As filed with the Securities and Exchange Commission
on July 2, 1998
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
(Amendment No. 2)
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)
June 17, 1998
(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.
729069.1
<PAGE>
CUSIP No. 140920 10 9 SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Veqtor Finance Company, L.L.C.
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)
63.05%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
729069.1
<PAGE>
CUSIP No. 140920 10 9 SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Capital Trust Investors Limited Partnership (f/k/a 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, 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)
63.05%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
729069.1
<PAGE>
CUSIP No. 140920 10 9 SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
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)
63.05%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
729069.1
<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)
63.05%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
729069.1
<PAGE>
CUSIP No. 140920 10 9 SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
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)
63.05%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
729069.1
<PAGE>
CUSIP No. 140920 10 9 SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
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)
63.05%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
729069.1
<PAGE>
CUSIP No. 140920 10 9 SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
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 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)
63.05%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
729069.1
<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
25,000
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 25,000
10 SHARED DISPOSITIVE POWER
19,227,251
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,252,251
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
63.1%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
729069.1
<PAGE>
CUSIP No. 140920 10 9 SCHEDULE 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
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
43,000
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 19,227,251
OWNED BY EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 43,000
10 SHARED DISPOSITIVE POWER
19,227,251
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,270,251
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
63.2%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
729069.1
<PAGE>
CUSIP No. 140920 10 9 SCHEDULE 13D
This Amendment No. 2 to Schedule 13D ("Amendment No. 2"), which is filed
pursuant to rule 13d-2(a) under the Securities Exchange Act of 1934, as amended,
amends and supplements the Schedule 13D, dated July 15, 1997, as filed with the
Securities and Exchange Commission (the "SEC") on July 25, 1997, as amended by
Amendment No. 1, as filed with the SEC on December 22, 1997 (as amended, the
"Schedule 13D"), which was filed by (i) Veqtor Finance Company, L.L.C., a
Delaware limited liability company ("VFC"); (ii) Capital Trust Investors Limited
Partnership (f/k/a CalREIT Investors Limited Partnership), an Illinois limited
partnership and a managing member of VFC ("CTILP"); (iii) SZ Investments, LLC, a
Delaware limited liability company and the sole general partner of CTILP,
("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; (vii) V2
Holdings LLC, a Delaware limited liability company and a member of VFC ("V2H");
(viii) Mr. John R. Klopp, a citizen of the United States and a member of V2H;
and (ix) Craig M. Hatkoff, a citizen of the United States and a member of V2H,
with respect to the ownership of 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"). All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Schedule 13D. Item 2.
Identity and Background.
Item 2 is amended and supplemented by adding the following:
The principal place of business of each of VFC, V2H, and
Messrs. Klopp and Hatkoff is 605 Third Avenue, 26th Floor, New York, New York
10016.
Item 5. Interest in Securities of the Issuer.
Item 5 is amended by amending and restating paragraphs (a) and (b) in their
entirety as follows:
(a) and (b) The aggregate percentage of shares of Class A
Common Shares reported beneficially owned by the Reporting Persons is based upon
18,229,650 Class A Common Shares outstanding as reported in the Issuer's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998. 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 63.05% 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"). CTILP, 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. Mr. Hatkoff beneficially
owns and has the sole power to vote and dispose of 18,000 Class A Common Shares.
Mr. Hatkoff beneficially owns options to purchase 25,000 Class A Common Shares
that vest and become exercisable on July 16, 1998, and upon the issuance of the
Class A Common Shares underlying such options, Mr. Hatkoff will have the sole
power to vote and dispose of the foregoing shares. Mr. Klopp beneficially owns
options to purchase 25,000 Class A Common Shares that will vest on July 16,
1998, and upon the issuance of the Class A Common Shares underlying such
options, Mr. Klopp will have the sole power to vote and dispose of the foregoing
shares.
729069.1
<PAGE>
CUSIP No. 140920 10 9 SCHEDULE 13D
Item 6. Contracts, Arrangements, Understandings or Relationships with
respect to Securities of the Issuer.
