UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Capital Trust
- -------------------------------------------------------------------------------
(Name of Issuer)
Class A Common Shares of Beneficial Interest
- -------------------------------------------------------------------------------
(Title of Class of Securities)
140920 10 9
- -------------------------------------------------------------------------------
(CUSIP Number)
Thomas E. Kruger, Esq.
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
(212) 856-7000
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
July 15, 1997
- -------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act.
617501.1
<PAGE>
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CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Veqtor Finance Company, LLC
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, BK
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
19,227,251
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY -0-
OWNED BY EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 19,227,251
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,227,251
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
90%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
617501.1
<PAGE>
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CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CalREIT Investors Limited Partnership
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, B
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Illinois
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH -0-
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
19,227,251
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,227,251
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
90%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
617501.1
<PAGE>
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CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SZ Investments, LLC
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, BK
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH -0-
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
19,227,251
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,227,251
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
90%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
617501.1
<PAGE>
- ---------------------
CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Zell General Partnership, Inc.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, BK
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Illinois
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON WITH ----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
19,227,251
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,227,251
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
90%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
617501.1
<PAGE>
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CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Samuel Zell Revocable Trust U/T/A
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, BK
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL
PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Illinois
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH -0-
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
19,227,251
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,227,251
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
90%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
617501.1
<PAGE>
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CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Samuel Zell
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, BK
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH -0-
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
19,227,251
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,227,251
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
90%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
617501.1
<PAGE>
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CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
V2 Holdings LLC
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, BK
- -------------------------------------------------------------------------------
5 CHECK BOX I DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH -0-
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
19,227,251
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,227,251
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
90%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
617501.1
<PAGE>
- ---------------------
CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
John R. Klopp
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, BK
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH -0-
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
19,227,251
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,227,251
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
90%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
617501.1
<PAGE>
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CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Craig M. Hatkoff
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, BK
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH -0-
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
19,227,251
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,227,251
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
90%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
617501.1
<PAGE>
- ---------------------
CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
This Schedule 13D reflects (i) the reclassification on July 15, 1997
of the common shares of beneficial interest, $1.00 par value, of California Real
Estate Investment Trust, a California business trust (the "Company"), as class A
common shares of beneficial interest, $1.00 par value, in the Company and (ii)
the change in the name of the Company on July 15, 1997 to "Capital Trust."
Item 1. Security and Issuer.
This statement relates to the class A common shares of beneficial
interest, $1.00 par value (the "Class A Common Shares"), in Capital Trust, a
California business trust (the "Issuer"), whose principal office is 885 Third
Avenue, 12th Floor, New York, New York 10022.
Item 2. Identity and Background.
This statement is filed by: (i) Veqtor Finance Company, LLC, a
Delaware limited liability company ("VFC"); (ii) CalREIT Investors Limited
Partnership, an Illinois limited partnership and a managing member of VFC
("CRIL"); (iii) SZ Investments, LLC, a Delaware limited liability company and
the sole general partner of CRIL, ("SZI"); (iv) Zell General Partnership, Inc.,
an Illinois corporation and the sole managing member of SZI ("Zell GP"); (v) the
Samuel Zell Revocable Trust, a trust formed under Illinois law pursuant to a
trust agreement, dated December 17, 1990, and the sole stockholder of Zell GP
("Zell Trust"); (vi) Mr. Samuel Zell, a citizen of the United States and the
trustee of Zell Trust; V2 Holdings LLC, a Delaware limited liability company and
a member of VFC ("V2H"); (vii) Mr. John R. Klopp, a citizen of the United States
and a member of V2H; and (viii) Craig M. Hatkoff a citizen of the United States
and a managing member of V2H. The foregoing persons are hereinafter referred to
as the "Reporting Persons."
The principal place of business of each of CRIL, SZI, Zell GP, Zell
Trust and Mr. Zell is c/o Equity Group Investments, Inc., Two North Riverside
Plaza, Chicago, Illinois 60606. The principal place of business of each of VFC,
V2H, and Messrs. Klopp and Hatkoff is 885 Third Avenue, 12th Floor, New York,
New York 10022.
VFC was formed to purchase and hold the securities of the Issuer
discussed in Item 3 below. The principal business purpose of CRIL is to hold its
membership interest in VFC. The principal business purpose of SZI is to invest
in investment securities. The principal business purpose of Zell GP is to serve
as general partner or member of partnerships or limited liability companies in
which certain of its affiliates own equity interests. Mr. Zell is a trustee and
chairman of the board of trustees of the Issuer.
The principal business purpose of V2H is to hold its membership
interest in VFC. Mr. Klopp is a trustee, vice chairman and chief executive
officer of the Issuer. Mr. Hatkoff is a trustee, vice chairman and chairman of
executive committee of the board of trustees of the Issuer.
Attached as Appendix A to Item 2 is information concerning the
directors, executive officers and stockholder of Zell GP, which is required to
be disclosed pursuant to Item 2 and General Instruction C to Schedule 13D.
None of the Reporting Persons nor, to their knowledge, any of the
individuals listed in Appendix A to Item 2, has, during the last five years (i)
been convicted in a criminal proceeding (excluding
617501.1
<PAGE>
- ---------------------
CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
traffic violations or similar misdemeanors) or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
Item 3. Source and Amount of Funds or Other Consideration.
VFC funded the $54,298,815 aggregate purchase price for the 6,959,593
Class A Common Shares and the 12,267,658 class A 9.5% cumulative convertible
preferred shares of beneficial interest, $1.00 par value, in the Issuer ("Class
A Preferred Shares") (which are convertible into Class A Common Shares at the
rate of one Class A Common Share for each Class A Preferred Share) with funds
obtained from the $5,000,000 of capital contributions of its members and from
the $50,000,000 of borrowings under notes issued to BankAmerica Investment
Corporation, Banc Boston Investments, Inc., First Chicago Capital Corporation
and Wells Fargo & Company.
Item 4. Purpose of Transaction.
The Reporting Persons have acquired the securities of the Issuer
reported herein pursuant to the plans presented to and approved by the board of
trustees of the Issuer to have the Issuer pursue a new business plan to be
implemented by a new management team following a preferred equity investment of
not less than $30 million. Following the Issuer's annual meeting of
shareholders, the new management team was appointed, the preferred equity
investment in the form of the purchase of the Class A Preferred Shares reported
in Item 3 above was consummated and the Issuer commenced full implementation of
the business plan under the direction of a newly elected board of trustees,
which include Messrs. Klopp, Hatkoff and Zell. The Reporting Persons intend to
hold the securities of the Issuer reported herein for investment purposes, but
reserve the right to consider various alternatives for their investment in the
Issuer including pursuing or advancing:
(a) the acquisition of additional securities of the Issuer, or the
disposition of securities of the Issuer in the open market or otherwise; (b) an
extraordinary corporate transaction, such as a merger or liquidation, involving
the Issuer; (c) a sale or transfer of a material amount of assets of the Issuer;
(d) a change in the present board of trustees or management of the Issuer; (e) a
material change in the present dividend policy of the Issuer; (f) other material
changes in the Issuer's business or corporate structure; (g) changes in the
Issuer's amended and restated declaration of trust or bylaws or other actions
which may impede the acquisition of control of the Issuer by a person; or (h)
actions similar to those enumerated above.
The Reporting Persons' determination with respect to the foregoing
possibilities will depend upon various factors, including, but not limited to,
the Reporting Persons' evaluation of the Issuer and its prospects, general
market and economic conditions (including conditions affecting the real estate
market in general), other opportunities available to the Reporting Persons and
other factors the Reporting Persons may deem relevant to their investment
decision.
Item 5. Interest in Securities of the Issuer.
(a) and (b) The aggregate percentage of shares of Class A Common
Shares reported beneficially owned by the Reporting Persons is based upon
9,137,335 Class A Common Shares outstanding
617501.1
<PAGE>
- ---------------------
CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
as reported in the Issuer's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997. The Reporting Persons beneficially own (i) 6,959,593 Class
A Common Shares and (ii) 12,267,658 Class A Preferred Shares, which may be
converted into 12,267,658 Class A Common Shares which shares represent
approximately 90% of the outstanding Class A Common Shares (calculated in
accordance with Rule 13d-3). VFC holds of record and thereby directly
beneficially owns and has the sole power to vote and dispose of the foregoing
Class A Common Shares (and the Class A Common Shares into which the Class A
Preferred Shares may be converted (the "Reported Shares"). CRIL, SZI, Zell GP,
Zell Trust, Mr. Zell, V2H, Mr. Klopp and Mr. Hatkoff share the indirect power to
vote or dispose of the Reported Shares that are beneficially owned directly by
VFC.
(c) On July 15, 1997, following the Issuer's annual meeting of
shareholders, VFC purchased from the Issuer 12,267,658 Class A Preferred Shares
pursuant to the terms of the preferred share purchase agreement, dated as of
June 16, 1997, by and between the Issuer and VFC. The aggregate purchase price
for the Class A Preferred Shares was $33,000,000. In addition, concurrently with
the foregoing, pursuant to the terms of a common share purchase agreement VFC
purchased from CRIL 6,959,593 common shares of beneficial interest, $1.00 par
value, of the Issuer (which shares were reclassified on July 15, 1997 as Class A
Common Shares). The aggregate purchase price for the Class A Common Shares was
$21,298,815.
(d) No other person is known to have the right to receive or the power
to direct the receipt of dividends from, or the proceeds from the sale of, the
Class A Common Shares reported herein.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with respect to
Securities of the Issuer.
The Limited Liability Company Agreement of VFC, dated as of June 16,
1997 (the "LLC Agreement"), provides for the allocation of profits and losses
from VFC's activities, including its investment in the Class A Common Shares and
the Class A Preferred Shares, between and among its members and the voting and
disposition of the Class A Common Shares and the Class A Preferred Shares owned
by VFC. A copy of the LLC Agreement is attached hereto Exhibit 1, and is
incorporated herein by reference.
The VFC Investment Agreement, among VFC, CRIL, V2H, and Messrs. Klopp
and Hatkoff, dated as of July 15, 1997 (the "Investment Agreement"), provides
for buy/sell provisions pursuant to which one member of VFC may purchase from or
sell to the other member its interests in VFC or one member of V2H or CRIL may
purchase the other V2H member's interest in V2H. A copy of the Investment
Agreement is attached hereto Exhibit 2, and is incorporated herein by reference.
Item 7. Material to be Filed as Exhibits.
Exhibit No. Description
1. Joint Filing Agreement and Power of Attorney, dated July 15,
1997.
617501.1
<PAGE>
- ---------------------
CUSIP No. 140920 10 9 SCHEDULE 13D
- ---------------------
2. Limited Liability Company Agreement of Veqtor Finance Company,
LLC ("VFC"), dated as of June 16, 1997, among CalREIT Investors
Limited Partnership, V2 Holdings LLC and the persons who became
members of VFC from time to time in accordance with the
provisions thereof.
3. VFC Investment Agreement, dated as of July 15, 1997, among Veqtor
Finance Company, LLC, CalREIT Investors Limited Partnership, V2
Holdings LLC, John R. Klopp and Craig M. Hatkoff.
4. 12% Convertible Redeemable Note Purchase Agreement, dated as of
June 16, 1997, by and between Veqtor Finance Company, LLC and the
investors listed on the signature page thereto.
617501.1
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct and agrees that this statement may be
filed jointly with the other undersigned party.
Dated: July 25, 1997
CalREIT Investors Limited Partnership
By: SZ Investments, LLC
its general partner
By: Zell General Partnership, Inc.,
its managing member
By: /s/ Samuel Zell
-------------------------------
Name: Samuel Zell
Title: President
SZ Investments, LLC
By: Zell General Partnership, Inc.,
its managing member
By: /s/ Samuel Zell
-------------------------------
Name: Samuel Zell
Title: President
Zell General Partnership, Inc.
By: /s/ Samuel Zell
-----------------------------------
Name: Samuel Zell
Title: President
Samuel Zell Revocable Trust
By: /s/ Samuel Zell
-----------------------------------
Name: Samuel Zell
Title: Trustee
Samuel Zell
By: /s/ Samuel Zell
-----------------------------------
Name: Samuel Zell
Title: Samuel Zell
617501.1
<PAGE>
V2 Holdings LLC
By: John R. Klopp
its member
/s/ John R. Klopp
----------------------------
John R. Klopp
John R. Klopp
/s/ John R. Klopp
----------------------------
John R. Klopp
Craig M. Hatkoff
/s/ Craig M. Hatkoff
----------------------------
Craig M. Hatkoff
617501.1
<PAGE>
APPENDIX A TO ITEM 2
Set forth below is information concerning the directors, executive
officers and sole stockholder of Zell General Partnership, Inc., which is the
sole managing member of SZ Investments, LLC, the sole general partner of CalREIT
Investors Limited Partnership. Each of the individuals identified below is a
United States citizen.
Samuel Zell is the sole director of Zell General Partnership, Inc. Mr.
Zell, as trustee of the Samuel Zell Revocable Trust, under trust agreement,
dated December 17, 1990, is the sole stockholder of Zell General Partnership,
Inc. The principal executive officers of Zell General Partnership, Inc. are as
follows:
Samuel Zell President
Sheli Z. Rosenberg Vice President
Donald J. Liebentritt Vice President
Rod F. Dammeyer Vice President
The principal occupation of Mr. Zell is Chairman of Equity Group
Investments, Inc. ("EGI"), a privately held investment company engaged in the
acquisition and management of real estate and other commercial enterprises. The
principal occupation of Ms. Rosenberg is President and Chief Executive Officer
of EGI. The principal occupation of Mr. Liebentritt is Executive Vice President
and General Counsel of EGI and Chairman of the law firm Rosenberg & Liebentritt,
P.C. The principal occupation of Mr. Dammeyer is Managing Director of EGI
Corporate Investments, a division of EGI. The business address of Messrs. Zell,
Liebentritt and Dammeyer and Ms. Rosenberg is c/o Equity Group Investments,
Inc., Two North Riverside Plaza, Chicago, Illinois 60606.
617501.1
Exhibit 1
JOINT FILING AGREEMENT AND POWER OF ATTORNEY
(i) Joint Filing. Each of the undersigned persons does hereby agree to
jointly file with the Securities and Exchange Commission a Schedule 13D on
behalf of each of them with respect to their beneficial ownership of class A
common shares of beneficial interest, $1.00 par value, in Capital Trust.
(j) Power of Attorney. Know all persons by these presents that each person
whose signature appears below constitutes and appoints Samuel Zell and John R.
Klopp, and each of them, as his true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments to the Schedule 13D filed on behalf of each of them with respect to
their beneficial ownership of securities of Capital Trust, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or such person or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: July 25, 1997
CalREIT Investors Limited Partnership
By: SZ Investments, LLC
its general partner
By: Zell General Partnership, Inc.,
its managing member
By: /s/ Samuel Zell
-------------------------------
Name: Samuel Zell
Title: President
SZ Investments, LLC
By: Zell General Partnership, Inc.,
its managing member
By: /s/ Samuel Zell
-------------------------------
Name: Samuel Zell
Title: President
617501.1
<PAGE>
Zell General Partnership, Inc.
By: /s/ Samuel Zell
-----------------------------------
Name: Samuel Zell
Title: President
Samuel Zell Revocable Trust
By: /s/ Samuel Zell
-----------------------------------
Name: Samuel Zell
Title: Trustee
Samuel Zell
By: /s/ Samuel Zell
-----------------------------------
Name: Samuel Zell
Title: Samuel Zell
617501.1
<PAGE>
V2 Holdings LLC
By: John R. Klopp
its member
/s/ John R. Klopp
----------------------------
John R. Klopp
John R. Klopp
/s/ John R. Klopp
----------------------------
John R. Klopp
Craig M. Hatkoff
/s/ Craig M. Hatkoff
----------------------------
Craig M. Hatkoff
617501.1
Exhibit 2
LIMITED LIABILITY COMPANY AGREEMENT OF
VEQTOR FINANCE COMPANY, LLC
This Limited Liability Company Agreement of Veqtor Finance Company,
LLC, a Delaware limited liability company (the "Company"), is made as of June
16, 1997, among CalREIT Investors Limited Partnership, an Illinois limited
partnership ("CRIL"), and V2 Holdings LLC, a Delaware limited liability company
("V2H"), both as Common Members (as defined herein) and as the Managing Members,
and the Persons (as defined below) who become Members of the Company from time
to time in accordance with the provisions hereof (collectively, the "Members").
WHEREAS, the Common Members have formed the Company under the Delaware
Limited Liability Company Act, 6 Del. C. Section 18-101, et seq., as amended
from time to time (the "Delaware Act"), by filing a Certificate of Formation of
the Company with the Office of the Secretary of State of the State of Delaware
on May 20, 1997.
WHEREAS, the Members desire to enter into a written agreement, in
accordance with Section 18-201(d) of the Delaware Act, as to the affairs of the
Company and the conduct of its business.
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, the Members hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Capitalized terms used but not otherwise
defined herein shall have the meanings herein specified.
"Additional Member" has the meaning specified in Section 3.04 of this
Agreement.
"Affiliate" means, with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person.
"Agreement" means this Limited Liability Company Agreement of the
Company, as amended, modified, supplemented or restated from time to time.
"Bank Holding Company" means a bank holding company (as defined in
Section 1841(a) of the Bank Holding Company Act of 1956, as amended) or an
affiliate (as defined in Section 1841(k) of the Bank Holding Company Act of
1956, as amended) of any bank holding company (as defined in Section 1841(a) of
the Bank Holding Company Act of 1956, as amended).
"Capital Account" means the capital account established for each Member
in accordance with Section 5.02(a).
"Capital Receipts" means the gross cash proceeds received by the
Company from the sale, exchange or any other disposition of all or substantially
all of the assets of the Company (including without limitation any Liquidation
of the Company) or from the disposition of any portion of the
LLCAGR13.DOC
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Capital Trust Shares reduced by the sum of (i) all expenditures made by the
Company in connection with such sale, exchange or other disposition, (ii) loan
repayments made from such proceeds (including, without limitation, the repayment
of any Convertible Notes or any Convertible Notes Redemption Debt) and (iii)
amounts set aside as reserves therefrom by the Managing Members.
"Capital Trust" means the California Real Estate Investment Trust, a
business trust organized under the laws of the State of California and
established under a Declaration of Trust dated September 15, 1966, as amended
from time to time, and any successors thereto, whose name is intended to be
changed to "Capital Trust".
"Capital Trust Amended and Restated Declaration of Trust" means the
Amended and Restated Declaration of Trust of Capital Trust, as amended, in the
form attached to the Capital Trust Proxy Statement as Annex C.
"Capital Trust MBS Business" means the aspect of the business of
investing in high-yielding "mezzanine" or bridge debt instruments in commercial
real estate, commercial mortgage backed securities (including U.S. government
agency mortgage backed securities) and/or preferred equity securities backed by
commercial and/or multi-family income properties, which is the primary focus of
Capital Trust's business activities.
"Capital Trust Non-Voting Common" means the class B non-voting common
shares of beneficial interests, $1.00 par value, in Capital Trust, having the
designations and rights, qualifications, limitations and restrictions set forth
in the Capital Trust Amended and Restated Declaration of Trust.
"Capital Trust Non-Voting Preferred" means the Class B 9.5% Cumulative
Convertible Non-Voting Preferred Shares of Beneficial Interests, $1.00 par
value, in Capital Trust established pursuant to a Certificate of Designation,
Preferences and Rights of the Class A 9.5% Cumulative Convertible Preferred
Shares of Beneficial Interests and the Class B 9.5% Cumulative Convertible
Preferred Shares of Beneficial Interests of Capital Trust in the form attached
as Annex B to the Capital Trust Proxy Statement.
"Capital Trust Proxy Statement" means the Proxy Statement dated June
19, 1997, mailed to the holders of outstanding Capital Trust Shares for the
Annual Meeting of Capital Trust to be held on July 15, 1997.
"Capital Trust Shares" means any and all shares, rights, warrants or
options to purchase shares, securities convertible into or exchangeable or
exercisable for shares and participations in or other equivalents of interests
(other than security interests) in shares of beneficial interest in Capital
Trust, however designated and whether voting or nonvoting.
"Capital Trust Voting Common" means the class A common shares of
beneficial interests, $1.00 par value, in Capital Trust, having the designations
and rights, qualifications, limitations and restrictions set forth in the
Capital Trust Amended and Restated Declaration of Trust.
