SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of -earliest event reported): December 15, 1998
STARWOOD FINANCIAL TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-10150 95-6881527
State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1114 Avenue of the Americas
27th Floor
New York, NY 10036
(Address of principal executive offices) (Zip Code)
Copy to: James B. Carlson
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Registrant's telephone number, including area code: (212) 930-9400
<PAGE>
Item 1. Changes in Control of Registrant.
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
On December 15, 1998, Starwood Financial Trust (the "Company")
consummated (i) the sale of 4,400,000 Series A Preferred Shares of beneficial
interest (the "Preferred Shares") and Warrants ("Warrants") to purchase
6,000,000 Class A Shares of beneficial interest pursuant to a Securities
Purchase Agreement, dated as of December 15, 1998 (the "Stock Purchase
Agreement"), by and among the Company, Lazard Freres Real Estate Fund II, L.P.,
a Delaware limited partnership ("Fund II"), Lazard Freres Real Estate Offshore
Fund II, L.P., a Delaware limited partnership (the "Offshore Fund"), and LF
Mortgage REIT, a Maryland real estate investment trust (the "Private REIT" and
collectively with Fund II and the Offshore Fund, the "Investors") and (ii) the
acquisition of certain assets the ("Acquired Assets"), pursuant to an Asset
Purchase and Sale Agreement, dated as of December 15, 1998 (the "Asset Purchase
Agreement"), by and between Lazard Freres Real Estate Fund L.P., a Delaware
limited partnership ("Fund I"), Fund II, Prometheus Mid- Atlantic Holding, L.P.
("PMAH"), a Delaware limited partnership, Pacific Preferred LLC, a New York
limited liability company ("Pacific"), Atlantic Preferred II LLC, a New York
limited liability company ("Atlantic"), Indian Preferred LLC, a New York limited
liability company ("Indian") and Prometheus Investment Holding, L.P., a Delaware
limited partnership ("PIHLP"; Fund I, Fund II, PMAH, Pacific, Atlantic, Indian
and PIHLP, each a "Seller Party" and collectively, "Sellers") and the Company.
The Preferred Shares have a liquidation value of $50 per share, carry a
dividend yield of 9.50% per annum, payable quarterly in arrears, and are
callable without premium at the Company's option on or after December 15, 2003.
On each of December 15, 2005, 2006 and 2007, the dividend rate on the Preferred
Shares will increase by 0.25% per annum.
The Warrants are exercisable on or after December 15, 1999 at a price
of $35 per share and expire on December 15, 2005.
The Acquired Assets include eight senior and mezzanine loans which were
acquired for $238.5 million and are backed by a diverse portfolio of Class A
office, multifamily and retail properties located in San Francisco, San Jose,
Los Angeles, New York, suburban Washington, D.C., Philadelphia and Pittsburgh.
The acquired loans have a weighted average unleveraged yield to maturity of
13.15% and a weighted average maturity of 7.5 years.
The Company also purchased an 85% senior participation in a portfolio
of commercial mortgage-backed securities for $41.8 million. These securities are
backed by a pool of 10 large balance loans secured by first mortgages on office,
multi-family, self storage, retail, hotel and senior living properties. The
Company's 85% interest in the
<PAGE>
securities is senior to a 15% interest retained by the Sellers. These securities
have a face amount of $54.5 million, are rated "BB" and "B" and carry a weighted
average unleveraged yield of 11.66% and a weighted average maturity of 13.5
years.
In consideration for the Preferred Shares and Warrants, at the closing
the Investors paid the Company an aggregate of $220 million. In consideration
for the assets purchased pursuant to the Asset Purchase Agreement, at the
closing, the Company paid the Sellers an aggregate of $280.3 million (including
assumed debt).
The Company purchased the assets with the proceeds from the sale of the
Preferred Shares and Warrants, $12.4 million of cash on hand and $47.9 million
in existing debt assumed in connection with the transaction.
Included as exhibits hereto are the Stock Purchase Agreement, the Asset
Purchase Agreement and the documents relating thereto, and the foregoing
description is qualified in its entirety by reference to the terms and
provisions contained in those exhibits.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
Not Applicable.
Item 6. Resignations of Registrant's Directors.
Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Not Applicable.
<PAGE>
Item 8. Change in Fiscal Year.
Not Applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
STARWOOD FINANCIAL TRUST
(Registrant)
Date: December 18, 1998 By: /s/ Jay Sugarman
Name: Jay Sugarman
Title: President & Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3.1 Articles Supplementary relating to the Series A Preferred
Shares of Beneficial Interest.
3.2 Articles of Amendment to the Company's Amended and Restated
Declaration of Trust.
4.1 Investor Rights Agreement, dated as of December 15, 1998 among
Starwood Financial Trust, a Maryland real estate investment
trust, Starwood Mezzanine Investors, L.P., a Delaware limited
partnership, SOFI-IV SMT Holdings, L.L.C., a Delaware limited
liability company, B Holdings, L.L.C., a Delaware limited
liability company, and Lazard Freres Real Estate Fund II L.P.,
a Delaware limited partnership, Lazard Freres Real Estate
Offshore Fund II L.P., a Delaware limited partnership, and LF
Mortgage REIT, a Maryland real estate investment trust.
4.2 Form of warrant certificates.
4.3 Form of certificate for Series A Preferred Shares of
beneficial interest.
10.1 Securities Purchase Agreement, dated as of December 15, 1998,
by and between Starwood Financial Trust, Lazard Freres Real
Estate Fund II, L.P., a Delaware limited partnership, Lazard
Freres Real Estate Offshore Fund II, L.P., a Delaware limited
partnership, and LF Mortgage REIT, a Maryland real estate
investment trust.
10.2 Asset Purchase and Sale Agreement, dated as of December 15,
1998 by and between Lazard Freres Real Estate Fund L.P., a
Delaware limited partnership, Lazard Freres Real Estate Fund
II L.P., a Delaware limited Partnership, Prometheus
Mid-atlantic Holding, L.P., a Delaware limited partnership,
Pacific Preferred LLC, a New York limited liability company,
Atlantic Preferred II LLC, a New York limited liability
company, Indian Preferred LLC, a New York limited liability
company and Prometheus Investment Holding, L.P., a Delaware
limited partnership and Starwood Financial Trust.
99 Text of Press Release issued December 16, 1998.
STARWOOD FINANCIAL TRUST
------------------------
ARTICLES SUPPLEMENTARY
of
SERIES A PREFERRED SHARES
of
STARWOOD FINANCIAL TRUST
(Pursuant to Section 8-203 of the
Maryland Corporations and Associations Code)
----------------------------------
Starwood Financial Trust, a Maryland real estate investment trust (the
"Company"), hereby certifies to the State Department of Assessments and Taxation
of Maryland that:
FIRST: Under a power contained in Article VI of the declaration of
trust of the Company (the "Declaration"), the Board of Trustees of the Company
(the "Board of Trustees"), by resolution duly adopted at a meeting duly called
and held, classified and designated 4,400,000 preferred shares of beneficial
interest (as defined in the Declaration) as shares of Series A Preferred Shares
of beneficial interest, par value $.01 per share (the "Series A Preferred
Shares"), with the following preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption, which, upon any
restatement of the Declaration, shall be deemed to be Article 12 of the
Declaration:
1. Rank.
The distinctive name and designation of this series of preferred shares
is Series A Preferred Shares. Each Series A Preferred Share shall rank senior to
any "Junior Securities" (herein defined) in the payment of dividends and in the
dissolution or winding up of the Trust. No Series of Preferred Shares hereafter
issued shall rank senior to or on a parity with the Series A Preferred Shares
unless the issuance thereof is in compliance with the terms of the Investor
Rights Agreement among the Trust, certain holders of the Series A Preferred
Shares and certain other parties thereto relating among other things to the
Series A Preferred Shares.
<PAGE>
2. Number of Shares.
The Series A Preferred Shares shall consist of 4,400,000 shares, which
number may be increased or decreased (but not below the number of Series A
Preferred Shares then issued and outstanding) from time to time by a resolution
or resolutions of the Board of Trustees. Series A Preferred Shares repurchased
by the Trust shall be canceled and shall revert to authorized but unissued
Shares, undesignated as to class or series, subject to reissuance by the Trust
as shares of any one or more series.
3. Dividends.
(a) Each Series A Preferred Share shall entitle the holder thereof to
receive dividends out of any assets legally available therefor, prior to and in
preference to any declaration or payment of any dividend (payable other than in
Junior Securities) payable on any Junior Securities and pari passu with any
securities ranking on parity with the Series A Preferred Shares and junior to
any Senior Preferred Shares (herein defined). Dividends shall be payable when
and as authorized by the Board of Trustees and declared by the Trust. Dividends
on each Series A Preferred Share shall accrue at the rate determined pursuant to
Section 3(c) (the "Dividend Rate") on the Liquidation Value. The dividend on the
Series A Preferred Shares shall be cumulative and shall be payable in cash in
arrears on April 15, July 15, October 15 and January 15 of each year (each a
"Dividend Payment Date"), commencing January 15, 1999 to holders of record on
the last day of the month immediately preceding such Dividend Payment Date
(i.e., March 31, June 30, September 30 and December 31). Dividends shall accrue
whether or not they have been declared and whether or not there are profits,
surplus or other funds of the Trust legally available for the payment of
dividends. To the extent that any dividend on the Series A Preferred Shares is
not paid on the Dividend Payment Date, such dividend shall accumulate and
compound quarterly from that date at the then applicable Dividend Rate until
such dividend is paid in full. The date on which the Trust initially issues a
Series A Preferred Share shall be referred to as the Original Issue Date
regardless of the number of transfers of such shares made on the stock records
maintained by or for the Trust and regardless of the number of certificates that
may be issued to evidence such share.
(b) The Trust shall not (i) pay or set aside for payment any dividends
(payable other than in Junior Securities), on Junior Securities or (ii) redeem,
repurchase or otherwise acquire any Junior Securities (except as required by
Article XI of the Declaration of Trust or the excess share and real estate
investment trust qualification provisions of applicable law) until all
accumulated, accrued and unpaid dividends (including any compounded dividends
thereon) have been paid on the Series A Preferred Shares through the last
preceding Dividend Payment Date.
(c) The Dividend Rate shall initially be 9.5% per annum. On each of
December 15, 2005, 2006 and 2007, the Dividend Rate shall increase by 0.25% per
annum. If the Trust fails to pay on any four (4) or more consecutive Dividend
Payment Dates the full
- 2 -
<PAGE>
amount of unpaid dividends accrued or accumulated as of each such Dividend
Payment Date on the Series A Preferred Shares (whether or not such payments are
legally permissible or are prohibited by an agreement to which the Trust is
subject), any of which dividends remain unpaid on the day after the fourth such
Dividend Payment Date, the Dividend Rate on the Series A Preferred Shares then
in effect shall be increased by 0.50% per annum with such increase being
effective retroactive to the immediately prior Dividend Payment Date with
respect to which all accrued or accumulated but unpaid dividends have been paid.
Such increased Dividend Rate shall remain in effect until the close of business
on the date that all accrued or accumulated dividends (including any compounded
dividends thereon) in arrears on the Series A Preferred Shares are paid in full
at which time the Dividend Rate increase shall be of no further force and
effect, the Dividend Rate shall be reset to that Dividend Rate that would have
been in effect at such time pursuant to the first and second sentences of this
Section 3(c) but for the effect of the third sentence of this Section 3(c)
(subject to subsequent increases pursuant to this section) and the calculation
of the periods dividends are in arrears shall be reset to zero (0). Subject to
subsequent increases after reset pursuant to the preceding sentence, no
additional dividend rate increases shall be made for defaults in the payment of
dividends in excess of such four (4) consecutive Dividend Payment Dates, but the
aforesaid increase shall remain in effect in accordance with the immediately
preceding sentence until the time specified therein.
(d) The amount of dividends payable for each quarterly dividend period
for the Series A Preferred Shares shall be computed by dividing the Dividend
Rate by four. The amount of dividends payable for the initial dividend period or
any other period shorter or longer than a full quarterly period shall be
computed on the basis of twelve 30-day months and a 360-day year.
(e) Dividend payments shall be made by wire transfer to an account
designated by each holder of Series A Preferred Shares or, if no account
information is provided to the Trust by a holder of Series A Preferred Shares,
dividend payments shall be made by check delivered by first class mail to the
address of such holder as set forth in the stock records of the Trust.
4. Liquidation, Dissolution or Winding Up; Certain Mergers,
Consolidations and Asset Sales.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Trust, the holders of Series A Preferred Shares
then outstanding shall be entitled to be paid out of the assets of the Trust
available for distribution to its shareholders after and subject to the payment
in full of all amounts required to be distributed to the holders of any other
class or series of Shares of the Trust that specifically state that on
liquidation they rank prior and in preference to the Series A Preferred Shares,
whether or not convertible into Junior Securities (collectively referred to as
"Senior Preferred Shares"), but before any payment shall be made to the holders
of Class A Shares, Class B Shares or any other class or series of Shares ranking
on liquidation junior to the Series A Preferred Shares
- 3 -
<PAGE>
(the Class A Shares, the Class B Shares and any other class or series of Shares
ranking in payment of dividends or on liquidation junior to the Series A
Preferred Shares, or options, warrants or rights to purchase or that are
convertible into any such Shares but in no event including any Senior Preferred
Shares being collectively referred to as "Junior Securities") by reason of their
ownership thereof, an amount equal to $50.00 per share (such amount being the
"Liquidation Value"), plus any dividends declared, accumulated or accrued
(including any compounded dividends thereon) but unpaid thereon. If, upon any
such liquidation, dissolution or winding up of the Trust, the remaining assets
of the Trust available for distribution to its shareholders shall be
insufficient to pay the holders of Series A Preferred Shares and all other
classes or series of shares ranking on liquidation on a parity with the Series A
Preferred Shares the full amount to which they shall be entitled, the holders of
Series A Preferred Shares and any class or series of shares ranking on
liquidation on a parity with the Series A Preferred Shares shall share ratably
in any distribution of the remaining assets and funds of the Trust in proportion
to the respective amounts which would otherwise be payable in respect of the
Shares held by them upon such distribution if all amounts payable on or with
respect to such Shares were paid in full.
(b) After the payment of all preferential amounts required to be paid
to the holders of Senior Preferred Shares, Series A Preferred Shares and any
other class or series of Shares of the Trust ranking on liquidation on a parity
with the Series A Preferred Shares, upon the dissolution, liquidation or winding
up of the Trust, the holders of shares of Junior Securities then outstanding
shall be entitled to receive the remaining assets and funds of the Trust
available for distribution to its shareholders.
(c) The voluntary consolidation or merger of the Trust into or with any
other entity or entities which results in the exchange of outstanding shares of
the Trust for securities or other consideration issued or paid or caused to be
issued or paid by any such entity or affiliate thereof, and the voluntary sale
or transfer by the Trust of all or substantially all its assets, shall not be
deemed to be a liquidation, dissolution or winding up of the Trust within the
meaning of the provisions of this Section 4 unless such sale, conveyance,
exchange or transfer is in connection with a dissolution or winding up of the
business of the Trust, provided, however, that any consolidation or merger of
the Trust in which the Trust is not the surviving entity shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the Trust within the
meaning of this Section 4 if, (i) in connection therewith, any holders of Junior
Securities receive as consideration, whether in whole or in part, for such: (1)
cash (other than as payment for fractional shares), (2) notes, debentures or
other evidences of indebtedness or obligations to pay cash (other than as
payment for fractional shares) or (3) preferred stock of the surviving entity
(whether or not the surviving entity is the Trust) which ranks on a parity with
or senior to the preferred stock received by holders of the Series A Preferred
Shares with respect to liquidation or dividends or (ii) the holders of the
Series A Preferred Shares do not receive preferred stock of the surviving entity
with rights, powers and preferences equal to (or more favorable to the holders
than) the rights, powers and preferences of the Series A Preferred Shares.
- 4 -
<PAGE>
5. Voting.
(a) Except as otherwise provided in Section 8 hereof or by the
provisions of Subsection 5(b) below, holders of Series A Preferred Shares shall
not be entitled to vote.
(b) Without the written consent or affirmative vote of the holders of a
majority of the then outstanding Series A Preferred Shares, given in writing or
by vote at a meeting, consenting or voting (as the case may be) separately as a
class, the Trust shall not amend, alter or repeal the preferences, special
rights or other powers of the Series A Preferred Shares as set forth in these
Articles Supplementary.
6. Optional Repurchase by the Company.
(a) From and after December 15, 2003, the Trust shall have the right to
repurchase and redeem (the "Repurchase") all, or any part of the Series A
Preferred Shares outstanding on the date of notice of Repurchase (the
"Repurchase Date"), for a price per share equal to the Liquidation Value thereof
plus all unpaid dividends that have been declared, accumulated or accrued
(including any compounded dividends thereon) to the Repurchase Date; provided
that after the Company has redeemed 74% of the total number of Series A
Preferred Shares issued on the Original Issue Date, the Company must redeem all
remaining outstanding Series A Preferred Shares if any are redeemed. Any
Repurchase of Series A Preferred Shares shall be made pro rata among all holders
of Series A Preferred Shares and shall be in minimum amounts equal to the lesser
of (i) $10 million in Liquidation Value or (ii) the remaining amount of Series A
Preferred Shares then outstanding.
(b) All holders of record of Series A Preferred Shares will be given
written notice of the Repurchase not less than 30 days nor more than 60 days
prior to the Repurchase Date, which notice shall set forth the Repurchase Date
and place designated for Repurchase of the Series A Preferred Shares pursuant to
this Section 6. Such notice shall be sent by overnight courier or first class or
registered mail, postage prepaid, to each record holder of Series A Preferred
Shares at such holder's address last shown on the records of the transfer agent
for the Series A Preferred Shares (or the records of the Trust, if it serves as
its own transfer agent). On or before the Repurchase Date, the Trust shall
irrevocably deposit, for the benefit of the holders of the Series A Preferred
Shares, the funds necessary to effect the Repurchase in full with a bank or
trust company in the Borough of Manhattan, The City of New York having a capital
and surplus of not less than $500 million. The Trust shall have the right to
revoke the notice of the Repurchase at any time prior to the designated
Repurchase Date. On or before the Repurchase Date, each holder of Series A
Preferred Shares shall surrender his, her or its certificate or certificates for
all such Shares to the Trust at the place designated in such notice, and on the
later of the Repurchase Date and the date such certificates are surrendered,
shall receive the payment to which such holder is entitled pursuant to this
Section 6. On the Repurchase Date, provided that the Trust has so deposited the
funds necessary to effect the Repurchase in full as provided in this Section 6,
all rights with respect to the Series A Preferred Shares, including the rights,
if any, to receive notices
- 5 -
<PAGE>
and vote, will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive payment for
the Series A Preferred Shares. If so required by the Trust, certificates
surrendered shall be endorsed or accompanied by written instrument or
instruments of transfer, in form reasonably satisfactory to the Trust, duly
executed by the registered holder or by his or its attorney duly authorized in
writing. (c) All certificates evidencing Series A Preferred Shares that are
required to be surrendered for repurchase in accordance with the provisions
hereof shall, if the Trust has deposited the funds necessary to effect the
Repurchase in full as provided in Section 6(b) above, from and after the
Repurchase Date, be deemed to have been retired and canceled and the Series A
Preferred Shares represented thereby converted into the right to receive payment
for such shares, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Trust may thereafter
take such appropriate action (without the need for shareholder action) as may be
necessary to reduce the authorized Series A Preferred Shares accordingly.
7. Optional Redemption by the Holders.
(a) In the event of a Change of Control, as defined below, each holder
of Series A Preferred Shares shall have the right to elect to have the Company
repurchase (the "Redemption") all, but not less than all, of the Series A
Preferred Shares held by such holder on the date of the Change of Control (the
"Change of Control Date") for a price per share equal to the Liquidation Value
thereof plus all unpaid dividends that have been declared, accumulated or
accrued (including any compounded dividends thereon) to the Redemption Date. The
procedure for electing the Redemption is set forth in Section (b) and (c) below.
The Trust shall not be required to redeem any Series A Preferred Shares unless
holders of not less than a majority of the Series A Preferred Shares outstanding
have elected to have their Shares redeemed in which case the Trust shall redeem
all outstanding Series A Preferred Shares including those owned by holders who
have not so elected.
(b) If a Change of Control (as defined below) has occurred, the Trust
shall give prompt written notice of such Change of Control (the "Change of
Control Notice"), describing in reasonable detail the definitive terms and date
of consummation thereof, to each holder of Series A Preferred Shares, but in any
event, such notice shall be given no later than five business days after the
Change of Control Date. Such notice shall be sent by overnight courier or first
class or registered mail, postage prepaid, to each record holder of Series A
Preferred Shares at such holder's address last shown on the records of the
transfer agent for the Series A Preferred Shares (or the records of the Trust,
if it serves as its own transfer agent) and shall set forth the date of the
closing of the Redemption (the "Redemption Date"), which Redemption Date shall
be the later of the Change of Control Date or 30 days after the date the Change
of Control Notice was first mailed by the Trust to the holders of Series A
Preferred Shares, and place designated for the redemption of the Series A
Preferred Shares pursuant to this Section 7. Upon receipt of such notice, each
holder of Series A Preferred Shares will have 20 days to elect to exercise the
Redemption by delivering
- 6 -
<PAGE>
written notice thereof to the Trust. If the Trust does not receive from the
holders of at least a majority the Series A Preferred Shares outstanding notice
of their election to exercise the Redemption within the 20 day period, no Series
A Preferred Shares shall be repurchased by the Trust and all rights under this
Section 7 shall terminate with respect to the Change of Control identified in
the Change of Control Notice but not with respect to any future Change of
Control. If the holders of at least a majority of the Series A Preferred Shares
outstanding give notice of election to exercise the Redemption within the
required time period then on or before the Redemption Date, the Trust shall
irrevocably deposit, for the benefit of the holders of all of the Series A
Preferred Shares, the funds necessary to effect the Redemption in full with a
bank or trust company in the Borough of Manhattan, The City of New York with
capital and surplus of not less than $500 million. On or before the Redemption
Date, each holder of Series A Preferred Shares shall surrender his, her or its
certificate for all such Shares to the Trust at the place designated in the
notice, and on the Redemption Date shall receive the payment to which such
holder is entitled pursuant to this Section 7. On the Redemption Date, the Trust
will redeem all of the Series A Preferred Shares for the consideration such
holder is entitled pursuant to this Section 7; provided that no holder of Series
A Preferred Shares shall be entitled to receive such consideration until the
certificates representing his, her or its Shares have been delivered to the
Trust at the place designated in such notice. On the Redemption Date, provided
that the Trust has so deposited the funds necessary to effect the Redemption in
full as provided in this Section 7, all rights with respect to the Series A
Preferred Shares, including the rights, if any, to receive notices and vote,
will terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive payment for the Series A
Preferred Shares. If so required by the Trust, certificates surrendered shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form reasonably satisfactory to the Trust, duly executed by the registered
holder or by his or its attorney duly authorized in writing. On the later of the
Redemption Date and the surrender of the certificate or certificates for Series
A Preferred Shares, the Trust shall cause to be delivered to such holder, a cash
payment for such redeemed Series A Preferred Shares. If a proposed Change of
Control is not consummated, all elections to redeem in connection therewith
shall automatically be rescinded.
(c) All certificates evidencing Series A Preferred Shares that are
required to be surrendered for repurchase in accordance with the provisions
hereof shall, if the Trust has deposited the funds necessary to effect the
Redemption in full as provided in Section 7(b) above, from and after the
Redemption Date, be deemed to have been retired and canceled and the Series A
Preferred Shares represented thereby converted into the right to receive payment
for such shares, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Trust may thereafter
take such appropriate action (without the need for shareholder action) as may be
necessary to reduce the authorized Series A Preferred Shares accordingly.
(d) "Change of Control" means the occurrence of one of more of the
following events that is not approved by the Board of Trustees of the Trust
prior to the
- 7 -
<PAGE>
occurrence of such event: (i) any Person or "Group" (as such terms are used in
Sections 13 (d) and 14 (d) of the Exchange Act), other than the Permitted
Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed to have
beneficial ownership of all shares that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of a number of shares of the voting stock of the
Trust which would entitle the holder thereof to cast a majority of the votes
entitled to be cast on matters generally to be voted on by the shareholders of
the Trust; provided that if the Permitted Holders have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board of Trustees of the Trust a Change of Control shall not be
deemed to occur even if the Permitted Holders "beneficially own" (as so defined)
a lesser percentage of such voting stock than such other person; or (ii) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Trust to
any Person or Group, together with any affiliates thereof other than the
Permitted Holders. "Permitted Holders" shall mean B. Holdings, L.L.C., Starwood
Mezzanine Investors, L.P., Starwood Opportunity Fund IV, L.P., SOFI-IV SMT
HOLDINGS, L.L.C., the direct and indirect general partners thereof and their
respective affiliates.
8. Board Representation. (a) If the Trust fails to pay within 30 days
of any single Dividend Payment Date the full dividend then accrued or
accumulated but unpaid on the Series A Preferred Shares, whether or not such
payment is legally permissible or is prohibited by any agreement to which the
Trust is subject (a "Single Dividend Deficiency Period"), then the number of
trustees constituting the Board of Trustees of the Trust shall be increased to
permit the holders of a majority of the Series A Preferred Shares (the "Majority
Holders") voting separately as one class, to elect one trustee. If the Trust
fails to pay the full dividends then accrued or accumulated but unpaid
(including compounded dividends) on the Series A Preferred Shares for any six
consecutive Dividend Payment Dates (including the initial Single Dividend
Deficiency Period) so that six consecutive dividend payments are not paid in
full as of the day after the sixth such Divided Payment Date, whether or not
such payment is legally permissible or is prohibited by any agreement to which
the Trust is subject (a "Multiple Dividend Deficiency Period" and together with
a Single Dividend Deficiency Period an "Election Period"), then the number of
Trustees of the Trust shall be increased to permit the Majority Holders, voting
separately as one class, to elect one more trustee. Any trustee elected pursuant
to this Section 8 is referred to as a Preferred Trustee. Upon the payment in
full of all accrued or accumulated but unpaid dividends (including compounded
dividends) on the Series A Preferred Shares, the calculation of the periods
dividends are in arrears shall reset to zero (0).
(b) The right of the Majority Holders voting separately as one class to
elect Preferred Trustees shall continue until such time as all accrued or
accumulated dividends (including compounded dividends) that are in arrears on
the Series A Preferred Shares are paid in full, at which time the term of any
Preferred Trustee shall terminate and the number of Trustees constituting the
Board of Trustees shall be reduced to the number necessary to
- 8 -
<PAGE>
reflect the termination of the right of the Majority Holders to elect Preferred
Trustees; subject to the right of the holders of Series A Preferred Shares to
elect the appropriate number of Preferred Trustees if a subsequent Election
Period should occur. Any Preferred Trustees shall continue in office until the
earlier of (A) such time as his or her successor shall have been elected by
Majority Holders and (B) the termination of his or her term in accordance with
the immediately preceding sentence. Notwithstanding any other sections of the
Declaration of Trust, during any Election Period, the Majority Holders shall be
entitled to (A) remove from the Board any Preferred Trustee elected under the
foregoing subsection (i), and (B) elect each successor to any such Preferred
Trustee removed in accordance herewith or who otherwise vacates such office.
(c) The right of the Majority Holders to elect Preferred Trustees may
be exercised at the special meeting called pursuant to this Section, at any
annual or other special meeting of shareholders and, to the extent and in the
manner permitted by applicable law, pursuant to a written consent in lieu of a
shareholders meeting. A proper officer of the Trust shall, upon the written
request of the Majority Holders, addressed to any officer of the Trust, call a
special meeting of the shareholders for the purpose of electing trustees
pursuant to this Section. Such meeting shall be held at the earliest legally
permissible date at the principal office of the Trust, or at such other place
designated by the Majority Holders. If such meeting has not been called by a
proper officer of the Trust within 15 days after personal delivery, by hand or
by a nationally recognized, overnight courier guaranteeing next business day
delivery, of such written request upon any officer of the Trust or within 20
days after mailing the same to the secretary of the Trust at its principal
office, then the Majority Holders may call such meeting at the expense of the
Trust, and such meeting may be called upon the notice required for annual
meetings of shareholders and shall be held at the Trust's principal office, or
at such other place designated by the Majority Holders. In the event that the
Trust is then subject to the proxy solicitation rules of the Securities and
Exchange Act of 1934, as amended, the 15 day and 20 day periods referenced above
shall be increased to 120 days and 125 days, respectively. The Majority Holders
shall be given access to the stock record books of the Trust for the purpose of
causing a meeting of shareholders to be called pursuant to this Section.
(d) At any meeting or at any adjournment thereof at which the holder of
the Series A Preferred Shares have the right to elect trustees, the presence, in
person or by proxy, of the holders of a majority of the Series A Preferred
Shares shall be required to constitute a quorum for the election or removal of
any trustee by the Majority Holders. The affirmative vote of the holders of a
majority of the Series A Preferred Shares represented in person or proxy at such
meeting shall be required to elect or remove any Preferred Trustee.
9. Restriction on Transfer, Acquisition and Redemption of Shares
9.1 Definitions. For purposes of this Section 9, the following terms shall
have the following meanings:
- 9 -
<PAGE>
(a) "Beneficial Ownership" shall mean ownership of Shares by a Person
who would be treated as an owner of such Shares either directly or
constructively through the application of Section 544 of the Code, as modified
by Section 856(h) of the Code. The terms "Beneficial Owner," "Beneficially
Owns," "Beneficially Own" and "Beneficially Owned" shall have correlative
meanings.
(b) "Charitable Beneficiary" shall mean an organization or
organizations described in Sections 170(b)(1)(A) and 170(c) of the Code and
identified by the Board of Trustees as the beneficiary or beneficiaries of the
Excess Share Trust.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Debt" shall mean indebtedness of the Trust.
(e) "Excess Shares" shall have the meaning given to it in paragraph (a)
of Section 9.3.
(f) "Excess Share Trust" shall mean the trust created pursuant to
Section 9.15.
(g) "Excess Share Trustee" shall mean a person, who shall be
unaffiliated with the Trust, any Purported Beneficial Transferee and any
Purported Record Transferee, identified by the Board of Trustees as the trustee
of the Excess Share Trust.
(h) "Existing Holder" shall mean (i) any Person who Beneficially Owns
Shares in excess of the Ownership Limit, both upon and immediately after June
17, 1998 (the "Restriction Commencement Date"), so long as such Person
Beneficially Owns Shares in excess of the Ownership Limit and (ii) any Person to
whom an Existing Holder Transfers, subject to the limitations provided in this
Section 9, Beneficial Ownership of Shares causing such transferee to
Beneficially Own Shares in excess of the Ownership Limit.