Item 6 is amended and supplemented by adding the following:
Pursuant to an Amended and Restated Limited Liability
Agreement of VFC, dated as of June 17, 1998, among CTILP, V2H and First Chicago
Capital Corporation, Wells Fargo & Company and BankAmerica Investment
Corporation (collectively, the "Preferred Members"), the limited liability
agreement of VFC was amended and restated to provide for, among other things,
the conversion of the $50,000,000 of notes issued by VFC into preferred units of
VFC and the admission of the Preferred Members as preferred members of VFC in
connection with the foregoing conversion. A copy of the Amended and Restated LLC
Agreement is attached hereto Exhibit 1, and is incorporated herein by reference.
Item 7. Material to be Filed as Exhibits.
Item 7 is hereby amended and supplemented by adding the following:
Exhibit No. Description
----------- -----------
2. Amended and Restated Limited Liability Company
Agreement of Veqtor Finance Company, L.L.C., dated as
of June 17, 1998, among Capital Trust Investors
Limited Partnership, V2 Holdings LLC and First
Chicago Capital Corporation, Wells Fargo Company and
BankAmerica Investment Corporation.
729069.1
<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 1, 1998
Capital Investors Limited Partnership
By: SZ Investments, LLC
its general partner
By: Zell General Partnership, Inc.,
its managing member
By: *
----------------------------
Name: Samuel Zell
Title: President
SZ Investments, LLC
By: Zell General Partnership, Inc.
its managing member
By: *
----------------------------
Name: Samuel Zell
Title: President
Zell General Partnership, Inc.
By: *
-------------------------------
Name: Samuel Zell
Title: President
Samuel Zell Revocable Trust
By: *
------------------------------------
Name: Samuel Zell
Title: Trustee
Samuel Zell
*
------------------------------------
Samuel Zell
729069.1
<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
*
-------------------------------
Craig M. Hatkoff
* By /s/ John R. Klopp
-------------------------------
John R. Klopp
Attorney-in-Fact
729069.1
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
VEQTOR FINANCE COMPANY, L.L.C.
692584.12
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS...........................................2
SECTION 1.01 Definitions..................................2
ARTICLE 2 GENERAL PROVISIONS....................................9
SECTION 2.01 Continuation.................................9
SECTION 2.02 Company Name.................................9
SECTION 2.03 Registered Office; Registered Agent..........9
SECTION 2.04 Nature of Business Permitted; Powers.........9
SECTION 2.05 Fiscal Year.................................10
SECTION 2.06 Perpetual Existence.........................10
SECTION 2.07 Limitation on Member Liability..............10
SECTION 2.08 Indemnification.............................10
SECTION 2.09 Exculpation.................................11
SECTION 2.10 Fiduciary Duty..............................11
SECTION 2.11 Insurance...................................12
SECTION 2.12 Outside Businesses..........................12
ARTICLE 3 CLASSES OF INTERESTS AND ADMISSION OF MEMBERS........13
SECTION 3.01 Classes.....................................13
SECTION 3.02 Continuation of Initial Members.............13
SECTION 3.03 Admission of Preferred Members..............14
SECTION 3.04 Admission of Additional Members.............14
SECTION 3.05 Schedule A and Schedule B...................14
ARTICLE 4 VOTING AND MANAGEMENT................................14
SECTION 4.01 Common Member Voting Rights.................14
SECTION 4.02 Preferred Member Voting Rights..............14
SECTION 4.03 Management of the Company...................15
SECTION 4.04 Books and Records; Accounting...............17
SECTION 4.05 Reliance by Third Parties...................17
SECTION 4.06 Expenses....................................17
SECTION 4.07 Company Tax Returns.........................18
ARTICLE 5 CONTRIBUTIONS AND CAPITAL ACCOUNTS...................18
SECTION 5.01 Capital Contributions.......................18
SECTION 5.02 Capital Accounts............................19
SECTION 5.03 Withdrawal of Capital; Return of Capital;
Deficit Balance in Capital Account..........19
692584.12
-i-
<PAGE>
ARTICLE 6 ALLOCATIONS..........................................20
SECTION 6.01 Allocation of Net Operating Profits and
Net Operating Losses........................20
SECTION 6.02 Allocation of Net Disposition Profits.......21
SECTION 6.03 Allocation of Net Disposition Losses........21
ARTICLE 7 DISTRIBUTIONS........................................22
SECTION 7.01 Distributions from Operations...............22
SECTION 7.02 Distributions of Capital Receipts...........22
SECTION 7.03 Redemption of Preferred Units...............23
