form of proxy relating to the approval by CT's stockholders
of the Warrant Issuance.
Section 4. Miscellaneous.
(a) Ratification. Except as expressly amended hereby, all of
the terms, provisions and conditions of the Venture Agreement are hereby
ratified and confirmed in all respects by each party hereto and, except as
expressly amended hereby, are, and hereafter shall continue, in full force
and effect.
(b) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of each party and their respective successors
and permitted assigns. Governing Law. This Agreement shall be governed by
and be construed in accordance with the laws of the State of New York
without regard to its conflict of laws principles.
(d) Counterparts . This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date first above
stated.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above stated.
CAPITAL TRUST, INC. TRAVELERS LIMITED REAL ESTATE
MEZZANINE INVESTMENTS I, LLC
By:/s/ John R. Klopp
---------------------------- By: /s/ Michael Watson
John R. Klopp ------------------------------
Chief Executive Officer Michael Watson
Vice President
CT-F1-GP,LLC
By: Capital Trust, Inc., sole Member TRAVELERS GENERAL REAL ESTATE
MEZZANINE INVESTMENTS II, LLC
By: /s/ John R. Klopp
---------------------------- By: /s/ Michael Watson
John R. Klopp ------------------------------
Chief Executive Officer Michael Watson
CT-F2-GP,LLC
By: Capital Trust, Inc., sole Member TRAVELERS LIMITED REAL ESTATE
MEZZANINE INVESTMENTS II, LLC
By: /s/ John R. Klopp
---------------------------- By: /s/ Michael Watson
John R. Klopp ------------------------------
Chief Executive Officer Michael Watson
Vice President
CT-F2-LP,LLC
By: Capital Trust, Inc.,sole Member
By: /s/ John R. Klopp
----------------------------
John R. Klopp
Chief Executive Officer
CT INVESTMENT MANAGEMENT CO.,
LLC
By: Capital Trust, Inc.,sole Member
By: /s/ John R. Klopp
----------------------------
John R. Klopp
Chief Executive Officer
<PAGE>
ANNEX B
MORGAN STANLEY DEAN WITTER
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
March 13, 2000
Board of Directors
Capital Trust, Inc.
605 Third Avenue, 26th Floor
New York, NY 10016
Members of the Board:
We understand that Capital Trust, Inc. and its affiliates (collectively
"CT" or the "Company") may participate in a proposed transaction to co-sponsor
pooled investment vehicles that will originate and hold primarily commercial
real estate mezzanine loans with affiliates of Citigroup Investments, Inc.
(collectively "CIG"). We understand the terms of the transaction would provide,
among other things, for (1) the execution of a Venture Agreement between CT and
CIG, substantially in the form of the draft dated March 5, 2000 (the "Venture
Agreement"), which provides for the co-sponsorship by CT and CIG of pooled
investment vehicles (each, a "Pooled Vehicle"), (2) formation, pursuant to the
Venture Agreement, of a $200 million joint venture in which CIG shall contribute
$150 million and CT shall contribute $50 million and in which CIG and CT shall
be the only members and the only investors ("Fund I"), (3) the planned formation
of at least one other Pooled Vehicle (the aggregate capital commitments of which
will total at least $496 million, of which no more than $116.7 million and $62.5
million will be required to come from CIG and CT respectively) co-sponsored by
CT and CIG that will offer interests to third parties ("Fund II and Subsequent
Funds") (Fund I and Fund II and Subsequent Funds are collectively referred to as
the "Funds"), (4) issuance to CIG of warrants to purchase 4.25 million shares of
class A common stock, par value $.01 per share, of CT (the "Common Stock") upon
the closing of Fund I and warrants to purchase up to 5.25 million shares of
Common Stock upon the closing of Fund II and Subsequent Funds (the "CIG
Warrants") contingent upon capital commitments and stockholder approval, (5)
designation by CIG of two persons for which management agrees to vote in favor
of election to CT's Board of Directors, (6) future modification of certain terms
of the Indenture Agreement and the Preferred Securities Agreements (each as
defined below) and certain other agreements ancillary thereto, including the
termination of the Co-Investment Agreement (as defined below), (such
modifications pursuant to such agreements are collectively referred to as the
"CTP Modification"), and (7) the obligation of CT to make an election to be
treated as a real estate investment trust (a "REIT") under Section 857 et seq.
of the Internal Revenue Code as soon as practicable including via a merger with
an
<PAGE>
MORGAN STANLEY DEAN WITTER
existing REIT ("REIT Conversion") (all of the foregoing transactions are
collectively the "Transaction").