(i) "Existing Holder Limit" (i) for any Existing Holder who is an
Existing Holder by virtue of clause (i) of the definition thereof, shall mean,
initially, the percentage of the outstanding Class A, Class B or Series A
Preferred Shares Beneficially Owned (with such percentage for each class
determined separately) by such Existing Holder upon and immediately after the
Restriction Commencement Date, and, after any adjustment pursuant to Section
9.9, shall mean such percentage of the outstanding Shares as so adjusted, and
(ii) for any Existing Holder who becomes an Existing Holder by virtue of clause
(ii) of the definition thereof, shall mean, initially, the percentage of the
outstanding Class A, Class B or Series A Preferred Shares Beneficially Owned
(with such percentage for each class determined separately) by such Existing
Holder at the time that such Existing Holder becomes an Existing Holder, but in
no event shall such percentage be greater than the lesser of (i) the Existing
Holder Limit for the Existing Holder who Transferred Beneficial Ownership of
such Shares or, in the case of more than one transferor, in no event shall such
percentage be
- 10 -
<PAGE>
greater than the smallest Existing Holder Limit of any transferring Existing
Holder, or (ii) the Ownership Limit if the Existing Holder is a person other
than a trust qualified under Section 401(a) of the Code and exempt from tax
under Section 501(a) of the Code, and, after any adjustment pursuant to Section
9.9, shall mean such percentage of the outstanding Shares as so adjusted. From
the Restriction Commencement Date until the Restriction Termination Date, the
Trust shall maintain and, upon request, make available to each Existing Holder,
a schedule which sets forth the then current Existing Holder Limit for each
Existing Holder.
(j) "Market Price" shall mean the last reported sales price reported on
the American Stock Exchange for a particular class of Shares on the trading day
immediately preceding the relevant date, or if not then traded on the American
Stock Exchange, the last reported sales price for such class of Shares on the
trading day immediately preceding the relevant date as reported on any exchange
or quotation system over or through which such class of Shares may be traded, or
if not then traded over or through any exchange or quotation system, then the
market price of such class of Shares on the relevant date as determined in good
faith by the Board of Trustees.
(k) "Ownership Limit" shall initially mean 9.8% of the (i) number of
Series A Preferred Shares, or (ii) value of the aggregate outstanding Shares of
the Trust, and after any adjustment as set forth in Section 9.10, shall mean
such percentage in number of Series A Preferred Shares, or value of the
aggregate outstanding Shares, as so adjusted. Such number and/or value shall be
determined by the Board of Trustees in good faith, which determination shall be
conclusive for all purposes hereof.
(l) "Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of
the Code), portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity.
(m) "Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, as defined below in Section
9.3, the beneficial holder of the Shares, if such Transfer had been valid under
Section 9.2.
(n) "Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, as defined below in Section
9.3, the record holder of the Shares, if such Transfer had been valid under
Section 9.2.
(o) "REIT Provisions of the Code" means Part II, Subchapter M of
Chapter 1 of Subtitle A of the Code, as now enacted or hereafter amended,
including successor statutes and regulations promulgated thereunder.
(p) "Restriction Termination Date" shall mean the first day after the
Restriction Commencement Date on which the Board of Trustees determines that it
is no longer in the best interests of the Trust to attempt to, or continue to,
qualify as a real estate investment trust.
- 11 -
<PAGE>
(q) "Shares" means any shares of beneficial interest in the Trust.
(o) "Transfer" shall mean any sale, transfer, gift, assignment, devise
or other disposition of Shares (including (a) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Shares, (b) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Shares, but excluding
the exchange of Debt or any security of the Trust for Shares and (c) any
transfer or other disposition of any interest in Shares as a result of a change
in the marital status of the holder thereof), whether voluntary or involuntary,
whether of record, constructively or beneficially and whether by operation of
law or otherwise. The terms "Transfers" and "Transferred" shall have correlative
meanings.
9.2 Ownership Limitation.
(a) Except as provided in Sections 9.12 and 9.20, and subject to
paragraph (f) of this Section 9.2, from the Restriction Commencement Date until
the Restriction Termination Date, no Person (other than an Existing Holder)
shall Beneficially Own Shares in excess of the Ownership Limit and no Existing
Holder shall Beneficially Own Shares in excess of the Existing Holder Limit for
such Existing Holder.
(b) Except as provided in Sections 9.12 and 9.20, and subject to
paragraph (f) of this Section 9.2, from the Restriction Commencement Date until
the IRestriction Termination Date, any Transfer that, if effective, would result
in any Person (other than an Existing Holder) Beneficially Owning Shares in
excess of the Ownership Limit shall be void ab initio as to the Transfer of the
Shares which would be otherwise Beneficially Owned by such Person in excess of
the Ownership Limit; and the intended transferee shall acquire no rights in such
Shares.
(c) Except as provided in Sections 9.9 and 9.12, and subject to
paragraph (f) of this Section 9.2, from the Restriction Commencement Date until
the Restriction Termination Date, any Transfer that, if effective, would result
in any Existing Holder Beneficially Owning Shares in excess of the applicable
Existing Holder Limit shall be void ab initio as to the Transfer of the Shares
which would be otherwise Beneficially Owned by such Existing Holder in excess of
the applicable Existing Holder Limit; and such Existing Holder shall acquire no
rights in such Shares.
(d) Subject to paragraph (f) of this Section 9.2, from the Restriction
Commencement Date until the Restriction Termination Date, any Transfer that, if
effective, would result in the Shares being beneficially owned (as provided in
Section 856(a) of the Code) by less than 100 Persons (determined without
reference to any rules of attribution) shall be void ab initio as to the
Transfer of Shares which would be otherwise beneficially owned (as provided in
Section 856(a) of the Code) by the transferee; and the intended transferee shall
acquire no rights in such Shares.
- 12 -
<PAGE>
(e) Subject to paragraph (f) of this Section 9.2, from the Restriction
Commencement Date until the Restriction Termination Date, any Transfer that, if
effective, would result in the Trust being "closely held" within the meaning of
Section 856(h) of the Code shall be void ab initio as to the Transfer of the
Shares which would cause the Trust to be "closely held" within the meaning of
Section 856(h) of the Code; and the intended transferee shall acquire no rights
in such Shares.
(f) Nothing contained in this Section 9 shall preclude the settlement
of any transaction entered into through the facilities of the American Stock
Exchange. The fact that the settlement of any transaction is permitted shall not
negate the effect of any other provision of this Section 9 and any transferee in
such a transaction shall be subject to all of the provisions and limitations set
forth in this Section 9.
9.3 Excess Shares.
(a) If, notwithstanding the other provisions contained in this Section
9, at any time from the Restriction Commencement Date until the Restriction
Termination Date, there is a purported Transfer or other change in the capital
structure of the Trust such that any Person would Beneficially Own Shares in
excess of the applicable Ownership Limit or Existing Holder Limit (as
applicable), then, except as otherwise provided in Sections 9.9 and 9.12, and
subject to paragraph (f) of Section 9.2, the Shares Beneficially Owned in excess
of such Ownership Limit or Existing Holder Limit (rounded up to the nearest
whole Share) shall constitute "Excess Shares" and be treated as provided in this
Section 9. Such designation and treatment shall be effective as of the close of
business on the business day prior to the date of the purported Transfer or
change in capital structure.
(b) If, notwithstanding the other provisions contained in this Section
9, at any time after the Restriction Commencement Date until the Restriction
Termination Date, there is a purported Transfer or other change in the capital
structure of the Trust which, if effective, would cause the Trust to become
"closely held" within the meaning of Section 856(h) of the Code, then the Shares
being Transferred which would cause the Trust to be "closely held" within the
meaning of Section 856(h) of the Code (rounded up to the nearest whole Share)
shall constitute "Excess Shares" and be treated as provided in this Section 9.
Such designation and treatment shall be effective as of the close of business on
the business day prior to the date of the purported Transfer or change in
capital structure.
9.4 Prevention of Transfer. If the Board of Trustees or its designee
shall at any time determine in good faith that a Transfer has taken place in
violation of Section 9.2 or that a Person intends to acquire or has attempted to
acquire beneficial ownership (determined without reference to any rules of
attribution) or Beneficial Ownership of any Shares in violation of Section 9.2,
the Board of Trustees or its designee shall take such action as it deems
advisable to refuse to give effect to or to prevent such transfer, including,
but not limited to, refusing to give effect to such Transfer on the books of the
Trust or instituting proceedings to enjoin such Transfer; provided, however,
that any Transfers or attempted Transfers in violation of paragraph (b), (c),
(d) or (e) of Section 9.2 shall automatically result in the designation and
treatment described in Section 9.3, irrespective of any action (or non-action)
by the Board of Trustees.
- 13 -
<PAGE>
9.5 Notice to Trust. Any Person who acquires or attempts to acquire Shares
in violation of Section 9.2, or any Person who is a transferee such that Excess
Shares result under Section 9.3, shall immediately give written notice or, in
the event of a proposed or attempted Transfer, shall give at least 15 days prior
written notice to the Trust of such event and shall provide to the Trust such
other information as the Trust may request in order to determine the effect, if
any, of such Transfer or attempted Transfer on the Trust's status as a REIT.
9.6 Information for Trust. From the Restriction Commencement Date and until
the Restriction Termination Date:
(a) every Beneficial Owner of more than 5% (or such other percentage,
between 1/2 of 1% and 5%, as provided under the REIT Provisions of the Code) of
the number or value of outstanding Shares of the Trust shall upon the Trust's
written request, within 30 days after January 1 of each year, give written
notice to the Trust stating the name and address of such Beneficial Owner, the
number of Shares Beneficially Owned, and a description of how such Shares are
held. Each such Beneficial Owner shall provide to the Trust such additional
information as the Trust may reasonably request in order to determine the
effect, if any, of such Beneficial Ownership on the Trust's status as a REIT.
(b) each Person who is a Beneficial Owner of Shares and each Person
(including the shareholder of record) who is holding Shares for a Beneficial
Owner shall provide to the Trust in writing such information with respect to
direct, indirect and constructive ownership of Shares as the Board of Trustees
deems reasonably necessary to comply with the provisions of the Code applicable
to a REIT, to determine the Trust's status as a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
9.7 Other Action by Board of Trustees. Subject to paragraph (f) of Section
9.2, nothing contained in this Section 9 shall limit the authority of the Board
of Trustees to take such other action as it deems necessary or advisable to
protect the Trust and the interests of its shareholders by preservation of the
Trust's status as a REIT; provided, however, that no provision of this Section
9.8 shall preclude the settlement of any transaction entered into through the
facilities of the American Stock Exchange.
9.8 Ambiguities. In the case of an ambiguity in the application of any of
the provisions of this Section 9, including any definition contained in Section
9.1, the Board of Trustees shall have the power to determine in good faith the
application of the provisions of this Section 9 with respect to any situation
based on the facts known to it and the Board of Trustees' determination shall be
conclusive for all purposes of this Declaration.
- 14 -
<PAGE>
9.9 Modification of Existing Holder Limits. The Existing Holder Limits may
be modified as follows:
(a) Subject to the limitations provided in Section 9.11, the Board of
Trustees may grant options which result in Beneficial Ownership of Shares by an
Existing Holder pursuant to an option plan approved by the Board of Trustees
and/or the shareholders. Any such grant shall increase the Existing Holder Limit
for the affected Existing Holder to the maximum extent possible under Section
9.11 to permit the Beneficial Ownership of the Shares issuable upon the exercise
of such option.
(b) Subject to the limitations provided in Section 9.11, an Existing
Holder may elect to participate in a dividend reinvestment plan approved by the
Board of Trustees which results in Beneficial Ownership of Shares by such
participating Existing Holder. Any such participation shall increase the
Existing Holder Limit for the affected Existing Holder to the maximum extent
possible under Section 9.11 to permit Beneficial Ownership of the Shares
acquired as a result of such participation.
(c) The Board of Trustees shall reduce the Existing Holder Limit for
any Existing Holder after any Transfer permitted in this Section 9 by such
Existing Holder by the percentage of the outstanding Shares so Transferred or
after the lapse (without exercise) of an option described in paragraph (a) of
thiIs Section 9.9 by the percentage of the Shares that the option, if exercised,
would have represented, but in either case no Existing Holder Limit shall be
reduced to a percentage which is less than the Ownership Limit.
9.10 Increase or Decrease in Ownership Limit. Subject to the limitations
provided in Section 9.11 and Article 5.1 of the Declaration of Trust, the Board
of Trustees may from time to time increase or decrease the Ownership Limit;
provided, however, that any decrease may only be made prospectively as to
subsequent holders (other than a decrease as a result of a retroactive change in
existing law that would require a decrease to retain REIT status, in which case
such decrease shall be effective immediately).
9.11 Limitations on Changes in Existing Holder and Ownership Limits.
(a) Neither the Ownership Limit nor any Existing Holder Limit may be
increased (nor may any additional Existing Holder Limit be created) if, after
giving effect to such increase (or creation), five Beneficial Owners of Shares
(including all of the then Existing Holders) could Beneficially Own, in the
aggregate, more than 49.9% in number or value of the outstanding Shares.
(b) Prior to the modification of any Existing Holder Limit or Ownership
Limit pursuant to Section 9.9 or 9.10, the Board of Trustees may require such
opinions of counsel, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure the Trust's status as a
REIT.
(c) No Existing Holder Limit shall be reduced to a percentage which is
less than the Ownership Limit.
- 15 -
<PAGE>
9.12 Waivers by Board of Trustees.
(a) The Board of Trustees, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence satisfactory to the
Board of Trustees and upon at least 15 days written notice from a transferee
prior to the proposed Transfer which, if consummated, would result in the
intended transferee owning Shares in excess of the Ownership Limit or the
Existing Holder Limit, as the case may be, and upon such other conditions as the
Board of Trustees may direct, may waive the Ownership Limit or the Existing
Holder Limit, as the case may be, with respect to such transferee.
(b) In addition to waivers permitted under paragraph (a) above, the
Board of Trustees shall waive the Ownership Limit with respect to a Person if:
(i) such Person submits to the Board of Trustees information satisfactory to the
Board of Trustees, in its reasonable discretion, demonstrating that such Person
is not an individual for purposes of Section 542(a)(2) of the Code (determined
taking into account Section 856(h)(3)(A) of the Code); (ii) such Person submits
to the Board of Trustees information satisfactory to the Board of Trustees, in
its reasonable discretion, demonstrating that no Person who is an individual for
purposes of Section 542(a)(2) of the Code (determined taking into account
Section 856(h)(3)(A) of the Code) would be considered to Beneficially Own Shares
in excess of the Ownership Limit by reason of the ownership of Shares in excess
of the Ownership Limit by the Person receiving the waiver granted under this
paragraph (b); (iii) such Person submits to the Board of Trustees information
satisfactory to the Board of Trustees, in its reasonable discretion,
demonstrating that the ownership of Shares in excess of the Ownership Limit by
the Person receiving the waiver granted under this paragraph (b) will not result
in the Trust failing to qualify as a REIT; and (iv) such Person provides to the
Board of Trustees such representations and undertakings, if any, as the Board of
Trustees may, in its reasonable discretion, require to ensure that the
conditions in clauses (i), (ii) and (iii) above are satisfied and will continue
to be satisfied throughout the period during which such Person owns Shares in
excess of the Ownership Limit pursuant to any waiver granted under this
paragraph (b), and such Person agrees that any violation of such representations
and undertakings or any attempted violation thereof will result in the
application of the remedies set forth in Section 9.3 with respect to Shares held
in excess of the Ownership Limit by such Person (determined without regard to
the waiver granted such Person under this paragraph (b)).
9.13 Legend. Each certificate for Shares shall bear substantially the
following legend:
The securities represented by this certificate are subject to
restrictions on transfer for the purpose of the Trust's maintenance of
its status as a REIT under the Internal Revenue Code of 1986, as
amended. Except as otherwise provided pursuant to the Declaration of
Trust of the Trust, no Person may Beneficially Own Shares in excess of
9.8% (or such greater percentage as may be determined by the Board of
Trustees of the Trust) of the number or value of the outstanding Shares
of the Trust (unless such Person is an Existing Holder). Any Person who
attempts or proposes to Beneficially Own Shares in excess of the above
limitations must notify the Trust in writing at least 15 days prior to
such proposed or attempted Transfer. All capitalized terms in this
legend have the meanings defined in the Declaration of Trust of the
Trust, a copy of which, including the restrictions on transfer, will be
sent without charge to each shareholder who so requests. If the
restrictions on transfer are violated, the securities represented
hereby shall be designated and treated as Excess Shares which shall be
held in trust by the Excess Share Trustee for the benefit of the
Charitable Beneficiary.
- 16 -
<PAGE>
9.14 Severability. If any provision of this Section 9 or any application
of any such provision is determined to be void, invalid or unenforceable by any
court having jurisdiction over the issue, the validity and enforceability of the
remaining provisions shall be affected only to the extent necessary to comply
with the determination of such court.
9.15 Trust for Excess Shares. Upon any purported Transfer that results
in Excess Shares pursuant to Section 9.3, such Excess Shares shall be deemed to
have been transferred to the Excess Share Trustee, as trustee of the Excess
Share Trust for the exclusive benefit of the Charitable Beneficiary. Excess
Shares so held in trust shall be issued and outstanding Shares of the Trust. The
Purported Beneficial Transferee shall have no rights in such Excess Shares
except as provided in Section 9.18.
9.16 Distributions on Excess Shares. Any distributions (whether as
dividends, distributions upon liquidation, dissolution or winding up or
otherwise) on Excess Shares shall be paid to the Excess Share Trust for the
benefit of the Charitable Beneficiary. Upon liquidation, dissolution or winding
up, the Purported Record Transferee shall receive the lesser of (a) the amount
of any distribution made upon liquidation, dissolution or winding up or (b) the
price paid by the Purported Record Transferee for the Shares, or if the
Purported Record Transferee did not give value for the Shares, the Market Price
of the Shares on the day of the event causing the Shares to be held in trust.
Any such dividend paid or distribution paid to the Purported Record Transferee
in excess of the amount provided in the preceding sentence prior to the
discovery by the Trust that the Shares with respect to which the dividend or
distribution was made had been exchanged for Excess Shares shall be repaid to
the Excess Share Trust for the benefit of the Charitable Beneficiary.
9.17 Voting of Excess Shares. The Excess Share Trustee shall be entitled
to vote the Excess Shares for the benefit of the Charitable Beneficiary on any
matter. Any vote taken by a Purported Record Transferee prior to the discovery
by the Trust that the Excess Shares were held in trust shall be rescinded ab
initio. The owner of the Excess Shares shall be deemed to have given an
irrevocable proxy to the Excess Share Trustee to vote the Excess Shares for the
benefit of the Charitable Beneficiary.
- 17 -
<PAGE>
9.18 Non-Transferability of Excess Shares. Excess Shares shall be
transferable only as provided in this Section 9.18. At the direction of the
Trust, the Excess Share Trustee shall transfer the Shares held in the Excess
Share Trust to a person whose ownership of the Shares will not violate the
Ownership Limit or Existing Holder Limit. Such transfer shall be made within 60
days after the latest of (x) the date of the Transfer which resulted in such
Excess Shares and (y) the date the Board of Trustees determines in good faith
that a Transfer resulting in Excess Shares has occurred, if the Trust does not
receive a notice of such Transfer pursuant to Section 9.5. If such a transfer is
made, the interest of the Charitable Beneficiary shall terminate and proceeds of
the sale shall be payable to the Purported Record Transferee and to the
Charitable Beneficiary. The Purported Record Transferee shall receive the lesser
of (a) the price paid by the Purported Record Transferee for the Shares or, if
the Purported Record Transferee did not give value for the Shares, the Market
Price of the Shares on the day of the event causing the Shares to be held in
trust, and (b) the price received by the Excess Share Trust from the sale or
other disposition of the Shares. Any proceeds in excess of the amount payable to
the Purported Record Transferee shall be paid to the Charitable Beneficiary.
Prior to any transfer of any Excess Shares by the Excess Share Trustee, the
Trust must have waived in writing its purchase rights under Section 9.19. It is
expressly understood that the Purported Record Transferee may enforce the
provisions of this Section 9.18 against the Charitable Beneficiary.
If any of the foregoing restrictions on transfer of Excess Shares is
determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Trust, to have acted as an agent of the Trust in acquiring such Excess
Shares and to hold such Excess Shares on behalf of the Trust.
9.19 Call by Trust on Excess Shares. Excess Shares shall be deemed to have
been offered for sale to the Trust, or its designee, at a price per Share equal
to the lesser of (a) the price per Share in the transaction that created such
Excess Shares (or, in the case of a devise, gift or other transaction in which
no value was given for such Excess Shares, the Market Price at the time of such
devise, gift or other transaction) and (b) the Market Price to which such Excess
Shares relates on the date the Trust, or its designee, accepts such offer (the
"Redemption Price"). The Trust shall have the right to accept such offer for a
period of 90 days after the later of (x) the date of the Transfer which resulted
in such Excess Shares and (y) the date the Board of Trustees determines in good
faith that a Transfer resulting in Excess Shares has occurred, if the Trust does
not receive a notice of such Transfer pursuant to Section 9.5 but in no event
later than a permitted Transfer pursuant to and in compliance with the terms of
Section 9.18. Unless the Board of Trustees determines that it is in the
interests of the Trust to make earlier payments of all of the amount determined
as the Redemption Price per Share in accordance with the preceding sentence, the
Redemption Price may be payable at the option of the Board of Trustees at any
time up to but not later than
- 18 -
<PAGE>
one year after the date the Trust accepts the offer to purchase the Excess
Shares. In no event shall the Trust have an obligation to pay interest to the
Purported Record Transferee.
9.20 Underwritten Offerings. The Ownership Limit shall not apply to the
acquisition of Shares or rights, options or warrants for, or securities
convertible into, Shares by an underwriter in a public offering, provided that
the underwriter makes a timely distribution of such Shares or rights, options or
warrants for, or securities convertible into, Shares.
10. The Trust. Each of the parties hereto acknowledges and agrees that the
name Starwood Financial Trust is a designation of the Trust and its Trustees (as
Trustees but not personally) under the Trust's Declaration of Trust, and all
persons dealing with the Trust shall look solely to the Trust's assets for the
enforcement of any claims against the Trust, and the Trustees, officers, agents
and security holders of the Trust assume no personal liability for obligations
entered into on behalf of the Trust, and their respective individual assets
shall not be subject to the claims of any person relating to such obligations.
SECOND: The Series A Preferred Shares have been classified and
designated by the Board of Trustees under the authority contained in the
Declaration.
THIRD: These Articles Supplementary have been approved by the Board of
Trustees in the manner and by the vote required by law.
FOURTH: Each of the undersigned acknowledges these Articles
Supplementary to be the trust act of the Company and, as to all matters or facts
required to be verified under oath, the undersigned acknowledges that to the
best of his or her knowledge, information and belief, these matters and facts
are true in all material respects and that this statement is made under the
penalties for perjury.
- 19 -
<PAGE>
IN WITNESS WHEREOF, this Articles Supplementary is executed on behalf
of this TrustI by its Chief Executive Officer and President and attested by its
Secretary this 9th day of December 1998.
By: /s/ Jay Sugarman
-------------------------------------
Jay Sugarman
Chief Executive Officer and President
Attest:
By: /s/ Spencer Haber
-----------------------
Spencer Haber
Secretary
- 20 -
STARWOOD FINANCIAL TRUST
------------------------
ARTICLES OF AMENDMENT OF DECLARATION OF TRUST
THIS IS TO CERTIFY THAT:
FIRST: The Amended and Restated Declaration of Trust, as amended (the
"Declaration of Trust"), of Starwood Financial Trust, a Maryland real estate
investment trust (the "Trust"), is hereby amended by deleting Article VI,
Section 6.1 of the Declaration of Trust in its entirety and replacing it with
the following:
SECTION 6.1 Shares. The total number of shares of beneficial interest
which the Trust ("Shares") is authorized to issue is 109,400,000
shares, of which 70,000,000 shall be designated Class A Shares of
beneficial interest, par value $1.00 per share ("Class A Shares"),
35,000,000 shall be designated Class B Shares of beneficial interest,
par value $.01 per share ("Class B Shares"), and 4,400,000 shall be
designated as preferred shares of beneficial interest, $.01 par value
per share ("Preferred Shares").
The certificates evidencing the Shares shall be in such form
and signed (manually or by facsimile) on behalf of the Trust in such
manner as the Trustees may from time to time prescribe or as may be
prescribed in the Bylaws in accordance with the laws of the State of
Maryland. The certificates shall be negotiable and title thereto and to
the Shares represented thereby shall be transferred by assignment and
delivery thereof to the same extent and in all respects as a share
certificate of a Maryland corporation. As set forth in Section 3.2(d),
the Trustees may amend the Declaration, without Shareholder consent, to
increase or decrease the aggregate number of Shares or number of Shares
of any class or series that the Trust has authority to issue. The
Shares may be issued for such consideration as the Trustees shall
determine or without consideration by way of share dividend or share
split in the discretion of the Trustees. Shares reacquired by the Trust
shall no longer be deemed outstanding and shall have no voting or other
rights unless and until reissued. Shares acquired by the Trust may be
canceled and restored to the status of authorized and unissued Shares
by action of the Trustees. All Shares shall be fully paid and
non-assessable by or on behalf of the Trust upon receipt of the full
consideration for which they have been issued or without additional
consideration if issued by way of share dividend or share split. The
Shares shall not entitle the holder to any preference, pre-emptive,
appraisal, conversion, or exchange rights of any kind, except as
provided in Section 6.14.
<PAGE>
The Trustees are hereby required to issue for par value a
sufficient number of Class B Shares such that the total number of
outstanding Class B Shares shall at all times equal 50% of the total
number of outstanding Class A Shares to all holders of Class B Shares
on a pro rata basis based on the number of Class B Shares held by such
holder on the date of issuance of the Class A Shares requiring the
issuance of the Class B Shares to the extent that (a) additional Class
A Shares are issued by the Trust (provided that if and to the extent
such issuance is subject to the approval of the American Stock
Exchange, Inc. or such other exchange or market on which the Class A
Shares or other securities of the Trust are traded, then such approval
shall be obtained), and (b) the Class A Shares are subject to any stock
dividend, stock split, or other recapitalization affecting the number
of Class A Shares outstanding. The additional Class B Shares shall be
issued within 60 days of the issuance of the Class A Shares and the
purchase price may be paid in cash or by delivery of a promissory note.
To the extent that the Class B Shareholders convert their Class B
Shares into Class A Shares as provided in Section 6.14, the percentage
of outstanding Class B Shares required to be maintained by this Section
6.1 shall be reduced by multiplying such 50% by a fraction, the
numerator of which is the aggregate number of Class B Shares
outstanding as of the date of determination and the denominator of
which is one-half of the total number of Class A Shares issued and
outstanding on such date.
SECOND: The foregoing amendment has been approved by the Board of
Trustees of the Trust as required by Section 8-203(a)(7) of the Corporations and
Associations Article of the Annotated Code of Maryland and Article X, Section
10.2 of the Declaration of Trust.
THIRD: The total number of shares of beneficial interest which the
Trust had authority to issue immediately prior to this amendment was 90,000,000,
consisting of 60,000,000 Class A Shares of beneficial interest, par value $1.00
per share, and 30,000,000 Class B Shares of beneficial interest, par value $.01
per share. The aggregate par value of all authorized shares of beneficial
interest having par value was $60,300,000.
FOURTH: The number of shares of beneficial interest which the Trust has
authority to issue pursuant to the foregoing amendment is 109,400,000,
consisting of 70,000,000 Class A shares of beneficial interest, par value $1.00
per share, 35,000,000 Class B Shares of beneficial interest, par value $.01 per
share and 4,400,000 preferred shares of beneficial interest, $.01 par value per
share. The aggregate par value of all authorized shares of beneficial interest
having par value is $70,394,000.
FIFTH: The undersigned Chief Executive Officer and President
acknowledges this amendment to be the trust act of the Trust and, as to all
matters or facts required to be verified under oath, the undersigned Chief
Executive Officer and President acknowledges that, to the best of his knowledge,
information and belief, these matters and facts are true in all material
respects and that this Statement is made under the penalties for perjury.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this amendment to be signed in
its name and on its behalf by its Chief Executive Officer and President and
attested to by its Secretary on this 9th day of December, 1998.
ATTEST: STARWOOD FINANCIAL TRUST
/s/ Spencer Haber /s/ Jay Sugarman
- ------------------------- ----------------------------
Spencer Haber Jay Sugarman
Secretary Chief Executive Officer and
President
- 3 -
INVESTOR RIGHTS AGREEMENT
among
STARWOOD FINANCIAL TRUST,
STARWOOD MEZZANINE INVESTORS, L.P.,
SOFI-IV SMT HOLDINGS, L.L.C.,
B HOLDINGS, L.L.C.,
LAZARD FRERES REAL ESTATE FUND II L.P.,
LAZARD FRERES REAL ESTATE OFFSHORE FUND II L.P.
and
LF MORTGAGE REIT
December 15, 1998
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions and Usage...........................................1
Section 2. Covenants of the Company........................................6
Section 3. Registration...................................................10
Section 4. Piggyback Registration.........................................13
Section 5. Registration Procedures and Termination........................14
Section 6. Holder's Obligations...........................................17
Section 7. Expenses of Registration.......................................18
Section 8. Indemnification; Contribution..................................18
Section 9. Holdback.......................................................22
Section 10. Election of Trustees...........................................22
Section 11. Transfers......................................................24
Section 12. Amendment, Modification and Waivers; Further Assurances........29
Section 13. Assignment; Benefit............................................29
Section 14. Miscellaneous..................................................30
Section 15. Representative.................................................31
-i-
<PAGE>
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered
into this 15th day of December, 1998, among Starwood Financial Trust, a Maryland
real estate investment trust (the "Company"), Starwood Mezzanine Investors,
L.P., a Delaware limited partnership ("Starwood Mezzanine"), SOFI-IV SMT
Holdings, L.L.C., a Delaware limited liability company ("SOFI IV"), B Holdings,
L.L.C., a Delaware limited liability company ("BLLC", and together with Starwood
Mezzanine and SOFI IV, "Starwood"), and Lazard Freres Real Estate Fund II L.P.,
a Delaware limited partnership (the "Onshore Fund"), Lazard Freres Real Estate
Offshore Fund II L.P., a Delaware limited partnership ("Offshore Fund"), and LF
Mortgage REIT, a Maryland real estate investment trust ("Private REIT" and
collectively with Onshore Fund and Offshore Fund, the "Investors"). Each of the
Investors is referred to herein as an "Investor". Unless otherwise indicated,
capitalized terms used herein are used herein as defined in Section 1.1.