"Capital Trust Voting Preferred" means the Class A 9.5% Cumulative
Convertible Preferred Shares of Beneficial Interests, $1.00 par value, in
Capital Trust established pursuant to a Certificate of Designation, Preferences
and Rights of the Class A 9.5% Cumulative Convertible Preferred Shares of
Beneficial Interests and the Class B 9.5% Cumulative Convertible Non-Voting
Preferred
LLCAGR13.DOC
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Shares of Beneficial Interests of Capital Trust in the form attached as Annex B
to the Capital Trust Proxy Statement.
"Capital Trust's Equity Affiliates" means any Person in which Capital
Trust or any of its consolidated subsidiaries has an equity interest which is
or, in accordance with generally accepted accounting principles, should be
accounted for on the equity method in Capital Trust's consolidated financial
statements.
"Cash Flow" means, with respect to any period, the amount by which (i)
all cash receipts of the Company during such period from whatever source derived
(including, without limitation, cash from operations and funds released during
such period from cash reserves previously established from cash from operations,
but excluding Capital Receipts, funds released from reserves relating to Capital
Receipts and capital contributions) exceeds (ii) all disbursements of cash by
the Company during such period, including, without limitation, payment of
operating expenses, capital expenditures, payment of principal and interest on
the Company's indebtedness (including without limitation the Convertible Notes
and any Convertible Notes Redemption Debt) except to the extent taken into
account with under the definition of Capital Receipts and reserves established
by the Managing Members, but excluding distributions to Members and expenses and
additions to reserves relating to any Capital Receipts.
"Certificate" means the Certificate of Formation referred to in the
first recital of this Agreement and any and all amendments thereto and
restatements thereof filed on behalf of the Company with the office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect and applicable on the date of application
of the provisions of this Agreement containing such reference.
"Common Member" means a Member that holds one or more Common Units.
"Common Units" means the Interests in the Company designated as common
Interests as provided in Section 3.01(a) of this Agreement having the terms
provided in this Agreement.
"Company" has the meaning specified in the Preamble to this Agreement.
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
"Convertible Notes" means the 12% Convertible Redeemable Notes to be
issued by the Company in an aggregate principal amount of $50,000,000, which
Convertible Notes are by their terms convertible into Preferred Units.
"Convertible Notes Purchase Agreement" means the 12% Convertible
Redeemable Note Purchase Agreement, dated as of June 16, 1997, by and between
the Company and certain investors, for the issuance and sale of the Convertible
Notes.
LLCAGR13.DOC
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<PAGE>
"Convertible Notes Redemption Debt" means any Indebtedness incurred by
the Company, the net proceeds of which are used for the redemption of
Convertible Notes for cash pursuant to the terms of the Convertible Notes and
transaction expenses incurred in connection with the issuance of Convertible
Notes Redemption Debt and the redemption of the Convertible Notes.
"Covered Person" means the Managing Members, any Affiliate of the
Managing Members or any officers, directors, managers, shareholders, partners,
members, employees, representatives or agents of the Managing Members, or any
employee or agent of the Company or its Affiliates.
"Damages" shall have the meaning set forth in Section 2.07.
"Delaware Act" shall have the meaning set forth in the first recital of
this Agreement.
"D/E Ratio" means, as of the date of determination, the ratio of (i)
the sum of (x) the total Indebtedness of Capital Trust and its consolidated
subsidiaries as reflected on Capital Trust's last regularly prepared balance
sheet, plus (y) Capital Trust's pro rata share, based upon its percentage equity
ownership interest therein, of aggregate total Indebtedness of Capital Trust's
Equity Affiliates, to (ii) the excess of total assets over total liabilities of
Capital Trust as reflected on Capital Trust's last regularly prepared balance
sheet, in each case determined in accordance with generally accepted accounting
principles and after giving effect to the incurrence of any proposed
Indebtedness and the application of proceeds of such Indebtedness.
"Distribution Payment Date" shall have the meaning set forth in
Section 7.06(b).
"Distribution Period" shall have the meaning set forth in Section
7.06(b).
"Fiscal Year" shall have the meaning set forth in Section 2.04.
"Incur" means to issue, assume, guarantee, incur or otherwise become
liable for.
"Indebtedness" means with respect to any Person, without duplication,
any liability of such Person (i) for borrowed money, (ii) evidenced by bonds,
debentures, notes (including, without limitation, the Convertible Notes) or
other similar instruments, (iii) constituting capitalized lease obligations,
(iv) Incurred as the deferred purchase price of property, or pursuant to
conditional sale obligations and title retention agreements (but excluding trade
accounts payable arising in the ordinary course of business), and (v) for
Indebtedness of any other Person of the type referred to in clauses (i) through
(iv) which are secured by any Lien on any property or asset of such first
referred to Person.
"Interest" means a limited liability company interest in the Company,
including the right of the holder thereof to any and all benefits to which a
Member may be entitled as provided in this Agreement, together with the
obligations of a Member to comply with all of the terms and provisions of this
Agreement.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest.
"Liquidation" means any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary; provided, however, that, the
Redemption of all or any part of the Preferred
LLCAGR13.DOC
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<PAGE>
Units pursuant to Section 7.03 shall not constitute a Liquidation. For the
purpose of this definition, the voluntary sale, conveyance, exchange or transfer
(for cash, shares of stock, interests, units or other consideration) of all or
substantially all the property or assets of the Company shall be deemed a
voluntary liquidation, dissolution or winding up of the Company, but a
consolidation or merger of the Company with one or more other limited liability
companies, corporations or other Persons shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
"Managing Member" means CRIL or V2H, each in their capacity as Members
of the Company designated as managers.
"Member" means any Person that holds an Interest in the Company, is
admitted as a member of the Company pursuant to the provisions of this Agreement
and named as a member of the Company on Schedule A hereto and includes any
Person admitted as an Additional Member or a Substitute Member pursuant to the
provisions of this Agreement, in such Person's capacity as a member of the
Company. For purposes of the Delaware Act, the Common Members and the Preferred
Members shall constitute separate classes or groups of Members.
"Net Disposition Profits" and "Net Disposition Losses" means for each
taxable year of the Company an amount equal to the Company's net income or loss
for such year resulting from the disposition of substantially all of the assets
of the Company or from the disposition of any portion of the Capital Trust
Shares, determined in accordance with the accounting methods and rules used by
the Company in accordance with Section 4.04.
"Net Operating Profits" and "Net Operating Losses" means for each
taxable year of the Company an amount equal to the Company's net income or loss
for such year as determined in accordance with the accounting methods and rules
used by the Company in accordance with Section 4.04, but excluding Net
Disposition Profits and Net Disposition Losses.
"Net Other Assets" means, as of the date of determination, that
positive or negative amount equal to the difference between the fair market
value of the Company's total assets, other than any Capital Trust Shares, and
the sum of (i) the Company's total liabilities, other than Convertible Notes or
Convertible Notes Redemption Debt, and (ii) the amount of a reasonable reserve
determined by the Managing Members.
"Note Conversion Date" means, with respect to any Preferred Units, the
date on which such Preferred Units were issued by the Company pursuant to
Section 3.03 upon conversion of Convertible Notes.
"Outstanding Note Value" means, with respect to any Convertible Note,
the sum of the outstanding principal amount of such Convertible Note, plus
accrued and unpaid interest thereon as of the date of redemption or conversion,
as applicable.
"Person" means an individual, a corporation, a partnership, a limited
liability company, a joint venture, an association, a joint-stock company, a
trust, a business trust, a government or any agency or any political
subdivision, any unincorporated organization or any other entity.
"Preferred and Convertible Note Approval" means the prior written
consent of the holders of Preferred Units and Convertible Notes representing in
the aggregate more than 50% of the sum of (i) the total number of Preferred
Units actually outstanding on the date of determination and (ii) the total
number of Preferred Units that would be issuable by the Company upon conversion
of all
LLCAGR13.DOC
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<PAGE>
of the Convertible Notes outstanding on the date of determination pursuant to
the terms of the Convertible Notes.
"Preferred Distribution" means the distributions provided for in
Section 7.06 hereof.
"Preferred Member" means a Member that holds one or more Preferred
Units.
"Preferred Share Purchase Agreement" means the Class A 9.5% Cumulative
Convertible Preferred Share Purchase Agreement, by and between Capital Trust and
the Company, as amended, modified, supplemented or restated from time to time,
in the form attached as Annex A to the Capital Trust Proxy Statement.
"Preferred Units" means the Interests in the Company designated as
preferred Interests as provided in Section 3.01(a) of this Agreement having the
terms provided in this Agreement.
"Principal Note Amount" means, as of the date of determination, with
respect to any Preferred Member, that portion of such Preferred Member's
Outstanding Note Value converted into Preferred Units which constituted
outstanding principal of such Preferred Member's Convertible Note as of the
applicable Note Conversion Date, less any distributions received by such
Preferred Member under Section 7.02(a)(i).
"Pro Rata Share" means, with respect to any Preferred Member, a
fraction, the numerator of which is the aggregate number of Preferred Units held
by such Preferred Member and the denominator of which is the sum of (i) the
total number of Preferred Units actually outstanding on the date of
determination, and (ii) the total number of Preferred Units that would be
issuable by the Company upon conversion of all of the Convertible Notes
outstanding on the date of determination pursuant to the terms of the
Convertible Notes, plus (iii) the total number of Common Units outstanding on
the date of determination.
"Proportionate Share" means, with respect to any Member, a fraction,
the numerator of which is the aggregate number of Common Units and Preferred
Units held by such Member and the denominator of which is the sum of (i) the
total number of Preferred Units actually outstanding on the date of
determination, and (ii) the total number of Common Units outstanding on the date
of determination.
"Redemption" means any redemption of Preferred Units under Section
7.03.
"Redemption Date" means, with respect to any Redemption under Section
7.03, the date of such Redemption.
"Regulations" means the regulations promulgated under the Code, as
amended from time to time, or any federal income tax regulations promulgated
after the date of this Agreement. A reference to a specific Regulation refers
not only to such specific Regulation but also to any corresponding provision of
any federal tax regulation enacted after the date of this Agreement, as such
specific Regulation or corresponding provision is in effect and applicable on
the date of application of the provisions of this Agreement containing such
reference.
"Related Party" means, with respect to a specified Person, any
Affiliate of such specified Person as of the date hereof, other than any
Excluded Person. As used in this definition, "Excluded Person" means (i) any
Person having securities that are listed on a national securities
LLCAGR13.DOC
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exchange or traded in the national over-the-counter market (a "Public Company"),
(ii) any subsidiary, direct or indirect, of a Public Company, and (iii) any
Person any part of whose equity or other ownership interests (or any rights to
acquire the same) are owned, directly or indirectly, beneficially or of record
by any Person(s) in addition to (A) CRIL, (B) Equity Group Investments, Inc.
("EGI"), or (C) any Person that owns, directly or indirectly, beneficially or of
record, any equity or other ownership interests in CRIL, EGI or any wholly-owned
subsidiary, direct or indirect, of CRIL or EGI.
"Restricted Payment" shall have the meaning set forth in Section
7.06(e).
"Substitute Member" means a Person who is admitted to the Company as a
Member pursuant to Section 10.5 hereof, and who is named as a Member on Schedule
A to this Agreement.
"Tax Distributions" means any cash distributions made under Section
7.04.
"Tax Matters Partner" means the Managing Member designated as such in
4.07(b) of this Agreement.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.01. Company Name. The name of the Company is "Veqtor Finance
Company, LLC". The name of the Company may be changed from time to time by the
Managing Members in their discretion.
SECTION 2.02. Registered Office; Registered Agent. The Company shall
maintain a registered office in the State of Delaware at, and the name and
address of the Company's registered agent in the State of Delaware is, The
Prentice-Hall Corporation System, Inc., 1013 Centre Road, Wilmington, Delaware
19805-1297. Such office and such agent may be changed from time to time by the
Managing Members in their discretion.
SECTION 2.03. Nature of Business Permitted; Powers.
(a) The purpose of the Company is to acquire, own, hold, monitor, vote,
sell, exchange, dispose of and exercise all rights and remedies with respect to
Capital Trust Shares and any cash or cash equivalents or other property received
by the Company in respect thereof, provided, that not more than 5% of the total
assets of the Company shall consist of such other property (other than cash or
cash equivalents). In addition, the Company may conduct such other business and
take all other actions as may be attendant to said purpose.
(b) The Company shall use its best efforts (including without
limitation appropriate exercise of voting rights with respect to Capital Trust
Shares owned by the Company) to ensure that Capital Trust engages only in the
businesses of:
(i) buying, holding, selling, financing and refinancing any interest
of any kind in commercial and multi-family real estate of any kind;
LLCAGR13.DOC
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(ii) buying, holding, selling, financing and refinancing any
interest in any mortgage-backed securities and any other securities
issued to finance, or any securities secured by, any interest in
commercial and multi-family real estate;
(iii) providing services related to the forgoing, including
providing financial advisory and other services related to the real
estate and real estate financing industries; and
(iv) investing in companies that provide such services.
(c) Notwithstanding anything to the contrary herein, the business of
the Company shall be conducted in compliance with any requirements necessary for
the Company (a) to qualify as an "investment partnership" under Section
731(c)(3)(C) of the Code, (b) to remain eligible for exemption from the
definition of Bank Holding Company, and (c) to remain exempt from the periodic
reporting requirements under the Securities Exchange Act of 1934, as amended.
SECTION 2.04. Fiscal Year. Unless and until otherwise determined by the
Managing Members, the fiscal year of the Company for federal income tax purposes
shall, except as otherwise required in accordance with the Code, end on December
31 of each year (each, a "Fiscal Year").
SECTION 2.05. Perpetual Existence. The Company shall have a perpetual
existence unless dissolved in accordance with the provisions of Article XI of
this Agreement.
SECTION 2.06. Limitation on Member Liability.
(a) Except as otherwise expressly required by law, the debts,
obligations and liabilities of the Company, whether arising in contract, tort or
otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Member or Managing Member shall be obligated personally for any
such debt, obligation or liability of the Company solely by reason of being a
Member or Managing Member.
(b) Except as otherwise expressly required by law, a Member, including
a Managing Member, in its capacity as a Member or Managing Member, shall have no
liability to any Person hereunder in excess of (i) its obligation to make
payments expressly provided for in this Agreement and (ii) the amount of any
distributions wrongfully distributed to it.
SECTION 2.07. Indemnification. To the fullest extent permitted by
applicable law, any Covered Person shall be indemnified and held harmless by the
Company for and from any liabilities, demands, claims, actions or causes of
action, regulatory, legislative or judicial proceedings or investigations,
assessments, levies, losses, fines, penalties, damages, costs and expenses,
including, without limitation, reasonable attorneys', accountants',
investigators', and experts' fees and expenses (collectively, "Damages")
sustained or incurred by such Covered Person by reason of any act performed or
omitted by such Covered Person in good faith and in a manner reasonably believed
by the Covered Person to be in or not opposed to the best interests of the
Company; provided, however, that any indemnity under this Section 2.07 shall be
provided out of and to the extent of Company assets only, and no Member shall
have any personal liability on account thereof. The right of indemnification
pursuant to this Section 2.07 shall include the right to be paid, in advance, or
reimbursed by the Company for the reasonable expenses incurred by a Covered
Person who was, is, or is threatened to be made a named defendant or respondent
in a proceeding provided
LLCAGR13.DOC
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<PAGE>
that the Covered Person shall have given a written undertaking to reimburse the
Company in the event it is subsequently determined that he, she or it is not
entitled to such indemnification.
SECTION 2.08. Exculpation.
(a) No Covered Person shall be liable to the Company or any Member for
any Damages incurred by reason of any act performed or omitted by such Covered
Person in good faith on behalf of the Company and in a manner reasonably
believed to be in or not opposed to the best interests of the Company.
(b) A Covered Person shall be fully protected in relying in good faith
upon the records of the Company and upon such information, opinions, reports or
statements presented to the Company by any Person as to matters the Covered
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Company, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which distributions to
Members might properly be paid.
SECTION 2.09. Fiduciary Duty.
(a) To the extent that, at law or in equity, a Covered Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Company or to any Member or Managing Member, a Covered Person acting under this
Agreement shall not be liable to the Company or to any Member or Managing Member
for its good faith reliance on the provisions of this Agreement. The duties and
liabilities of a Covered Person shall be as expressly set forth in this
Agreement, and the parties hereto agree that such duties and liabilities replace
any duties and liabilities of a Covered Person which would otherwise exist at
law or equity.
(b) Unless otherwise expressly provided herein, (i) whenever a conflict
of interest exists or arises between any Member and the Company or another
Member, or (ii) whenever this Agreement or any other agreement contemplated
herein or therein provides that a Member shall act in a manner that is, or
provide terms that are, fair and reasonable to the Company or any other Member,
the Member shall resolve such conflict of interest, take such action or provide
such terms, considering in each case the relative interest of each party
(including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by a Member, the
resolution, action or term so made, taken or provided by such Member shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or of any duty or obligation of such Member at law or in equity or otherwise.
(c) Whenever in this Agreement a Member is permitted or required to
make a decision, the Member shall be entitled to make such decision in its sole
discretion and to consider such interests and factors as it desires, including
its own interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the Company or any other
Person. If in this Agreement a Member is permitted or required to make a
decision in its "good faith" or under another express standard, the Covered
Person shall act under such express standard and shall not be subject to any
other or different standard imposed by this Agreement or other applicable law.
LLCAGR13.DOC
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SECTION 2.10. Insurance. The Company may purchase and maintain
insurance, to the extent and in such amounts as the Managing Members shall, in
their sole discretion, deem reasonable, on behalf of Covered Persons and such
other Persons as the Managing Members shall determine, against any liability
that may be asserted against or expenses that may be incurred by any such Person
in connection with the activities of the Company regardless of whether the
Company would have the power to indemnify such Person against such liability
under the provisions of this Agreement. The Company may enter into indemnity
contracts with Covered Persons and such other Persons as the Managing Members
shall determine and adopt written procedures pursuant to which arrangements are
made for the advancement of expenses and the funding of obligations under this
Section 2.10 and containing such other procedures regarding indemnification as
are appropriate and consistent with this Agreement.
SECTION 2.11. Outside Businesses.
(a) For a period of three years after the filing of the Certificate,
notwithstanding anything to the contrary in this Agreement, except through
Capital Trust and its Affiliates none of CRIL, V2H or any Person who is a
Related Party of either CRIL or V2H shall (i) form, incorporate or otherwise
organize any Person whose primary purpose is to engage, or that engages, in the
Capital Trust MBS Business, or (ii) purchase or otherwise acquire control of any
Person whose primary purpose is to engage, or that engages, in the Capital Trust
MBS Business; it being acknowledged, however, that CRIL, V2H and any Person who
is a Related Party of either CRIL or V2H as of the date of filing the
Certificate shall be entitled to (A) form, incorporate or otherwise organize any
Person other than for the primary purpose of engaging in the Capital Trust MBS
Business and that does not engage therein, or (B) purchase or otherwise acquire
control of any Person whose primary purpose is other than to engage in the
Capital Trust MBS Business and that does not engage therein.
(b) Subject to Section 2.11(a), any Member or Affiliate thereof may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Company or Capital Trust, and the Company and the Members shall have no
rights by virtue of this Agreement in and to such independent ventures or the
income or profits derived therefrom, and the pursuit of any such venture, even
if competitive with the business of the Company or Capital Trust, shall not be
deemed wrongful or improper. No Member or Affiliate thereof shall be obligated
to present any particular investment opportunity to the Company or Capital Trust
even if such opportunity is of a character that, if presented to the Company or
Capital Trust, could be taken by the Company or Capital Trust, and any Member or
Affiliate thereof shall have the right to take for its own account (individually
or as a fiduciary) or to recommend to others any such particular investment
opportunity. Notwithstanding anything to the contrary in this Section 2.11 or
elsewhere in this Agreement: (i) no Member shall be restricted from co-investing
with Capital Trust in any investment; and (ii) no Member shall be restricted
from purchasing or otherwise acquiring any Capital Trust Shares or otherwise
making an investment in Capital Trust.
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ARTICLE III
CLASSES OF INTERESTS AND ADMISSION OF MEMBERS
SECTION 3.01. Classes.
(a) Subject to Section 3.02(b), the Interests of the Company shall be
divided into two classes, Common Units and Preferred Units, each having the
relative rights, powers and duties set forth in this Agreement.