SECTION 7.04 Tax Distributions...........................25
SECTION 7.05 Distributions in Kind.......................25
SECTION 7.06 Preferred Distributions and Preferred
Guaranteed Payments.........................26
ARTICLE 8 SPECIAL ALLOCATION RULES.............................28
SECTION 8.01 Certain Definitions.........................28
SECTION 8.02 Allocations.................................31
ARTICLE 9 COVENANTS............................................34
SECTION 9.01 Negative Covenants..........................34
SECTION 9.02 Affirmative Covenants.......................35
ARTICLE 10 RESIGNATION AND ASSIGNMENT OF INTERESTS..............35
SECTION 10.01 Resignation of a Managing Member............35
SECTION 10.02 Resignation of Member.......................35
SECTION 10.03 No Distribution Upon Resignation............35
SECTION 10.04 Assignment of Interests.....................36
SECTION 10.05 Right of Assignee to Become a
Substitute Member...........................36
SECTION 10.06 Recognition of Assignment by Company........37
ARTICLE 11 DISSOLUTION..........................................37
SECTION 11.01 Duration and Dissolution....................37
SECTION 11.02 Winding Up..................................38
SECTION 11.03 Distribution of Assets......................38
SECTION 11.04 Notice of Liquidation.......................38
ARTICLE 12 MISCELLANEOUS........................................38
SECTION 12.01 Record Dates................................38
SECTION 12.02 Tax Reports and Financial Statements........38
SECTION 12.03 Amendment to the Agreement..................38
SECTION 12.04 Successors; Counterparts....................39
SECTION 12.05 Governing Law; Severability.................39
SECTION 12.06 Filings.....................................39
692584.12
-ii-
<PAGE>
SECTION 12.07 Power of Attorney...........................39
SECTION 12.08 Headings....................................40
SECTION 12.09 Additional Documents........................40
SECTION 12.10 Notices.....................................40
SECTION 12.11 Waiver of Right to Partition and
Bill of Accounting..........................40
692584.12
-iii-
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
VEQTOR FINANCE COMPANY, L.L.C.
This Amended and Restated Limited Liability Company Agreement of Veqtor
Finance Company, L.L.C. (the "Company") is made as of June 17, 1998, among
Capital Trust Investors Limited Partnership, an Illinois limited partnership
("CTILP"), and V2 Holdings LLC, Delaware limited liability company ("V2H"), both
as the initial Common Members and the Managing Members (collectively, the
"Initial Members"), and the Persons whose names are set forth as Preferred
Members on Schedule A hereto and who become Members in accordance with the
provisions hereof.
PRELIMINARY STATEMENT
The Company was formed under the Delaware Limited Liability Act (6 Del. C.
ss. 18-101, et seq.), as amended from time to time (the "Delaware Act"),
pursuant to a Certificate of Formation filed with the Secretary of State of the
State of Delaware on May 20, 1997 and the Limited Liability Company Agreement of
the Company, dated as of June 16, 1997, (the "Original Agreement"). On July 15,
1997, the Company issued $50 million principal amount of Convertible Notes
pursuant to the Convertible Notes Purchase Agreement which notes are convertible
into Preferred Units pursuant to the terms of the Convertible Notes and the
Original Agreement.
The Initial Members and the holders of the Convertible Notes desire to
accelerate the time upon which the Convertible Notes may be converted into
Preferred Units and in connection therewith desire to amend and restate in their
entirety the terms and provisions of the Original Agreement to provide for,
among other things, (i) the conversion as of the date of this Agreement of the
Convertible Notes into Preferred Units, (ii) the admission of the Preferred
Members in connection with foregoing conversion of Convertible Notes, (iii) the
continuation of the Company, (iv) the Capital Contributions and the allocation
of Profits, Losses and distributions of proceeds of the Company among the
Members, (v) the respective rights, obligations, and interests of the Members to
each other and to the Company and (vi) certain other matters.
Accordingly, in consideration of the covenants and agreements made herein,
the parties, hereby agree as follows:
692584.12
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<PAGE>
ARTICLE 1
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.
"Adjusted Base Amount" means an amount obtained by multiplying a Preferred
Member's Original Note Value by the simple interest rate of 6% per annum for the
period commencing on the Redemption Date and ending on July 15, 2000.