RECITALS
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of the
date hereof, among the Company and the Investors (the "Purchase Agreement"), the
Investors are purchasing an aggregate of 4,400,000 Series A Preferred Shares of
beneficial interest, $.01 par value per share, of the Company (the "Preferred
Shares") and warrants ("Warrants"), to purchase 6,000,000 Class A Shares of
beneficial interest, $1.00 par value per share, of the Company ("Class A
Shares"); and
WHEREAS, the parties hereto desire to set forth the rights and the
obligations of the parties hereto with respect to the Preferred Shares, the
Warrants and the Class A Shares issuable upon exercise of the Warrants;
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions and Usage.
1.1. Definitions. As used in this Agreement:
"Advisor" means Starwood Financial Advisors, L.L.C. and its successors
and assigns.
"Affiliate" of any Person means a Person which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, such Person.
<PAGE>
"Beneficially Owning" and "Beneficially Own" shall mean owning Class A
Shares, Warrants and/or Preferred Shares directly, indirectly or constructively
by a Person through the application of Section 318(a) of the Code, as modified
by Section 856(d)(5) of the Code, or Section 544 of the Code, as modified by
Section 856(h) of the Code.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which all U.S. securities exchanges or any recognized trading market on
which any securities of the Company are listed or included for quotation, are
authorized or required to close.
"Class A Shares" shall have the meaning set forth in the Recitals.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Holder" shall mean (i) each Lazard Holder, (ii) any Person as
long as such Person together with its Affiliates owns Registrable Common
Securities equal to (or exercisable, convertible or exchangeable for) 50% of the
aggregate number of Class A Shares underlying Warrants issued pursuant to the
Purchase Agreement and (iii) any Person that acquired Registrable Common
Securities from a member of the Investor Group pursuant to the exercise of
foreclosure remedies under a financing arrangement or any subsequent Transferee
of such Person and, in each case, such Person agrees in writing to be bound by
the provisions of this Agreement.
"Competitor" shall mean any Person the primary business of which is to
acquire or originate debt or debt-like interests in real estate and/or real
estate related assets; provided, however, that in determining if any Person is a
Competitor, (i) any co-investment made by such Person with the Company or any
Affiliate of the Company and (ii) in the case of any member of the Investor
Group only, any debt or interest owned by such Person on the date of
determination shall be disregarded.
"control" of a Person shall mean the power, direct or indirect, (i) to
vote or direct the voting of more than 50% of the outstanding shares of voting
stock or voting units of such Person, or (ii) to direct or cause the direction
of the management and policies of such Person, whether by contract or otherwise
(and correlative words shall have correlative meanings).
"Control Principal Group" means Arthur P. Solomon and any three of
Robert P. Freeman, Anthony E. Meyer, Murry N. Gunty, Klaus P. Kretschmann, John
A. Moore, Douglas T. Healy and Marjorie L. Reifenberg.
-2-
<PAGE>
"Designated Affiliates" means Lazard Freres Real Estate Investors
L.L.C. ("LFREI"), LF Real Estate Investors Company ("LFREIC") and any Person
controlled by LFREI, LFREIC or the Control Principal Group the primary business
of which is to acquire, own or originate debt or debt-like interests in real
estate and/or real estate related assets or securities of the Company but only
if one or more Persons that are Existing Holders, directly or indirectly, own at
least 95% of the economic interest in such Person.
"Disposing Shareholder" is defined in Section 11.4(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Existing Holder" shall mean, as of any date of determination, (i) each
direct or indirect partner, member or shareholder of an Investor on the date of
this Agreement ("Current Holders") and (ii) Persons to whom any Current Holder
that is either a shareholder that does not have a controlling interest in, a
limited partner of or a non- managing member of any member of the Investor Group
has transferred its ownership interest in an Investor or Designated Affiliate
and all subsequent transferees of such ownership interests prior to the date of
determination.
"Fair Market Value" as of any date on which the same is being
calculated shall mean the average closing price of the Class A Shares on the
American Stock Exchange or the exchange or national quotation system on which
the Class A Shares are primarily traded for the twenty (20) Business Days
preceding the calculation date.
"Holder" shall mean (i) any Preferred Holder and (ii) any Common
Holder.
"Investor Group" shall mean each Investor and any Designated Affiliate,
but only if such Person agrees in writing to become bound by the terms of this
Agreement and "member of the Investor Group" means any such Person.
"Lazard Affiliate" means Lazard Freres Real Estate Investors L.L.C.
("LFREI"), LF Real Estate Investors Company ("LFREIC") and any Person controlled
by LFREI, LFREIC or a Designated Affiliate, the primary business of which is to
acquire, own or originate debt or debt-like interests in real estate and/or real
estate related assets or securities of the Company.
"Lazard Holders" means each Investor, any Designated Affiliate and each
Existing Holder, but only if such Person has agreed in writing to be bound by
the terms of this Agreement.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Piggyback Registration" shall have the meaning set forth in Section
4.1(b).
-3-
<PAGE>
"Preferred Holder" shall mean (i) each Lazard Holder, (ii) any Person
as long as such Person together with its Affiliates owns Registrable Preferred
Securities equal to 50% of the aggregate number of Preferred Shares issued
pursuant to the Purchase Agreement and (iii) any Person that acquired
Registrable Preferred Securities from a member of the Investor Group pursuant to
the exercise of foreclosure remedies under a financing arrangement or any
subsequent Transferee of such Person and, in each case, such Person agrees in
writing to be bound by the provisions of this Agreement.
"Preferred Shares" is defined in the Recitals.
"Purchase Agreement" shall have the meaning set forth in the Recitals.
"Purchase Offer" is defined in Section 11.4(b).
"Register", "registered", and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering by the Commission of effectiveness of such registration statement or
document.
"Registrable Common Securities" shall mean: (i) the Warrants issued to
an Investor pursuant to the Purchase Agreement; (ii) the Class A Shares issuable
to a Common Holder upon exercise of the Warrants issued to an Investor pursuant
to the Purchase Agreement; (iii) any Class A Shares, Warrants or other
securities issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange by the Company for, or in
replacement by the Company of, such Class A Shares or Warrants; and (iv) any
securities issued in exchange for such Class A Shares, Warrants or other
securities that are Registrable Common Securities in any merger, reorganization,
recapitalization or combination of the Company; provided, however, that
Registrable Common Securities shall not include any securities which have
theretofore been Transferred in an offering registered under the Securities Act
or which have been Transferred pursuant to Rule 144 or any similar rule
promulgated by the Commission pursuant to the Securities Act.
"Registrable Preferred Securities" shall mean: (i) the Preferred Shares
issued to an Investor pursuant to the Purchase Agreement; (ii) any Preferred
Shares or other securities issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange by the Company for, or in
replacement by the Company of, such Preferred Shares; and (iii) any securities
issued in exchange for such Preferred Shares or other securities that are
Registrable Preferred Securities in any merger, reorganization, recapitalization
or combination of the Company; provided, however, that Registrable Preferred
Securities shall not include any securities which have theretofore been
Transferred in an offering registered under the Securities Act or which have
been Transferred pursuant to Rule 144 or any similar rule promulgated by the
Commission pursuant to the Securities Act.
-4-
<PAGE>
"Registrable Securities" shall mean the Registrable Preferred
Securities and the Registrable Common Securities.
"Registration Expenses" shall have the meaning set forth in Section 7.
"REIT" means a real estate investment trust.
"REIT Requirements" shall mean the requirements for the Company to
qualify as a REIT under the Code.
"Representative" means a Person designated by the Lazard Holders from
time to time to receive notices, grant approvals, waivers and consents and
otherwise act on behalf of the Lazard Holders pursuant to this Agreement as set
forth in Section 15.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, all as the same may be
in effect at the time.
"Selling Holder" shall mean, with respect to a specified registration
pursuant to this Agreement, a Holder if its Registrable Securities are included
in such registration.
"Shelf Registration" shall have the meaning set forth in Section 3.1.
"Starwood Holder" means SOFI-IV or Starwood Mezzanine or the direct or
indirect managing members and general partners of each.
"Transfer" shall mean and include the act of selling, giving,
transferring, creating a trust (voting or otherwise), assigning or otherwise
disposing of (and correlative words shall have correlative meanings).
"Underwriters' Representative" shall mean the managing underwriter, or,
in the case of a co-managed underwriting, the managing underwriter designated as
the Underwriters' Representative by the co-managers.
"Violation" shall have the meaning set forth in Section 8.1.
1.2. Usage.
(i) References to Registrable Securities "owned" by the Holder shall
include Registrable Securities beneficially owned by such Person but which are
held of record in the name of a nominee, trustee, custodian, or other agent.
-5-
<PAGE>
(ii) Unless this Agreement specifically provides otherwise, references
to a document are to it as amended, waived and otherwise modified from time to
time in accordance with the terms thereof and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to time
(and references to any provision thereof shall include references to any
successor provision).
(iii) References to Sections are to sections hereof, unless the context
otherwise requires.
(iv) The definitions set forth herein are equally applicable both to
the singular and plural forms and the feminine, masculine and neuter forms of
the terms defined.
(v) The term "including" and correlative terms shall be deemed to be
followed by "without limitation" whether or not followed by such words or words
of like import.
(vi) The term "hereof" and similar terms refer to this Agreement as a
whole.
(vii) The "date of" any notice or request given pursuant to this
Agreement shall be determined in accordance with Section 14.2.
(viii) References to "Preferred Shares issued pursuant to the Purchase
Agreement" shall be determined based on the number of Preferred Shares issued
pursuant to the Purchase Agreement as adjusted for stock splits,
recapitalizations and similar transactions.
Section 2. Covenants of the Company.
2.1. As long as the Lazard Holders own, in the aggregate, at least 50%
of the Preferred Shares issued pursuant to the Purchase Agreement:
(a) Filings. Within five business days after the Company files
with the Commission copies of its annual reports, quarterly reports,
other current reports and proxy statements pursuant to the Exchange
Act, the Company will furnish a copy of the same to the Representative.
(b) Affiliate Transactions. The Company agrees that until the
date that a majority of members of the Board of Trustees are
Independent Trustees (the "Restricted Period"), it will obtain the
written consent of the Representative which consent will not be
unreasonably withheld and which consent or denial of consent will not
be unreasonably delayed, prior to entering into any Interested
Transaction unless any such Interested Transaction has been approved by
a majority of the Independent Trustees of the Company. In addition, as
to all contracts or other transactions between the Company and any
Trustee or any Affiliate of a Trustee, such interested Trustee shall
recuse himself from any vote by the Board of Trustees on such agreement
or transaction; provided that the presence of such interested Trustee
shall count for the determination of the presence of a quorum at any
meeting. For purposes of this Section 2.1(b) only the following terms
shall be defined as set forth below:
-6-
<PAGE>
"Independent Trustees" shall mean a Trustee who qualifies as a
"Non- Employee Director" of the Company within the meaning of Rule
16b-3(b)(3) of the Exchange Act and who is not (i) a Person directly or
indirectly owning, controlling or holding 3% or more of the outstanding
economic or voting interest of the Advisor or SCG, (ii) a Person
directly or indirectly owning, controlling or holding 10% or more of
the economic interest of any borrower under any loan made by the
Company with an outstanding principal balance in excess of $3 million
(a "Borrower") or any Person that provides mortgage servicing, or real
estate or financial advisory or consulting services to the Company and
that received fees from the Company for such services in excess of
$100,000 for the prior fiscal year or is expected to receive in excess
of $100,000 per annum during the current fiscal year (a "Service
Provider") or an Affiliate of such Borrower or Service Provider, (iii)
an officer, director, employee, member or partner of the Advisor or
SCG, (iv) a spouse, sibling, lineal descendent, parent, grandparent,
sibling of parents or first cousin, including adoptive relationships
and with respect to siblings and parents, in-laws (a "Relative") of any
Person described in clause (i), or (v) a Relative of a Borrower or any
Person described in clause (iii) residing in the same household as such
Person.
"Interested Transactions" means to:
(i) merge, consolidate with, or otherwise acquire all
or any portion of the business, assets or securities of any
Affiliate of SAHI or SCG or sell, transfer or assign any
portion of the Company's business, assets or securities to any
Affiliate of SAHI or SCG;
(ii) make any loans or other advances of money to, or
guarantee with or for the benefit of, any Affiliate of SAHI or
SCG or any officer, director, partner, trustee or shareholder
(both direct and indirect) of any Affiliate of SAHI or SCG;
(iii) sell, lease, transfer or otherwise dispose of
any property or assets from, entertain or maintain any
contract, agreement or understanding with, or otherwise enter
into, or be a party to, any transaction with, any Affiliate of
SAHI or SCG or any officer, director, partner, trustee or
shareholder (both direct and indirect) of any Affiliate of
SAHI or SCG;
(iv) take any actions which would result in one or
more publicly-traded classes of the Company's equity
securities no longer having the attributes of public
ownership; or
(v) take any actions beneficial to any Affiliate of
SAHI or SCG which would be detrimental to a material number of
public shareholders of the Company;
-7-
<PAGE>
provided, however, the actions described in (i), (ii) and (iii) above,
shall not constitute an Interested Transaction if (1) the action taken
has been determined by the Independent Trustees to be pursuant to the
reasonable requirements of the Company's business and upon fair and
reasonable terms which are no less favorable to the Company than would
be obtained in a comparable arm's length transaction with an
independent third-party and (2) the transaction involves less than
$500,000.
"SAHI" means B Holdings, L.L.C., a Connecticut limited
liability company, Starwood Mezzanine Investors, L.P., a Delaware
limited partnership, and SOFI-IV SMT Holdings, L.L.C.
"SCG" means Starwood Capital Group, L.L.C.
2.2. Additional Covenants. As long as the Lazard Holders own, in the
aggregate, at least 25% of the Preferred Shares issued pursuant to the Purchase
Agreement:
(a) REIT Qualification. The Company will use best efforts to
qualify to be taxed as a REIT unless the Representative approves
otherwise, which approval or denial of approval will not be
unreasonably delayed.
(b) Securities Issuances. The Company will obtain the consent
of the Representative before issuing any Debt (as defined below), or
any shares of beneficial interest in the Company ("Shares") that are
pari passu or that have a preference or priority over the Preferred
Shares as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the
Company and any securities convertible or exchangeable into or
exercisable for any such pari passu, preference or priority Shares
(collectively, "Senior and Parity Securities"), if after giving effect
to such issuance (and such conversion, exchange or exercise) the
Company's outstanding Debt to Equity (as defined below) ratio would
exceed 8:1 as of the date of issuance. Within 45 days of the end of
each fiscal quarter, the Company will deliver to the Representative a
certificate signed by the Chief Financial Officer of the Company
stating that as of the end of such fiscal quarter either (i) the Debt
to Equity ratio of the Company is less than or equal to 8:1 or that
(ii) the Debt to Equity ratio of the Company is greater than 8:1.
"Debt" means, without duplication, any consolidated
indebtedness of the Company and its subsidiaries, whether or not
contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the
balance of deferred and unpaid purchase price of any property
(including pursuant to capital leases), if and to the extent such
indebtedness would appear as a liability upon a balance sheet of the
Company prepared on a consolidated basis in accordance with generally
accepted accounting principles, and also includes, to the extent not
otherwise included, (i) the Company's pro rata share (determined as
provided below)
-8-
<PAGE>
of the Debt of any unconsolidated joint ventures in which the Company
has an interest except for Debt of the joint venture owed to the
Company or its subsidiaries, (ii) the liquidation value and any
accumulated and unpaid dividends thereon of the Preferred Shares, (iii)
the liquidation value and any accumulated and unpaid dividends thereon
of any Senior or Parity Securities and (iv) the guarantee of the
principal amount and any accrued interest thereon that has not been
paid on the date due, after the tolling of any applicable grace
periods, of any Debt of any Person which is of the type that would be
included within this definition if such Person were the Company;
provided, however, that Debt will not include any such balance that
constitutes an accrued expense, a trade payable, deferred taxes, a
borrower deposit, any Debt incurred on the Closing Date in connection
with the Asset Purchase Agreement and listed on Schedule II, an escrow
obligation, the portion of any Debt of a Person consolidated with the
Company attributable to any minority interest to the extent not
guaranteed by the Company or its subsidiaries, or Incentive
Arrangements or obligations or payments thereunder. The Company's pro
rata share of the Debt of any unconsolidated joint venture shall be
determined based on the Company's percentage interest (on an economic
basis) in such venture without regard to the nature of such interest.
For example, if the Company has a 1% general partnership interest in an
entity with $100 in Debt, its pro rata share of the Debt of such entity
would be $1. Debt shall not include any non-recourse Debt of
unconsolidated joint ventures if the Company's only interest is as a
limited partner, limited liability company member or holder of a
similar interest that has limited liability or if the partners of such
entity are exculpated from liability for such Debt (other than
customary non-recourse carveouts).
"Equity" shall mean book shareholders' equity determined in
accordance with generally accepted accounting principles excluding any
amount attributable to all outstanding Preferred Shares and Senior or
Parity Securities (i.e., the account balance and any cumulative and
unpaid dividends thereon).
"Incentive Arrangements" means any earn-out agreements, stock
appreciation rights, "phantom" stock plans, employment agreements,
non-competition agreements, subscription and stockholders agreements
and other incentive and bonus plans and similar arrangements made in
connection with acquisitions of businesses by the Company or the
retention of executives, officers or employees by the Company but shall
not include the amount of any deferred purchase price (whether
structured as an earn-out or otherwise) that is determinable at the
date of issuing any Debt or Senior and Parity Securities and the
liability for payment of which is not dependent on the happening of an
event or fulfillment of a condition that has not yet occurred as of
such date of issuance.
-9-
<PAGE>
(c) Declaration of Trust. The Company will obtain the consent
of the Representative prior to amending Section 1.4 of the Company's
Declaration of Trust which consent will not be unreasonably withheld
and which consent or denial of consent will not be unreasonably
delayed.
2.3. Preferred Share Redemption. The Company shall not repurchase and
redeem any Preferred Shares if such repurchase and redemption would cause or
result in the Lazard Holders owning, in the aggregate, less than 25% of the
Preferred Shares issued pursuant to the Purchase Agreement unless all
outstanding Preferred Shares are simultaneously repurchased or redeemed.
2.4. Ownership Limit Waivers by Board of Trustees. The Board of
Trustees of the Company shall waive the Ownership Limit (as defined in Section
11.1(j) of the Declaration of Trust and Section 9.1(j) of the Articles
Supplementary) in accordance with Section 11.12 of the Declaration of Trust and
Section 9.12 of the Articles Supplementary with respect to the acquisition and
ownership of (i) any Class A Shares or Warrants by any member of the Investor
Group that acquires such Class A Shares or Warrants from any member of the
Investor Group or (ii) any Preferred Shares by any Person that acquires
Preferred Shares from any member of the Investor Group or from any Lazard Holder
that received more than 9.8% of the outstanding Preferred Shares as a
distribution from a member of the Investor Group; provided, however, in each
case that such Preferred Shares, Class A Shares or Warrants were originally
acquired by the Investors pursuant to the Purchase Agreement and the waiver
shall only apply to ownership of such Shares or Warrants and not to any other
securities of the Company owned by such Person; provided, further, that the
Board of Trustees shall not be required to waive the Ownership Limit until such
Person has provided a representation letter to the Board of Trustees
substantially in the form of Exhibit A hereto provided, further, that the Board
of Trustees shall not be required to waive the Ownership Limit if such waiver
would result in the Company being "closely held" within the meaning of Section
856(h) of the Code. Any waiver granted pursuant to this Section 2.3 shall
terminate and be of no further force and effect as of the Termination Date (as
defined in Exhibit A). The Company shall have no obligation to grant a waiver
pursuant to this Section 2.4 to (i) any transferee of a member of the Investor
Group if the Investor Group then owns, in the aggregate 9.8% or less of the
Preferred Shares issued pursuant to the Purchase Agreement or (ii) any
transferee of a Lazard Holder (other than a member of the Investor Group) if
such Lazard Holder then individually owns 9.8% or less of the Preferred Shares
issued pursuant to the Purchase Agreement.
Section 3. Registration.
3.1. The Company shall use its best efforts to cause a registration
statement covering resales of the Registrable Common Securities to be declared
effective by the Commission in accordance with the Securities Act for an
offering on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act (the "Shelf Registration") within one year from the date of this
Agreement.
-10-
<PAGE>
3.2. If the Company shall receive from the Representative on behalf of
Preferred Holders owning a majority of the Registrable Preferred Securities on
any one occasion not earlier than seven years after the date of this Agreement,
a written request that the Company effect a shelf registration with respect to
resales of all but not less than all of the Registrable Preferred Securities
held by such Preferred Holders, the Company will use its best efforts to file
such shelf registration and have it declared effective as soon as reasonably
practical (the "Preferred Registration Statement") (including, without
limitation, filing post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws, and appropriate compliance
with the Securities Act) as would permit or facilitate the sale and distribution
of all or such portion of such Registrable Preferred Securities as are specified
in such request. The Company shall only be required to comply with this Section
3.2 on one occasion and to effect one Preferred Registration Statement; provided
that the Company will effect additional registrations if it violates Section 3.5
to the extent required to comply with its obligations under Section 3.5.
3.3. Each Holder will provide at least five (5) Business Days notice of
its intention to effect a resale of any Registrable Securities pursuant to the
Shelf Registration or Preferred Registration Statement to the Company and the
Company's transfer agent. In no event will any Holder be permitted to Transfer
any Registrable Securities in violation of federal and state securities laws,
including pursuant to the Shelf Registration or Preferred Registration Statement
if such registration has been suspended pursuant to Section 3.4 or prior to
delivery by the Company of the requested number of prospectuses. A Holder may
Transfer Registrable Securities at any time including periods during which the
Shelf Registration or Preferred Registration Statement is suspended if such
Transfer is otherwise in compliance with applicable state and federal securities
law. Any notice given pursuant to this Section 3.3 shall be addressed to the
attention of the Secretary of the Company and the Company's transfer agent, and
shall specify the maximum number of Registrable Securities to be sold, the
intended methods of disposition thereof and the number of copies of the
prospectus included in the Shelf Registration or Preferred Registration, as
applicable, as the Holder requests.
3.4. Subject to the provisions of this Section 3.4, the Company shall
be entitled to postpone or suspend the filing, effectiveness, supplementing or
amending of any registration statement otherwise required to be prepared and
filed pursuant to this Section 3, if the Board of Trustees of the Company
reasonably determines that such registration and the Transfer of Registrable
Securities contemplated thereby would materially interfere with, or require
premature disclosure of, any material financing, acquisition, disposition,
reorganization or other transaction involving the Company, including the filing
of a registration statement covering primary sales of securities by the Company,
as to which, in each instance of the Company determining that the registration
and Transfer would require premature disclosure, the Company has a bonafide
business purpose for preserving the confidentiality thereof and the Company
promptly gives the Representative notice of such determination, provided that
the Company shall not suspend or postpone the filing, effectiveness,
supplementing or amending of the shelf registration statement on more than two
occasions during any
-11-
<PAGE>
12-month period or for any period longer than 90 days. The notice by the Company
required by this Section 3.4 will include the Company's estimate of the length
of the suspension or postponement. Upon receipt of such notice, each Holder
agrees to cease making offers or Transfers of Registrable Securities pursuant to
such registration statement during such suspension period. The Company will give
prompt notice to the Representative of the expiration or early termination of
any suspension or postponement pursuant to this Section 3.4. The Representative
and each Holder hereby acknowledges that any notice given by the Company
pursuant to this Section 3.4 may constitute material non-public information and
that the United States securities laws prohibit any Person who has material
non-public information about a company from purchasing or selling securities of
such company or from communicating such information to any other Person under
circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell such securities.
3.5. Subject to Section 3.4, the Company shall use its best efforts to
keep any Shelf Registration filed pursuant to Section 3.1 continuously effective
until the Common Holders no longer hold any Registrable Common Securities and
shall use its best efforts to keep any Preferred Registration Statement filed
pursuant to Section 3.2 continuously effective until the Registrable Preferred
Securities included in such Preferred Registration Statement are no longer owned
by the Preferred Holders or no longer meet the definition of Registrable
Preferred Securities.
3.6. Notwithstanding anything in this Agreement to the contrary but
subject to the Company's obligations to grant waivers pursuant to Section 2.4,
no Transfer of Registrable Securities may be effected if as a result thereof in
the reasonable judgment of the Company, the Company would not satisfy the REIT
Requirements in any respect or if such Transfer would result in any Person who
has not received a waiver pursuant to Section 2.4 Beneficially Owning Class A
Shares, Warrants or Preferred Shares in excess of the ownership limitation
provisions of the REIT Requirements or the Amended and Restated Declaration of
Trust of the Company, as amended from time to time.
3.7. A registration pursuant to this Section 3 shall be on such
appropriate registration form of the Commission as shall be selected by the
Company and shall permit the disposition of the Registrable Securities in
accordance with the intended method or methods of disposition specified in each
notice given pursuant to Sections 3.1 and 3.2.
3.8. The Holders shall have the right to determine if any Registration
pursuant to this Section 3 shall involve an underwritten offering. At the
request of the Selling Holders, on one occasion after the sixth anniversary of
the date of this Agreement the Company shall cooperate on a reasonable basis in
a manner consistent with customary practices for an underwritten resale offering
with the Selling Holders and the Underwriters' Representative for such offering
in the marketing of the Registrable Securities, including making available on a
reasonable basis the officers, accountants, counsel, premises, books and records
of the Company for such purpose, but the Company shall not be required to incur
any material out-of-pocket expense pursuant to this paragraph that would not be
incurred by the Company
-12-
<PAGE>
if the offering were not underwritten, including as a result of drafting or
filing any amendment to any registration statement that is then effective to the
extent that such amendment would set forth information in addition to that which
would typically be required in order to update the information set forth in such
registration statement (other than by incorporation by reference) if the
offering were not underwritten. The Selling Holders shall use best efforts to
time any underwritten offering so as not to materially interfere with the
Company's financing and capital raising efforts or materially disrupt the
Company's business, including delaying such offering if reasonably requested by
the Company as a result of such material interference or disruption. If any
Registration pursuant to Section 3 involves an underwritten offering (whether on
a "firm commitment," "best efforts" or "all reasonable efforts" basis or
otherwise), the Company shall select the underwriter or underwriters and manager
or managers to administer such underwritten offering; provided that each such
Person so selected shall be reasonably acceptable to the Representative. The
Company shall use reasonable efforts to and shall cause its officers,
accountants and counsel to cooperate on a reasonable and customary basis in
connection with any due diligence request made by potential purchasers in block
trades by the Investors.
Section 4. Piggyback Registration.
4.1. (a) At anytime after the second anniversary of this Agreement, if
the Company proposes to register equity securities for its own account under the
Securities Act in connection with the underwritten public offering solely for
cash on Form S-1, S-2, S-3, or S-11 (or any replacement or successor forms)
other than in connection with an offering that is primarily of debt securities
(the "Offering"), the Company shall promptly give to the Representative written
notice of such registration. Common Holders are not entitled pursuant to this
Section 4 to participate in any Registrations that are solely of resales of
securities by Persons other than the Company. This Section 4 shall terminate and
be of no further force and effect on the date that the Lazard Holders no longer
own, in the aggregate, at least 50% of the Preferred Shares issued pursuant to
the Purchase Agreement.
(b) Upon the written request of the Representative on behalf of each
Common Holder given as promptly as practicable but in any event within twenty
(20) days following the date of such notice, the Company shall cause to be
included in such registration statement and use its reasonable efforts to be
registered under the Securities Act the Registrable Common Securities that the
Representative on behalf of each Common Holder shall have requested to be
registered, subject to Sections 4.1(c) and 4.2; provided, however, that such
right of inclusion shall not apply to any registration statement covering an
offering of debt securities or convertible debt securities (any such
registration in which the Common Holders participate pursuant to this Section
4.1 being referred to as a "Piggyback Registration").
(c) The Company shall have the absolute right to delay, withdraw or
cease to prepare or file any registration statement for any offering referred to
in this Section 4 without any obligation or liability to the Common Holders, it
being understood that any Registrable
-13-
<PAGE>
Common Securities previously included in any such withdrawn Registration
Statement shall not cease to be Registrable Common Securities by reason of such
inclusion or withdrawal.
4.2. If the Underwriters' Representative shall advise the Company that,
in its opinion, the amount or type of Registrable Common Securities requested to
be included in such registration would adversely affect such offering, or the
timing thereof, then the Company will include in such registration, to the
extent of the amount and class which the Company is so advised can be sold
without such adverse effect in such offering: first, securities proposed to be
sold by the Company; second, securities registered by the Company pursuant to
the Registration Rights Agreement among the Company, Mezzanine, SOFI IV and SAHI
Partners as in effect on the date hereof; and third, the Registrable Common
Securities and all other securities requested to be included in such
registration, pro rata based on the number of securities that have a right to be
included in such registration.
4.3. The Company shall only be required to comply with this Section 4
on the first four occasions that the requirements of Section 4.1(a) are
applicable; provided that if the Common Holders have requested to be included in
such registration and less than the lesser of (i) 300,000 Registrable Common
Securities (as adjusted for stock splits, recapitalizations and similar
transactions) or (ii) the number of Registrable Common Securities requested to
be included in such Piggyback Registration are actually sold, such Piggyback
Registration shall not count as a registration for purposes of this Section 4;
provided, further, that the Company shall have no obligations under this Section
4 after an aggregate of 600,000 Registrable Common Securities (as adjusted for
stock splits, recapitalizations and similar transactions) have been sold by the
Common Holders in any Piggyback Registration.
4.4. Prior to the inclusion of any Registrable Common Securities in any
Piggyback Registration, the Common Holder shall be required to agree to exercise
(if not previously exercised) at the closing of such offering Warrants for Class
A Shares in an amount equal to that to be sold pursuant to such Piggyback
Registration; provided, however, that no member of the Investor Group shall
perform a cashless exercise of such Warrants pursuant to any sale of Class A
Shares in a Piggyback Registration; provided, further that the Common Holder is
permitted to pay the exercise price of such Warrants with the proceeds of the
sale of such Class A Shares.
Section 5. Registration Procedures and Termination. Whenever required
under Section 3 to effect the registration of any Registrable Securities
(subject to Section 3.3), the Company shall, as promptly as practicable:
5.1. Prepare and file with the Commission a registration statement with
respect to such Registrable Securities and in the case of a Shelf Registration
or Preferred Registration Statement, use best efforts to cause such registration
statement to become effective and to notify the Representative of such
effectiveness in a timely manner.