You have asked for our opinion as to whether the consideration to be
given by CT pursuant to the Transaction is fair from a financial point of view
to CT.
For purposes of the opinion set forth herein, we have:
i. reviewed the draft dated January 28, 2000 of the Citigroup /
Capital Trust Mezzanine Venture Summary of Terms document;
ii. reviewed the draft Venture Agreement and certain other
documents;
iii. reviewed the 8.25% Step Up Convertible Junior Subordinated
Debentures Indenture Agreement between Capital Trust and
Wilmington Trust Company dated July 28, 1998 ("Indenture
Agreement");
iv. reviewed the Preferred Securities Purchase Agreement among CT,
CT Convertible Trust I and Vornado Realty L.P., EOP Operating
Limited Partnership, and Mellon Bank N.A. as trustee for
General Motors Hourly-Rate Employees Pension Trust, and Mellon
Bank N.A. as trustee for General Motors Salaried Employees
Pension Trust dated July 28, 1998, and reviewed the CT
Convertible Trust I Declaration of Trust among Capital Trust
and John R. Klopp, Sheli Z. Rosenberg, and Wilmington Trust
Company ("Preferred Securities Agreements") each of which
relate to the 8.25% Step Up Convertible Trust Preferred
Securities of CT Convertible Trust I (the "CTP Securities");
v. reviewed the Co-investment Agreement among Capital Trust,
Vornado Realty L.P., EOP Operating Limited Partnership, and
General Motors Investment Management Corporation dated July
28, 1998 (the "Co-Investment Agreement");
vi. reviewed the form of the draft dated March 7, 2000 of the CTP
Modification Term Sheet (the "CTP Modification Term Sheet");
vii. reviewed certain publicly available financial statements and
other information of the Company;
viii. reviewed certain internal financial statements and other
financial and operating data, prepared by CT, with respect to
the Transaction;
ix. reviewed and analyzed certain financial projections and
models, prepared by CT, with respect to the Transaction;
x. discussed the past and current operations and financial
condition and the prospects of CT, including certain
financial, operational and strategic benefits expected from
the Transaction, with senior executives of CT;
xi. reviewed the reported prices and trading activity for the
Common Stock;
<PAGE>
MORGAN STANLEY DEAN WITTER
xii. compared the financial performance of the Company and the
prices and trading activity of the Common Stock with that of
certain other comparable publicly-traded companies and their
securities;
xiii. discussed the terms and conditions of the proposed Transaction
with senior executives of CT;
xiv. performed certain valuation analyses with respect to the CTP
Securities and the CIG Warrants; and
xv. performed such other analyses and considered such other
factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information supplied or otherwise made
available to us by CT for the purposes of this opinion. With respect to the
financial estimates and projections prepared by CT, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of management personnel of CT with respect to the
expected future financial performance of the Funds and CT respectively. We have
further assumed that CT is eligible to make, and will successfully complete, the
REIT Conversion. We have not made or been furnished with any independent
appraisal of the assets or liabilities of the Funds or of CT. Our opinions are
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of CT in
connection with this transaction and will receive a fee for our services,
including a transaction fee, which is contingent upon the formation of at least
one Pooled Vehicle. In the past, Morgan Stanley & Co. Incorporated and its
affiliates have provided financial advisory and financing services for CT
(including acting as lender to CT), Citigroup and certain of their respective
affiliates and have received fees for the rendering of these services.
In arriving at our opinion, we were not asked to consider alternatives
other than the Transaction, nor did we solicit interest from any other party
with respect to the Transaction or other alternatives.