"Adjusted Proportionate Share" has the meaning specified in Section 7.03.
"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 Amended and Restated Limited Liability Company
Agreement of the Company, as amended, modified, supplemented or restated from
time to time.
"Average CT Trading Price" means the average of the closing prices for the
Capital Trust Voting Common reported by the New York Stock Exchange during the
period of six months ending on the last business day preceding the day on which
the event requiring the fair market valuation in accordance with Section 5.01
occurs.
"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 Contribution" means a contribution to capital in accordance with
Section 5.01.
"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 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 (iii) amounts set aside as reserves therefrom by the Managing
Members.
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"Capital Trust" means Capital Trust (f/k/a 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.
"Capital Trust Amended and Restated Declaration of Trust" means the Amended
and Restated Declaration of Trust of Capital Trust as filed with and certified
by the Assessor- Recorder's Office of the County of San Francisco, California,
as amended from time to time.
"Capital Trust MBS Business" means the aspect of the business of investing
in senior and junior commercial mortgage loans, 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 interest, $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 interest, $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 as filed with and
certified by the Assessor-Recorder's Office of the County of San Francisco,
California.
"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
interest, $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 interest, $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
Shares of Beneficial Interests of Capital Trust as filed with and certified by
the Assessor-Recorder's Office of the County of San Francisco, California.
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"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 under 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)
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
Preliminary Statement 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.
"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.
"Conversion Agreement" means the Conversion Agreement, dated as of June 17,
1998, by and among the Company and the holders of the Convertible Notes, with
respect to the conversion of the Convertible Notes.
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"Convertible Notes" means the 12% Convertible Redeemable Notes in an
aggregate principal amount of $50,000,000, issued by the Company pursuant to the
Convertible Notes Purchase Agreement, which Convertible Notes are by their terms
convertible into Preferred Units and shall be converted as of the date of this
Agreement in accordance with Section 3.03.
"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, pursuant to which the Convertible Notes were issued and
sold.
"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" has the meaning set forth in Section 2.08.
"Delaware Act" has the meaning set forth in the Preliminary Statement 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" has the meaning set forth in Section 7.06(c).
"Distribution Period" has the meaning set forth in Section 7.06(c).
"Fiscal Year" has the meaning set forth in Section 2.05.
"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 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 is secured by any Lien on any property or asset of such
first referred to Person.
"Initial Members" has the meaning specified in the Preamble to this
Agreement.
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"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 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 CTILP 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, Net Disposition Losses and Preferred Guaranteed Payments.
"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
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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.
"Original Agreement" has the meaning set forth in the Preliminary Statement
of this Agreement.
"Original Note Value" means, with respect to any Convertible Note, the
original principal amount of such Convertible Note.
"Outstanding Note Value" means, with respect to any Convertible Note, the
sum of the outstanding principal amount of such Convertible Note, plus the
Deferred Amount (as defined in the Convertible Note) which shall have accrued
thereon through June 30, 1998.
"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.
"PIK Price" has the meaning set forth in Section 7.06(b).
"PIK Units" has the meaning set forth in Section 7.06(b).
"Preferred Approval" means the prior written consent of the holders of
Preferred Units representing in the aggregate more than 50% of the total number
of Preferred Units actually outstanding on the date of determination.
"Preferred Distribution" means the distributions provided for in Section
7.06(a).
"Preferred Guaranteed Payments" has the meaning set forth in Section
7.06(b).
"Preferred Member" means a Member that holds one or more Preferred Units
and is admitted as a Preferred Member pursuant to the provisions of this
Agreement and named as a Preferred Member on Schedule A hereto and includes any
Person issued or assigned Preferred Units and admitted as an Additional Member
or a Substitute Member, as the case may be, pursuant to the provisions of this
Agreement, in such Person's capacity as a Preferred Member.
"Preferred Share Purchase Agreement" means the Class A 9.5% Cumulative
Convertible Preferred Share Purchase Agreement, dated as of June 16, 1997, by
and between Capital Trust and the Company, as amended, modified, supplemented or
restated from time to time.
"Preferred Units" means the Interests in the Company designated as
preferred Interests as provided in Section 3.01(a) of this Agreement including,
without limitation, PIK Units issued and outstanding in accordance with Section
7.06(b).