-14-
<PAGE>
5.2. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act and rules thereunder with respect to the
disposition of all securities covered by such registration statement. If the
registration is for an underwritten offering, the Company shall amend the
registration statement or supplement the prospectus whenever required by the
terms of the underwriting agreement entered into pursuant to Section 5.5;
provided that if such underwritten offering is not by the Company such amendment
or supplement shall be at the expense of the Selling Holders to the extent that
such amendment would set forth information (other than by incorporation by
reference) in addition to that which would typically be required in order to
update the information set forth in such registration statement if the offering
were not underwritten. The Company shall amend the registration statement or
supplement the prospectus so that it will remain current and in compliance with
the requirements of the Securities Act for the period specified in Section 3.5,
and if during such period any event or development occurs as a result of which
the registration statement or prospectus contains a misstatement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the Company shall
promptly notify the Representative and one counsel to all Selling Holders
identified in writing by the Representative (the "Designated Counsel"), promptly
amend the registration statement or supplement the prospectus in a prompt manner
so that each will thereafter comply with the Securities Act and promptly furnish
to the Representative and the Designated Counsel such amended or supplemented
prospectus, which each Selling Holder shall thereafter use in the Transfer of
Registrable Securities covered by such registration statement. Following receipt
of such notice and pending any such amendment or supplement described in this
Section 5.2, each Holder shall cease making offers or Transfers of Registrable
Securities pursuant to the prior prospectus.
5.3. Furnish promptly to the Representative on behalf of each Selling
Holder of Registrable Securities, without charge, such numbers of copies of the
registration statement, any pre-effective or post-effective amendment thereto,
the prospectus, including each preliminary prospectus and any amendments or
supplements thereto, in each case in conformity with the requirements of the
Securities Act and the rules thereunder, and such other related documents as the
Representative on behalf of each Selling Holder may reasonably request in order
to facilitate the disposition of Registrable Securities owned by such Selling
Holder.
5.4. Use best efforts to obtain the withdrawal of any order suspending
the effectiveness of a registration statement or any blue sky qualifications at
the earliest possible moment.
5.5. In the event of any underwritten offering, (i) use best efforts to
enter into and perform its obligations under an underwriting agreement
(including indemnification and contribution obligations to underwriters), in
usual and customary form, with the managing underwriter or underwriters of such
offering, (ii) use reasonable and customary efforts to
-15-
<PAGE>
obtain a comfort letter from the Company's accountants addressed to the
underwriters of such offering and the Selling Holders (which shall be paid for,
in the event of an underwritten offering under the Shelf Registration, by the
Selling Holders). Delivery of any such comfort letter to the Selling Holders
shall be subject to the recipient furnishing such written representations or
acknowledgments as are customarily provided by selling shareholders who receive
such comfort letters.
5.6. Promptly notify the Representative of any stop order issued or
threatened to be issued by the Commission in connection therewith and take all
reasonable actions required to prevent the entry of such stop order or to
promptly remove it if entered.
5.7. Make available for inspection by the Representative on behalf of
each Selling Holder and the representatives and counsel of the Selling Holders
(but not more than one firm of counsel to the Selling Holders), all financial
and other information as shall be reasonably requested by them, and provide the
Representative and the representatives of the Selling Holder the reasonable
opportunity to discuss the business affairs of the Company with its principal
executives and independent public accountants who have certified the audited
financial statements included in such registration statement, in each case all
as necessary to enable them to exercise their due diligence responsibility under
the Securities Act; provided, however, that information that the Company
determines to be confidential and which the Company advises such Person in
writing, is confidential shall not be disclosed unless such Person signs a
confidentiality agreement reasonably satisfactory to the Company or the Selling
Holder of Registrable Securities agrees to be responsible for such Person's
breach of confidentiality on terms reasonably satisfactory to the Company;
provided, further, that all requests for information and discussions shall be
coordinated between the Company and the Representative and made in such a manner
as to avoid duplication.
5.8. Use best efforts to cause the Registrable Securities covered by
such registration statement (i) if the Class A Shares are then listed on a
securities exchange or included for quotation in a recognized trading market, to
be so listed or included for a reasonable period of time after the offering and,
in any event, so long as any Class A Shares are otherwise listed, and (ii) to be
registered with or approved by such other United States or state governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company or the securities laws of the states in which such
Registrable Securities are to be offered and sold to enable each Selling Holder
of Registrable Securities to consummate the disposition of such Registrable
Securities.
5.9. Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included in
each such registration.
5.10. The Company shall have no obligation under this Agreement to
register or keep effective any registration statement covering any Registrable
Common Securities after the twelfth anniversary of this Agreement if the Company
shall deliver to the Common Holder of such Registrable Common Securities an
opinion to the effect that the proposed sale
-16-
<PAGE>
or disposition of all of the Registrable Common Securities for which
registration was requested does not require registration under the Securities
Act for a sale or disposition in a single public sale, and removes any and all
legends that relate to securities laws and that restrict Transfer from the
certificates evidencing such Registrable Common Securities upon tender of
certificates by the Holder. The term Registrable Common Securities shall not
include such securities held by a Holder other than a member of the Investor
Group if the Company delivers such an opinion and removes such legend upon
tender of certificates by the Holder.
5.11. The Company shall have no obligation under this Agreement to
register or keep effective any registration statement covering any Registrable
Preferred Securities after the twelfth anniversary of this Agreement if the
Company shall deliver to the Preferred Holder thereof an opinion to the effect
that the proposed sale or disposition of all of the Registrable Preferred
Securities for which registration was requested does not require registration
under the Securities Act for a sale or disposition in a single public sale, and
removes any and all legends that relate to securities laws and that restrict
Transfer from the certificates evidencing such Registrable Preferred Securities
upon tender of certificates by the Holder. The term Registrable Preferred
Securities shall not include such securities held by a Holder other than a
member of the Investor Group if the Company delivers such an opinion and removes
such legend upon tender of certificates by the Holder.
Section 6. Holder's Obligations.
6.1. It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to the
Registrable Securities of any Selling Holder of Registrable Securities that the
Selling Holder shall:
(a) Furnish to the Company in writing such information
regarding the Selling Holder, the number of the Registrable Securities
owned by it, and the intended method of disposition of such securities
as shall be required under the Securities Act to effect the
registration of the Selling Holder's Registrable Securities and to keep
such information current.
(b) Cooperate fully with the Company in preparing any
registration statement.
(c) In the event of a Piggyback Registration in which they
participate, agree to sell their Registrable Securities included in
such Piggyback Registration to the underwriters at the same price and
on substantially the same terms and conditions as the Company, and to
execute the underwriting agreement agreed to by the Company. No Selling
Holder shall be permitted to withdraw any securities from an
underwritten offering pursuant to a Piggyback Registration after the
printing of the final "red herring" prospectus related thereto without
the consent of the Company.
-17-
<PAGE>
6.2. Each Holder shall notify the Company within 5 Business Days of any
sale of Registrable Securities.
Section 7. Expenses of Registration. With respect to the Shelf
Registration and the Preferred Registration Statement, the Company shall bear
and pay all expenses incurred by the Company in connection with any
registration, filing, or qualification of Registrable Securities with respect to
such registration for each Selling Holder, including all registration, filing
and National Association of Securities Dealers, Inc. fees, listing fees, all
fees and expenses of complying with securities or blue sky laws, all printing
expenses, messenger and delivery expenses, the reasonable fees and disbursements
of counsel for the Company and of the independent accountants including comfort
letters addressed to the Company (the "Registration Expenses"), but excluding
underwriting discounts and commissions relating to Registrable Securities (which
shall be paid by the Holders) and all other fees and expenses of the Holders
including counsel for the Holders. Notwithstanding the foregoing, the Company
shall not be required to bear the expenses of any underwritten offering under
the Shelf Registration Statement to the extent such expenses are greater than
they would otherwise have been if such offering had not been underwritten,
including excess printing costs, accounting and legal fees, and the other
Registration Expenses.
Section 8. Indemnification; Contribution. If any Registrable Securities
are included in a registration statement under this Agreement:
8.1. To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls any Selling Holder within the meaning of the Securities Act, and each
officer, director, trustee, partner and employee of any Selling Holder and such
controlling Person, against any and all losses, claims, damages, liabilities and
expenses (joint or several), including reasonable attorneys' fees and
disbursements and reasonable expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or investigation,
or to which any of the foregoing Persons may become subject under the Securities
Act, the Exchange Act or other federal or state laws, insofar as such losses,
claims, damages, liabilities and expenses arise out of or are based upon any of
the following statements, omissions or violations (collectively, a "Violation"):
(a) Any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any
amendments thereof or supplements thereto; or
(b) The omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading; provided, however, that the
indemnification required by this Section 8.1 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or
expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable in any
-18-
<PAGE>
such case for any such loss, claim, damage, liability or expense to the
extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with information related to the
indemnified party furnished to the Company by the indemnified party in
writing expressly for use in connection with such registration
statement; and provided, further, that the indemnity agreement
contained in this Section 8 shall not apply to the extent that any such
loss is based on or arises out of (A) any matter covered by Section 8.2
for which the Selling Holders are required to indemnify the Company,
(B) an untrue statement or alleged untrue statement of a material fact,
or an omission or alleged omission to state a material fact, contained
in or omitted from any preliminary prospectus if the final prospectus
shall correct such untrue statement or alleged untrue statement, or
such omission or alleged omission, and a copy of the final prospectus
has not been sent or given to such Person at or prior to the
confirmation of sale to such Person if an underwriter was under an
obligation to deliver such final prospectus and failed to do so or (C)
the Selling Holders' failure to comply with applicable prospectus
delivery requirements if the Company has complied with Section 5.3.
8.2. To the extent permitted by applicable law, each Selling Holder,
severally and not jointly, shall indemnify and hold harmless the Company, and
each of the officers, employees and Trustees of the Company who shall have
signed the registration statement, and each Person, if any, who controls the
Company within the meaning of the Securities Act, against any and all losses,
claims, damages, liabilities and expenses, including reasonable attorneys' fees
and disbursements and reasonable expenses of investigation, incurred by such
party pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise become
subject under the Securities Act, the Exchange Act or other federal or state
laws, but only insofar as such losses, claims, damages, liabilities and expenses
arise out of or are based upon any Violation, in each case to the extent that
such Violation occurs in reliance upon and in conformity with information
related to such Selling Holder and furnished by such Selling Holder in writing
expressly for use in connection with such registration; provided, however, that
(x) the indemnification required by this Section 8.2 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or expense if such
settlement is effected without the consent of the Representative (which consent
shall not be unreasonably withheld) and (y) in no event shall the aggregate
amount of any indemnity obligation of any Selling Holder under this Section 8.2
together with any contribution obligation under Section 8.4 exceed the proceeds
(net of any underwriting discounts or commissions) from the applicable offering
received by such Selling Holder.
8.3. Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, suit, proceeding, investigation
or threat thereof made in writing for which such indemnified party may make a
claim under this Section 8, such indemnified party shall deliver to the
indemnifying party a written notice thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the
-19-
<PAGE>
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential conflicts
or differing interests between such indemnified party and any other party
represented by such counsel in such proceeding; provided that the indemnifying
party shall in no event be obligated to pay the fees and expenses of more than
one counsel (who may retain one local counsel in each jurisdiction that such
counsel is not admitted to practice if reasonably required at the expense of the
indemnifying party) for all indemnified parties. The failure to deliver written
notice to the indemnifying party within a reasonable time following the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 8 to the extent of such prejudice but shall
not relieve the indemnifying party of any liability that it may have to any
indemnified party otherwise than pursuant to this Section 8. Any fees and
expenses incurred by the indemnified party (including any fees and expenses
incurred in connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within thirty
(30) days of written notice thereof to the indemnifying party (regardless of
whether it is ultimately determined that an indemnified party is not entitled to
indemnification hereunder). Except as set forth above, any such indemnified
party shall have the right to employ separate counsel in any such action, claim
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be the expenses of such indemnified party unless
(i) the indemnifying party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding or (iii) the named parties to any such action, claim
or proceeding (including any impleaded parties) include both such indemnified
party and the indemnifying party, and such indemnified party shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or in addition to those available to the indemnifying
party and that the assertion of such defenses would create a conflict of
interest such that counsel employed by the indemnifying party could not
faithfully represent the indemnified party (in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action, claim or
proceeding on behalf of such indemnified party, it being understood, however,
that the indemnifying party shall not, in connection with any one such action,
claim or proceeding or separate but substantially similar or related actions,
claims or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the reasonable
judgment of such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
action, claim or proceeding, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or counsels).
-20-
<PAGE>
8.4. If the indemnification required by this Section 8 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to in this
Section 8:
(a) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any Violation has been
committed by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Section 8.1 and Section 8.2, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation
or proceeding.
(b) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8.4 were determined
by pro rata allocation or by any other method of allocation which does
not take into account the relative fault referred to in Section 8.4(i).
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent
misrepresentation.
(c) In no event shall the aggregate amount of any contribution
obligation from any Selling Holder under this Section 8.4 together with
any indemnification obligation under Section 8.2 exceed the proceeds
(net of any underwriting commissions or discounts) from the applicable
offering received by such Selling Holder.
8.5. If indemnification is available under this Section 8, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 8 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 8.4.
8.6. The obligations of the Company and the Selling Holders under this
Section 8 shall survive the completion of any offering of Registrable Securities
pursuant to a registration statement under this Agreement, and otherwise.
-21-
<PAGE>
Section 9. Holdback.
9.1. In connection with an underwritten offering by the Company of any
Class A Shares (or any securities convertible into or exchangeable or
exercisable for Class A Shares) covered by a registration statement filed by
Company, each Holder, whether or not its Registrable Securities are included in
the registration statement, if so requested by the Underwriters' Representative
shall not effect any public sale or distribution of Class A Shares or Warrants
(except as part of such underwritten registration), during any such lock up
periods requested by the Underwriter's Representative, not to exceed the 10-day
period prior to, and during the 180-day period in the case of the first
registration statement declared effective after the date hereof and 90 days in
the case of any subsequent registration beginning on, the date such registration
statement is declared effective under the Securities Act by the Commission. In
order to enforce the foregoing covenant, the Company shall be entitled to impose
stop-transfer instructions with respect to the Registrable Securities of the
Holders until the end of such period.
9.2. In the event of a merger or similar transaction which is accounted
for by the Company as a pooling of interests, each Holder further agrees that it
will, if it is advised by the Company's counsel that it may be deemed an
"affiliate" of the Company, at such time enter into a customary "affiliate
agreement" restricting its ability to effect any public sale or distribution of
Class A Shares or Preferred Shares in any manner that would cause the Company to
not be able to account for the transaction as a pooling of interest if and to
the same extent that Starwood Holders are subject to identical restrictions.
9.3. The terms of this Section 9 shall not be applicable to any Holder
if the Starwood Holders are not subject to identical restrictions or when such
Holder, together with its Affiliates, no longer owns Class A Shares (including
and assuming exercise of the Warrants) with a Fair Market Value of at least 2.5%
of the Fair Market Value of the outstanding Class A Shares.
Section 10. Election of Trustees.
10.1. Subject to Section 10.2, the Company shall use its best efforts
to cause Arthur Solomon or his successor designated by the members of the
Investor Group who is reasonably acceptable to the Company (the "Investor
Trustee") to be elected to the Board of Trustees, to the Audit Committee thereof
and, as long as such Investor Trustee qualifies as a Non-Employee Director under
Rule 16b-3 of the Exchange Act, the Compensation Committee thereof. Starwood
agrees to and to cause its Affiliates that own Class A or Class B Shares or any
other voting securities of the Company to vote all Class A and Class B Shares
and any other voting securities beneficially owned by it and them for the
election of Mr. Solomon or his successor.
10.2. Subject to Section 10.5, the right of the members of the Investor
Group to elect the Investor Trustee shall continue until such time as any member
of the Investor Group or any Lazard Affiliate is a Competitor, at which time the
term of any Investor Trustee shall terminate and the number of Trustees
constituting the Board of Trustees shall be reduced by
-22-
<PAGE>
one. If requested by the Company, the Investor Trustee will execute a written
resignation as a Trustee upon the expiration of his or her term pursuant to the
preceding sentence. In the event that each of the members of the Investor Group
and any Lazard Affiliates ceases to be a Competitor, the Company and Starwood
shall promptly comply with Section 10.1.
10.3. If the Investor Trustee shall resign or be removed other than
pursuant to the first two sentences of Section 10.2 (either with or without
cause), then the members of the Investor Group shall have the right to approve
the Trustee elected to fill the vacancy created by such resignation or removal;
provided that the Company reasonably approves such nominee. Further, Starwood
agrees not to and to cause its Affiliates that own Class A or Class B Shares or
other voting securities of the Company not to vote to remove the Investor
Trustee, other than for cause.
10.4. Each member of the Investor Group hereby acknowledges that any
Confidential Information provided to the Investor Trustee is confidential and
proprietary to the Company and that any Investor Trustee will be required to
enter into a confidentiality agreement as a condition precedent to election as a
Trustee, which agreement shall be no more restrictive than the confidentiality
obligations of any other trustee. Each member of the Investor Group agrees that
any Confidential Information shall (a) be kept confidential, (b) not, except as
otherwise provided in this Section, be disclosed by a receiving party to any
person in any manner without the prior written consent of the Company and (c)
not be used by a receiving party other than for Company purposes without
prejudice to the right of the members of the Investor Group at all times to sell
or otherwise dispose of all or any part of the Preferred Shares, Warrants or
Class A Shares in compliance with applicable law. The materials and information
that the Company will make available to the Investor Trustee relating to the
Investor Trustee's duties as a member of the Company's Board of Trustees
(collectively, "Information"), including oral communications with the Company's
agents or employees contain economic, commercial, marketing, financial and
contract information that the Company deems confidential and proprietary
("Confidential Information"). So that the parties will not be obliged to attempt
an item-by-item evaluation of the Information, it is expressly understood that
all the Information is Confidential Information, whether or not it qualifies
under governing law as trade secrets or proprietary information with the sole
exception of the following:
(a) Information which is or becomes generally available to the
public other than by violation of this Agreement;
(b) Information that was available to such member of the
Investor Group or any Investor Trustee on a non-confidential basis
prior to its disclosure to the Investor Trustee by the Company, its
subsidiaries, the Advisor or their representatives or agents, provided
that the source of such information is not known by the member of the
Investor Group or any Investor Trustee to be bound by a confidentiality
agreement with the Company, its subsidiaries, the Advisor or their
representatives or agents or
-23-
<PAGE>
otherwise prohibited from transmitting the information to the member of
the Investor Group or any Investor Trustee by a contractual, legal or
fiduciary obligation; and
(c) Information that becomes available to the member of the
Investor Group or any Investor Trustee on a non-confidential basis from
a source other than the Company, its subsidiaries, the Advisor or their
representatives or agents, provided that such source is not known by
the member of the Investor Group or any Investor Trustee to be bound by
a confidentiality agreement with the Company or its representatives or
agents or otherwise prohibited from transmitting the information to the
member of the Investor Group or any Investor Trustee by a contractual,
legal or fiduciary obligation.
In the event that any member of the Investor Group is requested or
becomes legally compelled (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to make any disclosure which is prohibited or otherwise constrained by
this Agreement, each member of the Investor Group agrees that it will (i)
provide the Company with prompt notice of such request(s) (unless such Person is
legally prohibited from doing so pursuant to a court order of a court of
competent jurisdiction) so that it may seek an appropriate protective order or
other appropriate remedy and/or waive Investor Group member's compliance with
the provisions of this Agreement, (ii) not oppose the Company's efforts to
decline, resist or narrow such requests and (iii) in the event a protective
order or other remedy is not obtained, reasonably cooperate with the Company, at
the Company's sole cost and expense, to minimize disclosure of Confidential
Information that such Persons are not legally compelled to disclose.
10.5 This Section 10 (other than Section 10.4) shall terminate on the
date that the members of the Investor Group no longer own in the aggregate at
least 50% of the Preferred Shares issued pursuant to the Purchase Agreement.
Section 11. Transfers.
11.1. (a) No Lazard Holder will Transfer, facilitate a Transfer or
otherwise participate in any manner in a Transfer of Warrants, Class A Shares or
Preferred Shares to a Person that such Transferring Holder knows is a
Competitor. Each Lazard Holder (a "Transferring Holder") will give the Company
written notice of any proposed Transfer of Warrants, Class A Shares or Preferred
Shares, except Transfers to other Lazard Holders prior to the consummation of
such Transfer. Such notice will include the identity of the purchaser (if known
by the Transferring Holder after compliance with the inquiry standards set forth
in this Section 11.1) of the Warrants, Class A Shares or Preferred Shares,
including all Affiliates of such purchaser, in each case as can reasonably be
determined with reasonable effort by the Transferring Holder which efforts shall
include but not be limited to, inquiry of such prospective purchaser as to the
identity of the Purchaser and its Affiliates and may include, if appropriate, a
request for representation as to such identity, in any purchase agreement
relating to such Transfer. Notwithstanding the foregoing, in the event of a
-24-
<PAGE>
Transfer of 200,000 or fewer Class A Shares (as adjusted for stock splits,
recapitalizations and similar transactions) in a single transaction or series of
related transactions pursuant to the Shelf Registration during any 30 day
period, the Transferring Holder shall only be required to inquire as to the
identity of the purchaser of such Class A Shares and shall not be required to
include the identity of the Purchaser in the notice to the Company unless known
to such Transferring Holder after inquiry. Upon receipt of such notice,
including the identity of the purchaser (if known by the Transferring Holder
after compliance with the inquiry standards set forth in this Section 11.1) and
its Affiliates, the Company shall have 5 Business Days to notify the
Transferring Holder in writing of its reasonable objection to such Transfer
based upon the fact that the Transfer is to a Competitor that is not a member of
the Investor Group (or an entity whose Affiliate is a Competitor) of the
Company. In the event that the Company provides notice of its objection, the
Transferring Holder agrees not to Transfer such Warrants, Class A Shares or
Preferred Shares to the proposed purchaser. If the Company does not provide
notice of its objection within 5 Business Days of receipt of notice of the
Transfer by the Transferring Holder, the Transferring Holder may consummate such
Transfer; provided that if, prior to the consummation of such Transfer, the
identity of the proposed purchaser changes, or the Transferring Holder acquires
actual knowledge (without any obligation of investigation or inquiry) that the
identity of the proposed purchaser's Affiliates has changed, this Section 11.1
shall again be applicable to such Transfer.
(b) The obligations under this Section 11.1 shall not apply to any
Transfer or disposition in connection with (a) any arrangement involving a
secured or structured financing, including any pledge or other security
interest, (b) any foreclosure or other exercise of remedies or negotiated
arrangements or Transfer in connection with any structured or other financing
arrangement, (c) any Transfer, distribution or resale by parties that acquired
securities in connection with the arrangements and transactions referred in
clauses (a) and (b), (d) any sale to an underwriter in connection with a firm
commitment underwritten public offering, (e) any distribution by a member of the
Investor Group to an Existing Holder and (f) any Transfer to a member of the
Investor Group.
(c) This Section 11.1 shall terminate with respect to Class A Shares on
the date that the Lazard Holders own less than an aggregate of 200,000 Class A
Shares (as adjusted for stock splits, recapitalizations and similar
transactions).
11.2. (a) Except for Transfers of Warrants or Class A Shares by a
member of the Investor Group to Lazard Holders, if at any time during the term
of this Agreement any Lazard Holder shall desire to Transfer in a single
transaction or a series of related transactions over a consecutive 30 day period
any Warrants or Class A Shares constituting (assuming exercise of the Warrants)
20% or more of the Class A Shares issuable under the Warrants that were acquired
pursuant to the Purchase Agreement in the aggregate owned by him, her or it
(such Person desiring to Transfer such Warrants or Class A Shares being referred
to herein as a "Selling Shareholder"), then such Selling Shareholder shall
deliver written notice of its desire to Transfer such Warrants or Class A Shares
(a "Notice of Intention"), accompanied by a copy of a proposal relating to such
Transfer (the "Sale
-25-
<PAGE>
Proposal"), to the Company, setting forth such Selling Shareholder's desire to
make such Transfer (which shall be for cash only), the number of Warrants or
Class A Shares proposed to be Transferred (the "Offered Shares") and the price
at which such Selling Shareholder on a good faith basis proposes to Transfer the
Offered Shares (the "First Offer Price") and other terms applicable thereto. For
purposes of calculations under this Section 11.2, all Warrants shall be
considered exercised.
(b) Upon receipt of the Notice of Intention, the Company shall then
have the right to purchase at the First Offer Price and on the other terms
specified in the Sale Proposal all or, subject to Section 11.2(d), any portion
of the Offered Shares. The rights of the Company pursuant to this Section
11.2(b) shall be exercisable by the delivery of notice to the Selling
Shareholder (the "Notice of Exercise"), within 5 Business Days from the date of
delivery of the Notice of Intention. The Notice of Exercise shall state the
total number of Offered Shares the Company is willing to purchase. The rights of
the Company pursuant to this Section 11.2(b) shall terminate if unexercised 5
Business Days after the date of delivery of the Notice of Intention.
(c) In the event that the Company exercises its rights to purchase any
or all of the Offered Shares in accordance with Section 11.2(b), then the
Selling Shareholder must Transfer the Offered Shares to the Company within 5
Business Days from the date of delivery of the Notice of Exercise received by
the Selling Shareholder.
(d) Notwithstanding the foregoing provisions of this Section 11.2,
unless the Selling Shareholder shall have consented in writing to the purchase
of less than all of the Offered Shares, the Company may not purchase any Offered
Shares hereunder unless all of the Offered Shares are to be so purchased.
(e) Any Person who has failed to give notice of the election of an
option under this Section 11.2 within the specified time period will be deemed
to have waived its rights with respect to the particular Notice of Intention
only on the day after the last day of such period.
(f) If all notices required to be given pursuant to Section 11.2 have
been duly given and the Company does not exercise its option to purchase all of
the Offered Shares at the First Offer Price and the Selling Shareholder does not
desire to sell less than all the Offered Shares or if, with the consent of the
Selling Shareholder, the Company purchases less than all of the Offered Shares
pursuant to the provisions hereof, then in either such event the Selling
Shareholder shall have the right, subject to compliance by the Selling
Shareholder with the other provisions of this Agreement, for a period of 180
calendar days from the earlier of (i) the expiration of the option period
pursuant to Section 11.2 with respect to such Sale Proposal or (ii) the date on
which such Selling Shareholder receives notice from the Company that it will not
exercise in whole or in part the options granted pursuant to Section 11.2, to
Transfer to any third party that is not, to the knowledge of the Selling
Shareholder (based on the procedures set forth in Section 11.1(a)), a Competitor
or Affiliate of a
-26-
<PAGE>
Competitor the Offered Shares remaining unsold at a price of not less than 95%
of the First Offer Price, and on the other terms specified in the Sale Proposal.
(g) The consummation of any purchase and Transfer pursuant to Section
11.2 shall take place on such date, not later than 5 Business Days after the
expiration of the option period pursuant to Section 11.2(b) with respect to such
option, as the Selling Shareholder shall select. Upon the consummation of any
such purchase and Transfer, the Selling Shareholder shall deliver certificates
evidencing the Offered Shares sold, if any, duly endorsed, or accompanied by
written instruments of transfer in form satisfactory to the purchaser duly
executed by the Selling Shareholder free and clear of any liens, against
delivery of the First Offer Price, payable by wire transfer of immediately
available funds.
(h) Subject to Section 11.2(a), making a written offer, giving or
failing to give written notice within the stated period, accepting an offer or
making a decision or election, in each case as provided in Section 11.2, shall
create a legally binding obligation to buy or Transfer, or an obligation to
refrain from buying or Transferring, as the case may be, the Offered Shares as
provided in such Section 11.2.
(i) The obligations under this Section 11.2 shall not apply to any
Transfer or disposition in connection with (a) any arrangement involving a
secured or structured financing, including any pledge or other security
interest, (b) any foreclosure or other exercise of remedies or negotiated
arrangements or Transfer in connection with any structured or other financing
arrangement, (c) any Transfer, distribution or resale by parties that acquired
securities in connection with the arrangements and transactions referred in
clauses (a) and (b), (d) any sale to an underwriter in connection with a firm
commitment underwritten public offering, (e) any Transfer to a Lazard Holder and
(f) any distribution by a member of the Investor Group to an Existing Holder.
11.3. Notwithstanding anything to the contrary herein, no Lazard Holder
shall Transfer any Preferred Shares, Warrants or Class A Shares prior to the one
year anniversary of this Agreement except to other Lazard Holders. The
restriction on Transfer under this Section 11.3 shall not apply to any Transfer
or disposition in connection with (a) any arrangement involving a secured or
structured financing, including any pledge or other security interest, (b) any
foreclosure or other exercise of remedies or negotiated arrangements or Transfer
in connection with any structured or other financing arrangement, (c) any
Transfer, distribution or resale by parties that acquired securities in
connection with the arrangements and transactions referred in clauses (a) and
(b), (d) any sale to an underwriter in connection with a firm commitment
underwritten public offering and (e) any distribution by a member of the
Investor Group to an Existing Holder, if such Existing Holder agrees in writing
to be bound by the terms of this Section 11.3.
11.4. Right to Join in Sale. (a) If, after the first anniversary
hereof, SOFI IV or Starwood Mezzanine proposes, in a single transaction or
series of related transactions within a 30 day period that is a private
placement to Transfer (other than Transfers to Affiliates if
-27-
<PAGE>
the Affiliate has agreed in writing to be bound by this Section 11.4) Class A
Shares for which it or they receives aggregate cash consideration in excess of
$25 million (a "Disposing Shareholder"), then, such Person or group shall
refrain from effecting such transaction unless, prior to the consummation
thereof, the members of the Investor Group shall have been afforded the
opportunity to include their Class A Shares in such Transfer of Class A Shares
on a pro rata basis, as hereinafter provided. As a condition to the inclusion of
any Class A Shares in a Transfer pursuant to this Section 11.4, the members of
the Investor Group shall be required at the closing of such Transfer to exercise
Warrants for Class A Shares in an amount equal to that to be included in such
Transfer; provided, however, that the members of the Investor Group shall not
perform a cashless exercise of such Warrants pursuant to any sale of Class A
Shares under this Section 11.4; provided, further, that the members of the
Investor Group are permitted to pay the exercise price of such Warrants with the
proceeds of such sale.