(b) Notwithstanding Section 3.02(a), the Managing Members are hereby
expressly authorized, without the vote or approval of any other Member, to take
any action, including without limitation amending this Agreement, to create any
class or series of Interests that was not previously outstanding, each having
such relative rights, powers and duties and interests in profits, losses,
allocations and distributions of the Company as may be determined by the
Managing Members and to cause holders of such Interests to be admitted as
Additional Members of the Company as provided in Section 3.04; provided,
however, that any action or actions taken by the Managing Members pursuant to
the provisions of this Section 3.01(b) shall be subject to the Preferred and
Convertible Note Approval requirement set forth in Section 9.01(b) of this
Agreement. Subject to Section 9.01(b) of this Agreement, the total number of
Common Units and Preferred Units which the Managing Members shall have the
authority to cause the Company to issue shall not be limited.
SECTION 3.02. Admission of Initial Members. Upon the execution of this
Agreement, CRIL and V2H shall be admitted to the Company as Common Members. The
Company shall issue 500,000 Common Units to CRIL and 500,000 Common Units to
V2H. The name and mailing address of each such Member and the amount to be
contributed by such Member to the capital of the Company is listed on Schedule A
attached hereto.
SECTION 3.03. Admission of Preferred Members. Subject to the terms of
the Convertible Notes, upon the execution of this Agreement and the surrender by
such holder of its Convertible Note, together with a written conversion notice
and a written instrument or instruments of transfer, each in form reasonably
satisfactory to the Company, any holder of a Convertible Note shall be admitted
to the Company as a Preferred Member. The Company shall issue a number of
Preferred Units to each such Preferred Member determined as provided in the
Convertible Notes. The name and mailing address of each such Member and the
amount contributed by such Member to the capital of the Company shall be listed
on Schedule A attached hereto by the Managing Member.
SECTION 3.04. Admission of Additional Members. Subject to Section
9.01(b), the Managing Members are authorized to admit any Person as an
additional member of the Company (each, an "Additional Member" and collectively,
the "Additional Members"), and issue to such Additional Members Common Units,
Preferred Units or any other class or series of Interests established by the
Managing Members pursuant to Section 3.01 of this Agreement. Each such Person
shall be admitted as an Additional Member at the time such Person (i) executes
this Agreement and (ii) is named as a Member on Schedule A hereto. Except as set
forth in Section 9.01(b), no consent of any Member other than the Managing
Members shall be required for the admission of an Additional Member.
SECTION 3.05. Schedule A. The Managing Members shall update Schedule A
from time to time as necessary to reflect accurately the information therein.
Any amendment or revision to
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Schedule A made in accordance with this Agreement shall not be deemed an
amendment to this Agreement. Any reference in this Agreement to Schedule A shall
be deemed to be a reference to Schedule A as amended and in effect from time to
time.
ARTICLE IV
VOTING AND MANAGEMENT
SECTION 4.01 Common Member Voting Rights. Common Members holding
Common Units shall be entitled to one vote for each such Common Unit upon all
matters upon which Common Members have the right to vote. All Common Members
shall have the right to vote separately as a class on any matter on which the
Common Members have the right to vote regardless of the voting rights of any
other class or series of Interests.
SECTION 4.02 Preferred Member Voting Rights. Except as otherwise
provided in Section 9.01, Section 12.03 and the proviso in Section 4.07(a) of
this Agreement, the Preferred Members holding Preferred Units shall have, with
respect to such Preferred Units, no right or power to vote on any question or
matter or in any proceeding or to be represented at, or to receive notice of,
any meeting of Members. Any required approval of holders of Preferred Units may
be given at a separate meeting of such holders convened for such purpose or at a
meeting of Members or pursuant to written consent. The Company shall cause a
notice of any meeting at which holders of the Preferred Units are entitled to
vote, or of any matter upon which action may be taken by written consent of such
holders, to be mailed to each holder of record of the Preferred Units. Each such
notice will include a statement setting forth (a) the date of such meeting or
the date by which such action is to be taken, (b) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matters upon which written consent is sought and (c)
instructions for the delivery of proxies or consents.
SECTION 4.03. Management of the Company. The business and affairs of
the Company shall be managed solely and exclusively by unanimity of the Managing
Members. The Managing Members shall have all rights and powers on behalf and in
the name of the Company to perform all acts necessary and desirable to the
objects and purposes of the Company. Without limiting the generality of the
foregoing, but subject to Section 2.03, the Managing Members shall have the
power to:
(a) authorize and engage in transactions and dealings on behalf of the
Company, including transactions and dealings with any Member or any Affiliate of
any Member or the Managing Members;
(b) call meetings of Members or any class or series thereof;
(c) issue Interests in accordance with Article III;
(d) incur and pay all expenses and obligations incident to the
operation and management of the Company;
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(e) acquire, own, hold, monitor, vote, sell, exchange or otherwise
dispose of any assets, including, without limitation, Capital Trust Shares, and
exercise all rights and remedies with respect thereto;
(f) subject to this Agreement, borrow money on behalf of the Company
(including, without limitation the Convertible Notes, Convertible Notes
Redemption Debt and debt convertible into or exchangeable for Interests), issue
or guarantee evidences of indebtedness and obtain lines of credit, loan
commitments and letters of credit for the account of the Company and secure the
same by mortgage, pledge or other lien on any assets of the Company;
(g) determine and make distributions, in cash or otherwise, on
Interests, in accordance with the provisions of this Agreement and of the
Delaware Act;
(h) establish or set aside any reserve or reserves for contingencies
and for any other proper Company purpose, including without limitation reserves
referred to in the definition of "Net Other Assets";
(i) redeem on behalf of the Company Interests which by their terms may
be so redeemed;
(j) appoint (and dismiss from appointment) officers, attorneys and
agents on behalf of the Company, and employ (and dismiss from employment) any
and all persons providing legal, accounting or financial services to the
Company, or such other employees or agents as the Managing Members deem
necessary or desirable for the management and operation of the Company,
including, without limitation, any Member or any Affiliate of the Managing
Members or any Member;
(k) acquire and enter into any contract of insurance necessary or
desirable for the protection or conservation of the Company and its assets or
otherwise in the interest of the Company as the Managing Members shall
determine;
(l) open accounts and deposit, maintain and withdraw funds in the name
of the Company in banks, savings and loan associations, brokerage firms or other
financial institutions;
(m) effect a dissolution of the Company and to act as liquidator or
the person winding up the Company's affairs, all in accordance with the
provisions of this Agreement and of the Delaware Act;
(n) bring and defend on behalf of the Company actions and proceedings
at law or equity before any court or governmental, administrative or otherwise
regulatory agency, body or commission or otherwise;
(o) prepare and cause to be prepared reports, statements and other
relevant information for distribution to Members as may be required or
determined to be appropriate by the Managing Members from time to time;
(p) prepare and file all necessary returns and statements and pay all
taxes, assessments and other impositions applicable to the assets of the
Company; and
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(q) execute all other documents or instruments, perform all duties and
powers and do all things for and on behalf of the Company in all matters
necessary or desirable or incidental to the foregoing.
The Managing Members are hereby authorized and directed to conduct the
Company's affairs and to operate the Company in such a way that the Company
would not be deemed to be a Bank Holding Company. In this connection, the
Managing Members are authorized to take any action not inconsistent with
applicable law, the Certificate or this Agreement which they determine in their
discretion to be necessary or desirable for such purposes.
No Preferred Member shall take part in the day-to-day management,
operation or control of the business and affairs of the Company and except as
otherwise provided in Section 9.01, Section 12.03 and the proviso in Section
4.07(a) hereof, no Preferred Member shall have any approval rights hereunder. No
Preferred Member, in its capacity as a Preferred Member of the Company, shall
have the authority to act as an agent of the Company or have any right, power or
authority to transact any business in the name of the Company or to act for or
on behalf of or to bind the Company.
Anything in the foregoing to the contrary notwithstanding, in the event
that (i) a vote of the Capital Trust Voting Preferred is required in accordance
with Sections 5(a), 5(b) or 6(c) of the Capital Trust Certificate of
Designation, Preferences and Rights referred to herein in the definition of
Capital Trust Voting Preferred and (ii) at the time of such vote, the Company
owns of record shares of Capital Trust Voting Preferred, the Managing Members
shall vote such shares with respect to the matters referred to in such sections
in accordance with written instructions from the holders of outstanding
Convertible Notes or Preferred Units if any, which are convertible (directly or
indirectly and whether at the time of such vote or a later date) into such
shares of Capital Trust Voting Preferred. The number of shares of Capital Trust
Voting Preferred as to which each holder of Preferred Units shall be entitled to
give voting instructions shall be that number of shares of Capital Trust Voting
Preferred into which the Preferred Units then held by such holder would be
convertible. The number of shares of Capital Trust Voting Preferred as to which
each holder of Convertible Notes shall be entitled to give voting instructions
shall be that number of shares of Capital Trust Voting Preferred into which the
Preferred Units issuable upon conversion of the Convertible Notes then held by
such holder would be convertible.
SECTION 4.04. Books and Records; Accounting. The Managing Members
shall keep or cause to be kept at the principal office of the Company (or at
such other place as the Managing Members shall advise the other Members in
writing) true and full books and records regarding the status of the business
and financial condition and results of operations of the Company. The books and
records of the Company shall be kept in accordance with the accounting methods
and rules determined by the Managing Members, applied in a consistent manner,
which methods and rules shall reflect all Company transactions and be
appropriate and adequate for the Company's business.
SECTION 4.05. Reliance by Third Parties. Persons dealing with the
Company are entitled to rely conclusively upon the power and authority of the
Managing Members herein set forth.
SECTION 4.06. Expenses. Except as otherwise provided in this
Agreement, the Company shall be responsible for all and shall pay out of funds
of the Company determined by the Managing Members to be available for such
purpose, all expenses and obligations of the Company, including those incurred
by the Company or the Managing Members or their Affiliates in connection with
the
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formation, operation or management of the Company, in organizing the Company and
preparing, negotiating, executing, delivering, amending and modifying this
Agreement and issuing the Convertible Notes.
SECTION 4.07. Company Tax Returns.
(a) The Managing Members shall cause to be prepared and timely filed
all tax returns required to be filed for the Company. The Managing Members may,
in their discretion, make or refrain from making any federal, state or local
income or other tax elections for the Company that they deem necessary or
advisable, including, without limitation, (i) any election under Section 754 of
the Internal Revenue Code or any successor provision, and (ii) any election
under Regulation Section 301.7701-3 of the Internal Revenue Code or any
successor provision; provided, however, that the Managing Members may not elect
to have the Company treated as a corporation for tax purposes without the
Preferred and Convertible Note Approval.
(b) V2H is hereby designated as the Company's "Tax Matters Partner"
under the Code Section 6231(a)(7) and shall have all the powers and
responsibilities of such position as provided in the Code. V2H is specifically
directed and authorized to take whatever steps V2H, in its discretion, deems
necessary or desirable to perfect such designation, including filing any forms
or documents with the Internal Revenue Service and taking such other action as
may from time to time be required under the Regulations issued under the Code
provided that V2H shall take no action as "Tax Matters Partner" under this
Section 4.07(b) without the prior approval of CRIL. Expenses incurred by the Tax
Matters Partner, in its capacity as such, will be borne by the Company.
ARTICLE V
CONTRIBUTIONS AND CAPITAL ACCOUNTS
SECTION 5.01. Capital Contributions. Each Common Member shall
contribute to the capital of the Company the amount set forth opposite the
Member's name on Schedule A attached hereto contemporaneously with closing of
the Convertible Notes Purchase Agreement. Each Preferred Member admitted as
provided in Section 3.03 shall be deemed to have contributed to the capital of
the Company an amount equal to the Outstanding Note Value of the Convertible
Note converted by such Preferred Member in exchange for its Preferred Units. The
Capital Contributions made or deemed to have been made by each Additional Member
shall be determined by the Managing Members and set forth on Schedule A. No
Member shall be required to make any additional capital contribution to the
Company. However, a Member may make additional capital contributions to the
Company with the written consent of the Managing Members.
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SECTION 5.02. Capital Accounts.
(a) There shall be established for each Member on the books of the
Company a capital account (a "Capital Account"), which shall be maintained and
adjusted as provided in the Regulations. The Capital Account of a Member shall
be credited with the amount of all cash capital contributions by such Member to
the Company, the fair market value of any property contributed by such Member to
the Company and, with respect to Preferred Members converting Convertible Notes,
the Outstanding Note Value of the Convertible Note converted by such Preferred
Member in exchange for its Preferred Units. The Capital Account of a Member
shall be increased by the amount of any Net Operating Profits or Net Disposition
Profits allocated to such Member, and decreased by (i) the amount of any Net
Operating Losses or Net Disposition Losses allocated to such Member, (ii) the
amount of any cash distributed to such Member, and (iii) the fair market value
of any assets (other than cash) distributed to such Member. The Capital Account
of each Member also shall be adjusted appropriately to reflect any other
adjustment required pursuant to Regulation Section 1.704-1 or 1.704-2.
(b) Upon the occurrence of any event specified in Regulation Section
1.704- 1(b)(2)(iv)(f), the Managing Members may, and upon the conversion of any
Convertible Note, the Managing Members shall, cause the Capital Accounts of the
Members to be adjusted to reflect the fair market value of the Company's assets
at such time as determined in good faith by the Managing Members. The
adjustments should reflect the manner in which the unrealized income, gains,
loss, or deduction inherent in such property would be allocated among the
Members if there were a taxable disposition of such property for such fair
market value determined in good faith by the Managing Members on the date of the
occurrence of such event.
SECTION 5.03. Withdrawal of Capital; Return of Capital; Deficit
Balance in Capital Account.
(a) Except as otherwise specifically set forth in this Agreement, no
Member shall have the right to (i) withdraw such Member's capital contribution
or to demand or receive the return of a capital contribution or make any claim
to any portion of Company capital or (ii) demand or receive property other than
cash in return for a capital contribution or to receive any distribution in
return for a capital contribution that is not required by this Agreement.
(b) Except as expressly provided in this Agreement, no Member shall
have personal liability to make any capital contribution.
(c) A deficit Capital Account of a Member shall not be deemed to be a
liability of such Member or an asset or property of the Company or any other
Member. Furthermore, no Member shall have any obligation to the Company or any
other Member for any deficit balance in such Member's Capital Account.
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ARTICLE VI
ALLOCATIONS
SECTION 6.01. Allocation of Net Operating Profits and Net Operating
Losses.
(a) Net Operating Profits shall be allocated as follows:
(i) First, to each Preferred Member, an amount of Net Operating
Profits equal to the excess of the Preferred Distribution accrued with
respect to such Preferred Member for the current period and all prior
periods over the amount previously allocated to such Preferred Member
pursuant to this Section 6.01(a)(i);
(ii) Second, to the Common Members, an amount of Net Operating Profits
equal to the excess of the amount required to be distributed to the Common
Members pursuant to Section 7.01(b) for the current period and all prior
periods over the amount previously allocated to such Common Member pursuant
to this Section 6.01(a)(ii); and
(iii) Thereafter, to the Members, in proportion to their Proportionate
Shares.
(b) Net Operating Losses shall be allocated as follows:
(i) First, to CRIL, an amount of Net Operating Losses sufficient to
cause its Capital Account to be equal to the Capital Account of V2H;
(ii) Second, to the Preferred Members, if any, an amount of Net
Operating Losses sufficient to cause the Capital Account of each Preferred
Member to equal such Preferred Member's Outstanding Note Value plus the
amount accrued with respect to such Preferred Member pursuant to Section
7.06, and minus the amount of any previous distributions to such Preferred
Member;
(iii) Third, to the Common Members, an amount of Net Operating Losses
sufficient to reduce each Common Member's Capital Account to zero;
(iv) Fourth, to the Preferred Members, an amount of Net Operating
Losses sufficient to reduce each Preferred Member's Capital Account to
zero; and
(v) Fifth, to each Member, in accordance with its respective
Proportionate Share.
SECTION 6.02. Allocation of Net Disposition Profits. Net Disposition
Profits shall be allocated as follows:
(a) First, to the Preferred Members, an amount of Net Disposition
Profits sufficient to cause the Capital Account of each Preferred Member to be
equal to the sum of such Preferred Member's Outstanding Note Value, plus the
amount accrued with respect to such Preferred Member pursuant to Section 7.06
hereof, and minus the amounts of all previous distributions to such Preferred
Member.
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(b) Second, to V2H, an amount of Net Disposition Profits sufficient to
cause the sum of the Capital Account of V2H and any previous distributions to
V2H to equal the sum of the Capital Account of CRIL and any previous
distributions to CRIL.
(c) Third, to each Member, an amount of Net Disposition Profits until
the ratio of the sum of each Member's Capital Account plus any previous
distributions to such Member to the sum of all Member's Capital Accounts plus
any previous distributions to all Members is equal to such Member's
Proportionate Share.
(d) Fourth, to the Members, in proportion to their respective
Proportionate Shares.
(e) In the event that Net Disposition Profits available for allocation
pursuant to Sections 6.02(a) or 6.02(c) hereof are not sufficient to cause the
Members' Capital Accounts to equal the amounts required by such Sections, then
the Net Disposition Profits available to be allocated pursuant to such Section
shall be apportioned among the Members in proportion to the amounts that would
be allocated to them under such Section if Net Disposition Profits sufficient to
cause each Member's Capital Account to be equal to the required amount were
available to be so allocated.
SECTION 6.03. Allocation of Net Disposition Losses. Net Disposition
Losses shall be allocated as follows:
(a) First, to CRIL, an amount of Net Disposition Losses sufficient to
cause its Capital Account to equal the Capital Account of V2H.
(b) Second, to Preferred Members, an amount of Net Disposition Losses
sufficient to cause the Capital Account of each Preferred Member to equal such
Preferred Member's Outstanding Note Value, plus the amount accrued with respect
to such Preferred Member pursuant to Section 7.06, and minus the amount of any
previous distributions to such Preferred Member.
(c) Third, to Common Members, an amount of Net Disposition Losses
sufficient to reduce each Common Member's Capital Account to zero.
(d) Fourth, to Preferred Members, an amount of Net Disposition Losses
sufficient to reduce each Preferred Member's Capital Account to zero.
(e) Fifth, to each Member, in accordance with its respective
Proportionate Share.
ARTICLE VII
DISTRIBUTIONS
SECTION 7.01. Distributions from Operations. Cash Flow for any period
shall be distributed to the Members, at times determined by the Managing
Members, as follows:
(a) First, to the Preferred Members, until the Preferred Members have
received distributions pursuant to this Section 7.01(a) and Section 7.04, in an
amount equal to any accrued but unpaid Preferred Distribution;
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(b) Second, to the Common Members, until the amounts distributed to
the Common Members pursuant to this Section 7.01(b) and Section 7.04, and the
amounts distributed to the Preferred Members pursuant to Sections 7.01(a) and
7.04 are in proportion to their Proportionate Shares; and
(c) Thereafter, to the Members, in proportion to their Proportionate
Shares.
SECTION 7.02. Distributions of Capital Receipts. After realized and
unrealized Net Disposition Profits and Net Disposition Losses are allocated to
the Members in accordance with Articles V, VI and VIII, Capital Receipts shall
be distributed to each Member, at times determined by the Managing Members, in
cash or in kind (as determined by the Managing Members), as follows:
(a) First, to the Preferred Members until the Preferred Members have
received distributions pursuant to Section 7.01(a), this Section 7.02(a) and
Section 7.04 in an amount equal to the sum of:
(i) the Preferred Member's Outstanding Note Value; and
(ii) the amount accrued with respect to such Preferred Member pursuant
to Section 7.06, minus the amount of any previous distributions to such
Preferred Member;
(b) Second, to the Common Members until each of the Common Members has
received distributions pursuant to Section 7.01, this Section 7.02(b) and
Section 7.04 in an amount equal to the lesser of (i) such Common Member's
Capital Account balance and (ii) such Common Member's Proportionate Share of the
amounts distributed pursuant to Section 7.01, Section 7.02(a), this Section
7.02(b) and Section 7.04;
(c) Third, to each Member, in proportion to its Capital Account
balance; and
(d) Fourth, to the Members in proportion to their Proportionate
Shares.