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"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 plus the number of PIK Units, if any, that have accrued but
have not been issued with respect to such Member on the date of determination
and the denominator of which is the sum of (i) the total number of outstanding
Preferred Units and (ii) the total number of outstanding Common Units plus the
total number of PIK Units, if any, that have accrued but have not been issued on
the date of determination.
"Redeemed Preferred Member" means, with respect to any Redemption under
Section 7.03(a)(ii), the Preferred Member subject to such Redemption.
"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 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) CTILP, (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 CTILP, EGI or any wholly-owned subsidiary,
direct or indirect, of CTILP or EGI.
"Restricted Payment" has the meaning set forth in Section 7.06(f).
"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.
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ARTICLE 2
GENERAL PROVISIONS
SECTION 2.01 Continuation.
(a) The Members hereby agree to continue the Company as a limited
liability company under and pursuant to the provisions of the Delaware Act and
agree that the rights, duties and liabilities of the Members shall be as
provided in the Delaware Act, except as otherwise provided herein.
(b) Upon execution of this Agreement or a counterpart of this
Agreement, CTILP and V2H shall continue as Members and each Person named as a
Preferred Member on Schedule A hereto shall be admitted to the Company as a
Member in accordance with Section 3.03.
SECTION 2.02 Company Name. The name of the Company is "Veqtor Finance
Company, L.L.C." The name of the Company may be changed from time to time by the
Managing Members in their discretion.
SECTION 2.03 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 2.04 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 necessary, convenient,
desirable or incidental 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;
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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 engage in the activities set
forth in clauses (i) through (iii) of this subparagraph (b).
(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 sections 13 or 15(d) of the Securities Exchange Act
of 1934, as amended.
SECTION 2.05 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 2.06 Perpetual Existence. The Company shall have a perpetual
existence unless dissolved in accordance with the provisions of Article 11 of
this Agreement.
SECTION 2.07 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 2.08 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
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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 2.08 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 2.08 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 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 2.09 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 2.10 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
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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.
SECTION 2.11 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 2.11 and containing such other procedures regarding indemnification as
are appropriate and consistent with this Agreement.
SECTION 2.12 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 or Capital Trust's Equity Affiliates, none of CTILP, V2H or any
Person who is a Related Party of either CTILP 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
CTILP, V2H and any Person who is a Related Party of either CTILP 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.
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(b) Subject to Section 2.12(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 2.12 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.
ARTICLE 3
CLASSES OF INTERESTS AND ADMISSION OF MEMBERS
SECTION 3.01 Classes.
(a) Subject to Section 3.01(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) 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 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 Continuation of Initial Members. Upon the execution of this
Agreement, CTILP and V2H shall continue as Common Members. The Company has
issued 500,000 Common Units to CTILP and 500,000 Common Units to V2H.
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SECTION 3.03 Admission of Preferred Members. Upon the execution of this
Agreement, each holder of Convertible Notes shall surrender to the Company such
notes, whereupon such Convertible Notes shall be deemed converted into Preferred
Units, and each former 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 as set forth in the Conversion Agreement.
The number of Preferred Units issued in accordance with this Section 3.03 to
each Preferred Member is set forth on Schedule B attached hereto.
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 and Schedule B. The Managing Members shall update
Schedule A and Schedule B from time to time as necessary to reflect accurately
the information therein. Any amendment or revision to Schedule A and Schedule B
made in accordance with this Agreement shall not be deemed an amendment to this
Agreement. Any reference in this Agreement to Schedule A and Schedule B, unless
the context otherwise requires, shall be deemed to be a reference to Schedule A
and Schedule B as amended and in effect from time to time.
ARTICLE 4
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 Preferred Members may be given
at a separate meeting of such Members convened for such purpose or at a meeting
of Members or
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pursuant to written consent. The Company shall cause a notice of any meeting at
which Preferred Members are entitled to vote, or of any matter upon which action
may be taken by written consent of such Members, to be mailed to each such
Member. 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 Members
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 2.04, 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 3;
(d) incur and pay all expenses and obligations incident to the
operation and management of the Company;
(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, 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";
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(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
(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.
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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 in the definition of Capital
Trust Voting Preferred contained in Article 1 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 Preferred
Members, if any. 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
which each such Preferred Member would then be entitled to receive upon
redemption of its Preferred Units in accordance with Section 7.03(a)(i).