(b) Prior to consummation of any proposed Transfer for aggregate cash
consideration in excess of $25 million of Class A Shares described in Section
11.4(a), each Disposing Shareholder shall offer in writing to the Representative
the opportunity for the members of the Investor Group to sell in the Transfer of
such Class A Shares a number of Class A Shares equal to the product of (i) the
number of Class A Shares then owned (or are entitled to be acquired upon
exercise of the Warrants) by the members of the Investor Group and that were
received upon exercise of Warrants originally issued pursuant to the Purchase
Agreement (regardless of whether the Class A Shares proposed to be sold by the
Disposing Shareholders are Class A Shares or convertible into Class A Shares)
(the "Purchase Offer") multiplied by (ii) a fraction the numerator of which
shall be the number of Class A Shares to be included in such sale by the
Starwood Holders and the denominator of which shall be the total outstanding
Class A Shares owned by the Starwood Holders on June 17, 1998 (adjusted for
stock splits, recapitalizations and similar transactions). Such offer shall be
made by each Disposing Shareholder at the highest price per Class A Share and on
such other terms and conditions as obtained by the Disposing Shareholder or
Shareholders. The Representative shall have 5 Business Days from the date of
receipt of the Purchase Offer in which to accept the Purchase Offer.
(c) This Section 11.4 shall terminate on the seventh (7th) anniversary
of the date of this Agreement.
(d) The obligations under this Section 11.4 shall not apply to any
Transfer or disposition in connection with (a) any arrangement involving a
secured or structured financing, including any pledge or other security
interest, (b) any foreclosure or other exercise of remedies or negotiated
arrangements or Transfer in connection with any structured or other financing
arrangement, (c) any Transfer, distribution or resale by parties that acquired
securities in connection with the arrangements and transactions referred in
clauses (a) and (b), (d) any sale to an underwriter in connection with a firm
commitment underwritten public offering and (e) any distribution by a
partnership, limited liability company or other entity to its partners, members
or owners or a Person owned by them and
-28-
<PAGE>
any subsequent distribution by such partners, members or owners to their
partners, members or owners.
Section 12. Amendment, Modification and Waivers; Further Assurances.
12.1. This Agreement may be amended with the consent of the Company and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the prior written consent to such amendment, action or omission to act of: (i)
in the case of Sections 3 through 9 (including all applicable defined terms) the
Holders of a majority of the then outstanding Registrable Securities; (ii) in
the case of Sections 2, 11, 12, 13, 14 and 15 (including all applicable defined
terms), the Representative; (iii) in the case of Section 10 (including all
applicable defined terms) and all other Sections, each member of the Investor
Group; and (iv) in the case of obligations or rights of the Starwood Holders,
without the consent of the Starwood Holders.
12.2. No waiver of any terms or conditions of this Agreement shall
operate as a waiver of any other breach of such terms and conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms explicitly provides to the
contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
12.3. Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
Section 13. Assignment; Benefit. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto, the Lazard Holders and the Holders (provided that a provision
shall only be binding on a Holder if the Holder has direct rights or obligations
relating to the Class A Shares, Warrants or Preferred Shares that were acquired
by the Investors pursuant to the Purchase Agreement that are now held by such
Holder) and each indemnified party under Section 8 hereof and their respective
heirs, permitted assigns, executors, administrators or successors. The rights
under Sections 3, 4, 5, 6, 7, 8 and 9 shall inure to the benefit of any Person
who acquires Class A Shares, Warrants or Preferred Shares pursuant to the
exercise of foreclosure remedies. The rights of the members of the Investor
Group pursuant to Section 10 shall not be assigned without the consent of the
Company.
-29-
<PAGE>
Section 14. Miscellaneous.
14.1. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving regard to
the conflict of laws principles thereof.
14.2. Notices. All notices and requests given pursuant to this
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), confirmed facsimile or
overnight air courier guaranteeing next business day delivery to the relevant
address specified on Schedule I, as otherwise specified to the Company in
writing or to the address set forth in the stock record books of the Company.
Except as otherwise provided in this Agreement, the date of each such notice and
request shall be deemed to be, and the date on which each such notice and
request shall be deemed given shall be: at the time delivered, if personally
delivered or mailed; when receipt is acknowledged, if sent by facsimile; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next business day delivery.
14.3. Entire Agreement; Integration. This Agreement supersedes all
prior agreements between or among any of the parties hereto with respect to the
subject matter contained herein, and this agreement embodies the entire
understanding among the parties relating to such subject matter.
14.4. Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
14.5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
14.6. Severability. If any provision of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not affect the
validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
14.7. Termination. Sections 3 through 9 of this Agreement may be
terminated at any time by a written instrument signed by the Company and the
holders of a majority of the outstanding Registrable Securities; Sections 2, 11
and 15 may be terminated with the written consent of the Company and the
Representative; and Section 10 may be terminated by the written consent of the
Company and the members of the Investor Group. Unless sooner terminated in
accordance with the preceding sentence or the other provisions of this
Agreement; Sections 3, 4, 5, 6, 7, 8 and 9 of this Agreement shall terminate in
their entirety on such date as there shall be no Registrable Securities
outstanding; provided that any Warrants, Preferred Shares or Class A Shares
previously subject to this Agreement shall not
-30-
<PAGE>
be Registrable Securities following the date such Warrants, Preferred Shares or
Class A Shares no longer meet the definition of Registrable Securities.
14.8. Submission to Jurisdiction. Each of the parties hereto and the
Holders irrevocably submits and consents to the jurisdiction of the United
States District Court for the Southern District of New York in connection with
any action or proceeding arising out of or relating to this Agreement, and
irrevocably waives any immunity from jurisdiction thereof and any claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled in any such action or proceeding.
14.9. The Trust. Each of the parties hereto acknowledges and agrees
that the name "Starwood Financial Trust" is a designation of the Company and its
Trustees (as Trustees but not personally) under the Company's Declaration of
Trust, and all persons dealing with the Company shall look solely to the
Company's assets for the enforcement of any claims against the Company, and the
Trustees, officers, agents and security holders of the Company assume no
personal liability for obligations entered into on behalf of the Company, and
their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
Section 15. Representative.
15.1. Representative. Notwithstanding any statement to the contrary
contained herein, each Lazard Holder irrevocably authorizes and appoints LFREI
or its successor appointed pursuant to this Section 15 (the "Representative") as
its true and lawful attorney and representative with full power and authority to
take any and all actions and execute any and all documents and agreements in
such Person's name, place and stead, with the same effect as if such action were
taken or such document or agreement were executed by such Person, in connection
with any matter or thing relating to any provision of this Agreement that states
that the Representative shall act or execute and LFREI hereby accepts its
appointment as the Representative and agrees to perform all of the duties of the
Representative hereunder.
15.2. The Representative cannot resign or be removed by the Lazard
Holders, except upon delivery to the Company of a written instrument signed by
the successor Representative in which the successor Representative agrees to
serve as Representative and the Lazard Holders consent thereto (such instrument
being referred to as a "Representative Replacement Instrument").
15.3. The signature of the Representative that purports to be on behalf
of one or more of the Lazard Holders shall be deemed to be the signature of such
Lazard Holders and they shall be bound by the terms of any documents and
agreements executed and delivered by the Representative pursuant to this
Agreement as though they were actual signatories thereto. The Company shall be
entitled to rely, without any investigation or inquiry by the Company, upon all
action by the Representative as having been taken upon the authority of
-31-
<PAGE>
such Lazard Holders. Any action by the Representative taken on behalf of the
Lazard Holders shall be conclusively deemed to be the action of the Lazard
Holders, and the Company shall not have any liability or responsibility to the
Lazard Holders for any action taken in reliance thereon.
-32-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first written above.
STARWOOD FINANCIAL TRUST
a Maryland real estate investment trust
By: /s/ Jay Sugarman
-------------------------------------
Name: Jay Sugarman
Title: CEO and President
LAZARD FRERES REAL ESTATE FUND II L.P.
By: Lazard Freres Real Estate
Investors L.L.C., General Partner
By: /s/ John A. Moore
-------------------------------------
Name: John A. Moore
Title: Chief Financial Officer
LAZARD FRERES REAL ESTATE OFFSHORE FUND
II L.P.
By: LF Real Estate Investors
Company, General Partner
By: /s/ Douglas N. Wells
-------------------------------------
Name: Douglas N. Wells
Title: Authorized Signatory
LF MORTGAGE REIT
By: /s/ John A. Moore
-------------------------------------
Name: John A. Moore
Title: Chief Financial Officer
<PAGE>
LAZARD FRERES REAL ESTATE INVESTORS
L.L.C. (Solely limited to its rights and
obligations as the Representative pursuant
to Section 15 hereof.)
By: /s/ John A. Moore
-------------------------------------
Name: John A. Moore
Title: Chief Financial Officer
SOFI-IV SMT HOLDINGS, L.L.C.*
By: Starwood Mezzanine Investors, L.P.
its managing member
By: Starwood Capital Group, L.P.
its general partner
By: BSS Capital Partners, L.P.
its general partner
By: Sternlicht Holdings II, Inc.
its general partner
By: /s/ Madison F. Grose
-------------------------------------
Name: Madison F. Grose
Title: Senior Managing Director
<PAGE>
STARWOOD MEZZANINE INVESTORS, *
By: SOFI IV Management, L.L.C.
Its: General Partner
By: Starwood Capital Group, L.L.C.
Its: General Manager
By: /s/ Madison F. Grose
-------------------------------------
Name: Madison F. Grose
Title: Executive Vice President
B HOLDINGS, L.L.C.*/
a Delaware limited liability company
By: /s/ Madison F. Grose
-------------------------------------
Name: Madison F. Grose
Title: Senior Managing Director
- --------
*/ Each of Starwood Mezzanine Investors, L.P., SOFI-IV, SMT Holdings
L.L.C. and B Holdings, L.L.C. is a party to this Agreement solely for
purposes of performing the obligations directly applicable to it and
not for the purposes of guaranteeing in any way the obligations of the
Company. No recourse under or upon any obligation, covenant, or
agreement contained in this Agreement shall be had against any partner
or member of Starwood Mezzanine Investors, L.P., SOFI-IV, SMT Holdings
L.L.C. or B Holdings, L.L.C. SOFI IV (other than with respect to the
general partner or managing member of each, for the fraud, intentional
misrepresentation, willful misconduct or gross negligence of such
general partner or managing member) or constituent member of the
general partner.
<PAGE>
SCHEDULE I
Addresses for Notice
If to the Investors to:
LF Mortgage REIT
30 Rockefeller Center
63rd Floor
New York, New York 10020
Phone: (212) 632-6000
Fax No.: (212) 332-5980
Attn: Robert P. Freeman
Lazard Freres Real Estate Fund II L.P.
30 Rockefeller Center
63rd Floor
New York, New York 10020
Phone: (212) 632-6000
Fax No.: (212) 332-5980
Attn: Robert P. Freeman
Lazard Freres Real Estate Offshore Fund II L.P.
30 Rockefeller Center
63rd Floor
New York, New York 10020
Phone: (212) 632-6000
Fax No.: (212) 332-5980
Attn: Robert P. Freeman
with a copy in each case to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Frederick Z. Lodge
Phone: (212) 468-7900
Fax No: (212) 468-7900
<PAGE>
If to the Representative to:
Lazard Freres Real Estate Investors L.L.C.
30 Rockefeller Center
63rd Floor
New York, NY 10020
Phone: (212) 632-6000
Fax No.: (212) 332-5980
Attn: Robert P. Freeman
with a copy to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Frederick Z. Lodge
Phone: (212) 468-7900
Fax No: (212) 468-7900
If to the Company to:
1114 Avenue of the Americas
27th Floor
New York, New York 10036
Attention: Spencer Haber
Phone: (212) 930-9400
Fax No.: (212) 930-9449
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carlson
Phone: (212) 506-2500
Fax No.: (212) 262-1910
and
Nina B. Matis
Katten, Muchin & Zavis
525 West Monroe Street - Suite 1600
Chicago, Illinois 60661
Phone: (312) 902-5560
<PAGE>
If to Starwood to:
c/o Starwood Group, L.P.
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Phone: (203) 861-2100
Fax No.: (203) 861-2101
with a copy to:
Rinaldi & Associates
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Ellis Rinaldi
Phone: (203) 861-2121
Fax No.: (203) 861-2122
<PAGE>
SCHEDULE II
Excluded Debt
Any Debt relating to:
MD3 Cayman L.P.
DC Retail
interest rate protection agreements relating to Debt incurred on the Closing
Date relating to
1500 Broadway
including, in each case, any refinancing of such Debt up to an amount equal to
the outstanding balance on the Closing Date, plus any accrued and unpaid
interest or fees thereon, plus the costs of the refinancing.
<PAGE>
Exhibit A
FORM OF INVESTOR REPRESENTATION LETTER
FOR SUBSEQUENT PURCHASES
Starwood Financial Trust
1114 Avenue of the Americas
27th Floor
New York, New York 10036
Ladies and Gentlemen:
In connection with the proposed acquisition of ___ Series A Preferred
Shares of beneficial interest, $.01 par value per share ("Series A Preferred"),
of Starwood Financial Trust, a Maryland real estate investment trust (the
"Company"), and/or ___ Class A Shares of beneficial interest, $1.00 par value
per share, of the Company ("Class A Shares"), and/or ___ warrants to purchase up
to ___ Class A Shares ("Warrants" and, together with the Series A Preferred and
Class A Shares, the "Shares"), the undersigned hereby certifies, represents and
covenants as to [ ] (the "Investor"), after due inquiry, as follows:
1. The Investor has received a copy of the Declaration of Trust, as
amended, including the Articles Supplementary with respect to the Series A
Preferred, and understands the restrictions on transfers and ownership of the
Company's shares of beneficial interest set forth therein.
2. The Investor represents and covenants that no individual or
organization described in Section 542(a)(2) of the Internal Revenue Code of
1986, as amended (the "Code"), as modified by Section 856(h) of the Code, that
is a direct or indirect partner, member or shareholder of the Investor, as the
case may be, Beneficially Owns (as defined herein) or, in the future will
Beneficially Own because of Investor's Beneficial Ownership in the Company,
Shares in excess of the Ownership Limit (as defined in both the Declaration of
Trust, as amended, and the Articles Supplementary with respect to the Series A
Preferred). A summary of the ownership of the Investor by those persons that
Beneficially Own a greater than 5% interest in the Investor as of the date
hereof has been attached hereto as Exhibit A-1. The summary of the ownership of
the Investor described in the immediate preceding sentence shall indicate the
classification of the person or entity (e.g., individual X) but shall not
necessarily need to indicate the name of such person. For purposes of this
representation, Beneficially Owns shall mean ownership by a person or entity who
would be treated as an owner of the Investor either directly or constructively
through the application of Section 544 of the Code, as modified by Section
856(h) of the Code.
<PAGE>
3. As of the date hereof, except as set forth at the end of this letter
the Investor (and any direct or indirect partner, member or shareholder of the
Investor) does not own, actually or constructively (as determined in accordance
with Code Section 544), any beneficial interest in the Company, including any
Shares (other than the Shares that are subject to this representation).
4. The Investor understands that any transferee of the Investor who
acquires or attempts to acquire the Company's Series A Preferred Shares or Class
A Shares in an amount in excess of the Ownership Limits (as defined in the
Declaration of Trust, as amended, including the Articles Supplementary with
respect to the Series A Preferred) will be subject to the Excess Share
provisions of Articles XI of the Declaration of Trust and Articles IX of the
Articles Supplementary unless a waiver of those provisions is provided by the
Company.
The Investor covenants that it will immediately notify the Company of
the date on which the foregoing representations and warranties are no longer
true and correct in all respects (the "Termination Date"). The Investor
understands that any breach of a representation or covenant contained in this
letter will automatically cause the waiver granted by the Company with respect
to the Shares to immediately cease to be effective to the extent necessary to
cause such representation or covenant to be true and correct and, to the extent
necessary to cause such representation or covenant to be true and correct, all
(or a portion of) the Shares owned by the Investor shall be subject to Article
XI of the Declaration of Trust and Article IX of the Articles Supplementary.
Very Truly Yours,
INVESTOR
By:_______________________________
Name:
Title:
Other Shares Owned:
<PAGE>
Exhibit A-1
SUMMARY OF GREATER THAN FIVE PERCENT
BENEFICIAL OWNERS OF THE INVESTOR
THIS WARRANT AND THE CLASS A SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAW, AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THEY HAVE BEEN
REGISTERED UNDER SUCH LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THIS WARRANT AND THE CLASS A SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
ARE SUBJECT TO CERTAIN RESTRICTIONS AGAINST TRANSFER CONTAINED IN THIS
CERTIFICATE, THE INVESTOR RIGHTS AGREEMENT TO WHICH THE WARRANTHOLDER IS A PARTY
AND THE ISSUER'S DECLARATION OF TRUST, AS IN EFFECT FROM TIME TO TIME. A COPY OF
SAID INVESTOR RIGHTS AGREEMENT AND DECLARATION OF TRUST IS AVAILABLE FOR
INSPECTION, WITHOUT CHARGE, AT THE OFFICES OF THE ISSUER.
December 15, 1998
WARRANT CERTIFICATE TO PURCHASE
CLASS A SHARES OF
STARWOOD FINANCIAL TRUST
This Warrant Certificate (the "Warrant Certificate") is to certify that
______________ and its permitted assignees (the "Warrantholder") is entitled, at
any time on or after the first anniversary of the Original Issue Date (as
defined in Section 5.1) but prior to the Expiration Date, to purchase, at the
Exercise Price (as hereinafter defined), _________ Class A Shares (the "Initial
Exercise Amount") of Starwood Financial Trust (the "Company"). Unless earlier
exercised in full and subject to the conditions set forth herein, this warrant
shall expire at 5:00 P.M., New York City time, on December 15, 2005 (the
"Expiration Date").
1. Exercise of Warrant.
1.1 This Warrant Certificate is exercisable by the
Warrantholder at the Exercise Price per Class A Share issuable hereunder,
payable in cash, by certified or official bank check. In lieu of payment of the
Exercise Price as provided above, the Warrantholder may elect a cashless net
exercise; provided that with regard to transactions pursuant to Section 4 or
Section 11.4 of the Investor Rights Agreement, dated the date hereof, among the
Company, Starwood Mezzanine Investors, L.P., SOFI-IV SMT Holdings, L.L.C., B
Holdings, L.L.C., the Warrantholder, Lazard Freres Real Estate Fund II L.P.,
Lazard Freres Real Estate Offshore Fund II L.P. and LF Mortgage REIT (the
"Investor Rights Agreement"), the cashless net exercise method may not be used.
In the
<PAGE>
case of such cashless net exercise, the Warrantholder shall surrender this
Warrant Certificate for cancellation and receive in exchange therefor (i) the
full number of duly authorized, validly issued, fully paid and nonassessable
Class A Shares specified, subject to adjustment in accordance with Section 5,
less (ii) the number of Class A Shares with an aggregate Fair Market Value (as
defined below) as of the Business Day (as defined below) on which the
Warrantholder surrenders this Warrant to the Company (the "Exercise Date") equal
to the aggregate Exercise Price that would have been payable upon such exercise
absent election of the cashless net exercise alternative. Upon surrender of this
Warrant Certificate with the Subscription Form (attached hereto) duly completed
and executed, together with any required payment of the Exercise Price for the
Class A Shares being purchased, at the Company's principal executive offices
presently located at 1114 Avenue of the Americas, 27th Floor, New York, New York
10036, the Warrantholder shall be entitled to receive a certificate or
certificates for the Class A Shares so purchased. "Business Day" means any day
other than a Saturday, Sunday or a day on which all United States securities
exchanges on which securities issued by the Company are listed, are authorized
or required to be closed. "Fair Market Value" as of any date on which the same
is being calculated shall mean the average closing price of the Class A Shares
on the American Stock Exchange or the exchange or national quotation system on
which the Class A Shares are primarily traded for the twenty Business Days
preceding the calculation date.
1.2 The purchase rights represented by this Warrant
Certificate are exercisable at the option of the Warrantholder, in whole or in
part (but not as to fractional Class A Shares), at any time and from time to
time on or after the first anniversary of the Original Issue Date and prior to
the Expiration Date.
1.3 In the case of the purchase of less than all the Class A
Shares purchasable under this Warrant Certificate, the Company shall cancel this
Warrant Certificate upon the surrender hereof and shall execute and deliver a
new Warrant Certificate as soon as practicable to the Warrantholder of like
tenor for the balance of the Class A Shares purchasable hereunder.
2. Issuance of Share Certificates.
2.1 The issuance of certificates for Class A Shares upon the
exercise of this Warrant Certificate shall be made as soon as practicable
thereafter and in any event within thirty (30) days of such exercise without
charge to the Warrantholder, including, without limitation, any tax that may be
payable in respect thereof, and such certificates shall (subject to the
provisions of this Section 2) be issued in the name of, or (subject to
restrictions on transfer contained herein) in such names as may be directed by,
the Warrantholder; provided, however, that the Company shall not be required to
pay any income tax to which the Warrantholder may be subject in connection with
the issuance of this Warrant Certificate or of Class A Shares upon the exercise
of this Warrant Certificate; provided, further, that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate in a name other than that
of the
-2-
<PAGE>
Warrantholder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
2.2 Each person in whose name any such certificate for Class A
Shares is issued shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Warrant Certificate was
surrendered and payment of the Exercise Price (if applicable) and any applicable
taxes was made, irrespective of the date of delivery of such certificate, except
that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares at the close of business on the next succeeding
date on which the stock transfer books are open.
3. Restrictions on Transfer.
3.1 Investment Representation and Transfer Restriction Legend.
Except as permitted by the Investor Rights Agreement, this Warrant Certificate
may not be sold, assigned, transferred or otherwise disposed, by the
Warrantholder until the first anniversary of the Original Issue Date. The
Warrantholder, by acceptance of this Warrant Certificate, represents and
warrants to the Company that it is acquiring this Warrant Certificate and the
Class A Shares issued or issuable upon exercise hereof (the "Warrant Shares")
for investment purposes only and not with a view towards the resale or other
distribution hereof or thereof except in compliance with applicable securities
laws. Each certificate representing Warrant Shares, unless at the same time of
exercise such Warrant Shares are registered under the Act and no longer subject
to the applicable restrictions, shall bear a legend in substantially the
following form on the face thereof:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW, AND MAY
NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THEY HAVE BEEN
REGISTERED UNDER SUCH LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE. THIS WARRANT AND THE CLASS A SHARES ISSUABLE UPON THE
EXERCISE OF THIS WARRANT ARE SUBJECT TO CERTAIN RESTRICTIONS AGAINST
TRANSFER CONTAINED IN THE INVESTOR RIGHTS AGREEMENT TO WHICH HOLDER IS
A PARTY AND THE ISSUER'S DECLARATION OF TRUST, AS IN EFFECT FROM TIME
TO TIME. A COPY OF SAID INVESTOR RIGHTS AGREEMENT AND DECLARATION OF
TRUST IS AVAILABLE FOR INSPECTION, WITHOUT CHARGE, AT THE OFFICES OF
THE ISSUER.
-3-
<PAGE>
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a distribution under a registration statement covering the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel to the Company, the securities represented thereby may be transferred as
contemplated by such Warrantholder without violation of the registration
requirements of the Act and are no longer subject to the applicable restriction.
4. Exercise Price and Exercise Amount.
4.1 Initial and Adjusted Exercise Price. The initial exercise
price of this Warrant Certificate shall be $35.00 per Class A Share. The
Exercise Price shall be adjusted from time to time pursuant to the provisions of
Section 5 hereof.
4.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price depending upon
the context.
4.3 Exercise Amount. The term "Exercise Amount" shall mean the
Initial Exercise Amount or the adjusted Exercise Amount determined pursuant to
Section 5 depending upon the context.
5. Adjustment of Exercise Amount and Number of Shares.
5.1 For purposes of this Warrant Certificate, "Original Issue
Date" shall mean December 15, 1998.
5.2 The Exercise Amount shall be subject to adjustment from
time to time as follows:
(a) Adjustment for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the Original Issue
Date effect a subdivision of the outstanding Class A Shares, the
Exercise Amount then in effect immediately before the subdivision shall
be proportionately increased and the Exercise Price shall be
proportionately decreased. If the Company shall at any time or from
time to time after the Original Issue Date combine the outstanding
Class A Shares, the Exercise Amount then in effect immediately before
the combination shall be proportionately decreased and the Exercise
Price shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(b) Adjustment for Certain Dividends and Distributions. In the
event the Company at any time, or from time to time, after the Original
Issue Date shall make or issue, or fix a record date for the
determination of holders of Class A Shares entitled to receive, a
dividend or other distribution payable in additional Class A Shares,
then in each such event the Exercise Amount then in effect shall be
increased
-4-
<PAGE>
as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date,
to an amount equal to the amount determined by multiplying the Exercise
Amount then in effect by a fraction:
(i) the numerator of which shall be the total number
of Class A Shares issued and outstanding immediately prior to
the time of such issuance or the close of business on such
record date plus the number of Class A Shares issuable in
payment of such dividend or distribution; and
(ii) the denominator of which shall be the total
number of Class A Shares issued and outstanding immediately
prior to the time of such issuance or the close of business on
such record date;
provided, however, if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on
the date fixed therefor, the Exercise Amount shall be recomputed
accordingly as of the close of business on such record date and
thereafter the Exercise Amount shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or
distributions.
(c) Adjustments for Other Dividends and Distributions. In the
event the Company at any time or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the
determination of holders of Class A Shares entitled to receive, a
dividend or other distribution payable in Securities of the Company
other than Class A Shares, then and in each such event provision shall
be made so that the Warrantholder shall receive upon exercise hereof,
in addition to the number of Class A Shares receivable thereupon, the
amount and type of securities that it would have received had its
Warrant Certificate been exercised for Class A Shares on the date of
such event and had it thereafter, during the period from the date of
such event to and including the actual exercise date, retained such
securities receivable by it as aforesaid during such period giving
application to all adjustments called for during such period.
(d) Adjustment for Reclassification, Exchange, or
Substitution. If the Class A Shares issuable upon exercise of this
Warrant Certificate shall be changed into the same or a different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or share dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets
provided for below), then and in each such event the Warrantholder
shall have the right thereafter to exercise this Warrant Certificate
for the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification, or
other change, by holders of the number of Class A Shares into which
this Warrant Certificate was exercisable immediately prior to such
reorganization, reclassification, or change, all subject to further
adjustment as provided herein.
-5-
<PAGE>
(e) Adjustment for Merger or Reorganization, etc. In case of
any consolidation or merger of the Company with or into another Person
or the sale of all or substantially all of the assets of the Company to
another Person, this Warrant Certificate shall thereafter be
exercisable for the kind and amount of shares of stock or other
securities or property to which a holder of the number of Class A
Shares of the Company deliverable upon exercise of this Warrant
Certificate would have been entitled upon such consolidation, merger or
sale; and, in such case, appropriate adjustment (as determined in good
faith by the Board in form and substance reasonably satisfactory to the
Warrantholder as to compliance with the terms of this paragraph) shall
be made in the application of the provisions in this Section 5 with
respect to the rights and interest thereafter of the Warrantholder, to
the end that the provisions set forth in this Section 5 (including
provisions with respect to changes in and other adjustments of the
Exercise Amount) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon exercise of this Warrant Certificate.
(f) Exercise Price Adjustment. In the event of any adjustment
to the Exercise Amount, the Exercise Price shall be adjusted as
necessary so that the aggregate Exercise Amount multiplied by the
Exercise Price before any adjustment is equal to the aggregate Exercise
Amount multiplied by the Exercise Price after the adjustment (assuming
no exercise of the Warrant Certificate).
(g) Certificate as to Amendments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this
Section 5, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms thereof and
furnish to each Warrantholder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the
written request at any time of any Warrantholder, furnish or cause to
be furnished to such holder the most recent certificate setting forth
(i) such adjustment or readjustment, (ii) the Exercise Amount and
Exercise Price then in effect, and (iii) the number of Class A Shares
and the amount, if any, of other property which then would be received
upon exercise of this Warrant Certificate.
6. Exchange and Replacement of Warrant Certificate.
6.1 On surrender for exchange of this Warrant Certificate, or
any Warrant Certificate or Warrant Certificates issued upon subdivision,
exercise, or transfer in whole or in part of this Warrant Certificate, properly
endorsed, to the Company, the Company at its expense will issue and deliver to
or on the order of the holder thereof a new Warrant Certificate or Warrant
Certificates of like tenor, in the name of such holder or as such holder (on
payment by such holder of any applicable transfer taxes) may direct representing
the right to purchase in the aggregate on the face or faces thereof the number
of Class A Shares set forth on the face or faces of the Warrant Certificate or
Warrant Certificates so surrendered.
-6-
<PAGE>
6.2 In the event this or any subsequently issued Warrant
Certificate is lost, stolen, mutilated or destroyed, the Company may, upon
receipt of a proper affidavit (and surrender of any mutilated Warrant
Certificate), and with respect to a lost or stolen certificate, an indemnity
agreement or security reasonably satisfactory in form and amount to the Company,
in each instance protecting the Company, issue a new Warrant Certificate of like
denomination, tenor and date as the Warrant Certificate so lost, stolen,
mutilated or destroyed. Any such new Warrant Certificate shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant Certificate shall be at any time
enforceable by anyone.
7. Elimination of Fractional Interests.
7.1 The Company shall not issue any fraction of a share in
connection with the exercise of this Warrant Certificate, but in any case where
the Warrantholder would, except for the provisions of this Section 7, be
entitled under the terms of this Warrant Certificate to receive a fraction of a
share upon the exercise of this Warrant Certificate, the Company shall, upon the
exercise of the Warrant Certificate for the largest number of full shares then
called for thereby and receipt of the Exercise Price thereof, pay a sum in cash
equal to the Fair Market Value of such fraction of a share on the day preceding
such exercise. The Warrantholder expressly waives its rights to receive any
fraction of a share or a Warrant Certificate representing a fractional share
upon exercise thereof.
7.2 If the taking of any action would cause an adjustment in
the Exercise Price so that the exercise of this Warrant Certificate while such
Exercise Price is in effect would cause shares to be issued at a price below
their then par value, the Company will take such action as may, in the opinion
of its counsel, be necessary in order that it may validly and legally issue
fully paid and nonassessable Class A Shares upon the exercise of this Warrant
Certificate.