If the amounts available for distribution pursuant to Section 7.02(a),
7.02(b) or 7.02(c) hereof are not sufficient to allow for the distribution to
each Member of the amounts provided for in such Sections, then the amount
distributable pursuant to each such Section shall be apportioned among the
Members in proportion to the amounts that would be distributed to them under
that Section if the amounts available for distribution thereunder were
sufficient to allow for the distribution to the Members of the amounts required
to be distributed pursuant to such Section.
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SECTION 7.03. Redemption of Preferred Units.
(a) The Preferred Units held by any Preferred Member shall be
redeemable by the Company, in whole but not in part, (i) at the option of the
Company, at any time after the date which is at least twenty-four months after
such Preferred Member's Note Conversion Date, provided that the Company
simultaneously redeems the Preferred Units of all of the Preferred Members or
(ii) at the option of such Preferred Member, at any time after the date which is
at least six months after such Preferred Member's Note Conversion Date, in each
case upon not less than 20 days' nor more than 60 days' prior written notice, or
earlier, in the event of any Liquidation, upon not less than 5 days' prior
written notice, in exchange for the following:
(i) such Preferred Member's Pro Rata Share of the Company's
entire right, title and interest in and to the Capital Trust Voting
Common held by the Company and such Preferred Member's Pro Rata Share
of the Company's entire right, title and interest in and to the Capital
Trust Voting Preferred held by the Company on the applicable Redemption
Date, as determined in accordance with Sections 7.03(e) and 7.03(f)
below, together with all rights held by the Company pertaining thereto,
including without limitation, any registration rights, and
(ii) assets having a fair market value equal to the amount of
such Preferred Member's Pro Rata Share of the sum of Net Other Assets
and the total amount distributed to all Members pursuant to Section
7.01, minus the total amount distributed to such Preferred Member
pursuant to Section 7.01.
(b) If the amount of Net Other Assets as of the Redemption Date is
less than zero, the Capital Trust Shares to which the Preferred Member otherwise
would be entitled pursuant to this Section 7.03 shall be reduced by a number of
such shares having a fair market value as determined by the Managing Members
equal to the excess, if any, of such Preferred Member's Pro Rata Share of the
deficit in Net Other Assets over the aggregate amount of Preferred Distributions
accrued with respect to such Preferred Member pursuant to Section 7.06.
(c) The Preferred Units shall not be subject to the operation of a
retirement or sinking fund.
(d) Subject to Section 7.03(e), upon redemption of Preferred Units
pursuant to Section 7.03(a) above, the Company shall assign, transfer and
deliver to the holder of said Preferred Units the Capital Trust Shares specified
in Section 7.03(a)(i) hereof.
(e) Notwithstanding anything to the contrary in Section 7.03(d), if
the holder of the Preferred Units subject to redemption pursuant to Section
7.03(a) is a Bank Holding Company, then, in lieu of assigning, transferring and
delivering to such holder the Capital Trust Voting Common and the Capital Trust
Voting Preferred specified by Section 7.03(d), the Company shall instead (i)
cause Capital Trust to convert or exchange the shares of Capital Trust Voting
Common and Capital Trust Voting Preferred which, but for this Section 7.03(d),
would have been assigned, transferred and delivered to such holder pursuant to
Section 7.03(e), into the same number of shares of Capital Trust Non-Voting
Common and Capital Trust Non-Voting Preferred respectively, and (ii) assign,
transfer and deliver to such holder the Company's entire right, title and
interest in and to such shares of Capital Trust Non-Voting Common and Capital
Trust Non-Voting Preferred.
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(f) All Capital Trust Voting Common, Capital Trust Voting Preferred,
Capital Trust Non-Voting Common and Capital Trust Non-Voting Preferred shall be,
when assigned, transferred and delivered to a Preferred Member in accordance
with this Section 7.03 fully paid and non-assessable by Capital Trust, and all
assets, if any, assigned, transferred and delivered to a Preferred Member in
accordance with Section 7.03(a)(ii) shall be assigned, transferred and delivered
to the Preferred Member free from all taxes, liens and charges with respect to
the assignment, transfer and delivery thereof, other than any payment of any
transfer taxes for which such Preferred Member shall be exclusively responsible.
(g) If, subsequent to any redemption pursuant to this Section 7.03, an
amount which was excluded from Net Other Assets under Section 7.03(a)(ii) as a
reserve is released from such reserve and available for distribution, the
Company shall distribute to each Person who had held Preferred Units which were
redeemed pursuant to this Section 7.03 an amount, payable in cash or Capital
Trust Shares, equal to such Person's Pro Rata Share as of the Redemption Date of
such amount.
SECTION 7.04. Tax Distributions. Notwithstanding anything to the
contrary in Section 7.01, Section 7.02 or Section 7.03, the Company shall, to
the extent of cash available after the establishment of reasonable reserves
determined by the Managing Members, distribute annually an amount of cash to
each Member sufficient to allow for the payment of such Member's federal and
state income tax liability resulting from such Member's allocable share of the
Company's taxable income. Amounts distributable pursuant to this Section 7.04
shall be calculated on the basis of an assumed forty-five percent (45%) marginal
taxable rate.
SECTION 7.05. Distributions in Kind. A Member, in the discretion of
the Managing Members and in accordance with any applicable terms of the
Interests, may receive distributions from the Company in any form other than
cash, and may be compelled to accept a distribution of any assets in kind from
the Company such that the percentage of the asset distributed to such Member
equals a percentage of that asset which is equal to the percentage in which such
Member shares in distributions from the Company. Whenever the distribution
provided for in Section 7.01 or Section 7.02 shall be payable in property other
than cash, the value of such distribution shall be the fair market value of such
property determined by the Managing Members in good faith. Except as provided in
Section 7.03, no Member shall have the right to demand that the Company
distribute any assets in kind to such Member.
SECTION 7.06. Preferred Distributions.
(a) A Preferred Distribution shall accrue with respect to each
Preferred Member at the rate of 6% per annum on the such Preferred Member's
Principal Note Amount. Such Preferred Distributions shall accrue (whether or not
declared) from and including the Note Conversion Date of the Preferred Units
held by such Member to and including the date on which such Preferred Units are
redeemed and, to the extent not paid for any Distribution Period, will be
cumulative. Distributions on the Preferred Units shall accrue on a daily basis
whether or not the Company shall have earnings or surplus at the time.
(b) Semi-annual distribution periods (each a "Distribution Period")
shall commence on and include the sixteenth day of December and June of each
year and shall end on and include the fifteenth day of June and December,
respectively of such year; provided, however, that the first Distribution Period
with respect to each Preferred Unit shall commence on the Note Conversion Date
and shall end on and include the December 15 or June 15 next following such Note
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Conversion Date. Distributions on the Preferred Units shall be payable, when and
as declared, semi-annually, in arrears, no later than December 31 and June 30 of
each year commencing on the June 30 or December 31 next following the applicable
Note Conversion Date (each such date, a "Distribution Payment Date"), except
that if any such date is not a Business Day, then such dividend shall be paid on
the next succeeding Business Day. Each such distribution shall be payable to
holders of Preferred Units at the close of business on the record date
established by the Managing Members, which record date shall be not more than 60
days prior to the date fixed for payment thereof.
(c) The amount of distributions payable per Preferred Unit for each
full Distribution Period shall be computed by applying the 6% annual
distribution rate to the Principal Note Amount with respect to any Preferred
Unit and dividing such amount by two. The amount of distributions payable for
the initial Distribution Period and any period shorter than a full Distribution
Period shall be computed on the basis of actual days elapsed and a 360-day year
consisting of twelve 30-day months.
(d) Except as otherwise provided in this Agreement, if on any
Distribution Payment Date the Company pays less than the total amount of
distributions then accrued with respect to the Preferred Units, the amount so
paid shall be distributed ratably among the holders of the Preferred Units,
based upon the amount of Preferred Distribution which each such holder of
Preferred Units is entitled to receive.
(e) Unless all accrued distributions and other amounts then accrued
through the end of the last Distribution Period and unpaid with respect to the
Preferred Units shall have been paid in full, the Company shall not declare or
pay or set apart for payment any distributions or make any other distributions
on, or make any payment on account of the purchase, redemption, exchange or
other retirement of, any Units of the Company other than the Preferred Units
(each, a "Restricted Payment"); provided, however, that a "Restricted Payment"
shall not include any distribution required by Section 7.04 hereof (relating to
Tax Distributions).
ARTICLE VIII
SPECIAL ALLOCATION RULES
SECTION 8.01. Certain Definitions. The following terms have the
definitions hereinafter indicated whenever used in this Article VIII with
initial capital letters:
(a) "Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year or other period, after giving effect to the
following adjustments:
(i) Credit to such Capital Account any amounts which such Member is
treated as obligated to restore to the Company pursuant to Section
1.704-1(b)(2)(ii)(c) of the Regulations or is deemed to be obligated to
restore pursuant to Section 1.704-2(g)(1) of the Regulations or Section
1.704-2(i)(5) of the Regulations; and
(ii) Debit to such Capital Account the items described in Sections
1.704- 1(b)(2)(ii)(d)(4), (d)(5), and (d)(6) of the Regulations.
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The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Regulations and shall be interpreted consistently therewith.
(b) "Depreciation" means, for each Fiscal Year, an amount equal to the
federal income tax depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided that if the
federal income tax depreciation, amortization, or other cost recovery deductions
for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Managing
Member.
(c) "Gross Asset Value" means, with respect to any asset of the
Company, such asset's adjusted basis for federal income tax purposes, except as
follows:
(i) the initial Gross Asset Value of any asset contributed by a Member
to the Company shall be the gross fair market value of such asset at the
time of contribution determined by the Managing Members using such
reasonable method of valuation as they may adopt;
(ii) in the discretion of the Managing Members, the Gross Asset Values
of all the Company's assets shall be adjusted to equal their respective
gross fair market values, as reasonably determined by the Managing Members,
immediately prior to the following events:
(A) the making of a Capital Contribution (other than a de minimis
Capital Contribution) to the Company by a new or existing Member as
consideration for an Interest;
(B) the distribution by the Company to a Member of more than a de
minimis amount of Company property as consideration for the redemption
of an Interest; and
(C) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and
(iii) the Gross Asset Values of the Company assets distributed to any
Member shall be the gross fair market values of such assets as reasonably
determined by the Managing Members as of the date of distribution.
At all times, Gross Asset Values shall be adjusted by any Depreciation
taken into account with respect to the Company's assets for purposes of
computing Profits and Losses. Gross Asset Values shall be further adjusted to
reflect adjustments to Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m) to the extent not otherwise reflected in adjustments to
Gross Asset Values. Any adjustment to the Gross Asset Values of the Company
property shall require an adjustment to the Members' Capital Accounts as
described in the definition of Capital Account.
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(d) "Nonrecourse Deductions" means the nonrecourse deductions as
defined in Regulations Section 1.704-2(b)(1). The amount of Nonrecourse
Deductions for a Fiscal Year equals the net increase, if any, in the amount of
Company Minimum Gain during such Fiscal Year reduced by any distributions during
such Fiscal Year of proceeds of a Nonrecourse Liability that are allocable to an
increase in Company Minimum Gain, determined according to the provisions of
Regulations Sections 1.704-2(c) and 1.704-2(h).
(e) "Nonrecourse Liability" means a nonrecourse liability as defined
in Regulations Section 1.704-2(b)(3).
(f) "Member Minimum Gain" means an amount, with respect to each Member
Nonrecourse Debt, equal to Company Minimum Gain that would result if such Member
Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).
(g) "Member Nonrecourse Debt" means a liability as defined in
Regulations Section 1.704-2(b)(4).
(h) "Member Nonrecourse Deductions" means the Partner Nonrecourse
Deductions as defined in Regulations Section 1.704-2(i)(2). The amount of Member
Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal
Year equals the net increase, if any, in the amount of Member Minimum Gain
during such Fiscal Year attributable to such Member Nonrecourse Debt, reduced by
any distributions during that Fiscal Year to the Member that bears the economic
risk of loss for such Member Nonrecourse Debt to the extent that such
distributions are from the proceeds of such Member Nonrecourse Debt and are
allocable to an increase in Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined according to the provisions of Regulations Sections
1.704-2(h) and 1.704-2(i).
(i) "Company Minimum Gain" means the aggregate gain, if any, that
would be realized by the Company for purposes of computing Profits and Losses
with respect to each Company asset if each Company asset subject to a
Nonrecourse Liability were disposed of for the amount outstanding on the
Nonrecourse Liability by the Company in a taxable transaction. Company Minimum
Gain with respect to each Company asset shall be further determined in
accordance with Regulations Section 1.704-2(d) and any subsequent rule or
regulation governing the determination of minimum gain. A Member's share of
Company Minimum Gain at the end of any Fiscal Year shall equal the aggregate
Nonrecourse Deductions allocated to such Member (or its predecessors in
interest) up to that time, less such Member's (and predecessors') aggregate
share of decreases in Company Minimum Gain determined in accordance with
Regulations Section 1.704-2(g).
(j) "Profits" and "Losses" shall mean, respectively, Net Operating
Profits plus Net Disposition Profits, and Net Operating Losses plus Net
Disposition Losses.
SECTION 8.02. Allocations. The following provisions are incorporated
in the Agreement.
(a) Allocations for U.S. Federal Income Tax Purposes.
(i) For each Fiscal Year or other relevant period, except as otherwise
provided in this Section 8.02(a), for federal income tax purposes, each
item of income, gain, loss and deduction shall be allocated among the
Members in the same manner as its correlative item of Profits or Losses is
allocated pursuant to Article VI of this Agreement.
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(ii) In accordance with Code Sections 704(b) and 704(c) and the
Regulations thereunder, income, gain, loss and deduction with respect to
any property contributed to the capital of the Company shall, solely for
federal income tax purposes, be allocated among the Members so as to take
into account any variation between the adjusted basis of such property to
the Company for federal income tax purposes and the initial Gross Asset
Value of such property.
(iii) If the Gross Asset Value of any Company property is adjusted as
described in the definition of Gross Asset Value, subsequent allocations of
income, gain, loss and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such asset for
federal income tax purposes and the Gross Asset Value of such asset in the
manner prescribed under Code Sections 704(b) and 704(c) and the Regulations
thereunder. In furtherance of the foregoing, the Company shall employ any
reasonable method selected by the Managing Members.
(b) Allocations with Respect to Transferred or Additional Interests.
Profits and Losses allocable to an Interest assigned, issued or reissued during
a Fiscal Year shall be allocated to each Person who was the holder of such
Interest during such Fiscal Year, in proportion to the number of days that each
such holder was recognized as the owner of such Interest during such Fiscal Year
or by an interim closing of the books or in any other proportion permitted by
the Code and selected by the Managing Members in accordance with this Agreement,
without regard to the results of the Company operations or the date, amount or
recipient of any distributions which may have been made with respect to such
Interest.
(c) Mandatory Allocations.
(i) No Excess Deficit. To the extent that any Member has or would
have, as a result of an allocation of Loss (or item thereof), an Adjusted
Capital Account Deficit, such amount of Loss (or item thereof) shall be
allocated to the other Members in accordance with Section 8.02(a), but in a
manner which will not produce an Adjusted Capital Account Deficit as to
such Members. To the extent such allocation would result in all Members
having Adjusted Capital Account Deficits, such Loss shall be allocated to
the Managing Members.
(ii) Minimum Gain Chargeback. Notwithstanding any other provision of
this Article VIII, if there is a net decrease in Company Minimum Gain
during any Fiscal Year, then, subject to the exceptions set forth in
Regulations Sections 1.704-2(f)(2), (3), (4) and (5), each Member shall be
specially allocated items of the Company income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such Member's
share of the net decrease in Company Minimum Gain, as determined under
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to
be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in such section of the Regulations in accordance with
Regulations Section 1.704-2(f). This Section 8.02(c)(ii) is intended to
comply with the minimum gain chargeback requirements in Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
(iii) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article VIII except Section 8.02(c)(ii), if there is a
net decrease in Member Minimum Gain attributable to a Member Nonrecourse
Debt during any Fiscal Year, then, subject to the exceptions set forth in
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Regulations Section 1.704-2(i)(4), each Member who has a share of the
Member Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5), shall be
specially allocated items of the Company income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such Member's
share of the net decrease in Member Minimum Gain attributable to such
Member Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined
in accordance with Regulations Section 1.704-2(i)(4). This Section
8.02(c)(iii) is intended to comply with the Minimum gain chargeback
requirement in such Section of the Regulations and shall be interpreted
consistently therewith.
(iv) Qualified Income Offset. Notwithstanding any other provision of
this Article VIII, except Sections 8.02(c)(ii) and 8.02(c)(iii), in the
event any Member receives any adjustments, allocations or distributions
described in Regulations Sections 1.704- 1(b)(2)(ii)(d)(4), (5), or (6),
that cause or increase an Adjusted Capital Account Deficit of such Member
items of Company income and gain shall be specially allocated to such
Member in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of such
Member as quickly as possible.
(v) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
for any Fiscal Year shall be specially allocated to the Member who bears
the economic risk of loss with respect to the Member Nonrecourse Debt to
which such Member Nonrecourse Deductions are attributable in accordance
with Regulations Section 1.704-2(i)(1).
(vi) Section 514(c)(9)(B)(vi) Limitation. [Intentionally Omitted]
(vii) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or
743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of
such adjustment to the Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such item of gain or loss shall be
specially allocated to the Members in a manner consistent with the manner
in which their Capital Accounts are required to be adjusted pursuant to
such Section of the Regulations.
Each Member hereby agrees to provide the Company with all information
necessary to give effect to an election made under Code Section 754 if the
Managing Members determine to make such an election; provided that the cost
associated with such an election shall be borne by the Company as a whole.
With respect to such election:
(A) Any change in the amount of the depreciation deducted by the
Company and any change in the gain or loss of the Company, for federal
income tax purposes, resulting from an adjustment pursuant to Code
Section 743(b) shall be allocated entirely to the transferee of the
Interest or portion thereof so transferred. Neither the Capital
Contribution obligations of, nor the Interest of, nor the amount of
any cash distributions to, the Members shall be affected as a result
of such election, and except as provided in Regulations Section
1.704-1(b)(2)(iv)(m), the making of such election shall have no effect
except for federal and (if applicable) state and local income tax
purpose,
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(B) Solely for federal and (if applicable) state and local income
tax purposes and not for the purpose of maintaining the Members'
Capital Accounts (except as provided in Regulations Section
1.704-1(b)(2)(iv)(m)), the Company shall keep a written record for
those assets, the bases of which are adjusted as a result of such
election, and the amount at which such assets are carried on such
record shall be debited (in the case of an increase in basis) or
credited (in the case of a decrease in basis) by the amount of such
basis adjustment. Any change in the amount of the depreciation
deducted by the Company and any change in the gain or loss of the
Company, for federal and (if applicable) state and local income tax
purposes, attributable to the basis adjustment made as a result of
such election shall be debited or credited, as the case may be, on
such record.
(viii) Curative Allocations. The allocations set forth in this Section
8.02 (the "Regulatory Allocations") are intended to comply with certain
requirements of Regulations Section 1.704-1(b). The Regulatory Allocations
shall be taken into account for the purpose of equitably adjusting
subsequent allocations of Profits and Losses, and items of income, gain,
loss, and deduction among the Members so that, to the extent possible, the
net amount of such allocations of Profits and Losses and other items to
each Member shall be equal to the net amount that would have been allocated
to each such Member if the Regulatory Allocations had not occurred.
(ix) Nonrecourse Debt Distribution. To the extent permitted by
Regulations Sections 1.704-2(h)(3) and 1.704-2(i)(6), the Managing Members
shall endeavor to treat distributions as having been made from the proceeds
of Nonrecourse Liabilities or Member Nonrecourse Debt only to the extent
that such distributions would cause or increase a deficit balance in any
Member's Capital Account that exceeds the amount such Member is otherwise
obligated to restore (within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(c)) as of the end of the Company's taxable year in which the
distribution occurs.
ARTICLE IX
COVENANTS
SECTION 9.01 Negative Covenants.
(a) So long as any Preferred Units or Convertible Notes are
outstanding, without the Preferred and Convertible Note Approval:
(i) The Company shall not agree to amend Section 8.8 of the Preferred
Share Purchase Agreement, to waive compliance by Capital Trust with such
Section 8.8 of the Preferred Share Purchase Agreement or vote the Capital
Trust Shares or otherwise provide its consent for Capital Trust to Incur
any Indebtedness if Capital Trust's D/E Ratio would exceed 5:l.