It is understood that this letter is for the information of the Board
of Directors of CT only and may not be used for any other purpose without our
prior written consent (such consent not to be unreasonably withheld), except
that the Opinion may be disclosed to CT's legal advisers and legal advisers to
CT's Board of Directors, and a copy of our Opinion may also be included, in its
entirety, in any filing made by CT with the Securities and Exchange Commission
with respect to the Transaction. In addition, Morgan Stanley expresses no
opinion or recommendation as to how the shareholders of CT should vote at any
shareholders' meeting held in connection with the Transaction.
<PAGE>
MORGAN STANLEY DEAN WITTER
<PAGE>
MORGAN STANLEY DEAN WITTER
Based on the foregoing, we are of the opinion on the date hereof that
the consideration to be given by CT in connection with the Transaction is fair
from a financial point of view to CT.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ J.E. Hoke Slaughter
----------------------------------------
J.E Hoke Slaughter
Managing Director
<PAGE>
ANNEX C
CAPITAL TRUST, INC.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: Capital Trust, Inc., a Maryland corporation (the "Corporation"),
hereby amends its charter as currently in effect as follows:
1. The first paragraph of Article FIRST of the Articles Supplementary
classifying and designating 12,639,405 shares of Preferred Stock, as shares of
Class A 9.5% Cumulative Convertible Preferred Stock, par value $.01 per share,
is hereby amended by deleting the number "12,639,405", and replacing it with the
number "4,213,135".
2. The first paragraph of Article FIRST of the Articles Supplementary
classifying and designating 12,639,405 shares of Preferred Stock, as shares of
Class B 9.5% Cumulative Convertible Non-Voting Preferred Stock, par value $.01
per share, is hereby amended by deleting the number "12,639,405", and replacing
it with the number "4,213,135".
3. Immediately upon the acceptance of these Articles of Amendment for
record (the "Effective Time") by the State Department of Assessments and
Taxation of Maryland ("SDAT"), every three shares of Common Stock, par value
$.01 per share, of the Corporation, which were issued and outstanding
immediately prior to the Effective Time shall automatically and without any
action on the part of the holder thereof be changed into one issued and
outstanding share of Common Stock, par value $.01 per share, of the same class,
and every three shares of Preferred Stock, par value $.01 per share, of the
Corporation, which were issued and outstanding immediately prior to the
Effective Time shall automatically and without any action on the part of the
holder thereof be changed into one issued and outstanding share of Preferred
Stock, par value $.01 per share, of the same class, subject to the treatment of
fractional interests in shares of Common Stock and Preferred Stock resulting
from the change described below. No certificates or scrip representing
fractional share interests in Common Stock or Preferred Stock shall be issued,
and no fractional share interest shall entitle the holder thereof to vote, or to
any rights as a stockholder of the Corporation. A stockholder shall receive, in
lieu of any fractional share interest in Common Stock or Preferred Stock to
which the stockholder would otherwise be entitled, a cash payment therefor equal
to the product obtained by multiplying (1) the closing price per share of Class
A Stock on the New York Stock Exchange on the day immediately preceding the
Effective Time, as reported on the composite tape of the New York Stock
Exchange, Inc. (or in the event the Class A Stock is not so traded on the day
immediately preceding the Effective Time, such closing price on the next
preceding day on which such stock was traded on the New York Stock Exchange), or
in the event the Class A Stock is not traded on the New York Stock Exchange, the
fair value per share as determined solely in the discretion of the Board of
Directors,
<PAGE>
by (2) the number of shares of Common Stock or Preferred Stock, as the case may
be, outstanding immediately prior to the Effective Time that would otherwise
have been changed into a fractional interest in Common Stock or Preferred Stock.
Each holder of a certificate which immediately prior to the Effective Time
represented outstanding shares of Common Stock or Preferred Stock (an "Old
Certificate") shall be entitled to receive upon surrender of such Old
Certificate to the transfer agent of the Corporation for cancellation, a
certificate (a "New Certificate") representing the number of whole shares of
Common Stock or Preferred Stock, as the case may be, into which and for which
the shares formerly represented by the Old Certificates so surrendered, are
changed into under the terms hereof. If more than one Old Certificate shall be
surrendered at one time for the account of the same stockholder, the number of
whole shares of Common Stock or Preferred Stock, as the case may be, for which
New Certificates shall be issued shall be computed on the basis of the aggregate
number of shares represented by the Old Certificates so surrendered.