8. Reservation and Listing of Shares. The Company will cause to be
reserved and kept available out of its authorized and unissued Class A Shares
solely for the purpose of issuance upon exercise of this Warrant Certificate the
number of Class A Shares sufficient to permit the exercise in full of this
Warrant Certificate. The Company will take all necessary actions to assure that
such Class A Shares are duly listed upon all exchanges or quoted in all markets,
if any, where other Class A Shares are then currently listed or quoted. The
Company will also take all necessary action, if any, to assure that such Class A
Shares are issued without violation of any law or governmental regulation
applicable to the Company or requirement of any securities exchange on which the
Class A Shares are then listed; provided that the Company shall have no
obligation to effect any registration of such Class A Shares except as required
by the Investor Rights Agreement and provided further that the Company shall
have received all necessary representations (which shall be true) and
cooperation from the holder of the Warrant Certificate to the extent required
for the Company to comply with securities laws applicable to such issuance or
requirements of any exchange or markets on which the Class A Shares are then
listed. Assuming payment in full of the Exercise Price
-7-
<PAGE>
(including for this purpose, through a cashless net exercise), all Class A
Shares issued upon exercise of this Warrant shall be duly issued, fully paid and
nonassessable and free and clear of all liens, charges and encumbrances imposed
upon the Class A Shares by or through the Company except for such liens, charges
or other encumbrances created by or on behalf of the holder thereof or such
restrictions as set forth in the Investor Rights Agreement or the Company's
Declaration of Trust, as amended from time to time.
9. Rights of Warrantholder. The Company may deem and treat the person
in whose name this Warrant Certificate is registered with it as the absolute
owner for all purposes whatever (notwithstanding any notation of ownership or
other writing thereon made by anyone other than the Company) and the Company
shall not be affected by any notice to the contrary. The terms "Warrantholder"
and "holder of the Warrant Certificate" and all other similar terms used herein
shall mean only such person(s) in whose name(s) this Warrant Certificate is
properly registered on the Company's books. However, notwithstanding the
foregoing, no person, entity or group may become a Warrantholder other than the
Warrantholder unless and until (a) the provisions of Section 3.1 hereof have
been complied with, (b) the Company has received an assignment transferring all
right, title and interest in and to this Warrant Certificate, (c) such person,
entity or group represents and warrants in writing that it will be the sole
legal and beneficial owner thereof and (d) if such consent is required by
Section 16, the Company has consented in writing to such person becoming a
Warrantholder.
10. No Voting Rights; Limitations of Liability. No Warrant Certificate
shall entitle the holder thereof to any voting rights or, except as otherwise
provided herein, other rights of a shareholder of the Company, as such.
11. Amendments and Waivers. Any provision of this Warrant Certificate
may be amended or waived, but only pursuant to a written agreement signed by the
Company and the Warrantholder.
12. Severability. Any provision of this Warrant Certificate which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Warrant
Certificate affecting the validity or enforceability of such provision in any
other jurisdiction.
13. Counterparts. This Warrant Certificate may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Warrant Certificate shall become effective when counterparts
hereof executed on behalf of the Company and the Warrantholder shall have been
received.
-8-
<PAGE>
14. Entire Agreement. This Warrant Certificate constitutes the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.
15. Notices. Any notice or demand authorized by this Warrant
Certificate to be given or made by the Warrantholder to or on the Company or to
be given or made by the Company to or on the Warrantholder shall be sufficiently
given or made if sent in writing by first-class mail, postage prepaid or by
overnight courier, addressed as follows:
(a) If to the Warrantholder, to the address for such
holder as shown on the books of the Company.
(b) If to the Company, to:
Starwood Financial Trust
1114 Avenue of the Americas
27th Floor
New York, New York 10036
Attention: Spencer Haber
with copies to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carlson
and:
Katten, Muchin & Zavis
525 West Monroe Street - Suite 1600
Chicago, Illinois 60661
Attention: Nina B. Matis
or at such other address as the registered holder or the Company may hereafter
have advised the other.
16. Successors. All the covenants, agreements, representations and
warranties contained in this Warrant Certificate shall bind the parties hereto
and their respective heirs, executors, administrators, distributees, successors
and assigns; provided that the Warrant Certificate may not be assigned by the
original Warrantholder (i) prior to the first anniversary of the date hereof or
(ii) to any Competitor (as defined in the Investor Rights Agreement) without the
prior written consent of the Company.
-9-
<PAGE>
17. Headings. The Section headings in this Warrant Certificate have
been inserted for purposes of convenience only and shall have no substantive
effect.
18. Law Governing. This Warrant Certificate is delivered in the State
of New York and shall be construed and enforced in accordance with, and governed
by, the laws of the State of New York (without giving effect to the choice of
law principle of such state), regardless of the jurisdiction of creation or
domicile of the Company or its successors or of the holder at any time hereof.
19. The Trust. Each of the parties hereto acknowledges and agrees that
the name AStarwood Financial Trust@ is a designation of the Company and its
Trustees (as Trustees but not personally) under the Company's Declaration of
Trust, and all persons dealing with the Company shall look solely to the
Company's assets for the enforcement of any claims against the Company, and the
Trustees, officers, agents and security holders of the Company assume no
personal liability for obligations entered into on behalf of the Company, and
their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
-10-
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant Certificate
by its duly authorized officer as of the day and year first above written.
STARWOOD FINANCIAL TRUST
a Maryland real estate investment trust
By:___________________________________
Name: Jay Sugarman
Title: CEO and President
HOLDER
By:___________________________________
Name:
Title:
<PAGE>
ASSIGNMENT FORM
(To Be Executed By The Holder of This Warrant
In Order to Assign This Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _____________________________ this Warrant and all rights evidenced thereby
and does irrevocably constitute and appoint __________________, attorney, to
transfer the said Warrant on the books of STARWOOD FINANCIAL TRUST.
-----------------------------
Signature
-----------------------------
-----------------------------
Address
Dated: _________________________
<PAGE>
SUBSCRIPTION FORM
(To Be Executed By The Warrantholder
In Order to Exercise The Warrant Certificate)
The undersigned, pursuant to the provisions set forth in the within
Warrant Certificate, hereby irrevocably elects to exercise the right to purchase
________ Class A Shares of Starwood Financial Trust covered by such Warrant
Certificate, and herewith tenders _________ having a fair market value of
$________ in full payment of the Exercise Price for such shares (which may
include foregoing receipt of ___ Class A Shares as per Section 1.1 of the
Warrant Certificate).
-----------------------------
Signature
-----------------------------
-----------------------------
Address
Dated: _____________________
- ------------ ------------
NUMBER SHARES
- ------------ ------------
SFTPA-00_ ORGANIZED UNDER THE LAWS OF THE **_________**
STATE OF MARYLAND
STARWOOD FINANCIAL TRUST
SERIES A PREFERRED SHARES OF BENEFICIAL INTEREST, par value $0.01
See Reverse for
Certain Definitions
This is to Certify that __________________ is the owner of ___________________
__________________ fully paid and non-assessable shares of the above Trust
transferable only on the books of the Trust by the holder thereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
Witness, the seal of the Trust and the signatures of its duly authorized
officers.
Dated December 15, 1998
/s/ /s/
Chief Financial Officer and Secretary Chief Executive Officer and President
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts
survivorship and not as tenants to Minors Act
in common ___________________
Additional abbreviations may also be used (State)
though not in the above list.
==========================BEGINNING OF RED HERRING==============================
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
==============================END OF RED HERRING================================
For value received ____________ hereby sell, assign, and transfer unto
(Please insert social security
or other identifying number
of assignee)
[ ]
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including
postal zip code of Assignee)
________________________________________________________________________________
________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
_____________________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated:_______________________
In the presence of
______________________________ ________________________________________
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of December
15, 1998, between Starwood Financial Trust, a Maryland real estate investment
trust (the "Company"), and the investors listed on Exhibit A hereto
(individually, an "Investor" and collectively, the "Investors").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Investors desire to purchase Series A Preferred Shares of
Beneficial Interest of the Company, par value $.01 per share (the "Series A
Preferred"), and Warrants (the "Warrants") to purchase Class A Shares of
Beneficial Interest of the Company, par value $1.00 per share (the "Class A
Shares"), and the Company desires to sell shares of Series A Preferred and
Warrants to the Investors.
NOW, THEREFORE, the Company and the Investors agree as follows:
1. Purchase of Securities.
1.1. Purchase of Series A Preferred and Warrants. Upon the terms and
subject to the conditions of this Agreement, the Company hereby agrees to sell
and the Investors hereby agree to purchase an aggregate of (i) 4,400,000 shares
of Series A Preferred (the "Investor Shares") and (ii) Warrants to purchase
6,000,000 Class A Shares (the "Investor Warrants") for an aggregate purchase
price of $220,000,000 (the "Purchase Price"). The amount of Investor Shares and
Investor Warrants being acquired by each Investor is set forth opposite such
Investor's name on Exhibit A hereto. Each of the Investor's obligations
hereunder shall be several. At the Closing (as hereinafter defined) each
Investor will pay or tender to the Company in immediately available funds its
allocable portion of the Purchase Price and the Company shall deliver to each
Investor its respective Investor Shares and Investor Warrants.
1.2. Issuance of Series A Preferred and Warrants; Execution of
Additional Agreements.
(a) At the Closing, the Company shall issue and deliver to each
Investor acquiring shares of Series A Preferred a certificate or certificates
representing the number of Investor Shares to be acquired by such Investor
pursuant hereto, which certificate or certificates shall be registered in such
Investor's name, and shall be in the form agreed upon by the Company and the
Investors. The Investor Shares shall have the rights, preferences and
limitations set forth in the Articles Supplementary of the Company attached as
Exhibit B hereto (the "Articles Supplementary"). At the Closing, the Company and
the Investors shall execute and deliver the Ownership Limit Waiver Agreement in
the form attached as Exhibit C hereto (the "Ownership Waiver").
(b) At the Closing, the Company shall issue and deliver to each
Investor acquiring Warrants a certificate or certificates representing the
number of Investor Warrants to be acquired by such Investor pursuant hereto,
which certificate or certificates shall be registered in such Investor's name,
and shall be in the form attached as Exhibit D hereto (the "Warrant
Certificate").
<PAGE>
(c) At the Closing, the Company, the Investors, Starwood Mezzanine
Investors, L.P., a Delaware limited partnership ("Starwood Mezzanine"), SOFI-IV
SMT Holdings, L.L.C., a Delaware limited liability company ("SOFI IV"), and B
Holdings, L.L.C., a Delaware limited liability company ("BLLC", and together
with Starwood Mezzanine and SOFI IV, "Starwood"), shall execute and deliver the
Investor Rights Agreement setting forth the rights and obligations of the
parties hereto with respect to the Investor Shares, Investor Warrants and the
Class A Shares issuable upon exercise of the Investor Warrants (the "Underlying
Class A Shares") and certain obligations of Starwood in the form attached as
Exhibit E hereto (the "Investor Rights Agreement," and together with the
Articles Supplementary, the Ownership Waiver and the Warrant Certificates, the
"Additional Agreements").
1.3. Closing. The issuance and delivery of the Investor Shares and
Investor Warrants by the Company to the Investors and the delivery of the
allocable portion of the aggregate Purchase Price to the Company by the
Investors and related transactions contemplated by this Agreement (the
"Closing"), will take place at the offices of Morrison & Foerster LLP, 1290
Avenue of the Americas, New York, New York, at 10:00 A.M. on December 14, 1998
(the "Closing Date"), or at such other time and place as the Company and the
Investors may agree orally or in writing. The Closing shall take place
concurrently with and shall be conditioned upon the consummation of the
transaction contemplated by the Asset Purchase and Sale Agreement, dated
December 14, 1998 by and among Lazard Freres Real Estate Fund L.P., a Delaware
limited partnership, Lazard Freres Real Estate Fund II L.P., a Delaware limited
partnership, Prometheus Mid-Atlantic Holding, L.P., a Delaware limited
partnership, SDJ Capital II, Ltd., a Cayman Islands exempted company, Atlantic
Preferred II LLC, a New York limited liability company, Indian Preferred LLC, a
New York limited liability company, Prometheus Investment Holding, L.P., a
Delaware limited partnership, the Company, SFT II, Inc., a Delaware corporation,
Starwood Cayman Bonds, Inc., a Delaware corporation, and Starwood D.C., Inc., a
Delaware corporation (the "Asset Purchase Agreement"), which Asset Purchase
Agreement shall be in full force and effect without modification or default.
1.4. Unauthorized Representations. Without in any way limiting any
other disclaimer or limitation set forth in this Agreement, and without in any
way limiting or disclaiming any of the Company's representations and warranties
set forth in this Agreement, the Investors expressly acknowledge and agree that
no Affiliate of the Company and no director, trustee, officer, manager,
attorney, agent, employee, accountant, consultant, advisor or representative of
the Company or any Affiliate of the Company is authorized to make any
representation or warranty regarding the transaction contemplated hereby, and
that neither the Company nor the Company's Affiliates, nor any director,
trustee, officer, manager, attorney, agent, employee, accountant, consultant,
advisor or representative of the Company or any Affiliate of the Company has
made any representation whatsoever, express or implied, regarding the Company,
its Subsidiaries (defined below) or the Securities (defined below), except for
the representations and warranties set forth in this Agreement. As used in the
Agreement, unless the context otherwise requires, "Affiliate" shall have the
meaning set forth in the Investor Rights Agreement.
2
<PAGE>
2. Representations and Warranties of the Investors.
Each Investor, severally and not jointly, represents and warrants to
the Company as follows:
2.1. No Registration of Shares. The Investor is aware that the offer
and sale of the Investor Shares and Investor Warrants and, when and if issued,
the Underlying Class A Shares (the Investor Shares, Investor Warrants and Class
A Shares issuable upon exercise of the Investor Warrants are collectively
referred to herein as the "Securities"), have not been registered under the
Securities Act of 1933, as amended (the "Act"), that such offer and sale are
intended to be exempt from registration under the Act and the rules promulgated
thereunder by the Securities and Exchange Commission (the "SEC"), and that the
Securities cannot be sold, assigned, transferred or otherwise disposed of unless
they are subsequently registered under the Act or an exemption from such
registration is available. The Investor is also aware that sales, assignments,
transfers and other dispositions of the Securities may be further restricted by
state securities laws, the Company's Amended and Restated Declaration of Trust,
as filed with the Maryland Department of Assessment and Taxation (the "MDAT") on
June 18, 1998 and as amended by the Articles of Amendment filed with the MDAT on
December 14, 1998 (the "Declaration of Trust"), as supplemented by the Articles
Supplementary, the Warrant Certificate and the Investor Rights Agreement.
2.2. Suitability of Investment.
(a) The Investor understands that there is no established market for
the Investor Shares or Investor Warrants and that no public market for the
Investor Shares or Investor Warrants is presently foreseeable.
(b) The Investor is acquiring the Securities for its own account for
investment and not with a view towards the resale, transfer or distribution
thereof, nor with any present intention of distributing the securities, but
subject, nevertheless, to any requirement of law that the disposition of the
Investor's property shall at all times be within the Investor's control, and
subject to the restrictions in the Declaration of Trust, Articles Supplementary,
Warrant Certificates and Investor Rights Agreement, without prejudice to the
Investor's right at all times to sell or otherwise dispose of all or any part of
such securities under a registration under the Act or under an exemption from
such registration.
(c) The Investor is an "accredited investor" within the meaning of Rule
501 of Regulation D of the Act.
(d) The Investor has sufficient knowledge and experience in financial
and business matters so as to be able to evaluate the risks and merits of its
investment in the Company, and it is able financially to bear the risks thereof.
The Investor has had an opportunity to conduct such due diligence, investigation
and analysis of the Company, its Subsidiaries and the Securities and to discuss
the business, management and financial affairs of the Company with management of
the Company as the Investor deems necessary or appropriate with respect to its
investment in the Company.
3
<PAGE>
2.3. Power; Authority; Enforceability. The Investor has full power and
legal right to enter into, execute and deliver this Agreement and the Investor
Rights Agreement and to perform its obligations hereunder and thereunder. All
action on the part of the Investor necessary for the authorization, execution
and delivery of this Agreement and the Investor Rights Agreement and for the
performance of all obligations of the Investor hereunder and thereunder has been
taken. This Agreement has been, and, as of the Closing the Investor Rights
Agreement will be, duly executed and delivered by the Investor and will
constitute valid and legally binding obligations of the Investor, enforceable in
accordance with their respective terms.
2.4. Organization. Each of Lazard Freres Real Estate Fund II L.P. and
Lazard Freres Real Estate Offshore Fund II L.P. is duly organized and in good
standing as a limited partnership under the laws of the State of Delaware. LF
Mortgage REIT ("REIT Investor") is duly organized and validly existing as a real
estate investment trust in good standing under the laws of the State of
Maryland.
2.5. Brokerage and Finder Fees. No Investor nor any of its respective
officers, directors, general partners, agents, employees or Affiliates, has
engaged or authorized any broker or finder, other than Merrill Lynch & Co., to
act, directly or indirectly, on its behalf, in connection with the transactions
contemplated by this Agreement, or has consented to or acquiesced in anyone so
acting, and it knows of no claim by any person for compensation for so acting or
of any basis for such a claim. The Company and its Affiliates will have no
liability for the fees, expenses or other amounts payable to Merrill Lynch & Co.
arising out of the transactions contemplated by this Agreement or the Asset
Purchase Agreement.
2.6. Ownership Limitations.
(a) The Investor has received a copy of the Declaration of Trust and
Articles Supplementary and understands the restrictions on transfers and
ownership of the Company's shares included therein.
(b) The Investor is not (i) an "employee benefit plan" as defined in
and subject to ERISA, (ii) a "plan" as defined in and subject to Section 4975 of
the Code or (iii) an entity any portion or all of the assets of which are
deemed, pursuant to United States Department of Labor Regulation ss.2510.3-101
or otherwise pursuant to ERISA, to be, for any purpose of ERISA or Section 4975
of the Code, assets of any "employee benefit plan" or "plan" described in clause
(i) or (ii) above which invests in such entity by virtue of such investment. As
used herein, "ERISA" means the Employee Retirement Act of 1974, as amended.
4
<PAGE>
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Investors as follows:
3.1. Organization and Qualification.
(a) The Company has been duly organized and is validly existing as a
real estate investment trust in good standing under the laws of the State of
Maryland and is duly qualified as a foreign organization to transact business
and is in good standing in each jurisdiction in which such qualification is
required, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect (as hereinafter defined). The Company has all
requisite trust power and authority: (i) to own and operate its assets and
properties and to carry on its business as currently conducted, (ii) to enter
into this Agreement and each Additional Agreement, instrument or document to be
executed by the Company in connection herewith at the Closing, (iii) to sell,
issue and deliver the Securities hereunder and (iv) to consummate the
transactions contemplated hereby and thereby. For purposes of this Agreement,
"Material Adverse Effect" means a change or effect (or any development or fact
of which the Company has actual knowledge or has been informed in writing or of
which senior personnel have been informed that could reasonably be expected to
result in any change or effect in all cases that is particular to the Company or
its business and not the industry in which the Company operates or the financial
markets generally) that is materially adverse to the (x) business, properties,
assets, condition (financial or otherwise) or results of operations of the
Company and the Subsidiaries, taken as a whole, (y) ability of the Company and
the Subsidiaries, taken as a whole, to conduct business in the manner in which
it is currently conducted or (z) ability of the Company to consummate the
transactions contemplated hereby without material delay or impairment.
(b) Except as set forth on Schedule 3.1 or Schedule 3.14 hereto, the
Company has no subsidiaries or any other equity interests in any corporation,
partnership, trust, limited liability company, association or other entity or
person. Each of the Company's subsidiaries (the "Subsidiaries") has been duly
organized and is validly existing under the laws of its jurisdiction of
organization and is duly qualified as a foreign organization to transact
business and is in good standing in each jurisdiction in which such
qualification is required, except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. Each Subsidiary has all
requisite corporate, partnership, limited liability company or other power and
authority to own and operate its assets and properties and to carry on its
business as currently conducted.
3.2. Authorization. All board of trustee action on the part of the
Company necessary for (i) the authorization, execution and delivery of this
Agreement and each Additional Agreement, instrument and document to be executed
by the Company at the Closing in connection herewith, (ii) the authorization,
issuance, sale and delivery of the Securities (including, without limitation,
the issuance of the Underlying Class A Shares upon the exercise of the Investor
Warrants), and (iii) the performance of all obligations of the Company hereunder
and thereunder has been taken. No shareholder or other trust action is required
for any of the actions contemplated by this Agreement or any Additional
Agreement. This Agreement has been and, as of the Closing, the Articles
Supplementary, Investor Rights Agreement and Warrant Certificates will be, duly
executed and delivered by the Company and constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws from time to time in
effect that affect creditors' rights generally, and by legal and equitable
limitations on the availability of specific remedies.
5
<PAGE>
3.3. Capitalization. Immediately preceding the Closing, the Company's
entire authorized share capital will consist of 70,000,000 Class A Shares,
35,000,000 Class B Shares, par value $.01 per share (the "Class B Shares" and
together with the Class A Shares, the "Common Shares"), and 4,400,000 Series A
Preferred Shares, having the rights and obligations set forth in the Declaration
of Trust of the Company, as amended by the Articles Supplementary filed with the
MDAT on December 14, 1998. As of the close of business on September 30, 1998,
there were (i) 52,407,718 Class A Shares and 26,203,859 Class B Shares issued
and outstanding, and (ii) 534,773 Class A Shares duly reserved for issuance upon
the conversion of Class B Shares and 2,485,838 Class A Shares duly reserved for
issuance upon the exercise of options. All of the issued and outstanding Common
Shares have been duly authorized and validly issued, are fully paid and
nonassessable and were issued in compliance with all applicable U.S. federal and
state securities laws in all material respects. Except as set forth on Schedule
3.3, as contemplated herein and pursuant to the Plan (as defined below), since
September 30, 1998, the Company has not issued any Common Shares or any
preferred shares. Except for (i) options to purchase Class A Shares that have
been or may be granted pursuant to the Company's 1996 Share Incentive Plan (the
"Plan"), (ii) the conversion rights of the Class B Shares into Class A Shares at
a rate of 49 Class B Shares for each Class A Share, (iii) the obligation of the
Company pursuant to the Declaration of Trust to issue one Class B Share for
every two Class A Shares that are issued, subject to adjustment in the event
Class B Shares are exchanged for Class A Shares, (iv) the Investor Warrants, (v)
this Agreement and (vi) as set forth on Schedule 3.3, there are no outstanding
or authorized preemptive rights, conversion rights, options, warrants, calls,
stock appreciation rights, convertible securities or other rights or agreements
of any character obligating the Company to issue, transfer, sell or acquire any
of its share capital or any other of its securities. Except as disclosed on
Schedule 3.3 or in the Company SEC Documents (as hereinafter defined) or as
contemplated by the Investor Rights Agreement, the Company is not party to, nor
does it have any knowledge of, any agreement with respect to the voting of the
Common Shares.
3.4. Valid Issuance. The Investor Shares have been duly authorized and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable, and the issuance of the Investor Shares, will not be
subject to preemptive or other similar rights that have not been waived. Upon
execution and delivery thereof by the Company in accordance with the terms of
this Agreement, the Investor Warrants will be exercisable for Class A Shares in
accordance with their terms. The Underlying Class A Shares have been duly
authorized and when issued, and when value has been given therefor as provided
herein and in the Warrant Certificates, the Underlying Class A Shares will be
validly issued, fully paid and nonassessable; and the issuance of the Underlying
Class A Shares is not subject to preemptive or other similar rights that have
not been waived other than the obligation of the Company pursuant to the
Declaration of Trust to issue one Class B Share for every two Class A Shares
that are issued, subject to adjustment in the event Class B Shares are exchanged
for Class A Shares. Except as set forth in the Declaration of Trust, the
Articles Supplementary, the Warrant Certificates and the Investor Rights
Agreement, upon issuance, the Investor Shares and Warrants will be free of all
liens, adverse claims, pledges, charges, proxies, voting trusts, security
interests, agreements and encumbrances of any kind whatsoever ("Liens") imposed
by or through the Company except for any Liens that may be imposed by or on
behalf of the Investors. The Company will reserve and keep available at all
times, free of preemptive rights except as otherwise set forth in this Section
3.4, a sufficient number of authorized Class A Shares to provide for the
issuance of the Underlying Class A Shares upon exercise of the Investor
Warrants.
6
<PAGE>
3.5. Conflicting Instruments; Valid Contracts.
(a) The execution and delivery of this Agreement and each Additional
Agreement, does not, and the consummation of the transactions contemplated
hereby and thereby and compliance with the terms hereof and thereof will not (i)
conflict with or result in any violation of (a) the laws of the State of
Maryland or any other applicable statutory or regulatory requirements, except
for such conflicts or violations that would not have a Material Adverse Effect
or (b) any provision of the Company's Declaration of Trust or By-Laws, (ii)
conflict with, result in a violation or breach of, or constitute a default (or
give rise to any right of termination, revocation, cancellation, acceleration or
any other right) under any of the terms, conditions or provisions of any loan
agreement, note, bond, mortgage, indenture, deed of trust, license, lease,
contract, commitment or arrangement to which the Company is a party or by which
it is bound, or by or to which any of its properties or assets may be bound or
subject (collectively, "Company Contracts"), except for those Company Contracts
disclosed on Schedule 3.5 hereto with respect to which the Company is required
to obtain a consent or waiver from the other parties to such Company Contract
(the "Third Party Consents"), (iii) result in the creation or imposition of a
Lien on any properties or assets owned or leased and operated by the Company,
(iv) conflict with or result in a violation or breach of any judgment, order,
decree, writ, injunction, statute, law, ordinance, rule or regulation
determination or award applicable to the Company or any of its properties or
assets, (v) violate or result in the revocation or suspension of any permit held
by the Company or (vi) assuming the representations and warranties of the
Investors set forth in Section 2.6 are true, cause the Company to fail to
qualify to be taxed as a domestically-controlled, non-pension-held "real estate
investment trust" (as defined in the Code) and the Rules and Regulations
thereunder) (a "REIT") for the year ending December 31, 1998, except in the case
of clauses (ii), (iii), (iv) and (v) for such conflicts, violations, breaches,
defaults, Liens, revocations or suspensions that could not, individually or in
the aggregate, have a Material Adverse Effect.
(b) To the Company's knowledge, the Company Contracts (other than the
Investments (as hereinafter defined)) are in full force and effect and have not
been breached by the Company except for such breaches that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has not received written notice of any breach by the
Company or by the other parties thereto of such Company Contracts that has not
been cured. All Third Party Consents have been, or as of the Closing, will have
been, obtained.
3.6. Government Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
governmental authority on the part of the Company is required in connection with
the valid execution and delivery of this Agreement, (assuming the
representations and warranties of the Investors set forth in Section 2 are true)
the offer, sale, issuance or delivery of the Securities, or the consummation of
the transactions contemplated by this Agreement and each Additional Agreement,
except for filing of the Articles Supplementary with the MDAT and required
filings with the SEC and the American Stock Exchange.
7
<PAGE>
3.7. SEC Filings and Memorandum. Since January 1, 1998, the Company has
filed in a timely manner all reports required to be filed by it pursuant to the
federal securities laws and the rules and regulations of the SEC promulgated
thereunder (the "Company SEC Documents"), all of which, at the time such Company
SEC Documents were filed, complied in all material respects with the
requirements of the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Documents. None of the Company SEC
Documents (including all financial statements included therein, and exhibits and
schedules thereto, and documents incorporated by reference therein), at the time
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company has not filed any report or other document with the SEC
since November 13, 1998.
3.8. Financial Information. The financial statements of the Company
included in the Company SEC Documents (i) comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby, (iii) fairly present (subject, in
the case of the unaudited statements, to normal, recurring audit adjustments and
the absence of footnotes) the consolidated financial position of the Company and
its subsidiaries as of the dates thereof and the consolidated results of their
operations and their cash flow statements for the periods then ended, and (iv)
are correct and complete in all material respects, and are materially consistent
with the Company's books and records, which books and records are accurate and
complete in all material respects. The pro forma financial data included in the
Company's Form 10-Q for the six months ended June 30, 1998 has been prepared in
accordance with the applicable rules and guidelines of the SEC with respect to
pro forma financial data, and the adjustments used therein are appropriate to
give effect to the transaction or circumstance referred to therein.
3.9. Litigation. Except as disclosed on Schedule 3.9 hereto or the
Company SEC Documents, there is no action, suit, arbitration, investigation or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or its properties or assets that could, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
8
<PAGE>
3.10. No Violations. The Company is not in violation of any law,
statute, regulation, rule, ordinance, judgment, decree or order of, or any
restriction imposed by, any federal, state or municipal entity having
jurisdiction over it or any agency thereof in respect of the conduct of its
business or the ownership of its properties or assets that could reasonably be
expected to have a Material Adverse Effect. The Company is not in violation of
or in default under any obligation, agreement, covenant or condition contained
in its Declaration of Trust or By-laws, which violation or default could,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
3.11. Absence of Certain Changes or Events. Except as set forth in the
Company SEC Documents since December 31, 1997, the Company and the Subsidiaries
have conducted their respective businesses in the ordinary course. Except as set
forth on Schedule 3.11, since December 31, 1997, there has not been any Material
Adverse Effect.
3.12. Licenses, Permits, etc. The Company has all licenses, permits,
franchises or other governmental authorizations or approvals necessary for the
ownership or operation of its property or to the conduct of its business, which
if violated or not obtained could reasonably be expected to result in a Material
Adverse Effect. The Company has not received written notice of any potential
revocation or non-renewal of any such licenses, permits, franchises or other
governmental authorizations necessary to its business, except for revocations or
non-renewals that would not have a Material Adverse Effect.
3.13. Liabilities. Except as set forth in Schedule 3.13 hereto or the
Company SEC Documents, the Company has no liabilities or obligations of any
nature (whether absolute, accrued, contingent or otherwise) except for current
liabilities incurred in the ordinary and usual course of business since
September 30, 1998 consistent with the past practices of the Company or that
could not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
3.14. Investments. As used in this Section 3.14, "Company" means
Starwood Financial Trust and its wholly-owned subsidiaries.
(a) Except as otherwise disclosed in the Company SEC Documents or
Schedule 3.14, (i) the Company owns no real property; (ii) all of the leases
under which the Company holds or uses real property or assets as a lessee are in
full force and effect, and the Company is not in default in respect of any of
the terms or provisions of any of such leases and no claim has been asserted by
anyone adverse to the Company's rights as lessee under any of such leases, or
affecting or questioning the Company's rights to the continued possession or use
of the leased property or assets under any such leases; and (iii) the Company
owns and has good, valid and marketable title to all of the Investments (as
hereinafter defined) and all other material assets purported to be owned by it,
free and clear of any liens, adverse claims, pledges, charges, security
interests or encumbrances of any kind whatsoever.