(ii) Except as otherwise provided in this Agreement, the Company shall
not enter into or be a party to any transaction or arrangement, including,
without limitation, the purchase, sale, lease or exchange of property or
the receipt of any service, with or from any Managing Member or any
Affiliate of a Managing Member, except upon fair and reasonable terms no
less favorable to the Company than the Company would obtain in a comparable
arm's length transaction with a Person other than the Managing Members or
their Affiliates.
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(b) So long as any Preferred Units or Convertible Notes are
outstanding, without the Preferred and Convertible Note Approval, the Company
shall not Incur any Indebtedness other than the Convertible Notes and any
Convertible Notes Redemption Debt. So long as any Preferred Units or Convertible
Notes are outstanding, the Company shall not without the Preferred and
Convertible Note Approval issue any class or series of Interests that was not
previously outstanding other than (A) Preferred Units upon conversion of
Convertible Notes with an aggregate original principal amount not exceeding
$50,000,000 in accordance with the terms of the Convertible Notes and Preferred
Members admitted with respect thereto pursuant to Section 3.03 hereof, and (B)
the Common Units issued and Common Members admitted pursuant to Section 3.02
hereof, unless (x) each Preferred Member's Pro Rata Share of Capital Trust
Shares and other assets of the Company to which such Preferred Member would have
been entitled upon Redemption or Liquidation immediately after the issuance of
such Interests would be no less than such Preferred Member's Pro Rata Share of
Capital Trust Shares and other assets of the Company to which such Preferred
Member would have been entitled upon Redemption or Liquidation immediately prior
to the issuance of such Interests, and (y) the net proceeds of such issuance are
used for the redemption of Convertible Notes for cash pursuant to the terms of
the Convertible Notes and transaction expenses incurred in connection with such
issuance and the redemption of Convertible Notes.
SECTION 9.02. Affirmative Covenants. So long as any Convertible Notes
are outstanding or any Preferred Units are held by any Preferred Member, the
Company shall deliver or cause to be delivered to the holder of such Convertible
Notes and such Preferred Member: (a) complete copies of each (i) Annual Report
on Form 10-K filed by Capital Trust with the Securities and Exchange Commission,
as promptly as practicable after such filing is made, (ii) definitive Proxy
Statement and Annual Report to Shareholders of Capital Trust as promptly as
practicable after the mailing thereof to Capital Trust's shareholders, (iii)
Quarterly Report on Form 10-Q of Capital Trust, as promptly as practicable after
such filing is made, and (iv) Current Report on Form 8-K of Capital Trust, as
promptly as practicable after such filing is made; and (b) an (i) annual audited
income statement and balance sheet for the Company within ninety (90) days
following each fiscal year end; (ii) a quarterly unaudited income statement and
balance sheet for the Company within thirty (30) days following each fiscal
quarter end; and (iii) a quarterly statement, if applicable, of the Preferred
Member's Capital Account balance within thirty (30) days following each fiscal
quarter end.
ARTICLE X
RESIGNATION AND ASSIGNMENT OF INTERESTS
SECTION 10.01. Resignation of a Managing Member. A Managing Member
shall only be entitled to resign upon assignment of all of its Common Units to a
single Person in compliance with Section 10.04 and Section 10.05.
SECTION 10.02. Resignation of Member. A Member (other than a Managing
Member) may resign from the Company prior to the dissolution and winding up of
the Company only upon, and shall be deemed to have resigned upon, any
redemption, exchange or other repurchase by the Company or an assignment of its
interests in compliance with the provisions of Section 10.04 and Section 10.05.
SECTION 10.03. No Distribution Upon Resignation. Upon resignation, no
resigning Member shall be entitled to receive any distribution or otherwise be
entitled to receive the fair value of its Interest; provided, however, that upon
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any redemption, exchange or other repurchase by the Company, such Member shall
be entitled to receive the amount payable by the Company in connection with
such redemption, exchange or other repurchase.
SECTION 10.04. Assignment of Interests.
(a) No transfer or assignment of all or any portion of a Member's
Interest, Common Units or Preferred Units (including some or all of its rights
or obligations hereunder) may be made without the satisfaction of the conditions
set forth in this Section 10.04.
(b) Without the Preferred and Convertible Note Approval, the Common
Members may not assign or transfer their Interests or Common Units except to
another Common Member or its Affiliate.
(c) The Company shall not recognize for any purpose any purported
transfer or assignment of all or any portion of a Member's Interest, Common
Units or Preferred Units (including some or all of its rights or obligations
hereunder) unless:
(i) the Managing Members shall have been furnished with the documents
effecting such transfer or assignment, in form and substance satisfactory
to the Managing Members, executed and acknowledged by both transferor and
transferee;
(ii) such transfer or assignment shall have been made in accordance
with all applicable laws and regulations and all necessary governmental
consents shall have been obtained and requirements satisfied, including
without limitation compliance with the Securities Act of 1933, as amended,
and applicable state blue sky and securities laws;
(iii) such transfer or assignment will not cause (A) a termination of
the Company for Federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code, (B) the Company to have more than 100 partners
(as determined for purposes of Treasury Regulations Section
1.7704-1(h)(1)(ii)) or (C) an "ownership change" with respect to Capital
Trust within the meaning of Section 382 of the Code;
(iv) all necessary instruments reflecting such admission shall have
been filed in each jurisdiction in which such filing is necessary in order
to qualify the Company to conduct business or to preserve the limited
liability of the Members; and
(v) such transfer or assignment will not cause the Company to be
required to register as an "investment company" under the Investment
Company Act of 1940.
SECTION 10.05. Right of Assignee to Become a Substitute Member. If the
provisions of Section 10.04 have been complied with, such transfer or assignment
shall, nevertheless, not entitle the assignee to become a Member or to be
entitled to exercise or receive any of the rights, powers or benefits of a
Member other than the right to receive distributions to which the assigning
Member would be entitled, unless (i) the assigning Member designates, in a
written instrument delivered to the Managing Members, its assignee to become a
Substitute Member, and (ii) the transferee has executed and acknowledged such
instruments, in form and substance reasonably satisfactory to the Managing
Members, as the Managing Members reasonably deem necessary or desirable in their
sole discretion to effectuate such admission and to confirm the agreement of
such transferee to be bound by all the terms and provisions of this Agreement
with respect to any rights and/or obligations represented by the Interests,
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Common Units or Preferred Units acquired by such transferee. The admission of
any transferee of a Member as a Substitute Member shall not require the approval
of any Member provided that the transferor and transferee have complied, to the
Managing Members' reasonable satisfaction, with the provisions of Section 10.04
and this Section 10.05. If a Member assigns all of its Interest, Common Units or
Preferred Units in the Company and the assignee of such Interest, Common Units
or Preferred Units is entitled to become a Substitute Member pursuant to this
Section 10.05, such assignee shall be admitted to the Company effective
immediately prior to the effective date of the assignment, and, immediately
following such admission, the assigning Member shall cease to be a member of the
Company.
SECTION 10.06. Recognition of Assignment by Company. No assignment, or
any part thereof, that is in violation of this Article X shall be valid or
effective, and neither the Company nor the Managing Members shall recognize the
same for the purpose of making distributions pursuant to Article VII hereof with
respect to such Interest, Common Units, Preferred Units or part thereof. Neither
the Company nor the Managing Members shall incur any liability as a result of
refusing to make any such distributions to the assignee of any such invalid
assignment. In the event that a transfer or assignment of an Interest, Common
Units or Preferred Units is made in compliance with Article X, the transferee
shall succeed to the portion of the Capital Account of the assigning Member
attributable to the Interest, Common Units or Preferred Units or portion thereof
transferred or assigned.
ARTICLE XI
DISSOLUTION
SECTION 11.01. Duration and Dissolution. The Company shall be
dissolved and its affairs shall be wound up upon the first to occur of the
following:
(a) the decision made by the Managing Members to dissolve the Company;
and
(b) the entry of a decree of judicial dissolution of the Company under
Section 18-802 of the Delaware Act.
The death, retirement, resignation, expulsion, bankruptcy or
dissolution of any Member or the occurrence of any other event which terminates
the continued membership of any Member in the Company shall not cause the
Company to be dissolved and its affairs wound up.
SECTION 11.02. Winding Up. Subject to the provisions of the Delaware
Act, the Managing Members shall have the exclusive right to wind up the
Company's affairs in accordance with Section 18-803 of the Delaware Act (and
shall promptly do so upon dissolution of the Company), and shall also have the
exclusive right to act as or appoint a liquidating trustee in connection
therewith.
SECTION 11.03. Distribution of Assets. Upon the winding up of the
Company the assets shall be distributed in the manner provided in Article VII,
subject to the applicable terms of Section 18-804 of the Delaware Act.
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SECTION 11.04. Notice of Liquidation. The Managing Members shall give
each of the other Members at least 10 days' prior written notice of any
Liquidation or any other sale or disposition of all or any Capital Trust Shares
by the Company.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Record Dates. The Managing Members, in their
discretion, shall establish a record date with respect to distributions by the
Company.
SECTION 12.02. Tax Reports and Financial Statements. After the end of
each fiscal year, the Managing Members shall, as promptly as possible and in any
event within 90 days after the close of the fiscal year, cause to be prepared
and transmitted to each Member federal income tax form K-1 or any other forms
which are necessary or advisable.
SECTION 12.03. Amendment to the Agreement. This Agreement may be
amended or supplemented by the written consent of the Managing Members;
provided, that no such amendment or supplement shall:
(a) change the percentage of Preferred Units necessary for any consent
required under this Agreement to the taking of any action without the Preferred
and Convertible Note Approval; or
(b) adversely affect the rights of the holders of Convertible Notes or
the Preferred Members without the Preferred and Convertible Note Approval;
provided, that the Company may issue classes and series of Interests that were
not previously outstanding and amend this Agreement in connection therewith as
long as such issuance is permitted by Section 9.01(b) of this Agreement; or
(c) amend this Section 12.03 without the Preferred and Convertible
Note Approval.
SECTION 12.04. Successors; Counterparts. This Agreement and any
amendment hereto in accordance with Section 12.03: (a) shall be binding as to
the executors, administrators, estates, heirs and legal successors, or nominees
or representatives, of the Members, and (b) may be executed in several
counterparts with the same effect as if the parties executing the several
counterparts had all execute one counterpart.
SECTION 12.05. Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflict of laws thereof. In
particular, this Agreement shall be construed to the maximum extent possible to
comply with all of the terms and conditions of the Delaware Act. If,
nevertheless, it shall be determined by a court of competent jurisdiction that
any provisions or wording of this Agreement shall be invalid or unenforceable
under said Delaware Act or other applicable law, such invalidity or
unenforceability shall not invalidate the entire Agreement. In that case, this
Agreement shall be construed as to limit any term or provision so as to make it
enforceable or valid within the requirements of applicable law, and, in the
event such term or provisions cannot be so limited, this Agreement shall be
construed to omit such invalid or unenforceable provisions. If it shall be
determined by a court of competent jurisdiction that any
LLCAGR13.DOC
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<PAGE>
provision relating to the distributions and allocations of the Company or to
any fee payable by the Company is invalid or unenforceable, this Agreement
shall be construed or interpreted so as (a) to make it enforceable or valid
and (b) to make the distributions and allocations as closely equivalent to
those set forth in this Agreement as is permissible under applicable law.
SECTION 12.06. Filings. Following the execution and delivery of this
Agreement, the Managing Members shall promptly prepare any documents required to
be filed and recorded under the Delaware Act, and the Managing Members shall
promptly cause each such document to be filed and recorded in accordance with
the Delaware Act and, to the extent required by local law, to be filed and
recorded or notice thereof to be published in the appropriate place in each
jurisdiction in which the Company may hereafter establish a place of business.
The Managing Members shall also promptly cause to be filed, recorded and
published such statements of fictitious business name and any other notices,
certificates, statements or other instruments required by any provision of any
applicable law of the United States or any state or other jurisdiction which
governs the conduct of its business from time to time.
SECTION 12.07. Power of Attorney. Each Member does hereby constitute
and appoint each Managing Member as its true and lawful representative and
attorney-in-fact, in its name, place and stead to make, execute, sign, deliver
and file (a) Certificate of Formation of the Company, any amendment thereof
required because of an amendment to this Agreement or in order to effectuate any
change in the membership of the Company, (b) this Agreement, (c) any amendments
to this Agreement and (d) all such other instruments, documents and certificates
which may from time to time be required by the laws of the United States of
America, the State of Delaware or any other jurisdiction, or any political
subdivision of agency thereof, to effectuate, implement and continue the valid
and subsisting existence of the Company or to dissolve the Company or for any
other purpose consistent with this Agreement and the transactions contemplated
hereby.
The power of attorney granted hereby is coupled with an interest and
shall (i) survive and not be affected by the subsequent death, incapacity,
disability, dissolution, termination or bankruptcy of the Member granting the
same or the transfer of all or any portion of such Member's Interest and (ii)
extend to such Member's successors, assigns and legal representatives.
SECTION 12.08. Headings. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define or limit the scope or intent of this Agreement or any
provision hereof.
SECTION 12.09. Additional Documents. Each Member, upon the request of
the Managing Members, agrees to perform all further acts and execute,
acknowledge and deliver any documents that may be reasonably necessary to carry
out the provisions of this Agreement.
SECTION 12.10. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given to such party (and any other person designated by
such party) at its address or facsimile number set forth in a schedule filed
with the records of the Company or such other address or facsimile number as
such party may hereafter specify for the purpose of notice to the Managing
Members (if such party is not a Managing Member) or to all the other Members (if
such party is a Managing Member). Each such notice, request or other
communication shall be effective (a) if given by facsimile, when transmitted to
the number specified pursuant to this Section and the appropriate confirmation
is received, (b) if given by mail, seventy-two hours after such communication is
deposited in the mails
LLCAGR13.DOC
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<PAGE>
with first class postage prepaid, addressed as aforesaid, or (c) if given by
any other means, when delivered at the address specified pursuant to this
Section.
SECTION 12.11. Waiver of Right to Partition and Bill of Accounting. To
the fullest extent permitted by applicable law, each of the Members covenants
that it will not, and hereby waives any right to, (except with the consent of
the Managing Members) file a bill for partnership accounting. Each of the
Members irrevocably waives any right that it may have to maintain any action for
partition with respect to any of the Company's assets.
LLCAGR13.DOC
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<PAGE>
IN WITNESS WHEREOF, the undersigned have hereto set their hands as of
the day and year first above written.
COMMON MEMBERS:
CalREIT INVESTORS LIMITED PARTNERSHIP
By: Zell General Partnership, Inc.
By:_____________________________________
Donald J. Liebentritt, Vice President
V2 HOLDINGS LLC
By:_________________________________________
John R. Klopp
LLCAGR13.DOC
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<PAGE>
SCHEDULE A
Common Member: Capital contribution: Address:
CalREIT INVESTORS $5,000,000 Two North Riverside Plaza,
LIMITED PARTNERSHIP Suite 600, Chicago, IL 60606
V2 HOLDINGS LLC $0 885 Third Avenue, 12th Floor
New York, New York 10002
Preferred Member: Capital Contribution: Address:
C:\WINDOWS\LLCAGR13.DOC
- 35 -
617925.1 7/24/97 9:18p
Exhibit 3
VFC INVESTMENT AGREEMENT
This VFC Investment Agreement (this "Agreement"), is made as of July
15, 1997, among Veqtor Finance Company, LLC, a Delaware limited liability
company ("Veqtor"), CalREIT Investors Limited Partnership, an Illinois limited
partnership ("CRIL"), V2 Holdings LLC, a Delaware limited liability company
("V2"), John R. Klopp ("Klopp") and Craig M. Hatkoff ("Hatkoff"). Capitalized
terms used and not otherwise defined herein have the respective meanings given
such terms in Article 1 hereof.
WITNESSETH
WHEREAS, as of the date of this Agreement, CRIL and V2 each hold the
same kind and number of Veqtor Units;
WHEREAS, as of the date of this Agreement, Klopp and Hatkoff hold in
the aggregate 100% of the issued and outstanding V2 Units;
WHEREAS, the parties hereto desire to set forth herein provisions
governing, among other things, the transfer of Veqtor Units and V2 Units among
one another and third parties;
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the parties agree as follows:
Article 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the following meanings:
"Affiliate" means, with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person.
"Capital Trust" means the California Real Estate Investment Trust, a
business trust organized under the laws of the State of California and
established under a Declaration of Trust dated September 15, 1966, as amended
from time to time, and any successor thereto, whose name is intended to be
changed to "Capital Trust".
"Capital Trust Voting Common" means the class A common shares of
beneficial interests, $1.00 par value, in Capital Trust.
"Capital Trust Voting Preferred" means the Class A 9.5% Cumulative
Convertible Preferred Shares of Beneficial Interests, $1.00 par value, in
Capital Trust.
"Claims" means all options, proxies, voting trusts, voting agreements,
judgments, pledges, charges, escrows, rights of first refusal or first offer,
mortgages, indentures, claims, transfer restrictions, liens, equities,
encumbrances, security interests and other encumbrances of every kind and nature
whatsoever, whether arising by agreement, operation of law or otherwise.
"control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
BUYSELL3.DOC
<PAGE>
"DOT" means the Amended and Restated Declaration of Trust of Capital
Trust, as amended or restated, from time to time.
"Employment Agreement" means: (a) with respect to Klopp, the
Employment Agreement, dated as of July 15, 1997, by and between Klopp and
Capital Trust, as amended, modified, supplemented or restated from time to time;
and (b) with respect to Hatkoff, the Employment Agreement, dated as of July 15,
1997, by and between Hatkoff and Capital Trust, as amended, modified,
supplemented or restated from time to time.
"Entity" means a corporation, a partnership or a limited liability
company.
"Fair Market Value" shall have the meaning ascribed to it in Section
3.5 hereof.
"Hatkoff Family Entity" means any corporation, partnership, limited
liability company or trust wholly controlled by Hatkoff and wholly owned
beneficially and of record by Hatkoff and Hatkoff's wife, children,
grandchildren and/or parents or a trust established for their benefit, provided
such trust is wholly controlled by Hatkoff.
"Holder" shall mean (a) each of CRIL, V2, Klopp, and Hatkoff, (b) each
Permitted Transferee of CRIL, V2, Klopp, and Hatkoff, and (c) each Third Party
Transferee.
"Klopp Family Entity" means any corporation, partnership, limited
liability company or trust wholly controlled by Klopp and wholly owned
beneficially and of record by Klopp and Klopp's wife, children, grandchildren
and/or parents or a trust established for their benefit, provided such trust is
wholly controlled by Klopp.
"Permitted Transferee" means:
(a) with respect to the Transfer of V2 Units by Klopp, a Klopp Family
Entity;
(b) with respect to the Transfer of V2 Units by Hatkoff, a Hatkoff
Family Entity;
(c) with respect to the Transfer of Veqtor Units by V2 (or its
Permitted Transferee, in the case of a subsequent Transfer subject to this
paragraph (c)): (i) any Entity wholly owned beneficially and of record, and
wholly controlled, by V2; or (ii) any Entity wholly owned beneficially and of
record by Klopp (or a Klopp Family Entity) and Hatkoff (or a Hatkoff Family
Entity) and wholly controlled by Klopp and Hatkoff, in each case in the same
relative proportions with respect to ownership and control vis a vis Klopp (or a
Klopp Family Entity), on the one hand, and Hatkoff (or a Hatkoff Family Entity),
on the other hand, immediately after the Transfer as immediately before the
Transfer; and
(d) with respect to the Transfer of Veqtor Units by CRIL (or its
Permitted Transferee, in the case of a subsequent Transfer subject to this
paragraph (d)), any Affiliate of CRIL.
"Person" means an individual, a corporation, a partnership, a limited
liability company, a joint venture, an association, a joint stock company, a
trust, a business trust, a government or any agency or any political
subdivision, any unincorporated organization or any other entity.
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BUYSELL3.DOC
<PAGE>
"Third Anniversary" means the third anniversary of the date of the
closing of that certain 12% Convertible Redeemable Note Purchase Agreement among
Veqtor and certain institutional investors, dated as of June 16, 1997.
"Third Party Transferee" means any Person (other than Klopp, Hatkoff,
V2, CRIL and their Permitted Transferees) to whom Veqtor Units or V2 Units are
Transferred pursuant to Section 4.2(b), 4.3(b) or 4.4(c) hereof.