SECOND: These Articles of Amendment of the Corporation have been duly
advised by the Board of Directors of the Corporation and approved by the
stockholders of the Corporation as required by law.
THIRD: The undersigned President acknowledges these Articles of
Amendment to be the corporate act of the Corporation and as to all matters or
facts required to be verified under oath, the undersigned President acknowledges
that to the best of his knowledge, information and belief, these matters and
facts are true in all material respects and that this statement is made under
the penalties for perjury.
-2-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed in its name and on its behalf by its President and
attested to by its Assistant Secretary on this ___ day of June, 2000.
ATTEST: CAPITAL TRUST, INC.
By:
- --------------------------- -----------------------(SEAL)
Edward L. Shugrue III John R. Klopp
Assistant Secretary President
-3-
<PAGE>
CAPITAL TRUST, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CAPITAL TRUST, INC. FOR
THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 21, 2000.
The undersigned stockholder of Capital Trust, Inc., a Maryland
corporation (the "Company"), hereby appoints John R. Klopp and Edward L. Shugrue
III, or either of them, with full power of substitution in each of them, to
attend the special meeting of stockholders of the Company to be held at the Penn
Club of New York, 30 West 44th Street, New York, New York 10036, on Wednesday,
June 21, 2000 at 10:00 a.m., local time, or any adjournment or postponement
thereof, to cast on behalf of the undersigned all votes that the undersigned is
entitled to cast at such meeting and otherwise to represent the undersigned at
the meeting, with all powers possessed by the undersigned if personally present
at the meeting. The undersigned hereby acknowledges receipt of the Notice of the
Special Meeting of Stockholders and of the accompanying Proxy Statement and
revokes any proxy heretofore given with respect to such meeting.
The votes entitled to be cast by the undersigned will be cast as
instructed below. If this Proxy is executed but no instruction is given, the
votes entitled to be cast by the undersigned will be cast "for" each of the
proposals as described in the Proxy Statement and in the discretion of the Proxy
holder on any other matter that may properly come before the meeting or any
adjournment or postponement thereof. Please mark your choice like this: x .
OUR BOARD OF DIRECTORS RECOMMENDS VOTES "FOR" PROPOSALS 1 AND 2.
1. On the proposal to approve and ratify the warrant transaction pursuant
to which additional warrants may be issued for ultimate ownership by
one or more affiliates of Citigroup Investments Inc.
(check one box) / / For / / Against / / Abstain
2. On the proposal to approve an amendment to our charter that would
effect a one (1) for three (3) reverse stock split.
(check one box) / / For / / Against / / Abstain
3. To vote and otherwise represent the undersigned on any other matter
that may properly come before the meeting or any adjournment or
postponement thereof in the discretion of the Proxy holder.
/ / CHECK HERE ONLY IF YOU PLAN TO ATTEND THE MEETING IN PERSON.
You may revoke or change your proxy at any time prior to its use at the special
meeting by giving us written notice to revoke it, by signing, dating and
returning to us a new proxy or by attending the special meeting and voting in
person. Your attendance at the special meeting will not by itself revoke a proxy
given by you. Written notice of revocation or subsequent proxy should be sent to
Capital Trust, Inc. c/o American Stock Transfer & Trust Company, 6201 Fifteenth
Avenue, Brooklyn, New York 11219, Attention: Paula Caroppoli, or hand-delivered
to Capital Trust, Inc. c/o American Stock Transfer & Trust Company, so as to be
delivered at or before the taking of the vote at the special meeting.
(Continued and to be signed on the reverse side)
<PAGE>
Date: ____________________, 2000
-----------------------------------
Signature (title, if any)
-----------------------------------
Signature, if held jointly
Please sign exactly as name appears
on the records of the Company and
date. If the shares are held jointly,
each holder should sign. When
signing as an attorney, executor,
administrator, trustee, guardian,
officer of a corporation or other
entity or in another representative
capacity, please give the full title
under signature(s).
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TODAY. YOU MAY REVOKE THIS PROXY IN THE MANNER DESCRIBED ABOVE AT ANY
TIME PRIOR TO THE TAKING OF A VOTE ON THE MATTERS DESCRIBED HEREIN.