9
<PAGE>
(b) Schedule 3.14 hereto is a complete and accurate list of, and
specified information with respect to, all loans and other investments of the
Company in another person (the "Investments") as of November 30, 1998. Except as
set forth in Schedule 3.14, there is no monetary default, breach, violation or
event of acceleration on the part of any person (other than the Company) that is
a party thereto beyond any applicable grace period existing under any of the
Investments. The Company has not given any notice (that is still outstanding) of
any non-monetary default, breach, violation or event of acceleration and, to the
Company's knowledge, except as set forth in Schedule 3.14, there is no
non-monetary default, breach, violation or event of acceleration existing under
any of the Investments that could, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect. The Company has not received
any written notice nor has any senior personnel of the Company been informed of
any default, breach or violation by the Company of any of the terms of any
Investment, and to the Company's knowledge, no such default, breach or violation
exists, except, in either instance, for such defaults, breaches or violations
that could not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect, and no person has any right of offset
against the Company in respect of any Investment. To the Company's knowledge,
there is no monetary default or any material default, breach, violation or event
of acceleration under any loan or security ranking in priority senior to any
Investment of the Company.
(c) The Company has not made any claim, nor does it have knowledge of
any basis for a claim, that the representations and warranties of the
Contributors (as such term is defined therein) in the Contribution Agreement,
dated February 1, 1998, between the Company and Starwood Mezzanine Investors,
L.P. and Starwood Opportunity Fund IV, L.P., were not true and correct in any
material respect at the time they were made.
(d) The Company has not assumed any liabilities or responsibilities of
any third party with respect to applicable laws relating to pollution or the
discharge of materials into the environment, including common law relating to
damage to property or injury to persons and laws relating to the protection of
the environment and the health and safety of persons (the "Environmental Laws").
3.15. Registration Rights. Except as set forth in the Investor Rights
Agreement or as referenced in the Company SEC Documents or on Schedule 3.15, the
Company is not under any obligation to register any of its securities, including
securities into or for which outstanding securities may be converted or
exchanged.
3.16. Investment Company. The Company is not, and, after giving effect
to the issuance of the Securities, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
3.17. REIT Status. Assuming the representations and warranties of the
Investors set forth in the Ownership Waiver are true and assuming the persons
and entities listed on Exhibit B thereto do not "Beneficially Own" (as defined
therein) any interest in Starwood Opportunity Fund IV, L.P. or Starwood
Mezzanine Investors, L.P., the Company's legal organization and method of
operation enable it to satisfy the requirements for qualification as a
domestically controlled, non-pension-held REIT under the Code and the Rules and
Regulations thereunder.
10
<PAGE>
3.18. Private Offering. None of the Company, its Affiliates or any
person acting on their or any of their Affiliates' behalf, has engaged, or will
engage, in connection with the offering of the Securities, in any communication
or other form of general solicitation or general advertising within the meaning
of Rule 502(c) under the Act. Assuming the representations and warranties of the
Investors set forth in Section 2 are true, the offer, issuance and sale of the
Securities in the manner contemplated by this Agreement are exempt from the
registration and prospectus delivery requirements of the Act, and have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
3.19. Brokerage and Finder Fees. Neither the Company nor any of its
officers, directors, general partners, agents, employees or Affiliates, has
engaged or authorized any broker or finder, to act, directly or indirectly, on
its behalf, in connection with the transactions contemplated by this Agreement,
or has consented to or acquiesced in anyone so acting on its behalf, and it
knows of no claim by any person for compensation for so acting on its behalf or
of any basis for such a claim.
3.20. Certain Transactions. Except as set forth in the SEC Documents
and except for arm's-length transactions pursuant to which the Company or any
Subsidiary makes payments in the ordinary course of business upon terms no less
favorable than the Company or any Subsidiary could obtain from third parties and
other than the grant of stock options pursuant to the Plan, none of the
officers, trustees, or employees of the Company or any Subsidiary is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as officers, trustees and employees), including any agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, trustee or such employee or any corporation,
partnership, trust, limited liability company or other entity in which any
officer, trustee, or employee has a substantial interest or is an officer,
director, trustee or partner.
3.21. Employees. The Company has no employees.
3.22. Powers of Attorney. The Company has not given any powers of
attorney to any third parties.
4. Conditions of the Investors' Obligations at Each Closing. The
obligation of each of the Investors to purchase the Investor Shares and the
Investor Warrants is subject to the fulfillment or waiver at or before the
Closing of each of the following conditions, any or all of which may be waived
by the Investor:
4.1. Representations and Warranties; No Material Adverse Effect. The
representations and warranties of the Company contained in Section 3 hereof
shall be true and correct in all material respects at and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of the Closing, except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct as of such date.
Between the date hereof and the Closing, there shall have been no Material
Adverse Effect.
4.2. Performance. The Company shall have performed and complied with
all agreements, obligations, covenants and conditions contained in this
Agreement that are required to be performed or complied with by the Company at
or before the Closing.
4.3. Asset Purchase Agreement. The transactions contemplated by the
Asset Purchase Agreement shall have been consummated.
11
<PAGE>
4.4. Resolutions and Other Matters. The Company shall have delivered to
the Investors resolutions of the Board of Trustees of the Company authorizing
the transactions contemplated hereby, certified by the Secretary of the Company,
which certificate shall also contain additional certifications customary in
transactions such as those contemplated by this Agreement.
4.5. Articles Supplementary. The Company shall have filed the Articles
Supplementary with the MDAT, which Articles Supplementary shall be in full force
and effect without modification.
4.6. Opinion of Company Counsel. Mayer, Brown & Platt, counsel to the
Company, shall deliver opinions addressed to the Investors, dated the date of
the Closing, substantially in the forms attached as Exhibit F hereto (as to
corporate law and related matters) and Exhibit G hereto (as to REIT status and
related matters), and Ballard Spahr Andrews & Ingersoll, LLP, Maryland counsel
to the Company, shall deliver an opinion addressed to the Investors, dated the
date of the Closing, substantially in the form of Exhibit H hereto.
4.7. Other Agreements. The Additional Agreements shall have been
executed and delivered by the parties thereto and shall be in full force and
effect.
4.8. Consents. All required third party consents shall have been
obtained by the Company.
4.9. No Proceedings, Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be in
effect, nor shall any action, suit or proceeding be pending or threatened with
respect thereto; it being agreed by each of the Company and each of the
Investors, however, that it shall use its best efforts to prevent the entry of
any such injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
5. Conditions of the Company's Obligations at Each Closing. The
obligations of the Company are subject to the fulfillment or waiver at or before
the Closing of each of the following conditions, any or all of which may be
waived by the Company:
5.1. Representations and Warranties. The representations and warranties
of each of the Investors contained in Section 2 hereof shall be true and correct
in all material respects at and as of the Closing with the same effect as though
such representations and warranties had been made at and as of the date of the
Closing.
12
<PAGE>
5.2. Performance. Each of the Investors shall have performed and
complied with all agreements, obligations and conditions in this Agreement that
are required to be performed or complied with by such Investor at or before the
Closing.
5.3. Opinion of Investors' Counsel. Morrison & Foerster LLP, counsel
for the Investors, shall deliver an opinion addressed to the Company, dated the
date of the Closing, substantially in the form attached as Exhibit I hereto, and
Ballard Spahr Andrews & Ingersoll, LLP, Maryland counsel to the Investors, shall
deliver an opinion addressed to the Company, dated the date of the Closing,
substantially in the form of Exhibit J hereto.
5.4. Other Agreements. The Investor Rights Agreement shall have been
executed and delivered by each of the Investors.
5.5. No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect, nor
shall any such order or injunction be pending or threatened with respect
thereto; it being agreed by each of the Company and each of the Investors,
however, that it shall use its best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered.
6. 1933 Act Legend.
6.1. 1933 Act Legend. Each certificate representing Securities shall
bear a legend substantially in the following form:
The securities represented by this certificate have not been registered
under the United States Securities Act of 1933, as amended (the "Act"),
and may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered under the
Act or, except as otherwise permitted pursuant to Rule 144 under the
Act or another exemption from registration under the Act and an opinion
of counsel reasonably satisfactory to the Company is obtained to the
effect that such registration is not required.
The securities represented by this certificate are subject to
certain restrictions against transfer contained in the
Investor Rights Agreement (including Section 11.3 thereof) to
which the holder is a party, and the issuer's Declaration of
Trust, as in effect from time to time. A copy of said Investor
Rights Agreement and Declaration of Trust is available for
inspection, without charge, at the office of the issuer.
The first paragraph of the foregoing legend, shall be removed from the
certificates representing any Series A Preferred, Warrant and Underlying Class A
Shares, at the request of the holder thereof, at such time as (i) they are sold
pursuant to an effective registration statement, (ii) they become eligible for
resale pursuant to Rule 144(k) under the Act or another provision of Rule 144 of
the Act pursuant to which all such securities could be sold in a single
transaction and an opinion of counsel reasonably satisfactory to the Company is
obtained to such effect, or (iii) an opinion of counsel reasonably satisfactory
to the Company is obtained to the effect that the proposed transfer is exempt
from the Act.
13
<PAGE>
7. Indemnification; Survival.
7.1. Indemnification.
(a) The Company shall indemnify and hold harmless each Investor and its
respective directors, officers, employees, agents, partners, affiliates,
successors and permitted assigns from and against any and all (x) liabilities,
losses or damages ("Loss") and (y) reasonable out-of-pocket expenses, including
without limitation attorneys' fees and expenses ("Expense") incurred by such
party in connection with (i) its breach or failure to perform its obligations
under this Agreement and (ii) any breach of any warranty or the inaccuracy of
any representation, or misrepresentation or material omission, made by it in
this Agreement; provided, however, that the obligation of the Company to
indemnify and hold the Investors harmless pursuant to this Section 7.1 shall be
limited to an amount equal to the Purchase Price.
(b) Each of the Investors shall indemnify and hold the Company and its
trustees, officers, employees, agents, partners, affiliates, successors and
assigns harmless from and against any and all Losses and Expenses incurred by
the Company in connection with (i) such Investor's respective breach or failure
to perform its obligations under this Agreement and (ii) any breach of any
warranty or the inaccuracy of any representation, or misrepresentation or
material omission, made by it in this Agreement; provided, however, that the
obligation of each Investor to indemnify and hold the Company harmless pursuant
to this Section 7.1 shall be limited to the payment by such Investor of an
amount equal to such Investor's applicable portion of the Purchase Price paid by
such Investor pursuant to this Agreement.
7.2. Notice of Claims. If a party believes that any of the persons
entitled to indemnification under this Section 7 has suffered or incurred any
Loss or incurred any Expense, such party shall notify the indemnifying party
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement, any Additional Agreement, or any certificate delivered pursuant
hereto in respect of which such Loss or Expense shall have occurred; provided,
however, that the omission by such indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its indemnification
obligation under this Section 7 except to the extent that such indemnifying
party is materially damaged as a result of such failure to give notice. If any
action at law or suit in equity is instituted against a third party with respect
to which any of the persons entitled to indemnification under this Section 7
intends to claim any liability or expense as Loss or Expense under this Section
7, any such person shall promptly notify the indemnifying party of such action
or suit as specified in this Section 7.2 and in Section 7.3.
7.3. Third-Party Claims. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceeding by
a third party, the indemnified persons shall give notice thereof to the
indemnifying party not later than 20 business days prior to the time any
response to the asserted claim is required, if possible, and in any event within
15 days following the date such indemnified person has actual knowledge thereof;
provided, however, that the omission by such indemnified party to give notice as
provided therein shall not relieve the indemnifying party of its indemnification
obligation under this Section 7 except to the extent that such indemnifying
party is materially damaged as a result of such failure to give notice. In the
event of any such claim for indemnification resulting from or in connection with
a claim or legal proceeding by a third party, the indemnifying party may, at its
sole cost and expense, assume the defense thereof; provided, however, that
counsel for the indemnifying party, who shall conduct the defense of such claim
or legal proceeding, shall be reasonably satisfactory to the indemnified party;
14
<PAGE>
and provided, further, that if the defendants in any such actions include both
the indemnified persons and the indemnifying party and the indemnified persons
shall have reasonably concluded based on a written option of counsel that there
may be legal defenses or rights available to them which have not been waived and
are in actual or potential conflict with those available to the indemnifying
party, the indemnified persons shall have the right to select one law firm
reasonably acceptable to the indemnifying party to act as separate counsel, on
behalf of such indemnified persons, at the expense of the indemnifying party.
Unless the indemnified persons are represented by separate counsel pursuant to
the second proviso of the immediately preceding sentence, if an indemnifying
party assumes the defense of any such claim of legal proceeding, such
indemnifying party shall not consent to entry of any judgment, or enter into any
settlement, that (a) is not subject to indemnification in accordance with the
provisions of this Section 7, (b) provides for injunctive or other nonmonetary
relief affecting the indemnified persons or (c) does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
indemnified persons of an unconditional release from all liability with respect
to such claim or legal proceeding, without the prior written consent of the
indemnified person (which consent, in the case of clauses (b) and (c), shall not
be unreasonably withheld); and provided, further, that unless the indemnified
persons are represented by separate counsel pursuant to the second proviso of
the immediately preceding sentence, the indemnified persons may, at their own
expense, participate in any such proceeding with the counsel of their choice
without any right of control thereof. So long as the indemnifying party is in
good faith defending such claim or proceeding, the indemnified persons shall not
compromise or settle such claim or proceeding without the prior written consent
of the indemnifying party, which consent shall not be unreasonably withheld. If
the indemnifying party does not assume the defense of any such claim or
litigation in accordance with the terms hereof, the indemnified persons may
defend against such claim or litigation in such manner as they may deem
appropriate, including, without limitation, settling such claim or litigation
(after giving prior written notice of the same to the indemnifying party) on
such terms as the indemnified persons may deem appropriate, and the indemnifying
party will promptly indemnify the indemnified persons in accordance with the
provisions of Section 7.
7.4. Effects of Closing Over Known Unsatisfied Conditions or Breached
Representations, Warranties or Covenants. Notwithstanding anything to the
contrary set forth herein, if any party elects to proceed with the Closing with
actual knowledge of any failure to be satisfied of any condition in its favor,
or the breach of any representation, warranty or covenant by any other party,
the condition that is unsatisfied or the representation, warranty or covenant
that is breached as of the Closing Date shall be deemed to be waived by such
party, and such party shall be deemed to fully release and forever discharge
such other party and the indemnified parties on account of any and all claims,
demands or charges, known or unknown, with respect to the same.
7.5. Survival of Representations and Warranties. All representation and
warranties contained in this Agreement shall survive through the close of
business on April 30, 2000 notwithstanding any due diligence, investigation or
analysis by or on behalf of the Investors.
15
<PAGE>
7.6. Limitation on Remedies. Notwithstanding anything contained in this
Agreement or any document, instrument or agreement referred to herein and in
addition to all other limitations on remedies available to the Investors on
account of the failure of the Company to observe or perform any term or
provision hereof or thereof or the breach by the Company of any representation
or warranty contained herein or therein, by executing and delivering this
Agreement each of the Investors and the Company hereby absolutely and
irrevocably waives: (a) any right to consequential or punitive damages arising
out of or relating to the transactions contemplated hereby, and (b) any right to
offset amounts due to the Company on the one hand or the Investors on the other
hand under any other agreement between the Company or any of its Affiliates on
one hand, and the Investors or any Affiliate of the Investors on the other hand,
against any damages on account of default by any of the Company hereunder on the
one hand or the Investors on the other hand.
8. Miscellaneous.
8.1. Expenses. Each party will bear its own expenses incurred in
connection with the transactions contemplated hereby.
8.2. Successors and Assigns. This Agreement may not be assigned by an
Investor or the Company without the prior written consent of the other party
hereto; provided, however, that any Investor may assign, in whole or in part,
its rights and obligations under this Agreement to any Lazard Holder (as such
term is defined in the Investor Rights Agreement) concurrently with and to the
extent such Lazard Holder would then own some or all of the Securities. Nothing
in this Agreement, express or implied, is intended to confer upon any party,
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
8.3. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER DETERMINED, IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (AS PERMITTED BY SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW (OR ANY SIMILAR SUCCESSOR
PROVISION)) WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW RULE THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE INTERNAL LAWS OF THE
STATE OF NEW YORK TO THE RIGHTS AND DUTIES OF THE PARTIES.
8.4. Jurisdiction; Venue. For the purposes of any suit, action or
proceeding involving this Agreement or any of the Additional Agreements, each of
the Company and each Investor hereby expressly submits to the jurisdiction of
all federal and state courts sitting in the State of New York and agrees that
any order, process, notice of motion or other application to or by any such
court or a judge thereof may be served within or without such court's
jurisdiction by registered mail or by service in hand, provided that a
reasonable time for appearance is allowed, and each party agrees that such
courts shall have exclusive jurisdiction over any such suit, action or
proceeding commenced by either or both of said parties. Each of the Company and
each Investor hereby irrevocably waives any objection that it may have now or
hereafter to the laying of venue of any suit, action or proceeding arising out
of or relating to this Agreement brought in any federal or state court sitting
in the State of New York and hereby further irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
16
<PAGE>
8.5. No Public Announcement. No party hereto shall, without the
approval of the other parties hereto (which may not be unreasonably withheld),
make any press release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that such party
shall be so obligated by law, in which case the other parties hereto shall be
advised in advance and the parties hereto shall use their reasonable efforts to
cause a mutually agreeable release or announcement to be issued.
8.6. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which together shall be deemed
to constitute one and the same instrument.
8.7. Captions and Headings. The captions and headings used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting this Agreement.
8.8. Notices. Unless otherwise provided, any notice or other
communication required or permitted to be given or effected under this Agreement
shall be in writing and shall be deemed effective upon personal or facsimile
delivery to the party to be notified or one business day after deposit with a
recognized courier service, delivery fees prepaid, and addressed to the party to
be notified at the following respective addresses, or at such other addresses as
may be designated by written notice; provided that any notice of change of
address shall be deemed effective only upon receipt:
If to the Company: Starwood Financial Trust
1114 Avenue of the Americas
New York, New York 10036
Attn: Spencer Haber, Chief Financial Officer
Phone: 212-930-9400
Fax: 212-930-9494
with a copy to: Mayer, Brown, & Platt
1675 Broadway
New York, New York 10019-5820
Attn: James B. Carlson, Esq.
Phone: 212-506-2500
Fax: 212-262-1910
and Katten, Muchin & Zavis
325 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attn: Nina B. Matis, Esq.
Phone: 312-902-5560
Fax: 312-902-1061
If to the Investors: Notice shall be sent
to the person and
address indicated on
Exhibit A hereto.
with a copy to: Lazard Freres Real Estate
Investors, L.L.C.
30 Rockefeller Center
63rd Floor
New York, New York 10020
Attn: Marjorie L. Reifenberg, Esq.
General Counsel
Phone: 212-632-6000
Fax: 212-332-5980
17
<PAGE>
and Morrison & Foerster LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Jeffrey S. Marcus, Esq.
Phone: 212-468-8000
Fax: 212-468-7900
8.9. Amendments and Waivers. Any term of this Agreement may be amended,
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of each of the Company and each Investor. Any amendment
or waiver effected in accordance with this Section 8.9 shall be binding upon
each holder of any Securities purchased under this Agreement at the time
outstanding, each future holder of all such Securities, and the other parties to
this Agreement.
8.10. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provisions shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.11. Waiver of Jury Trial. The parties hereto irrevocably waive the
right to a jury trial in connection with any legal proceeding relating to this
Agreement on any of the Additional Agreements or the enforcement of any
provision hereof or thereof.
8.12. Entire Agreement. This Agreement, the Exhibits and Schedules
hereto and the Additional Agreements constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements, understandings and discussions between them, and all documents
delivered by or on behalf of the Company to the Investors and its agents and
representatives, with respect to such subject matter.
The balance of this page intentionally left blank.
18
<PAGE>
8.1. The Trust. Each of the parties acknowledges and agrees that the
name "Starwood Financial Trust" is a designation of the Company and its Trustees
(as Trustees but not personally) under the Declaration of Trust, and all persons
dealing with the Company shall look solely to the Company's assets for the
enforcement of any claims against the Company, and the Trustees, officers,
agents and security holder of the Company assume no personal liability for
obligations entered into on behalf of the Company, and their respective
individual assets shall not be subject to the claims and any person relating to
such obligations.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STARWOOD FINANCIAL TRUST
By: /s/ Jay Sugarman INVESTORS:
Name: Jay Sugarman
Title: President & Chief
Executive Officer LAZARD FRERES REAL ESTATE FUND II L.P.
By: Lazard Freres Real Estate Investors
L.L.C., General Partner
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Title: Principal
LAZARD FRERES REAL ESTATE OFFSHORE
FUND II L.P.
By: LF Real Estate Investors Company,
General Partner
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Title: Director
LF MORTGAGE REIT
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Title: President
<PAGE>
EXHIBIT A
Investors
Series A
Preferred Shares Warrants
---------------- --------
LF Mortgage REIT 4,400,000
30 Rockefeller Center
63rd Floor
New York, NY 10020
Lazard Freres Real Estate 2,975,400
Fund II. L.P.
30 Rockefeller Center
63rd Floor
New York, NY 10020
Lazard Freres Real Estate 3,024,600
Offshore Fund II. L.P.
30 Rockefeller Center
63rd Floor
New York, NY 10020
All notices with respect to the above Investors should be sent to:
Lazard Freres Real Estate Fund II L.P.
30 Rockefeller Center
63rd Floor
New York, NY 10020
Phone: 212-632-6000
Fax: 212-332-5980
Attn: Robert P. Freeman
<PAGE>
SECURITIES PURCHASE AGREEMENT
Exhibits
--------
A Investors
B Articles Supplementary
C Ownership Waiver
D Warrant Certificate
E Investor Rights Agreement
F Corporate Opinion of Company Counsel
G REIT Opinion of Company Counsel
H Maryland Opinion of Company Counsel
I Corporate Opinion of Investors' Counsel
J Maryland Opinion of Investors' Counsel
Asset Purchase And Sale Agreement
by and between
Lazard Freres Real Estate Fund L.P.,
a Delaware limited partnership
Lazard Freres Real Estate Fund II L.P.,
a Delaware limited partnership
Prometheus Mid-Atlantic Holding, L.P.,
a Delaware limited partnership
Atlantic Preferred II LLC,
a New York limited liability company
Indian Preferred LLC,
a New York limited liability company
Prometheus Investment Holding, L.P.,
a Delaware limited partnership
SDJ Capital II, Ltd., a Cayman Islands exempted company
as Sellers
and
Starwood Financial Trust,
a Maryland real estate investment trust
SFT I, INC.,
a Delaware corporation
SFT II, INC.,
a Delaware corporation
Starwood Cayman Bonds, Inc.,
a Delaware corporation
Starwood D.C. Inc.,
a Delaware corporation
Starwood Cayman Bonds GP, Inc., a Delaware corporation
as Buyer
dated as of
December 15, 1998
<PAGE>
Asset Purchase And Sale Agreement
This Asset Purchase and Sale Agreement (the "Agreement") is entered
into as of the 15th day of December, 1998, by and between Lazard Freres Real
Estate Fund L.P., a Delaware limited partnership ("Fund I"), Lazard Freres Real
Estate Fund II L.P., a Delaware limited partnership ("Fund II"), Prometheus
Mid-Atlantic Holding, l.p., a Delaware limited partnership, ("PMAH"), SDJ
Capital II, LTD., a Cayman Islands exempted company ("SDJ"), Atlantic Preferred
II LLC, a New York limited liability company ("Atlantic"), Indian Preferred LLC,
a New York limited liability company ("Indian") and Prometheus Investment
Holding, L.P., a Delaware limited partnership ("PIHLP"; Fund I, Fund II, PMAH,
SDJ, Atlantic, Indian and PIHLP, each a "Seller Party" and collectively,
"Sellers") and Starwood Financial Trust, a Maryland real estate investment trust
("Starwood"), SFT I, Inc., a Delaware corporation ("SFT I"), SFT II, Inc., a
Delaware corporation ("SFT"), Starwood Cayman Bonds, Inc., a Delaware
corporation ("SCB"), Starwood Cayman Bonds GP, Inc., a Delaware corporation
("SCBGP") and Starwood D.C., Inc., a Delaware corporation ("SDC"; Starwood, SFT,
SFT I, SCB, SCBGP and SDC, each a "Buyer Party" and collectively, "Buyer").
Recitals
A. Sellers are the owners of certain Assets (as hereinafter defined)
which are listed on Schedule 1, attached hereto.
B. Sellers desire to sell and Buyer desires to buy all as the case may
be, of Sellers' right, title and interest in (or in the case of the Remic
Interest otherwise acquire as described herein) the Purchased Assets.
C. Sellers and Buyer hereby enter into this Agreement setting forth the
terms and conditions of the sale and purchase of the Purchased Assets.
Agreement
Now, Therefore, in consideration of the foregoing, the mutual promises
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sellers and Buyer agree as
follows:
ARTICLE I
Definitions
For purposes of this Agreement, the following terms shall have the
meanings indicated below:
1.1. "Act" has the meaning set forth in Section 2.5 of this Agreement.
1.2. "Actual Knowledge" shall mean as to each Seller Party, solely the
present actual knowledge of Douglas N. Wells, Klaus P. Kretschmann, Robert P.
Freeman, Anthony E. Meyer, John Moore or Henry Herms.
1.3. "Adjusted Purchase Price" means as to each Purchased Asset, the
Schedule Price for such Asset, subject to the adjustments set forth in Section
2.3.
1.4. "Affiliate" means with respect to a specified Person another
Person who:
1.4.1. Directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control
with the specified Person;
1.4.2. Is a partner, director, trustee or officer of the
specified Person or of any Person covered by Section 1.4.1 above; or
1.4.3. Is a partner of a partnership or joint venture or a
beneficiary or trustee of a trust or other owner which owns any stock
or other evidence of beneficial ownership in the specified Person or
any Person covered by Section 1.4.1 above.
No holder of a Preferred Equity Interest shall, for the purposes of
this Agreement, be deemed an Affiliate of the Borrower in which such holder owns
such Preferred Equity Interest or any Interested Person with respect to such
Borrower.
1.5. "Agreement," as defined in the introductory paragraph of this
document, means this Asset Purchase and Sale Agreement, including all Schedules,
as the same may be amended, supplemented or otherwise modified or replaced, in
writing, from time to time.
1.6. "Applicable Value" has the meaning set forth in Section 5.4.3.
1.7. "Asset" means a Loan (including the associated Hedge, if
applicable), Preferred Equity Interest or Remic Interest listed on the Asset
Schedule.
1.8. "Asset File" means, with respect to any Asset and to the exclusion
of any Excluded Document, the Due Diligence Materials.
1.9. "Asset Schedule" means the schedule identifying the Assets
attached hereto as Schedule 1.
1.10. "Assignment" means an instrument or instruments to be delivered
by a Seller Party to transfer the Purchased Assets hereunder, which instrument
shall be in in form and substance acceptable to each applicable Buyer Party and
each Seller Party as to each of its Purchased Assets.
1.11. "Assumed Liabilities" means all costs, expenses (including
reasonable attorneys' fees and expenses), claims, losses, commitments,
liabilities and obligations of any kind or nature, accrued or contingent,
arising out of, or related to, the ownership, use, possession, enjoyment or
operation of any of the Purchased Assets (including the Series B Obligation) and
the Remic Interest (to the extent of the Buyer's direct or indirect interest
therein following the Closing) except for (a) funding obligations of any Seller
Party in respect to any Loan scheduled to occur after the Closing which were not
disclosed in the Due Diligence Materials and which Buyer is not otherwise aware
of, (b) funding obligations of any Seller Party in respect to any Loan under the
Collateral Documents for such Loan which require such Seller Party to fund any
amounts prior to the Closing Date if and to the extent that such Seller Party
has not funded such amount, (c) liabilities with respect to which a breach of a
representation or warranty by any applicable Seller Party in respect of the
Asset in question has occurred (determined solely for the purposes of this
definition without reference to the limitations of Sections 5.4.3 and 5.6), (d)
any accounting for escrowed funds in respect to any of the Loans not paid or
credited to Buyer at the Closing, (e) the Wiener Litigation and (f) the Hedge
Claim.
1.12. "Assumption Agreement" means an agreement between a Buyer Party
and a Seller Party with respect to the assumption of the Assumed Liabilities by
a Buyer Party in form and substance acceptable to each Buyer Party, as
applicable, and each Seller Party as to each of its Purchased Assets.
1.13. "Atlantic" has the meaning set forth in the introductory
paragraph of this Agreement.
1.14. "Borrower" means, as to each Loan, the obligor(s) in respect to
such Loan.
1.15. "Business Day" means any day other than a Saturday, a Sunday, a
federal holiday or another day on which commercial banks in New York are
authorized or required to be closed for the conduct of their regular banking
operations.
1.16. "Buyer" has the meaning set forth in the introductory paragraph
of this Agreement.
1.17. "Buyer Party" has the meaning set forth in the introductory
paragraph of this Agreement.
1.18. "Buyer Excluded Matters" has the meaning set forth in Section 5.5
of this Agreement.
1.19. "Cash Management Provisions" has the meaning set forth in Section
5.2.17 of this Agreement.
1.20. "Certificate" means with respect to the Remic Interest,
collectively the certificates or other instruments evidencing such Remic
Interest.
1.21. "Closing" means the closing of the purchase and sale of the
Assets pursuant to Article III.
1.22. "Closing Date" means December 15, 1998.
1.23. "Closing Location" means, at Sellers' election, the offices of
(a) Lazard Freres Real Estate Investors L.L.C., 30 Rockefeller Plaza, New York,
NY 10020, or (b) Morrison & Foerster LLP, 1290 Avenue of the Americas, New York,
NY 10104 or (c) such other place as may be mutually agreed upon by Buyer and
Sellers.
1.24. "Collateral Documents" means, for each Loan, the Note, the
Security Documents and any other documents or instruments in Seller's Possession
creating, perfecting, evidencing, governing or otherwise relating to the
collateral security or credit support for the Note (exclusive of Excluded
Documents), which other documents or instruments may include, to the extent
applicable, any security agreement, financing statement, assignment of rents,
pledge agreement, guaranty, indemnification agreement, assignment of stock or
partnership units, letter of credit, title insurance policy, fire and casualty
insurance policy, flood hazard insurance policy, continuation statements,
assumption agreements, proxies, consents, management and other contract
assignments, consolidation agreements, spreader agreements, subordination
agreements, intercreditor agreements, reserve agreements, lockbox agreements,
cash management agreements, bank recognition agreements and tenant and other
estoppel certificates.