"Transfer" means any voluntary or involuntary, direct or indirect,
transfer, sale, assignment, donation, pledge, hypothecation, issuance, grant of
a security interest in or other disposition or attempted disposition of Veqtor
Units or V2 Units, as the case may be, or any right or interest whatsoever
therein, including, without limitation, pursuant to the laws of descent and
distribution, by operation of law or otherwise, whether with or without
consideration or value, and whether for cash, other securities or other property
and specifically including any share for share or similar exchange.
"V2 Units" means any and all limited liability company or other
interests in V2 or any successor thereto, however designated and whether voting
or nonvoting, including, without limitation, common interests and preferred
interests, and whenever acquired.
"Veqtor" means Veqtor Finance Company, LLC, a Delaware Limited
Liability Company.
"Veqtor LLC Agreement" means the Limited Liability Company Agreement
of Veqtor, dated as of June 16, 1997, as amended, modified, supplemented or
restated from time to time.
"Veqtor Units" means any and all limited liability company or other
interests in Veqtor or any successor thereto, however designated and whether
voting or nonvoting, including, without limitation, common interests and
preferred interests, and whenever acquired.
Article 2. Buy/Sell Agreement. From and after the Third Anniversary,
either CRIL or V2 (the "Initiating Party") may deliver written notice (the
"Initiating Notice") to the other (the "Responding Party") to the effect that
the Initiating Party is willing to sell for cash all (but not less than all) of
the Veqtor Units then held by the Initiating Party to the Responding Party or
purchase for cash from the Responding Party all (but not less than all) of the
Veqtor Units then held by the Responding Party at the same specified price per
Veqtor Unit. The Responding Party shall have one hundred fifty (150) days after
receipt of the Initiating Notice to elect, by delivery of written notice to the
Initiating Party, to either (i) sell for cash to the Initiating Party all (but
not less than all) of the Veqtor Units then held by the Responding Party at the
price per Veqtor Unit specified in the Initiating Notice or (ii) to purchase for
cash from the Initiating Party all (but not less than all) of the Veqtor Units
then held by the Initiating Party at the price per Veqtor Unit specified in the
Initiating Notice. If the Responding Party fails to make an election in a timely
manner as provided in the immediately preceding sentence, the Responding Party
shall be deemed to have elected to sell for cash to the Initiating Party all
(but not less than all) of the Veqtor Units then held by the Responding Party at
the price per Veqtor Unit specified in the Initiating Notice. If the Responding
Party elects to purchase, the closing of the purchase will take place on the
date specified by the Responding Party not later than one hundred eighty (180)
days after receipt of the Initiating Notice. If the Responding Party elects to
sell, the closing of the sale will take place on the date specified by the
Initiating Party not later than one hundred eighty (180) days after receipt of
the Initiating Notice.
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\BUYSELL3.DOC
<PAGE>
Article 3. Special Triggering Events.
3.1 Termination Event.
(a) Upon the termination of employment with Capital Trust of either
Klopp or Hatkoff for any or no reason, including, without limitation, by reason
of his death or disability, other than voluntary termination by Klopp or Hatkoff
(the "Termination Event"), whomever of Klopp or Hatkoff has not been the subject
of the Termination Event (the "Remaining Individual") shall have the right to
purchase all (but not less than all) of the V2 Units then held by the other
individual (the "Departing Individual") for cash at their Fair Market Value. In
order to exercise his purchase rights, within one hundred fifty (150) days after
the date of the Termination Event, the Remaining Individual shall deliver
written notice concurrently to the Departing Individual (or his estate or
representative) and CRIL of the Remaining Individual's election to purchase all
(but not less than all) of the V2 Units then held by the Departing Individual
(or his estate or representative) for cash at their Fair Market Value.
(b) If the Remaining Individual fails to timely elect to exercise its
purchase rights under Section 3.1(a) within the aforementioned one hundred fifty
(150) day period or fails to close on the purchase within one hundred eighty
(180) days after the date of the Termination Event, CRIL shall have the right to
purchase from V2 fifty percent (50%) of the Veqtor Units then held by V2 for
cash at their Fair Market Value, upon which purchase V2 shall distribute to the
Departing Individual (or his estate or representative) an amount equal to the
net proceeds of such sale reduced by 50% of V2's aggregate liabilities at the
date of distribution in full redemption of the V2 Units then held by the
Departing Individual (or his estate or representative). In order to exercise its
purchase rights under this Section 3.1(b), within CRIL's Election Period (as
hereinafter defined), CRIL shall deliver written notice to V2 of CRIL's election
to purchase from V2 fifty percent (50%) of the Veqtor Units then held by V2 for
cash at their Fair Market Value. As used in this Section 3.1, "CRIL's Election
Period" means (x) the one hundred eighty (180) day period following the date of
the Termination Event, if the Remaining Individual fails to timely make the
election to purchase all (but not less than all) of the V2 Units then held by
the Departing Individual (or his estate or representative) as provided in
Section 3.1(a), or (y) the two hundred ten (210) day period following the date
of the Termination Event, if the Remaining Individual timely makes the election,
but fails to close on the purchase of all (but not less than all) of the V2
Units then held by the Departing Individual (or his estate or representative),
as provided in Section 3.1(a).
(c) If CRIL declines or fails to timely elect to purchase from V2
fifty percent (50%) of the Veqtor Units then held by V2 for cash at their Fair
Market Value as provided in Section 3.1(b): (i) Veqtor shall, as soon as
practicable, but in no event later than thirty (30) days after the date of such
declination or failure to timely elect to purchase, distribute to V2 fifty
percent (50%) of the assets V2 would be entitled to receive from Veqtor if
Veqtor were to liquidate and distribute its assets to its members on the date in
question; (ii) V2's economic interest in Veqtor shall be reduced correspondingly
by fifty percent (50%); and (iii) V2 shall distribute to the Departing
Individual (or his estate or representative), in full redemption of the
Departing Individual's interest in V2, an amount equal to the net assets
received from Veqtor pursuant to subparagraph (i) above reduced by 50% of V2's
aggregate liabilities at the date of distribution.
3.2 Voluntary Termination Event.
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BUYSELL3.DOC
<PAGE>
(a) Upon the voluntary termination of employment (the "Voluntary
Termination Event") with Capital Trust of either Klopp or Hatkoff (the
"Voluntarily Departing Individual"), CRIL shall have the right to purchase from
V2 fifty percent (50%) of the Veqtor Units then held by V2 for cash at their
Fair Market Value, upon which purchase V2 shall distribute to the Voluntarily
Departing Individual an amount equal to the net proceeds of such sale reduced by
50% of V2's aggregate liabilities at the date of distribution in full redemption
of the V2 Units then held by the Voluntarily Departing Individual. In order to
exercise its purchase rights hereunder, within one hundred fifty (150) days of
the date of the Voluntary Termination Event, CRIL shall deliver written notice
to V2 of CRIL's election to purchase from V2 fifty percent (50%) of the Veqtor
Units then held by V2 for cash at their Fair Market Value.
(b) If CRIL fails to timely elect to exercise its purchase rights
under Section 3.2(a) within the aforementioned one hundred fifty (150) day
period or fails to close on the purchase within one hundred eighty (180) days
after the date of the Voluntary Termination Event, whomever of Klopp or Hatkoff
is not the Voluntarily Departing Individual (the "Voluntarily Remaining Member")
shall have the right to purchase all (but not less than all) of the V2 Units
then held by the Voluntarily Departing Individual for cash at their Fair Market
Value. In order to exercise his purchase rights under this Section 3.2(b),
within the Voluntarily Remaining Member's Election Period (as hereinafter
defined), the Voluntarily Remaining Member shall deliver written notice
concurrently to the Voluntarily Departing Individual and CRIL of the Voluntarily
Remaining Member's election to purchase all (but not less than all) of the V2
Units then held by the Voluntarily Departing Individual for cash at their Fair
Market Value. For purposes of this Section 3.2, "Voluntarily Remaining Member's
Election Period" means (x) the one hundred eighty (180) day period following the
date of the Voluntary Termination Event, if CRIL fails to timely make the
election to purchase all (but not less than all) of the V2 Units then held by
the Voluntarily Departing Individual as provided in Section 3.2(a), or (y) the
two hundred ten (210) day period following the date of the Voluntary Termination
Event, if CRIL timely makes the election, but fails to close on the purchase of
all (but not less than all) of the V2 Units then held by the Voluntarily
Departing Individual, as provided in Section 3.2(a).
(c) If the Voluntarily Remaining Member declines or fails to timely
elect to purchase from the Voluntarily Remaining Individual all (but not less
than all) of the V2 Units then held by the Voluntarily Departing Individual for
cash at their Fair Market Value as provided in Section 3.2(b): (i) Veqtor shall,
as soon as practicable, but in no event later than thirty (30) days after the
date of such declination or failure to timely elect to purchase by the
Voluntarily Remaining Member, distribute to V2 fifty percent (50%) of the assets
V2 would be entitled to receive from Veqtor if Veqtor were to liquidate and
distribute its assets to its members on the date in question; (ii) V2's economic
interest in Veqtor shall be reduced correspondingly by fifty percent (50%); and
(iii) V2 shall distribute to the Departing Individual (or his estate or
representative), in full redemption of the Departing Individual's interest in
V2, an amount equal to the net assets received from Veqtor pursuant to
subparagraph (i) above reduced by 50% of V2's aggregate liabilities at the date
of distribution.
3.3 Concurrent Termination Event.
(a) Upon the termination of employment with Capital Trust of both
Klopp and Hatkoff, within any thirty (30) day period, for any or no reason,
whether voluntary or involuntary, including, without limitation, by reason of
death or disability (the "Concurrent Termination Event"), CRIL shall have the
right to purchase from V2 all (but not less than all) of the Veqtor Units then
held by V2 for cash at their Fair Market Value. In order to exercise its
purchase
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BUYSELL3.DOC
<PAGE>
rights hereunder, within one hundred fifty (150) days after the date of the
Concurrent Termination Event, CRIL shall deliver written notice to V2 of
CRIL's election to purchase from V2 all (but not less than all) of the Veqtor
Units then held by V2 for cash at their Fair Market Value.
(b) If CRIL fails to timely elect to exercise its purchase rights
under Section 3.3(a) within the aforementioned one hundred fifty (150) day
period or fails to close on the purchase within one hundred eighty (180) days
after the date of the Concurrent Termination Event, Veqtor shall, as soon as
practicable, but in no event later than thirty (30) days after the date of such
declination or failure to timely elect to purchase, distribute to V2 one hundred
percent (100%) of the assets V2 would be entitled to receive from Veqtor if
Veqtor were to liquidate and distribute its assets to its members on the date in
question, in full redemption of one hundred percent (100%) of the Veqtor Units
then held by V2.
3.4 Final Termination Event.
(a) Upon the termination of employment with Capital Trust of either
Klopp or Hatkoff for any or no reason, whether voluntary or involuntary,
including, without limitation, by reason of his death or disability, following
by more than thirty (30) days the prior termination of employment with Capital
Trust of the other individual for any or no reason, whether voluntary or
involuntary, including, without limitation, by reason of his death or disability
(the "Final Termination Event"), CRIL shall have the right to purchase from V2
all (but not less than all) of the Veqtor Units then held by V2 for cash at
their Fair Market Value. In order to exercise its purchase rights hereunder,
within one hundred fifty (150) days after the date of the Final Termination
Event, CRIL shall deliver written notice to V2 of CRIL's election to purchase
from V2 all (but not less than all) of the Veqtor Units then held by V2 for cash
at their Fair Market Value.
(b) If CRIL fails to timely elect to exercise its purchase rights
under Section 3.4(a) within the aforementioned one hundred fifty (150) day
period or fails to close on the purchase within one hundred eighty (180) days
after the date of the Final Termination Event, Veqtor shall, as soon as
practicable, but in no event later than thirty (30) days after the date of such
declination or failure to timely elect to purchase, distribute to V2 one hundred
percent (100%) of the assets V2 would be entitled to receive from Veqtor if
Veqtor were to liquidate and distribute its assets to its members on the date in
question, in full redemption of one hundred percent (100%) of the Veqtor Units
then held by V2.
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<PAGE>
3.5 Determination of Fair Market Value.
(a) For purposes of this Article 3, Fair Market Value of Veqtor Units
or V2 Units shall be determined by mutual agreement of the seller and the buyer,
or, if they fail to agree within thirty (30) days after the date that a party
elects or otherwise becomes bound to purchase, then by an independent third
party appraiser of national reputation jointly selected by the seller and buyer.
If seller and buyer fail to agree on the selection of an appraiser within
fifteen (15) days after the expiration of the thirty (30) day period referred to
above, on the application of either buyer or seller, an appraiser shall be
appointed by the American Arbitration Association, whose appointment shall be
final and binding upon the parties, absent manifest error or fraud. The
appraiser's decision shall be final and binding upon the parties, absent
manifest error or fraud, and judgment may be entered on the appraiser's
decision. Buyer and seller each will bear one-half of all fees and expenses of
the appraiser. Buyer and seller shall each pay their own costs and expenses
(including attorney's, accountant's and expert's fees) incurred by them in
connection with the settlement of any dispute regarding Fair Market Value. In
the event of a dispute concerning Fair Market Value, the date by which a closing
must occur or payment must be made for the Veqtor Units or V2 Units in question
as otherwise provided in this Article 3 shall be tolled until the dispute is
resolved as provided in this Section 3.6. In determining Fair Market Value of
Veqtor Units or V2 Units, seller, buyer and the appraiser shall follow the
principles set forth below, in addition to any other suitable methods or
approaches not in conflict with such principles. (b) The Fair Market Value of V2
Units which are the subject of a sale shall be equal to the Fair Market Value of
the "Seller's Pro Rata Share" of Veqtor Units then held by V2 (determined in
accordance with paragraph (c) below, as if said Veqtor Units were the subject of
the sale). As used herein, "Seller's Pro Rata Share" means the percentage
interest in V2 represented by the V2 Units which are the subject of the sale.
(c) The Fair Market Value of Veqtor Units which are the subject of a
sale shall be determined based on the fair market value of the assets of Veqtor
(determined in accordance with paragraphs (d) and (e) below) which would be
distributed in respect of such Veqtor Units if Veqtor were to liquidate and
distribute its assets to its members on the date in question, without discount
for minority interest or illiquidity and without markup for control premium.
(d) The fair market value of the Capital Trust Voting Common will be
equal to the average closing price of the Capital Trust Voting Common during the
twenty (20) trading days commencing ten (10) trading days prior to the date of
the event requiring valuation of the Capital Trust Voting Common.
(e) The fair market value of the Capital Trust Voting Preferred will
be equal to the greater of (i) the fair market value of the Capital Trust Voting
Common issuable upon conversion of the Capital Trust Voting Preferred (as
determined in accordance with paragraph (d) above) and (ii) the liquidation
preference of the Capital Trust Voting Preferred.
3.6 Determination of Employment Status. Notwithstanding anything to
the contrary in this Agreement, the status of Klopp's or Hatkoff's employment
with Capital Trust and the nature of any termination thereof as determined
under, and for purposes of, the Employment Agreement, including, without
limitation, whether Klopp's or Hatkoff's employment has terminated, the
effective date of termination and whether the termination was voluntary,
involuntary or by reason of death or disability, all as determined under, and
for purposes of, the Employment Agreement, shall constitute the status of
Klopp's or Hatkoff's employment with
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<PAGE>
Capital Trust and the nature of any termination thereof for purposes of this
Article 3, including, without limitation, whether Klopp's or Hatkoff's
employment has terminated, the effective date of termination and whether the
termination was voluntary, involuntary or by reason of death or disability.
Article 4. Restrictions on Transfer and Rights of First Offer.
4.1 Restrictions on Transfer / Permitted Transferees.
(a) Except as otherwise provided in this Agreement, no Holder shall
Transfer any Veqtor Units or V2 Units, whether now owned or hereafter acquired,
prior to the Third Anniversary. If any Transfer is made or attempted contrary to
the provisions of this Agreement, such purported Transfer shall be void ab
initio; the Holders not involved in such transfer shall have, in addition to any
other legal or equitable remedies which they may have, the right to enforce the
provisions of this Agreement by actions for specific performance (to the extent
permitted by law); and both the Holders not involved in such purported Transfer
and Veqtor shall refuse to recognize any such purported transferee of Veqtor
Units as a holder of Veqtor Units for any purpose, and both the Holders not
involved in such purported Transfer and V2 shall refuse to recognize any such
purported transferee of V2 Units as a holder of V2 Units for any purpose.
(b) Notwithstanding anything to the contrary in Section 4.1(a) hereof,
a Holder may Transfer Veqtor Units or V2 Units to a Permitted Transferee of such
Holder without complying with the provisions of Section 4.2, Section 4.3 and
Section 4.4. As a condition to the effectiveness of any Transfer of Veqtor Units
or V2 Units to a Permitted Transferee, the Permitted Transferee shall execute a
counterpart to this Agreement, whereupon the Permitted Transferee shall hold
Veqtor Units or V2 Units, as the case may be, subject to all of the provisions
of this Agreement, as if: (a) in the case of a Permitted Transferee of Klopp,
Klopp were the holder of the V2 Units actually held by his Permitted Transferee;
(b) in the case of a Permitted Transferee of Hatkoff, Hatkoff were the holder of
the V2 Units actually held by his Permitted Transferee; (c) in the case of a
Permitted Transferee of V2, V2 were the holder of the Veqtor Units actually held
by its Permitted Transferee; and (d) in the case of a Permitted Transferee of
CRIL, CRIL were the holder of the Veqtor Units actually held by its Permitted
Transferee. No Permitted Transferee shall make any further Transfer of Veqtor
Units or V2 Units other than as permitted by this Agreement in conformance with
Section 4.1(b). Notwithstanding anything to the contrary in this Agreement: (i)
all rights and benefits originally granted to Klopp, Hatkoff, V2 or CRIL under
this Agreement shall remain with each of them, and shall not be assigned or
transferred to their Permitted Transferees, notwithstanding any Transfer of
Veqtor Units or V2 Units by them to their Permitted Transferees, as if Klopp,
Hatkoff, V2 and CRIL were the holders of the Veqtor Units or V2 Units actually
held by their Permitted Transferees; and (ii) no Permitted Transferee shall be
entitled to satisfy any obligation or otherwise take any action or do anything
under this Agreement, except through Klopp, Hatkoff, V2 or CRIL, as the case may
be, as the representative for all of such party's Permitted Transferees.
4.2 Right of First Offer on Transfer by V2.
(a) From and after the Third Anniversary, in the event that V2 wishes
to Transfer all or any portion of the Veqtor Units held by V2, V2 shall first
notify CRIL in writing of the number of Veqtor Units offered for sale by V2 and
the proposed price, form of consideration and other terms of sale. CRIL
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thereupon shall have the right to purchase all (but not less than all) of the
offered Veqtor Units at the proposed price in the proposed form of consideration
and on the other proposed terms of sale. In order to exercise its purchase
rights, within one hundred fifty (150) days after receiving written notice from
V2, CRIL shall deliver to V2 a written election to purchase all (but no less
than all) of the offered Veqtor Units.
(b) If CRIL does not exercise its purchase rights with respect to all
(and not less than all) of the offered Veqtor Units within the aforementioned
one hundred fifty (150) day period as provided in Section 4.2(a), V2 may, at any
time during the one hundred eighty (180) day period commencing on the earlier of
(i) the date V2 receives written notice from CRIL that CRIL declines to exercise
its purchase rights hereunder or (ii) the expiration of the aforementioned one
hundred fifty (150) day period, Transfer the offered Veqtor Units to any Person
at or above the price in the same form of consideration and on substantially the
same other terms of sale as set forth in V2's notice of intended sale. If such
Transfer is not consummated within the aforementioned one hundred eighty (180)
day period by V2, the offered Veqtor Units shall again be subject to be offered
for sale to CRIL under the provisions of this Section 4.2.
4.3 Right of First Offer on Transfer by CRIL.
(a) From and after the Third Anniversary, in the event that CRIL
wishes to Transfer all or any portion of the Veqtor Units held by CRIL, CRIL
shall first notify V2 in writing of the number of Veqtor Units offered for sale
by CRIL and the proposed price, form of consideration and other terms of sale.
V2 thereupon shall have the right to purchase all (but not less than all) of the
offered Veqtor Units at the proposed price in the proposed form of consideration
and on the other proposed terms of sale. In order to exercise its purchase
rights, within one hundred fifty (150) days after receiving written notice from
CRIL, V2 shall deliver to CRIL a written election to purchase all (but no less
than all) of the offered Veqtor Units.