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 formation,
operation or management of the Company, in organizing the Company and preparing,
negotiating, executing, delivering, amending and modifying this Agreement and
converting the Convertible Notes into Preferred Units.
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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 Approval.
(b) CTILP 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. CTILP is specifically
directed and authorized to take whatever steps CTILP, 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 CTILP shall take no action as "Tax Matters Partner" under this
Section 4.07(b) without the prior approval of V2H. Expenses incurred by the Tax
Matters Partner, in its capacity as such, will be borne by the Company.
ARTICLE 5
CONTRIBUTIONS AND CAPITAL ACCOUNTS
SECTION 5.01 Capital Contributions. Each Common Member has contributed 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 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 as set forth opposite the Preferred Member's
name on Schedule A. 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. Each Preferred Member shall also be deemed to have
contributed to the capital of the Company at the time any PIK Units are issued
to it pursuant to Section 7.06(b)(i) an amount equal to the fair market value of
the Company's capital that has shifted from the capital accounts of the Common
Members to the capital account of the Preferred Member as a result of the
issuance of such PIK Units. The fair market value of the portion of the
Company's capital that has so shifted shall be an amount equal to the increase
in the Preferred Member's Proportionate Share resulting from the issuance of
such PIK Units multiplied by the amount obtained by multiplying the aggregate
number of Capital Trust Shares owned by the Company by the Average CT Trading
Price (as adjusted to reflect fractional shares or interests therein and to
deduct the amount or value of
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additional consideration payable to Capital Trust in respect of the exercise of
any right, warrant or option to acquire shares) plus or minus the Company's Net
Other Assets. 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.
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 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. 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 and the issuance of any PIK Units, 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 cause the Capital Accounts of the
Members to equal the amount that would be distributed to them if the Company
were liquidated, and the fair market value of the Company's assets were
distributed in accordance with the priorities established in this Agreement, and
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.
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(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.
ARTICLE 6
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 CTILP, 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, 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 Preferred Distribution accrued with respect to such Preferred
Member pursuant to Section 7.06, and minus the amount of any previous
distributions to such Preferred Member;
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(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
Preferred Distribution accrued with respect to such Preferred Member pursuant to
Section 7.06, and minus the amounts of all previous distributions to such
Preferred Member.
(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 CTILP and any previous
distributions to CTILP.
(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 CTILP, an amount of Net Disposition Losses sufficient to
cause its Capital Account to equal the Capital Account of V2H.
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(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 Preferred Distribution
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.
SECTION 6.04 Allocation of Guaranteed Payments. Any deduction or other tax
consequences attributable to the Company's making any guaranteed payment,
including the Preferred Guaranteed Payment, shall be allocated to those Members
other than the Member or Members to which such payment is made. The amount so
allocated shall be apportioned among the recipients in accordance with their
relative Proportionate Shares.
ARTICLE 7
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;
(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 5, 6 and 8, 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:
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(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 Preferred Distribution 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, to the extent of its Capital Account
balance; and
(d) Thereafter, 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.
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 July 15, 1999, 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 July 15, 1999, 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) (A) in the case of any redemption by the Company after July
15, 2000 or any redemption by such Preferred Member at any time, such
Preferred Member's Proportionate 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 Proportionate Share of the
Company's entire right, title and interest in
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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
(B) assets having a fair market value equal to the amount of such
Preferred Member's Proportionate Share of the sum of Net Other Assets
and the total amount distributed to all Members pursuant to Sections
7.01, 7.02, 7.04 and 7.05 minus the total amount distributed to such
Preferred Member pursuant to Sections 7.01, 7.02, 7.04 and 7.05; or
(ii) (A) in the case of any redemption by the Company on or prior
to July 15, 2000, such Preferred Member's Adjusted Proportionate 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 Adjusted Proportionate 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
(B) assets having a fair market value equal to the amount of such
Preferred Member's Adjusted Proportionate Share of the sum of Net
Other Assets and the total amount distributed to all Members pursuant
to Section 7.01, 7.02, 7.04 and 7.05 minus the total amount
distributed to such Preferred Member pursuant to Section 7.01, 7.02,
7.04 and 7.05.