(b) If V2 does not exercise its purchase rights with respect to all
(and not less than all) of the offered Veqtor Units within the aforementioned
one hundred fifty (150) day period as provided in Section 4.3(a), CRIL may, at
any time during the one hundred eighty (180) day period commencing on the
earlier of (i) the date CRIL receives written notice from V2 that V2 declines to
exercise its purchase rights hereunder or (ii) the expiration of the
aforementioned one hundred fifty (150) day period, Transfer the offered Veqtor
Units to any Person at or above the price in the same form of consideration and
on substantially the same other terms of sale as set forth in CRIL's notice of
intended sale. If such Transfer is not consummated within the aforementioned one
hundred eighty (180) day period by CRIL, the offered Veqtor Units shall again be
subject to be offered for sale to V2 under the provisions of this Section 4.3.
4.4 Right of First Offer on Transfer by Klopp or Hatkoff.
(a) From and after the Third Anniversary, in the event that Klopp or
Hatkoff (the "Disposing Party") wishes to Transfer all or any portion of the V2
Units then held by the Disposing Party, the Disposing Party shall first notify
the other individual (the "Non Disposing Party") and CRIL at the same time in
writing of the number of V2 Units offered for sale by the Disposing Party, the
proposed price, form of consideration and other terms of sale. The Non Disposing
Party thereupon shall have the right to purchase all (but not less than all) of
the offered V2 Units at the proposed price in the proposed form of consideration
and on the other
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proposed terms of sale. In order to exercise his purchase rights, within one
hundred fifty (150) days after receiving written notice from the Disposing
Party, the Non Disposing Party shall deliver to the Disposing Party and CRIL a
written election to purchase all (but no less than all) of the offered V2 Units.
(b) If the Non Disposing Party does not exercise his purchase rights
with respect to all (and not less than all) of the offered V2 Units within the
aforementioned one hundred fifty (150) day period as provided in Section 4.4(a),
CRIL shall have the right to purchase all (but not less than all) of the offered
V2 Units at the proposed price in the proposed form of consideration and on the
other proposed terms of sale. In order to exercise its purchase rights, within
one hundred twenty (120) days after the earlier of (i) the date CRIL receives
written notice from the Non Disposing Party that the Non Disposing Party
declines to exercise his purchase rights hereunder (provided, however, if CRIL
receives such written notice from the Non Disposing Party within thirty (30)
days after receiving the notice of intended sale from the Disposing Party, for
purposes of this provision, the date CRIL receives written notice from the Non
Disposing Party that the Non Disposing Party declines to exercise his purchase
rights hereunder shall be deemed to be thirty (30) days after the actual date of
receipt) or (ii) the expiration of the aforementioned one hundred fifty (150)
day period, CRIL shall deliver to the Disposing Party and the Non Disposing
Party a written election to purchase all (but no less than all) of the offered
V2 Units.
(c) If CRIL does not exercise its purchase rights with respect to all
(and not less than all) of the offered V2 Units within the aforementioned one
hundred twenty (120) day period as provided in Section 4.4(b), the Disposing
Party may, at any time during the one hundred eighty (180) day period commencing
on the earlier of (i) the date the Disposing Party receives written notice from
CRIL that CRIL declines to exercise its purchase rights hereunder or (ii) the
expiration of the aforementioned one hundred twenty (120) day period, Transfer
the offered V2 Units to any Person at or above the price in the same form of
consideration and on substantially the same other terms of sale as set forth in
the Disposing Party's notice of intended sale. If such Transfer is not
consummated within the aforementioned one hundred eighty (180) day period by the
Disposing Party, the offered V2 Units shall again be subject to be offered for
sale to the Non Disposing Party and CRIL under the provisions of this Section
4.4.
(d) Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 4.4 shall be subject to, and preempted by, the
provisions of Article III.
4.5 Restrictions Applicable to Third Party Transferees. Each Third
Party Transferee shall be subject to all of the provisions of this Article 4 and
shall make no further Transfers other than as permitted in this Article 4. As a
condition to the effectiveness of any Transfer of Veqtor Units or V2 Units to
any Third Party Transferee, such Third Party Transferee shall execute a
counterpart to this Agreement.
Article 5. Management of Veqtor.
5.1 Voting Agreement. In the event that at any time, as a result of
any of the transactions contemplated by Articles 2, 3 or 4 hereof or otherwise,
V2 and CRIL do not hold the same number of Veqtor Units, then, notwithstanding
anything to the contrary in the Veqtor LLC Agreement, all matters to be
determined by V2 and CRIL as the managing members of Veqtor shall be determined
as between V2 and CRIL by an affirmative vote of a majority of the Veqtor Units
then held by V2 and CRIL, and V2 and CRIL shall be bound to act on such matter
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<PAGE>
as managing members in the manner determined by such vote. No Permitted
Transferee or Third Party Transferee shall be entitled to be appointed , or
otherwise act as, a managing member of Veqtor.
5.2 Nomination of Capital Trust Trustees. Notwithstanding anything to
the contrary in the Veqtor LLC Agreement, as long as V2 and CRIL hold the same
number of Veqtor Units, each shall be entitled to direct the nomination of an
equal number of trustees/directors of Capital Trust, and if Veqtor shall be
entitled to nominate an odd number of trustees/directors, V2 and CRIL shall
jointly select one of the trustee/director nominees. In the event that at any
time, as a result of any of the transactions contemplated by Articles 2, 3 or 4
hereof or otherwise, V2 and CRIL do not hold the same number of Veqtor Units,
then, notwithstanding anything to the contrary in the Veqtor LLC Agreement, V2
and CRIL each shall be entitled to direct the nomination of a number of
trustees/directors equal to their relative percentage holdings of Veqtor Units
multiplied by the total number of trustees/directors which Veqtor is then
entitled to nominate (rounded to the nearest whole number). V2 and CRIL shall
cause Veqtor to, and Veqtor shall, vote all shares of beneficial interest,
capital stock or other securities of Capital Trust entitled to vote held by
Veqtor, or over which Veqtor has voting control, and take all other necessary or
desirable actions within Veqtor's control, to effect the nomination and election
of trustee/director nominees selected by V2 and/or CRIL as provided in this
Section 5.3.
Article 6. Representations and Warranties.
6.1 General. Each party hereto, individually and not jointly, hereby
represents, warrants and covenants to the remaining parties as follows: (a) such
party has full authority and power under its governing limited liability company
or limited partnership agreement or comparable document to enter into this
Agreement (and, in the case of individuals, such individual has full capacity to
execute, deliver and perform this Agreement); (b) this Agreement constitutes the
valid and binding obligation of such party except (i) as the same may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) the
application of equitable principles, whether applied by a court of equity or
law; and (c) the execution, delivery and performance by such party of this
Agreement: (i) does not and will not violate any laws, rules or regulations of
the United States or any state or other jurisdiction applicable to such party,
or require such party to obtain any approval, consent or waiver of, or to make
any filing with, any Person that has not been obtained or made; and (ii) does
not and will not result in a breach of, constitute a default under, accelerate
any obligation under or give rise to a right of termination of any indenture or
loan or credit agreement or any other agreement, contract, instrument, mortgage,
lien, lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such party is a party or by which
the property of such party is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets or properties of such party. No Holder shall
enter into any agreement or other arrangement of any kind with any Person with
respect to Veqtor Units or V2 Units inconsistent with the provisions of this
Agreement or which may impair its ability to comply with this Agreement.
6.2 Upon Transfer. Whenever a Person (the "Transferor") Transfers any
Veqtor Units or V2 Units to any other Person, other than a Permitted Transferee
of the Transferor, (the "Transferee") pursuant to any provision of Article 3 or
Article 4 of this Agreement: (a) the Transferor shall be deemed to represent and
warrant to the Transferee at the time of Transfer
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<PAGE>
that the Transferor owns beneficially and of record all right, title and
interest in and to the Veqtor Units or V2 Units being Transferred, free and
clear of all Claims, other than any Claims arising under this Agreement, the DOT
or the Veqtor LLC Agreement; and (b) the Transferor shall Transfer to the
Transferee all right, title and interest in and to the Veqtor Units or V2 Units,
as the case may be, free and clear of all Claims, other than any Claims arising
under this Agreement, the DOT or the Veqtor LLC Agreement.
Article 7. Miscellaneous.
7.1 No Assignment. Except as set forth in this Agreement, a party may
not assign its rights or delegate its obligations hereunder.
7.2 Notices. Any notices or other communications required or permitted
hereunder shall be sufficient if in writing and delivered by hand or sent by
facsimile, or sent, postage prepaid, by registered, certified or express-mail,
or by recognized overnight air courier service and shall be deemed given when so
delivered by hand or facsimile, or if mailed or sent by over night courier
service, on the fifth (5) business day after mailing (one business day in the
case of express mail or overnight courier service) to the parties at the
following addresses:
(a) If to Veqtor:
To V2 and CRIL at the addresses indicated below.
(b) If to V2, Klopp or Hatkoff:
c/o Victor Capital Group, L.P.
885 Third Avenue, 12th Floor
New York, New York 10002
Attention: John R. Klopp and Craig Hatkoff
Facsimile: 212.593.0316
with a copy to:
Battle Fowler LLP
East 55th Street
New York, New York 10022
Attention: Thomas E. Kruger
Facsimile: 212.856.7815
(c) If to CRIL:
c/o Equity Group Investments, Inc.
Two North Riverside Plaza, 7th Floor
Chicago, Illinois 60606
Attention: Gary R. Garrabrant
Facsimile: 312.454.0157
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with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Suite 1600
Chicago, Illinois 60606
Attention: Alisa M. Singer
Facsimile: 312.454.0335
or to such other address as a party may instruct by notice to the other parties
hereto in accordance with this Section 7.2.
7.3 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
7.4 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
7.5 Remedies. The parties acknowledge that money damages may not be an
adequate remedy for violations of this Agreement and that any party may, in its
sole discretion, apply to any court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any violation hereof and,
to the extent permitted by applicable law, each party waives any objection to
the imposition of such relief.
7.6 Entire Agreement. This Agreement including the other documents
referred to herein embodies the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof, and, when executed by
the parties hereto, supersedes all prior agreements and communications, either
oral or in writing, among the parties hereto with respect to the subject matter
contained herein. None of the Holders shall have any power to legally bind the
other Holders, except as specifically provided in this Agreement.
7.7 Waiver. Any failure by a party hereto to comply with any
obligation, agreement or condition herein may by waived only be a written
instrument executed by each party adversely affected by such failure to comply,
with such waiver or failure to insist upon strict compliance with such
obligation, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any such subsequent or other failure.
7.8 Amendments. This Agreement may be modified or amended only
pursuant to a written instrument executed by the V2, Veqtor, CRIL, Klopp and
Hatkoff.
7.9 Variations in Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the antecedent person or persons or entity or
entities may require.
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7.10 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the internal laws of the State of New York without
giving effect to the conflicts of laws provisions of such jurisdiction.
7.11 Counterparts. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
executed and to be fully performed in such State, without giving effect to its
choice of law provisions.
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IN WITNESS WHEREOF, the undersigned have hereto set their hands as of
the day and year first above written.
VEQTOR FINANCE COMPANY, LLC
By: V2 Holdings LLC
Its: Managing Member
By: ___________________________
Its:
By: CalREIT Investors Limited Partnership
Its: Managing Member
By: SZ Investments, LLC
Its: General Partner
By: Zell General Partnership, Inc.
Its: Managing Member
By:______________________________
Its:
V2 HOLDINGS LLC
By:_______________________________________________
Its:
CALREIT INVESTOR LIMITED PARTNERSHIP
By: SZ Investments, LLC
Its: General Partner
By: Zell General Partnership, Inc.
Its: Managing Member
By:_______________________________
Its:
__________________________________________________
John R. Klopp
__________________________________________________
Craig M. Hatkoff
BUYSELL3.DOC
Exhibit 4
- -------------------------------------------------------------------------------
12% Convertible Redeemable Notes due April 15, 2007
of
Veqtor Finance Company, LLC
PURCHASE AGREEMENT
Dated as of June 16, 1997
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PURCH8.DOC
<PAGE>
12% CONVERTIBLE REDEEMABLE NOTE PURCHASE AGREEMENT ("Agreement"),
dated as of June 16, 1997, by and between VEQTOR FINANCE COMPANY, LLC, a
Delaware limited liability company (the "Company"), and the investors listed on
the signature pages hereto (each an "Investor" and, collectively, the
"Investors").
Preliminary Statement
The Company desires to sell, and the Investors desire to purchase at
the Closing (as defined below), pursuant to the terms and conditions set forth
in this Agreement, an aggregate of $50,000,000 of the Company's 12% Convertible
Redeemable Notes (each a "Note", and, collectively, the "Notes").
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, each Investor agrees with the Company as follows:
ARTICLE 1
DEFINITIONS
"Affiliate" means, with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person.
"Agreement" means this 12% Convertible Redeemable Note Purchase
Agreement and the Exhibits attached hereto, as amended, modified, supplemented
or restated from time to time.
"Approval Date" has the meaning set forth in Section 2.4(a)(ix).
"Business Day" means a day other than a Saturday, a Sunday or a day on
which banking institutions in the City of New York, New York are authorized or
obligated by law or executive order to close.
"Capital Trust" means California Real Estate Investment Trust, a
business trust organized under the laws of the State of California and
established under a Declaration of Trust dated September 15, 1966, as amended,
modified, supplemented or restated from time to time, and any successors
thereto, whose name is intended to be changed to "Capital Trust."
"Closing" has the meaning set forth in Section 2.3.
"Closing Date" has the meaning set forth in Section 2.3.
PURCH8.DOC
<PAGE>
"Common Units" shall have the meaning given that term in the Company
Agreement.
"Company" means Veqtor Finance Company, LLC, a Delaware limited
liability company.
"Company Agreement" means the Limited Liability Company Agreement of
the Company dated as of June 16, 1997, as amended, modified, supplemented or
restated from time to time.
"control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Indebtedness" means with respect to any Person, without duplication,
any liability of such Person (i) for borrowed money, (ii) evidenced by bonds,
debentures, notes (including, without limitation, the Notes) or other similar
instruments, (iii) constituting capitalized lease obligations, (iv) incurred or
assumed as the deferred purchase price of property, or pursuant to conditional
sale obligations and title retention agreements (but excluding trade accounts
payable arising in the ordinary course of business), and (v) for Indebtedness of
any other Person of the type referred to in clauses (i) through (iv) which are
secured by any Lien on any property or asset of such first referred to Person.
"Interest" means a limited liability company interest in the Company,
including the right of the holder thereof to any and all benefits to which a
Member may be entitled as provided in the Company Agreement, together with the
obligations of a Member to comply with all of the terms and provisions of the
Company Agreement.
"Investor" and "Investors" have the meanings set forth in the preamble
to this Agreement.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest.
"Managing Member" means CalREIT Investors Limited Partnership, an
Illinois limited partnership ("CRIL"), or V2 Holdings LLC, a Delaware limited
liability company ("V2H"), each in their capacity as Members of the Company
designated as managers.
"Member" means any Person that holds an Interest in the Company, is
admitted as a member of the Company pursuant to the provisions of the Company
Agreement, and named as a member of the Company on Schedule A to the Company
Agreement and includes any Person admitted as an Additional Member or a
Substitute Member (as
PURCH8.DOC
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<PAGE>
such terms are defined in the Company Agreement) pursuant to the provisions of
the Company Agreement, in such Person's capacity as a member of the Company.
"Note" and "Notes" have the meanings set forth in the Preliminary
Statement of this Agreement.
"Person" means an individual, a corporation, a partnership, a limited
liability company, a joint venture, an association, a joint-stock company, a
trust, a business trust, a government or any agency or any political
subdivision, any unincorporated organization or any other entity.
"Preferred Units" shall have the meaning given that term in the
Company Agreement.
"Related Agreements" has the meaning set forth in Section 2.4(iv).
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE 2
PURCHASE AND SALE OF NOTES
Section 2.1 Authorization of Note Issuance. On or before the Closing,
the Company will authorize the issuance and delivery of the Notes in the
aggregate principal amount of $50,000,000, to be dated the date of issuance
thereof and to be issued pursuant to this Agreement. The Notes shall be
convertible into Preferred Units. The terms of such conversion and additional
rights, restrictions and privileges are described in the Notes, which shall be
in the form of the Note attached hereto as Exhibit A.
Section 2.2 Purchase and Sale of Notes. On the terms and subject to the
conditions of this Agreement, and in reliance upon the representations and
warranties contained herein, at the Closing the Company shall issue and sell or
cause to be sold to each Investor, and each Investor shall purchase from the
Company, the principal amount of Notes set forth opposite such Investor's name
on the signature pages hereto for a purchase price equal to such principal
amount of Notes.
Section 2.3 Closing and Closing Date. Subject to Section 2.4, the
closing of the purchase and sale of the Notes (the "Closing") will take place on
the first Business Day following the Approval Date, or such other date as the
parties hereto may agree (the date of such closing, the "Closing Date"). At the
Closing, the Company shall deliver to each Investor, free and clear of any lien,
charge, encumbrance or expense (including, without limitation, any tax or other
fee payable in connection with such issuance), a Note in the aggregate principal
amount set forth opposite such Investor's name on the signature pages hereto,
registered in the name of each such Investor.
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Section 2.4 Conditions to Closing.
(a) The obligation of each Investor to close the transactions
contemplated hereunder is subject to the satisfaction on or prior to the Closing
Date of the following conditions:
(i) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition (A)
preventing the consummation of the Closing of the transactions contemplated
by this Agreement or (B) which is reasonably likely to materially adversely
affect the business of the Company or the transactions contemplated by this
Agreement, shall be in effect.
(ii) Each of the terms, covenants and conditions of this Agreement to
be complied with and performed by the Company on or prior to the Closing
Date shall have been duly complied with and performed in all material
respects, or the Investor shall have waived such compliance or performance,
and all documents to be delivered or actions to be taken by the Company
pursuant to Section 2.5 shall have been delivered or performed.
(iii) Each of the representations and warranties made by the Company
herein shall be true and correct in all material respects as of the date
hereof and as of the Closing Date (unless such representation and warranty
is made as of a specific date and then shall be true and correct in all
material respects as of such date) with the same force and effect as though
such representations and warranties had been made as of the Closing Date.
(iv) The Managing Members of the Company shall have approved the
transactions contemplated by this Agreement, in each case as required by
applicable law and in accordance with the Company Agreement.
(v) The form and substance of all instruments and documents required
to be delivered pursuant to this Agreement by the Company shall be
reasonably satisfactory in all respects to Investors.
(vi) At or prior to the Closing, the various parties named therein
shall have executed and delivered the agreements and other documents set
forth on Exhibit B attached hereto (collectively, the "Related
Agreements"), all of which shall be in full force and effect and none of
which shall have been amended or breached, and the transactions
contemplated by the Related Agreements to be consummated at or prior to the
Closing shall have been consummated.
(vii) At the Closing, the Company shall sell and issue to the
Investors Notes in the aggregate principal amount of Fifty Million Dollars
($50,000,000).
(viii) At the Closing, CRIL and V2H shall have contributed to the
capital of the Company Five Million Dollars ($5,000,000) in the aggregate,
in exchange for One Million (1,000,000) Common Units in the aggregate.
PURCH8.DOC
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(ix) the holders of the outstanding common shares of beneficial
interest of Capital Trust shall have duly approved the form of Amended and
Restated Declaration of Trust attached at Annex C to the Capital Trust
Proxy Statement (as defined in the Company Agreement) and such Amended and
Restated Declaration of Trust shall have become effective in accordance
with the laws of the State of California (such effective date being the
"Approval Date").
(b) The obligation of the Company to close the transactions
contemplated hereunder is subject to the satisfaction on or prior to the
Closing Date of the following conditions:
(i) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition (A)
preventing the consummation of the Closing of the transactions contemplated
by this Agreement or (B) which is reasonably likely to materially adversely
affect the business of the Company or the transactions contemplated by this
Agreement, shall be in effect.
(ii) Each of the terms, covenants and conditions of this Agreement to
be complied with and performed by Investors on or prior to the Closing Date
shall have been duly complied with and performed in all material respects,
or the Company shall have waived such compliance or performance, and all
documents to be delivered or actions to be taken by Investors pursuant to
Section 2.5 shall have been delivered or performed.