A Redeemed Preferred Member's "Adjusted Proportionate Share" means its
Proportionate Share as adjusted to take into account, and treat as outstanding
Preferred Units, in the calculation thereof the deemed issuance to such Redeemed
Preferred Member of a number of additional Preferred Units equal to the Adjusted
Base Amount divided by the PIK Price.
(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 Proportionate Share (or
Adjusted Proportionate Share, as appropriate) 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.
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(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) or Section 7.03(a)(ii), as the case may be.
(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(e),
would have been assigned, transferred and delivered to such holder pursuant to
Section 7.03(d), 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.
(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
other assets, if any, assigned, transferred and delivered to a Preferred Member
in accordance with Section 7.03(a) 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 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 Proportionate Share or Adjusted Proportionate Shares, as appropriate 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
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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 and Preferred Guaranteed Payments.
(a) A preferred distribution ("Preferred Distribution") payable from
Cash Flow shall accrue with respect to each Preferred Member at the rate of 6%
per annum on the Original Note Value of its Convertible Notes converted hereby
into Preferred Units.
(b) (i) A guaranteed payment ("Preferred Guaranteed Payment") payable
with additional Preferred Units ("PIK Units") shall accrue with
respect to each Preferred Member at a rate of 6% per annum on the
Original Note Value of its Convertible Notes converted hereby into
Preferred Units.
(ii) The number of PIK Units to be issued shall be the number
obtained by (A) multiplying an annual percentage rate of 6% by the
Preferred Member's Original Note Value (the "Base Amount") and (B)
dividing the Base Amount by the per Unit price of $55.59 (the "PIK
Price"). For example, a Preferred Member with an Original Note Value
of $5,000,000 would receive an annual distribution of PIK Units
determined as follows:
($5,000,000 x 6% / 55.59 = 5,396.65 PIK Units)
(iii) The PIK Price shall be subject to adjustment from time to
time by the Company as specified herein. In the event that the Company
shall at any time after the date of this Agreement:
(A) declare a dividend or make a distribution on the
Preferred Units in Preferred Units, or otherwise effect a split
of Preferred Units;
(B) subdivide the Preferred Units into a greater number of
Preferred Units;
(C) combine the Preferred Units into a smaller number of
Preferred Units; or
(D) issue Preferred Units at a per unit price of less than
$55.59.
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then the PIK Price in effect immediately prior thereto shall be
adjusted so that the Preferred Member who converted Convertible
Notes into Preferred Units in accordance with Section 3.03 shall
be issued the number of Preferred Units which such Preferred
Member would have been issued after the happening of any of the
events described above had additional Preferred Units been paid
immediately prior to the happening of such event. An adjustment
made pursuant to the foregoing shall become effective immediately
after the record date in the case of a dividend or distribution
and shall become effective immediately after the effective date
in the case of subdivision or combination. Such adjustment shall
be made successively whenever any event referred to above shall
occur.
(c) 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 July 1, 1998 and shall end
on and include the December 15 or June 15 next following. Preferred
Distributions and Preferred Guaranteed Payments 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 July 1, 1998
(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 and payment 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. Upon declaration and payment, Preferred
Guaranteed Payments shall be recorded by book entry on Schedule B. The Managing
Members shall update Schedule B as of each Distribution Payment Date to reflect
the additional Preferred Units paid to the Preferred Members.
(d) (i) The Preferred Distribution and Preferred Guaranteed Payment
for each full Distribution Period shall in each case be computed by
applying the 6% annual rate to the Original Note Value of the
Convertible Notes converted into Preferred Units and dividing such
amount by two. The amount of distributions and guaranteed payments
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.
(ii) Preferred Distributions and Preferred Guaranteed Payments
shall accrue (whether or not declared) from and including July 1, 1998
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. Preferred Distributions and Preferred Guaranteed Payments
shall accrue on a daily basis whether or not the Company shall have
earnings or surplus at the time.
(e) Except as otherwise provided in this Agreement, if on any
Distribution Payment Date, the Company pays less than the total amount of
distributions and guaranteed payments then accrued with respect to the Preferred
Units, the amount so paid shall be distributed ratably among
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the holders of the Preferred Units, based upon the amount of Preferred
Distribution and Preferred Guaranteed Payment which each such holder of
Preferred Units is entitled to receive.
(f) Unless all accrued distributions, guaranteed payments and other
amounts then accrued through the end of the last Distribution Period 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).