(iii) Each of the representations and warranties made by the Investors
herein shall be true and correct in all material respects as of the date
hereof and as of the Closing Date (unless such representation and warranty
is made as of a specific date and then shall be true and correct in all
material respects as of such date) with the same force and effect as though
such representations and warranties had been made as of the Closing Date.
(iv) The Managing Members of the Company shall have approved the
transactions contemplated by this Agreement, in each case as required by
applicable law and in accordance with the Company Agreement.
(v) The form and substance of all instruments and documents required
to be delivered pursuant to this Agreement by Investors shall be reasonably
satisfactory in all respects to the Company.
(vi) At or prior to the Closing, the various parties named therein
shall have executed and delivered the Related Agreements, all of which
shall be in full force and effect and none of which shall have been amended
or breached, and the transactions contemplated by the Related Agreements to
be consummated at or prior to the Closing shall have been consummated.
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(vii) At the Closing, the Notes in the aggregate principal amount of
Fifty Million Dollars ($50,000,000) shall be purchased by the Investors.
Section 2.5 Additional Closing Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Investor the documents listed below, in form and
substance reasonably satisfactory to Investors:
(i) the Certificate of Formation of the Company, certified as of the
Closing Date by a Managing Member of the Company;
(ii) a good standing certificate from the State of Delaware, dated as
of a recent date prior to the Closing Date and certified by the Secretary
of State or other authorized governmental entity;
(iii) a copy of the Company Agreement, certified as of the Closing
Date by a Managing Member of the Company;
(iv) resolutions of the Managing Members of the Company approving and
authorizing this Agreement and the transactions contemplated hereby,
including the approval of the issuance and delivery of the Notes, certified
as of the Closing Date by a Managing Member of the Company as being in full
force and effect without modification or amendment;
(v) a certificate of the Company certifying that the conditions set
forth in Sections 2.4(a)(ii) and (iii) have been satisfied;
(vi) the opinion of Battle Fowler LLP, special counsel to the Company,
substantially in the form of Exhibit C hereto, and the opinion of Rosenberg
& Liebentritt, P.C., special counsel to the Company, in form satisfactory
to the Investors, that the transactions contemplated by that certain Class
A 9.5% Cumulative Convertible Preferred Share Purchase Agreement, by and
between Capital Trust and the Company referred to in Exhibit B hereto, does
not require compliance with the reporting obligations of the
Hart-Scott-Rodino Antitrust Improvements Act; and
(vii) such other documents as may be reasonably requested by Investor
prior to the Closing Date in connection with the Closing of the
transactions contemplated by this Agreement.
(b) On or prior to the Closing Date, each Investor shall deliver or
cause to be delivered to the Company, in form and substance satisfactory to the
Company, such documents as may be reasonably requested by the Company prior to
the Closing Date in connection with the Closing of the transactions contemplated
by this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Investors as follows:
Section 3.1 Existence and Authority.
(a) The Company is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware. The
Company has full power and authority to enter into this Agreement and to perform
its obligations hereunder. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary limited liability
company actions on the part of the Company, and this Agreement constitutes the
valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equity principles.
(b) The Company has full power to carry on the business in which it
proposes to engage.
Section 3.2 Capitalization. The authorized Interests of the Company
consist of Common Units and Preferred Units. Immediately following the Closing,
there shall be issued and outstanding 1,000,000 Common Units, 500,000 of which
shall be held beneficially and of record by CRIL and 500,000 of which shall be
held beneficially and of record by V2H. Upon their issuance, all of the Common
Units shall be duly authorized, validly issued, fully paid and nonassessable.
There are no preemptive rights with respect to the issuance of Common Units.
There are no outstanding or authorized options, warrants, rights, contracts,
rights to subscribe, conversion rights or other agreements or commitments to
which the Company is a party or which are binding upon the Company providing for
the issuance or acquisition of any of the Company's Common Units or Preferred
Units.
The Company does not, directly or indirectly, own or control or have
any capital, equity, partnership, participation or other interest in any Person.
Section 3.3 No Consents, Approvals, Violations or Breaches. Neither the
Execution and delivery by the Company of this Agreement, nor the consummation by
the Company of the transactions contemplated hereby, will (i) require any
consent, approval, authorization or permit of, or filing, registration or
qualification with or notification to, any governmental or regulatory authority
under any law of the United States, any state or any political subdivision
thereof, applicable to the Company other than any action required to be taken by
Investor, (ii) violate any provision of the
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certificate of formation of the Company or the Company Agreement, (iii) assuming
no violation on the part of any Investor, violate any statute, law, ordinance,
rule or regulation of the United States, any state or any political subdivision
thereof, or any judgment, order, writ, decree or injunction applicable to the
Company, or (iv) assuming no violation on the part of any Investor, violate,
conflict with, or result in a material breach of any provisions of, or
constitute a material default (or any event which, with or without due notice or
lapse of time, or both, would constitute a material default) under, or result in
the termination of, or accelerate the performance required by, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Company
is a party. The Company is not (x) in violation of, or default under, any terms
or provisions of its constituent documents or (y) to the Company's knowledge, in
violation of, or default under, any lien, mortgage, lease, indenture, agreement,
instrument, order, judgment, decree or law to which it is a party or by which it
is bound or subject.
Section 3.4 Reservation, Etc. As of the Closing Date, sufficient
authorized but unissued Preferred Units will have been reserved by appropriate
action of the Company in connection with the prospective conversion of the
Notes. The issuance of the Notes and the Preferred Units into which the Notes
are convertible does not require any further authorizing action by the Managing
Members of the Company, is not subject to preemptive rights of any present
Member of the Company, and does not conflict with any provision of any agreement
to which the Company is a party.
Section 3.5 Outstanding Debt. The Company does not have, and on the
Closing Date will not have, any outstanding Indebtedness except for the Notes.
Section 3.6 Brokers. Neither the Company, the Managing
Members nor any of their respective Affiliates have engaged any broker in
connection with the transactions contemplated by this Agreement, and no Person
acting on behalf of the Company, the Managing Members or their respective
Affiliates is or will be entitled to any brokerage fee, commission, finder's fee
or financial advisory fee, directly or indirectly, from the Company in
connection with the transactions contemplated by this Agreement.
Section 3.7 Full Disclosure. The representations and warranties of the
Company in this Agreement are not false or misleading in any material respect
nor do they omit to state a material fact necessary in order to make the
representations and warranties contained herein not misleading in any material
respect.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each Investor hereby severally represents and warrants to the Company
as to itself as follows:
Section 4.1 Existence and Authority of Investor. Investor has been duly
formed and is validly existing and in good standing under the laws of the State
of its formation and has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by Investor and the consummation by Investor of
the transactions contemplated hereby have been duly authorized by all necessary
corporate proceedings on the part of Investor, and this Agreement constitutes
the valid and legally binding obligation of Investor, enforceable against
Investor in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equity principles.
Section 4.2 No Consents, Approvals, Violations or Breaches. Neither the
execution and delivery of this Agreement by Investor, nor the consummation by
Investor of the transactions contemplated hereby, will (i) require any consent,
approval, authorization or permit of, or filing, registration or qualification
with or notification to, any governmental or regulatory authority under any law
of the United States, any state or any political subdivision thereof applicable
to Investor, other than any action required to be taken by the Company, (ii)
violate any provision of the organizational or operating documents of Investor,
(iii) assuming no violations on the part of the Company, violate any statute,
law, ordinance, rule or regulation of the United States, any state or any
political subdivision thereof, or any judgment, order, writ, decree or
injunction applicable to Investor, the violation of which would have a material
adverse effect upon Investor or the Company, or (iv) assuming no violation on
the part of the Company, violate, conflict with, or result in a breach of any
provisions of, or constitute a default (or any event which, with or without due
notice or lapse of time, or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Investor is a party or by which Investor or any of its properties or assets may
be bound which would have a material adverse effect upon Investor or the
Company.
Section 4.3 Investment Intent. The Notes and, upon conversion, the
Preferred Units, will be held by Investor for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof
within the meaning of the Securities Act, nor with any present intention of
distributing or selling the same. Investor acknowledges that the certificates
evidencing the Notes and the Preferred Units to be issued upon conversion of the
Notes, contain or will contain customary legends the Company may apply, and that
neither the Notes nor the Preferred Units underlying the Notes, has been
registered under the Securities Act or any applicable state securities
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laws, and that the Notes and the Preferred Units may not be sold, transferred,
offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act or any applicable state securities laws,
except pursuant to an applicable exemption. Investor understands that the Notes
and the Preferred Units have not been, and will not be, registered under the
Securities Act by reason of an exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Investor's representations as
expressed herein. Investor is not a partnership formed solely for the purpose of
investing in the Notes or the Preferred Units, or if Investor is a partnership
formed solely for the purpose of investing in the Notes or such Preferred Units,
each partner of such partnership is an accredited investor as defined in Rule
501 of Regulation D under the Securities Act.
Section 4.4 Accredited Investor. Investor is an "accredited investor"
as defined in Rule 501 under the Securities Act.
Section 4.5 Rule 144. Investor acknowledges that the Notes and
Preferred Units must be held indefinitely unless subsequently registered under
the Security Act or an exemption from such registration is available. Investor
is aware of the provisions of Rule 144 promulgated under the Securities Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, in
most circumstances (i) the existence of a public market for the shares, (ii) the
availability of certain current public information about the Company, (iii) the
resale occurring not less than one (1) year after a party has purchased and
fully paid for the shares, (iv) the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" (as provided by
Rule 144(f)), and (v) the number of shares being sold during any three (3) month
period not exceeding specified limitations.
Section 4.6 No Public Market. Investor understands that no public
market now exists for any of the securities issued by the Company and that there
is no assurance that a public market will ever exist for any of the Company's
securities.
Section 4.7 Access to Data. Investor has been offered the opportunity
to discuss the Company's business, management, and financial affairs with the
Company's and Capital Trust's management. Investor has also been offered the
opportunity to ask questions of the Managing Members and officers of the Company
and Capital Trust's respectively, and, if it did so, its questions were answered
to its satisfaction.
Section 4.8 Knowledge and Experience. Investor has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of purchasing the Notes and, upon conversion, the Preferred
Units.
Section 4.9 Brokers. Neither Investor nor any of its Affiliates has
engaged any broker in connection with the transactions contemplated by this
Agreement or the Related Agreements and no Person acting on behalf of Investor
or any of its Affiliates is or will be entitled to any brokerage fee,
commission, finder's fee or financial advisory
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fee, directly or indirectly, from Investor or any of its Affiliates in
connection with the transactions contemplated by this Agreement or the Related
Agreements.
ARTICLE 5
COVENANTS OF THE COMPANY
During the period from the date hereof to the Closing Date, the
Company covenants and agrees as follows:
Section 5.1 Operations in Ordinary Course. The Company covenants and
agrees that the Company shall not conduct its business and operations in such a
manner as to impair its ability to consummate the transactions contemplated
hereunder, nor will it engage in any transaction, take any action or omit to
take any action, which could reasonably be expected to impair its ability to
consummate the transactions contemplated hereunder.
Section 5.2 Conditions to Closing. The Company shall use its reasonable
best efforts to satisfy, as expeditiously as reasonably possible, all of the
conditions to the obligations of the Company hereunder within the Company's
control, including obtaining all consents, approvals and agreements which are
required in order to consummate the transactions contemplated hereby.
ARTICLE 6
COVENANTS OF INVESTOR
Section 6.1 Conditions to Closing. Investor shall use its reasonable
best efforts to satisfy, as expeditiously as reasonably possible, all of the
conditions to the obligations of Investor hereunder within Investor's control,
including obtaining all consents, approvals and agreements which are required in
order to consummate the transactions contemplated hereby.
ARTICLE 7
FURTHER AGREEMENTS
Section 7.1 Further Assurances. Each party to this Agreement shall, at
the request of another party to this Agreement, at any time and from time to
time following the Closing hereunder, execute and deliver or cause to be
executed and delivered all such further instruments and take or cause to be
taken all such further action as may be reasonably necessary or appropriate in
order more effectively to sell, assign, transfer and convey to Investor the
Notes and, upon conversion thereof, the Preferred Units, or otherwise to confirm
or carry out the provisions of this Agreement and/or the Related Agreements to
which such person is a party.
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Section 7.2 Investor's Access to Records. The Company shall afford
Investor and its authorized representatives access during normal business hours
to their respective properties, books and records, in order that they may have
the opportunity to make such investigations as they shall desire to make of the
affairs of the Company. The Company shall cause its Members, employees,
investment bankers, counsel, accountants and other authorized representatives to
furnish such additional financial and operating data and other information as
Investor and such other persons shall from time to time reasonably request.
Section 7.3 Home Office Payment. The Company agrees that the Company
will make any payments to Investor on the Notes or, upon conversion, the
Preferred Units, by wire transfer in immediately available funds at the location
of Investor's account, on the date of payment to such account as specified by
Investor in writing to the Company.
Section 7.4 Confidentiality. Except to the extent disclosure is
required by law, or in response to any governmental authority, or in connection
with any litigation relating to an alleged breach of this Agreement, each party
shall maintain the confidentiality of all information obtained from the other
party hereto other than information that is otherwise publicly available and
shall use such information only for purposes reasonably related to this
Agreement and the transactions contemplated hereby.
Section 7.5 Expenses. The Company agrees, whether or not the
transactions contemplated hereby shall be consummated (unless the failure to so
consummate such transactions arises as a result of a breach of this Agreement by
an Investor), to pay, and save each Investor harmless against liability for the
payment of, all out-of-pocket expenses incurred by the Investors in connection
with (a) the negotiation, documentation and closing of such transactions,
including all document production and duplication charges and the fees and
expenses of any special counsel engaged by the Investors in connection with this
Agreement and the transactions contemplated hereby (up to $75,000 in the
aggregate for all Investors), and (b) the reasonable out-of-pocket costs and
expenses, including reasonable attorneys' fees, incurred by any Investor in
enforcing (or determining whether or how to enforce) any rights under this
Agreement, the Notes or the Company Agreement (including, without limitation,
reasonable costs and expenses incurred in any bankruptcy case involving the
Company) or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the
transactions contemplated hereby. The obligations of the Company under this
Section 7.5 shall survive the transfer of any Note or portion thereof or
interest therein by any Investor and the payment or conversion of any Note.
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ARTICLE 8
MISCELLANEOUS
Section 8.1 Survival of Representations, Warranties and Covenants
Notwithstanding any investigation made by or on behalf of Investor or the
Company, the representations and warranties of the Investor and the Company
contained in this Agreement shall be continuing representations and warranties
and shall survive the Closing for a period of one year thereafter. The covenants
and other agreements of the Company and Investor contained in this Agreement
shall be continuing covenants and agreements and shall survive the Closing
indefinitely.
Section 8.2 Indemnification.
(a) From and after the Closing Date, the Company shall hold the
Investors harmless from and against, and reimburse the Investors for any damages
resulting from, any and all loss, liability, damage or expense (including,
without limitation, interest, penalties and reasonable attorneys' fees and
disbursements) resulting to the Investors and based upon, arising out of or
otherwise in respect of any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement.
(b) From and after the Closing Date, each Investor shall hold the
Company harmless from and against, and reimburse the Company for any damages
resulting from, any and all loss, liability, damage or expense (including,
without limitation, interest, penalties and reasonable attorneys' fees and
disbursements) resulting to the Company and based upon, arising out of or
otherwise in respect of any breach of any representation, warranty, covenant or
agreement of such Investor contained in this Agreement.
(c) Notwithstanding the foregoing provisions of this Section 8.2, no
Investor shall be entitled to recover under Section 8.2(a) hereof, and the
Company shall not be entitled to recover under Section 8.2(b) hereof, unless a
claim has been asserted by such Investor or the Company (as the case may be) by
written notice, specifying the alleged breach of representation, warranty,
covenant or agreement in reasonable detail, delivered to the Company or Investor
(as the case may be) on or prior to expiration of the survival period for such
claim as set forth in Section 8.1
Section 8.3 Assignment. This Agreement and all covenants and
agreements by or on behalf of the parties hereto which are contained herein
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto, including without limitation all subsequent holders of
Notes, whether so expressed or not.
Section 8.4 Notices. Any notices or other communications required or
permitted hereunder shall be sufficient if in writing and delivered by hand or
sent by telecopy, or sent, postage prepaid, by registered, certified or
express-mail, or by recognized overnight air courier service and shall be deemed
given when so delivered by hand or
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telecopied, or if mailed or sent by overnight courier service, on the fifth
(5) Business Day after mailing (one Business Day in the case of express
mail or overnight courier service) to the parties at the following addresses:
If to the Company to:
Veqtor Finance Company, LLC
885 Third Avenue, 12th Floor
New York, NY 10022
Attention: John R. Klopp
Facsimile: (212) 593-0316
with a copy to:
Equity Group Investments, Inc.
Two North Riverside Plaza, 7th Floor
Chicago, Illinois 60606
Attention: Gary R. Garrabrant
Facsimile: (312) 454-0157
and:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Suite 1600
Chicago, Illinois 60606
Attention: Alisa M. Singer
Facsimile: (312) 454-0335
and:
Battle Fowler LLP
East 55th Street
New York, New York 10022
Attention: Thomas E. Kruger
Facsimile: (212) 856-7815
If to an Investor to the address set forth on such Investor's
signature page hereto, or to such other address as the addressee may have
specified in a notice duly given to the sender as provided herein.
Section 8.5 Entire AgreementSection Entire Agreement. This Agreement,
including the Exhibits hereto, constitutes the entire understanding of the
parties relating to the subject matter hereof and supersedes all prior
agreements and understandings, whether oral or written. No
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amendment or modification of the terms of this Agreement shall be
binding or effective unless expressed in writing and signed by each party.
Section 8.6 No Waiver. The waiver by any party of the breach of any of
the terms and conditions of, or any right under, this Agreement shall not be
deemed to constitute the waiver of any other breach of the same or any other
term or condition or of any similar right. No such waiver shall be binding or
effective unless expressed in writing and signed by the party giving such
waiver.
Section 8.7 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not in any way be impaired
or affected.
Section 8.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements executed and to be fully performed in such State, without giving
effect to its choice of law provisions.
Section 8.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
Section 8.10 Construction. The Article and Section headings contained
in this Agreement are inserted for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
VEQTOR FINANCE COMPANY, LLC
By: CalREIT Investors Limited Partnership,
its Managing Member
By: Zell General Partnership, Inc.
By: /s/ Donald J. Liebentritt
____________________________________
Donald J. Liebentritt, Vice President
By: V2 Holdings LLC, its Managing Member
By: /s/ John R. Klopp
_____________________________________
John R. Klopp
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INVESTOR:
BankAmerica Investment Corporation
By: /s/ C. Richard Schuler
______________________________________________
Name:
Title:
Address: ____________________________________
____________________________________
____________________________________
Attention:
Telecopy:
Phone Number:
Federal Tax I.D. Number: ____________________
Principal Amount of Notes to be Purchased: $5,000,000
INVESTOR:
BankBoston Investments, Inc.
By: /s/ Mary Josephs Reilly
______________________________________________
Name:
Title:
Address: ____________________________________
____________________________________
____________________________________
Attention:
Telecopy:
Phone Number:
Federal Tax I.D. Number: ____________________
Principal Amount of Notes to be Purchased: $15,000,000
INVESTOR:
First Chicago Capital Corporation
By: /s/ Robert P. Karnes
______________________________________________
Name:
Title:
Address: ____________________________________
____________________________________
____________________________________
Attention:
Telecopy:
Phone Number:
Federal Tax I.D. Number: ____________________
Principal Amount of Notes to be Purchased: $15,000,000
INVESTOR:
Wells Fargo & Company
By: /s/ Alan J. Pabst
______________________________________________
Name:
Title:
Address: ____________________________________
____________________________________
____________________________________
Attention:
Telecopy:
Phone Number:
Federal Tax I.D. Number: ____________________
Principal Amount of Notes to be Purchased: $15,000,000
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EXHIBIT A
FORM OF NOTE
[See Attached]
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EXHIBIT B
RELATED AGREEMENTS
1. The Company Agreement.
2. The Class A 9.5% Cumulative Convertible Preferred Share Purchase
Agreement, by and between Capital Trust and the Company, in the form
attached as Annex A to the Capital Trust Proxy Statement.
3. Common Stock Purchase Agreement, by and between CalREIT Investors
Limited Partnership and the Company, to be dated as of the Approval Date.
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