SECTION 7.07 Treatment of Guaranteed Payments. A guaranteed payment,
including the Preferred Guaranteed Payment, shall not constitute a distribution
for purposes of Section 7 hereof.
ARTICLE 8
SPECIAL ALLOCATION RULES
SECTION 8.01 Certain Definitions. The following terms have the definitions
hereinafter indicated whenever used in this Article 8 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.
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
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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.
(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
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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.
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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 6 of this
Agreement.
(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
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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 8, 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 8 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 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 8, 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.
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(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,
(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.
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(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 9
COVENANTS
SECTION 9.01 Negative Covenants.
(a) So long as any Preferred Units are outstanding, without the
Preferred Approval:
(i) 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.
(ii) 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 owned by the Company or otherwise
provide its consent for Capital Trust to incur any Indebtedness if
Capital Trust's D/E Ratio would exceed 5:1.
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(b) So long as any Preferred Units are outstanding, without the
Preferred Approval, the Company shall not Incur any Indebtedness, issue any
Interests of any series or class or sell, assign or transfer any of the Capital
Trust Shares.
SECTION 9.02 Affirmative Covenants. So long as any Preferred Units are held
by any Preferred Member, the Company shall deliver or cause to be delivered to
the holder of 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 10
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
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.
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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 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,
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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, 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 10 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 7 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 10, 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 11
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.
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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 7, subject to
the applicable terms of Section 18-804 of the Delaware Act.
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 12
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
Approval; or
(b) adversely affect the rights of the Preferred Members without the
Preferred 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
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(c) amend this Section 12.03 without the Preferred 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 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) any amendment to the Certificate of Formation of the Company
required as a result of this Agreement, any further amendment thereof required
because of a further 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
692584.12
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<PAGE>
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. The name and address of each Member is (or with
respect to any Additional Members shall be) set forth on Schedule A. 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 on Schedule A 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 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.
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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:
CAPITAL TRUST INVESTORS LIMITED
PARTNERSHIP
By: SZ Investments, LLC, its general partner
By: Zell General Partnership, Inc.,
its managing member
By: /s/ Donald J. Liebentritt
----------------------------------
Name: Donald J. Liebentritt
Title: Vice President
V2 HOLDINGS LLC
By: /s/ John R. Klopp
---------------------------------------
Name: John R. Klopp
Title: Member
PREFERRED MEMBERS:
FIRST CHICAGO CAPITAL CORPORATION
By: /s/ John C. Van Tassel
---------------------------------------
Name: John C. Van Tassel
Title: Vice President
WELLS FARGO & COMPANY
By: /s/ David Martin
---------------------------------------
Name: David Martin
Title: VP
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<PAGE>
BANKAMERICA INVESTMENT
CORPORATION
By: /s/ C. Richard Schuler
---------------------------------------
Name: C. Richard Schuler
Title: Attorney-in-Fact
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<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Common Member: Capital Contribution: Address:
<S><C> <C> <C>
CAPITAL TRUST INVESTORS $5,000,000.00 Two North Riverside Plaza
LIMITED PARTNERSHIP Suite 600, Chicago, IL 60606
V2 HOLDINGS LLC $0.00 605 Third Avenue, 26th Floor
New York, New York 10016
Preferred Member: Capital Contribution: Address:
FIRST CHICAGO CAPITAL $15,875,000.00 One First National Plaza
CORPORATION Mail Suite 0597
Chicago, Illinois 60670-0597
Attention: John Van Tassel
WELLS FARGO & COMPANY $15,875,000.00 333 South Grand Avenue
9th Floor
Los Angeles, California 90071
Attention: David Martin
BANKAMERICA INVESTMENT $21,166,667.67 231 South LaSalle Street
CORPORATION 17th Floor
Chicago, Illinois 60607
Attention: C. Richard Schuler
</TABLE>
692584.12
<PAGE>
SCHEDULE B
The information as to the ownership of Preferred Units by the Preferred Members
is as of June 17, 1998.
<TABLE>
<CAPTION>
Preferred Member: Number of Preferred Units
- ----------------- -------------------------
<S><C> <C>
FIRST CHICAGO CAPITAL CORPORATION 285,572.94
WELLS FARGO & COMPANY 285,572.94
BANKAMERICA INVESTMENT 380,763.93
CORPORATION
</TABLE>
692584.12