1.25. "Confidentiality Agreements" means that certain Confidentiality
Agreement, dated August 5, 1998, by Starwood in favor of Sellers and (b) that
certain Confidentiality Agreement, dated September 24, 1998, by Fund II and
Lazard Freres Real Estate Offshore Fund II, L.P. in favor of Starwood.
1.26. "Control" of any Person means, either (i) ownership directly, or
through other entities, of more than five percent (5%) of all beneficial equity
interests in such Person or (ii) the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, through the ownership of voting securities, by contract or otherwise.
1.27. "Current Amounts" has the meaning set forth in Section 2.3.1 of
this Agreement.
1.28. "CP/L" shall mean LF CP/L Limited, Inc., a Delaware corporation
and the holder of equity interests in City Place Limited Partnership,
Largo-Springhill Limited Partnership and Zapco 1500 Investment, L.P.
1.29. "Cut-off Date" means September 30, 1998.
1.30. "D.C. Retail Asset" shall mean the Asset identified as "D.C.
Retail" on the Asset Schedule.
1.31. "D.C. Retail Participation Agreement" means a participation
agreement pursuant to which SDC will be the holder of a senior participation
interest in the D.C. Retail Asset and Fund I will retain a junior participation
interest in the D.C. Retail Asset which is to be concurrently transferred by
Fund I to SDC at the Closing.
1.32. "Due Diligence Materials" means the files made available for
Buyers' review, which files contain, to the extent in Seller's Possession (but
in any event excluding Excluded Documents), the following with respect to each
Asset: (a) in the case of each Asset which is a Loan, (i) copies of the
Collateral Documents, (ii) payment histories, (iii) most recent financial
statements of borrowers and guarantors, (iv) most recent appraisals, (v)
guaranty and escrow agreements, if applicable, (vi) ground lease and occupancy
lease agreements, if applicable, (vii) most recent rent roll and property
operating statements and (viii) title insurance policies and preliminary title
reports, (b) in the case of each Asset which is a Preferred Equity Interest
copies of the Preferred Equity Documents; (c) in the case of each Hedge, copies
of the (i) ISDA Master Agreements, including the schedules and confirmations and
(ii) Interest Rate Cap Agreements; (d) in the case of the Remic Interest, (i)
copies of the Operative Documents, (ii) all financial statements and reports,
(iii) payment histories and (iv) other relevant documents and (e) in the case of
each of the Assets, all other relevant documents including, all environmental
site assessments, if applicable, asbestos surveys, if applicable, plats or
surveys, if applicable, opinions of counsel, financing statement searches and
all other documents, memoranda, reports, and correspondence maintained in the
ordinary course of each Seller's business as a part of the files relating to the
Assets in which such Seller has an interest or the enforcement, origination,
acquisition, servicing or administration thereof (including each Seller's
credit, servicing and management files). "Due Diligence Materials" includes all
Written Updates. Neither the term "Due Diligence Materials" nor any of its
constitutent components shall, except as referenced in Schedule 4 hereto,
include with respect to any Asset, correspondence, drafts, memoranda or similar
pre-asset acquisition or origination closing materials generated by or on behalf
of the applicable Seller Party and/or any of the applicable Interested Persons
with respect to any of the Assets prior to the closing at which such Asset was
acquired or originated by the applicable Seller Parties and which do not modify,
terminate, waive, release or subordinate any such Asset or create any defenses
to enforcement of an Asset or liability for the holder of an Asset.
1.33. "Excluded Documents" means (i) any reports, analyses, appraisals,
valuations, credit evaluations, credit ratings and memoranda generated
internally by any Seller Party or its Affiliates or its or their advisors,
attorneys, accountants or consultants (other than asset management reports, if
any), (ii) any confidential communication between any Seller Party and its legal
counsel, including, without limitation, any material subject to attorney-client
privilege, (iii) memoranda, notes, analyses, summaries and correspondence by or
between any Seller Party and its Affiliates or their respective partners,
members, shareholders, participants, managers, officers, directors, employees or
agents; provided, that, without limiting the foregoing, it is understood that
"Excluded Material" is not intended to include correspondence relating solely to
any of the Assets or any Secured Property with Loan obligors, senior lenders,
ground lessors, tenants of the Property in question, lockbox or depositary banks
(or other financial institutions performing similar functions) with respect to
the revenues of the Secured Property in question, servicers, property managers,
guarantors, indemnitors, sureties, insurers (including title insurers), letter
of credit issuers, and any partners or members in any of the Borrowers which are
not also Seller Parties or their Affiliates. The inclusion, in a Seller's sole
judgment and without any obligation, of any Excluded Document in any Asset File
shall not affect or limit in any manner such Seller's right to exclude such
Excluded Document from any other Asset File or to exclude any other Excluded
Document from any Asset File.
1.34. "Fund I" has the meaning set forth in the introductory paragraph
of this Agreement.
1.35. "Fund I Partnership Agreement" means that Second Amended and
Restated Limited Partnership Agreement of Fund I dated as of October 24, 1994.
1.36. "Fund II" has the meaning set forth in the introductory paragraph
of this Agreement.
1.37. "GAAP" means generally accepted accounting principles and
practices, consistently applied, and applicable in the United States.
1.38. "Governing Instruments": (A) in the case of a corporation, the
articles or certificates of incorporation or charter and by-laws of such
corporation and all amendments thereto, and resolutions and/or minutes, duly
adopted by the board of directors or comparable authority of each such
corporation (and the stockholders, if required), approving the transactions
anticipated hereby and the execution and delivery of this Agreement and the Sale
Documents; (B) in the case of a partnership, the partnership agreement and the
certificate of partnership of such partnership and all amendments thereto, and
resolutions or authorizations, duly adopted by the partners of such partnership,
approving the transactions anticipated hereby and the execution and delivery of
this Agreement and the Sale Documents; (C) in the case of a limited liability
company, the certificate of formation or articles of organization and operating
or limited liability company agreement and all amendments thereto, and
resolutions, actions or other approvals, duly adopted by the managers of such
limited liability company (and the members, if required), approving the
transactions anticipated hereby and the execution and delivery of this Agreement
and the Sale Documents; (D) in the case of a real estate investment trust, the
Declaration of Trust and by-laws of such real estate investment trust and all
amendments thereto and all resolutions and/or minutes, duly adopted by the board
of trustees (and shareholders, if required) approving the transactions
anticipated thereby and the execution and delivery of this Agreement and the
Sale Documents; (E) in the case of a Cayman Islands exempted company, the
Memorandum and Articles of Association of such exempted company and all
amendments thereto, and all resolutions and/or minutes, duly adopted by the
board of directors (and members, if required) approving the transactions
anticipated thereby and the execution and delivery of this Agreement and the
Sale Documents; and (F) in the case of a Cayman Islands exempted limited
partnership, the agreement of limited partnership and the certificate of limited
partnership, if any, of such partnership and all amendments thereto and all
resolutions and minutes, duly adopted by the partners of such partnership,
approving the transactions anticipated hereby and the executed and delivery of
this Agreement and the Sale Documents.
1.39. "Guaranty" is defined in the Letter Agreement.
1.40. "Hedge" means each interest rate hedging arrangement that is
referenced as a Hedge on Schedule 1 attached hereto.
1.41. "Hedge Claim" means any claim which may be asserted by The Chase
Manhattan Bank in respect to that certain Rate Floor Transaction identified by
The Chase Manhattan Bank Reference Number 101154.
1.42. "Indemnified Amounts" shall have the meaning set forth in Section
9.3.
1.43. "Indemnified Party" means Sellers, Lazard Freres Real Estate
Offshore Fund, L.P., a Delaware limited partnership, and Lazard Freres Real
Estate Offshore Fund II, L.P., a Delaware limited partnership, and their
respective Affiliates and their respective attorneys, directors, officers,
employees, agents, shareholders, members, managers, participants, partners,
successors, assigns, consultants and affiliates.
1.44. "Indian" has the meaning set forth in the introductory paragraph
of this Agreement.
1.45. "Indemnified Amounts" shall have the meaning set forth in Section
9.3.
1.46. "Insurance Policies" means any title insurance policy(s),
casualty insurance policy(s), credit life or disability insurance policy(s),
private insurance guarantor policy(s), or any other similar types of insurance
coverage documents.
1.47. "Interested Person" means with respect to any Asset, a Person
that is a Borrower or other obligor, or has an Affiliate that is a Borrower or
other obligor on, or in the case of Preferred Equity Interests, in respect to,
such Asset or, if the Asset in question is a Loan, provides collateral security
for the obligations of the Borrower or other obligor on such Asset, or, if the
Asset in question is a Loan, is a guarantor of such Asset or an issuer of or an
account party on a letter of credit securing such Asset or a provider of any
other credit support for such Asset.
1.48. "Key Lease" means any lease demising in excess of 15,000 rentable
square feet of space.
1.49. "Letter Agreement" is defined in the partnership agreement of MD3
Cayman L.P.
1.50. "LFREI" shall mean Lazard Freres Real Estate Investors L.L.C.
1.51. "Loan" means an individual loan that is identified as a Loan on
the Asset Schedule.
1.52. "MD3 Asset" shall mean the Purchased Asset relating to the Remic
Interest.
1.53. "MD3 Cayman L.P." means MD3 Cayman L.P., a Cayman Islands exempt
limited partnership, formed on or about the Closing Date which is the entity to
which SDJ will transfer the Remic Interest at Closing and in which SDJ, SCBGP
and SCB will directly or indirectly, own all of the general and limited
partnership interests.
1.54. "Menlo Letter" shall mean that certain letter from Fund II and
Atlantic in respect to the transfer of the Asset identified as "Montague" on the
Asset Schedule to the Borrower in respect to such Asset.
1.55. "Non-Transferable Rights" means the rights of Buyer as to a claim
for a breach of a representation, warranty or covenant hereunder, with respect
to any Asset.
1.56. "Note" means, with respect to each Loan, the promissory note or
other instrument evidencing the obligation to repay such Loan, as the same is
amended, endorsed or extended in writing prior to the Closing Date and disclosed
to Buyer in a Written Update.
1.57. "Offshore" means Lazard Freres Real Estate Offshore Fund L.P., a
Delaware limited partnership.
1.58. "Offshore II" means Lazard Freres Real Estate Offshore Fund II
L.P., a Delaware limited partnership.
1.59. "Operative Documents" means as to the Remic Interest, to the
extent in Seller's Possession, any private placement memorandums and/or
prospectuses, the related pooling and servicing agreement and any other relevant
documents (exclusive of Excluded Documents) including repurchase agreements and
hedge documentation, if any.
1.60. "Oxford Asset" shall mean the Asset identified as "Oxford" on the
Asset Schedule.
1.61. "Oxford Participation Agreement" means a participation agreement
pursuant to which Fund II will sell a 90% participation interest in the Oxford
Asset to SFT in form and substance acceptable to Fund II and SFT.
1.62. "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust, bank,
unincorporated organization or government or any agency or political subdivision
thereof.
1.63. "Preferred Equity Documents" means as to each Preferred Equity
Interest, to the extent in Seller's Possession, the Governing Instruments of the
Borrower in whom the Preferred Equity Interests are held.
1.64. "Preferred Equity Interest" means each Purchased Asset that is
identified on the Purchased Asset Schedule as an equity interest in a Borrower
(or in the case of Fund I, an equity interest in the holder of an equity
interest in a Borrower) currently held by either Atlantic, Indian or Fund I.
1.65. "PIHLP" has the meaning set forth in the introductory paragraph
of this Agreement.
1.66. "PMAH" has the meaning set forth in the introductory paragraph to
this Agreement.
1.67. "Property" shall mean all real and personal property (tangible
and intangible) associated with each of the Assets whether or not such Property
constitutes Secured Property.
1.68. "Purchase Price" means the price at which Buyer has agreed to
purchase the Purchased Assets purchased hereunder, which price is set forth on
Schedule 2 attached hereto and which is the aggregate of the Schedule Prices for
each of the Purchased Assets.
1.69. "Purchased Asset" means an Asset, or portion thereof or interest
therein, purchased hereunder and listed on the Purchased Asset Schedule.
1.70. "Purchased Asset Schedule" means the schedule identifying the
Purchased Assets to be sold, transferred and conveyed hereunder attached hereto
as Schedule 1A.
1.71. "Reconciliation Date" means the date which is forty-five (45)
days after the Closing Date.
1.72. "Remic Interest" means, collectively, the Assets that are
identified on the Asset Schedule as Commercial Mortgage Pass-Through
Certificates.
1.73. "Required Consents" means as to each Purchased Asset the consents
and approvals described on Schedule 3 in respect of such Purchased Asset.
1.74. "Responsible Party" shall have the meaning set forth in Section
9.4.
1.75. "Reserve Units" shall have the meaning set forth in the Fund I
Partnership Agreement and in the partnership agreement of Offshore.
1.76. "Sale Documents" has the meaning set forth in Section 5.1.2 of
this Agreement.
1.77. "SCB" has the meaning set forth in the introductory paragraph of
this Agreement.
1.78. "Schedule Price" means, with respect to each Purchased Asset, the
amount identified as the "Schedule Price" for such Purchased Asset on Schedule
2, attached hereto.
1.79. "SDC" has the meaning set forth in the introductory paragraph of
this Agreement.
1.80. "SDJ" has the meaning set forth in the introductory paragraph of
this Agreement.
1.81. "SFT I" has the meaning set forth in the introductory paragraph
of this Agreement.
1.82. "Secured Property" means the land, improvements, fixtures,
partnership interests, bank accounts, letters of credit, limited liability
company membership interests, stock, other personal property and other
collateral, a lien on which, or a security interest in which, is provided as
collateral for a Loan.
1.83. "Security Document" means with respect to any Note, a mortgage,
deed of trust, pledge or other security instrument creating a lien on the
Secured Property described therein to secure such Note, as the same is amended,
assigned or extended in writing prior to the Closing Date and disclosed to Buyer
in a Written Update.
1.84. "Sellers" has the meaning set forth in the introductory paragraph
of this Agreement.
1.85. "Seller Excluded Matters" shall have the meaning set forth in
Section 5.5 of this Agreement.
1.86. "Seller Party" has the meaning set forth in the introductory
paragraph of this Agreement.
1.87. "Seller Parties" means any group of more than one Seller Party.
1.88. "Seller's Possession" shall mean as to each Seller Party, the
documents and instruments in such Seller Party's actual possession or custody
(it being understood that documents (exclusive of the Excluded Documents) which
are in the possession of such Seller Party's Affiliates and are reasonably
obtainable by such Seller Party in question shall be deemed to be in such Seller
Party's possession).
1.89. "Senior Loan" means as to any Property, loans senior in priority
to the Loan relating to such Property.
1.90. "Series B Obligation" means any funding obligations of PIHLP as
holder of the Series B Preferred Interest in Commerce Square
Partners-Philadelphia Plaza, L.P. for One Commerce Asset arising under the
applicable Preferred Equity Documents.
1.91. "Starwood" has the meaning set forth in the introductory
paragraph of this Agreement.
1.92. "Surviving Representations" has the meaning set forth in Section
5.6 of the Agreement.
1.93. "Threshold Amount" shall have the meaning set forth in Section
5.4.3 of this Agreement.
1.94. "Wiener Litigation" means the litigation captioned "Joel Wiener
and Jonathan Wiener, Plaintiffs, against Lazard Freres & Co., Lazard Freres Real
Estate Investors Corp., Lazard Freres Real Estate Fund, L.P., et. al.,
Defendants.
1.95. "Written Updates" means, collectively, all periodic written
correspondence, copies of documents and other information sent by Sellers or
their agents to prospective purchasers before the Closing to amend, supplement
or update the Due Diligence Materials.
ARTICLE II
Purchase And Sale Of Assets
2.1. Purchase and Sale. (a) Subject to the terms and provisions set
forth in this Agreement and except as otherwise set forth in 2.1(b) and (c)
below, on the Closing Date each Seller Party shall sell, assign and convey to
the applicable Buyer Party, and such Buyer Party shall buy and accept from each
such Seller Party, all of such Seller Party's right, title and interest in and
to the respective Purchased Assets owned by such Seller Party.
(b) With respect to the D.C. Retail Asset, Fund I shall at Closing, in
connection with Fund I's sale of such Purchased Asset to SDC, transfer the D.C.
Retail Asset to SDC (who shall hold a senior participation interest therein) and
retain a junior participation interest in such Purchased Asset on the terms and
conditions set forth in the D.C. Retail Participation Agreement.
(c) With respect to the Remic Interest, SDJ shall contribute the Remic
Interest to MD3 Cayman L.P. at the Closing in the form of a contribution to the
capital of MD3 Cayman L.P., and concurrently therewith Starwood shall, or shall
cause SCB, to contribute the Purchase Price for the Purchased Asset in the form
of a contribution to the capital of MD3 Cayman L.P., and MD3 Cayman L.P. shall
immediately distribute such Purchase Price to SDJ. SCB, SCBGP and SDJ hereby
acknowledge that (i) MD3 Cayman L.P.'s tax basis in the REMIC Interest
immediately following the Closing will be not less than $49,207,886, (ii) the
aggregate tax basis of SCB and SCBGP in MD3 Cayman L.P. immediately following
the Closing will be not less than $41,826,703 and (iii) SDJ's tax basis in MD3
Cayman L.P. will be not less than $7,381,183.
2.2. Purchase Price and Payment. On the Closing Date, Buyer shall, if
all conditions to its obligations to close have been satisfied or waived, pay to
each Seller Party (or contribute capital pursuant to Section 2.1(c) with respect
to the Remic Interest) for the Purchased Assets then being transferred by such
Seller Party, without deduction or withholding for any taxes, levies, imposts,
duties, deductions, charges or other withholdings, the Adjusted Purchase Price
for such Purchased Assets, by irrevocable federal funds wire transfers to the
account of such Seller Party, in such amounts as such Seller Party may direct at
one or more federally insured financial institutions designated in writing by
such Seller Party.
2.3. Credits, Prorations and Payments on the Assets. Except for the MD3
Asset, the Purchase Price shall be adjusted on the Closing Date on a Purchased
Asset by Purchased Asset basis, and the Purchase Price in respect to the MD3
Asset shall be adjusted on the basis of the Remic Interest, but Current Payments
will be prorated as and when received in accordance with this Section 2.3. If
the amounts required to be paid or credited pursuant to this Section 2.3 cannot
be precisely determined by the Closing Date as to any Purchased Asset or
Purchased Assets, or the Remic Interest, as applicable, or were determined
erroneously on or before the Closing Date as to any Purchased Asset or Purchased
Assets, or the Remic Interest, as applicable, the applicable Seller Parties and
Buyer or MD3 Cayman L.P., as applicable shall make the necessary determination
or redetermination promptly following the Closing for such Purchased Asset or
Purchased Assets or the Remic Interest, as applicable, and the applicable Seller
Party (and in the case of more than one Seller Party, the applicable Seller
Parties) and Buyer or MD3 Cayman L.P., as applicable, shall make the necessary
adjustments through remittances between themselves not later than the
Reconciliation Date (except to the extent any payments on account of Current
Amounts are received later in which case such adjustments shall be made promptly
after receipt of the Current Amounts in question, provided that any Current
Amounts received on account of any of the Preferred Equity Interests after
January 31, 1999 shall not be prorated and shall be retained by Buyer). Without
limitation of the foregoing, on the Reconciliation Date each party that receives
a payment which is due to the other party under this Section 2.3 shall prepare
an accounting of the amounts so received for the benefit of the party entitled
to the same.
2.3.1. Accruing Interest. As to each Purchased Asset or the Remic
Interest, as applicable, all unpaid interest payable currently on or in respect
to Purchased Assets relating to Loans or Remic Interests (calculated at the then
current pay rate in respect to the applicable Asset) and distributions currently
payable in respect to the Preferred Equity Interests from the Cut-off Date
through and including the Closing Date (it being understood that such amounts
payable for the payment period or distribution period, as applicable, in which
the Closing Date occurs shall for the purposes of the foregoing be deemed to be
payable currently) ("Current Amounts") shall belong to Sellers (but only to the
extent allocable to the period prior to and including the Closing Date) and if
received by any Buyer Party or MD3 Cayman L.P., as applicable, shall be paid by
such Buyer Party or MD3 Cayman L.P., as applicable to the applicable Seller
Parties within five (5) Business Days of receipt by such Buyer Party or MD3
Cayman L.P., as applicable. All Current Amounts attributable to periods after
the Closing Date and all accrued interest and distributions and other amounts,
if any, relating to the Purchased Assets or the Remic Interest, as applicable,
which are not payable in or prior to the payment period or distribution period,
as applicable, in which the Closing Date occurs shall belong to Buyer or MD3
Cayman L.P., as applicable. All payments received on or prior to the Cut-off
Date shall, to the extent not allocable to the period following the Closing
Date, belong to the applicable Seller Parties.
2.3.2. [Intentionally Omitted].
2.3.3. Payments After the Cut-off Date. Except as provided herein and
in Sections 2.3.1, 2.3.4 and 2.3.5, (a) any payments with respect to any
Purchased Asset purchased under this Agreement or the Remic Interest, as
applicable, received by any Seller Party after the Cut-off Date, whether before,
on or after the Closing Date, shall be for Buyer's or MD3 Cayman L.P.'s, as
applicable, account and if received prior to the Closing Date, shall be retained
by the applicable Seller Party and credited to Buyer or MD3 Cayman L.P., as
applicable at Closing and, if the Closing occurs and such payment is received by
the Seller Party in question after the Closing Date, shall otherwise be paid to
Buyer or MD3 Cayman L.P., as applicable, within five (5) Business Days of
receipt by such Seller Party; and (b) any other payments Buyer or MD3 Cayman
L.P., as applicable, receives with respect to a Purchased Asset purchased by
Buyer or MD3 Cayman L.P., as applicable, pursuant to this Agreement after the
Closing in respect of such Purchased Asset may be retained by Buyer or MD3
Cayman L.P., as applicable.
2.3.4. Condemnation, Proceeds and Insurance Proceeds. All net
condemnation proceeds and insurance proceeds in respect of any Purchased Asset
(collectively, "Proceeds") received by the applicable Seller Party subsequent to
the Cut-off Date and on or before the Closing Date that are not used to restore
the real property related to such Purchased Asset shall, upon Closing, be
credited to the applicable Buyer Party (subject to the terms of the Oxford
Participation Agreement and the DC Retail Participation Agreement, if
applicable) and to MD3 Cayman L.P. in the case of Proceeds relating to the Remic
Interest. All Proceeds received by the Seller Parties after the Closing shall,
to the extent attributable to the Purchased Assets, be paid to the Buyer
(subject to distributions pursuant to the terms of the Oxford Participation
Agreement and the DC Retail Participation Agreement, if applicable); provided
that all Proceeds received in respect to the Remic Interest shall be paid to MD3
Cayman L.P. Each Seller Party shall be entitled to retain proceeds of insurance
policies obtained by such Seller Party or its Affiliates at their own expense
which are not for the benefit of the Borrower.
2.3.5. [Intentionally Omitted]
2.4. As-Is Purchase. Without in any way limiting any other disclaimers
or limitations set forth in this Agreement, including the provisions of Section
5.4, and without in any way limiting or disclaiming any of Sellers'
representations and warranties set forth in this Agreement, the D.C. Retail
Participation Agreement, the Oxford Participation Agreement, the Menlo Letter
and the MD3 Cayman L.P. partnership agreement, Buyer expressly acknowledges and
agrees to purchase the Purchased Assets taking into account all Property
(including the Secured Property) related to the Purchased Asset in question and
the ownership structures for the direct and indirect owners thereof in their "AS
IS, WHERE-IS" CONDITION "WITH ALL FAULTS" as of the Closing Date as to each of
the Purchased Assets. Buyer acknowledges that no Affiliate of any Seller Party
and no director, officer, manager, attorney, agent, employee, accountant,
consultant, advisor or representative of any Seller Party or any Affiliate of
any Seller Party is authorized to make any representations or warranties
regarding the transactions contemplated hereby and that neither Sellers, nor
Sellers' respective Affiliates, nor any director, officer, manager, attorney,
agent, employee, accountant, consultant, advisor or representative of any Seller
Party or any Affiliate of any Seller Party has made any representation
whatsoever, express or implied, regarding the Purchased Assets or any part
thereof, except for the representations and warranties set forth in this
Agreement, the D.C. Retail Participation Agreement, the Oxford Participation
Agreement, the Menlo Letter and the MD3 Cayman L.P. partnership agreement.
2.5. Not a Security. Buyer acknowledges and agrees that (i) Buyer will
not be relying in any way on the managerial efforts of Sellers with respect to
the Purchased Assets following the Closing Date, (ii) the proposed sale of the
Purchased Assets does not involve, nor is it intended in any way to constitute,
the sale of a "security" within the meaning of the Securities Act of 1933, as
amended (the "Act") or any applicable federal or state securities laws, and
(iii) no inference as to whether the Purchased Assets are or are not
"securities" under such federal or state securities laws shall be drawn from any
of the certifications, representations or warranties made herein.
ARTICLE III
Closing
3.1. Closing. The Closing of the purchase and sale of the Purchased
Assets shall take place at the Closing Location at 12:00 noon, New York City
time, on the Closing Date.
3.2. Conditions Precedent to the Obligations of Sellers. The obligation
of Sellers to sell the Purchased Assets pursuant to this Agreement is subject to
the fulfillment on or prior to the Closing Date of each of the following
conditions, except to the extent waived in writing by Sellers:
3.2.1. All material representations and warranties of Buyer set forth
in Article IV shall be true in all material respects;
3.2.2. All requisite material federal, state and local governmental and
regulatory approvals relating to the transaction contemplated hereby, if any,
required for the transaction contemplated herein to be consummated shall have
been obtained;
3.2.3. The Required Consents, if any, for each Purchased Asset being
transferred have been obtained (unless the requirement to obtain any such
Required Consent for such Purchased Asset is waived by both the Buyer and the
Seller Parties in question); and
3.2.4. The closing of the transactions contemplated by that certain
Securities Purchase Agreement of even date herewith between Starwood Financial
Trust and certain investors named therein shall have occurred simultaneously.
3.2.5. Buyer shall concurrently make all of Buyer's deliveries pursuant
to Section 3.3 below.
3.3. Deliveries by Buyer at Closing. On or prior to 12:00 noon New York
City time on the Closing Date, Buyer agrees to deliver to Sellers and, to the
extent applicable, MD3 Cayman L.P., the following:
3.3.1. Certificates of good standing, or other evidence reasonably
acceptable to Sellers, demonstrating that each Buyer Party is an entity in good
standing under the laws of the jurisdiction in which it is formed;
3.3.2. Evidence reasonably acceptable to Sellers demonstrating that
Buyer's execution and delivery of this Agreement, the Sale Documents and the
other documents delivered pursuant hereto and the consummation of the
transactions contemplated hereby have been duly authorized, by all actions
required under the Governing Instruments of Buyer and that such authorization is
in full force and effect and has not been modified;
3.3.3. Payment of the amounts due under Section 2.2, pursuant to the
terms thereof, to Sellers (or the applicable Seller Parties) by no later than
12:00 noon New York City time on the Closing Date;
3.3.4. The Assumption Agreement for each of the Purchased Assets being
transferred, dated the Closing Date and executed by an authorized signatory of a
Buyer Party, pursuant to which a Buyer Party shall assume the Assumed
Liabilities in respect of such Purchased Assets;
3.3.5. A receipt executed by an authorized signatory of the appropriate
Buyer Party or by an agent of Buyer (which may be an attorney for the Buyer),
designated in writing by an authorized signatory of such Buyer Party, in form
and substance acceptable to each Buyer Party and each Seller Party as to each of
its Purchased Assets, acknowledging receipt of Sellers' deliveries pursuant to
Section 3.4 (with exceptions for any items any Seller is unable to deliver noted
thereon);
3.3.6. The Oxford Participation Agreement, dated the Closing Date and
executed by SFT;
3.3.7. The D.C. Retail Participation Agreement, dated the Closing Date
and executed by SDC; and
3.3.8. Such other documents or instruments as each Seller may
reasonably request and which are reasonably necessary or desirable to complete
the transactions contemplated by this Agreement.
3.4. Conditions Precedent to the Obligations of Buyer. The obligation
of Buyer to buy the Purchased Assets pursuant to this Agreement is subject to
the fulfillment on or prior to the Closing Date of each of the following
conditions, except to the extent waived in writing by Buyer:
3.4.1. Subject to the provisions and limitations set forth in Sections
5.3 through 5.5, all representations and warranties of Seller set forth in
Article V shall be true in all material respects;
3.4.2. All requisite material federal, state and local governmental and
regulatory approvals relating to the transaction contemplated hereby, if any,
required for the transaction contemplated herein to be consummated shall have
been obtained;
3.4.3. The Required Consents, if any, for each Purchased Asset being
transferred shall have been obtained (unless the requirement to obtain any such
Required Consent for such Purchased Asset is waived by both the Buyer and the
Seller Parties in question);
3.4.4. The closing of the transactions contemplated by that certain
Securities Purchase Agreement of even date herewith between Starwood and certain
investors named therein shall have occurred simultaneously; and
3.4.5. Seller shall concurrently make all of Seller's deliveries
pursuant to Section 3.5 below.
3.5. Deliveries by Seller at Closing. On or prior to 12:00 noon New
York City time on the Closing Date, Sellers (or the applicable Seller Parties)
agree to deliver to Buyer, and, to the extent applicable, MD3 Cayman L.P., the
following:
3.5.1. The Assignment;
3.5.2. Certificates of good standing, or other evidence reasonably
acceptable to Buyer, demonstrating that each Seller Party and, to the extent
applicable, MD3 Cayman L.P. is an entity in good standing under the laws of the
jurisdiction in which they are formed;
3.5.3. Evidence reasonably acceptable to Buyer demonstrating that each
applicable Seller Party's execution and delivery of this Agreement and the other
documents delivered pursuant hereto and the consummation of the transactions
contemplated hereby have been fully authorized, by all actions required under
the Governing Instruments of each such Seller Party, and that such authorization
is in full force and effect and has not been modified; and
3.5.4. For each of the Purchased Assets being transferred:
3.5.4.1. For each Purchased Asset which is a Loan and for the D.C.
Retail Asset, an endorsement duly executed by such Seller Party of each original
Note (including in the case of Notes which have been assigned and later amended
and restated, consolidated, split or otherwise modified, all amended and
restated notes, replacement or substitute notes, consolidation and splitter
agreements and other documents effecting any of the foregoing) evidencing a
Loan, either directly or with an allonge to the Note, in the following manner:
"Pay to the order of [__________], a [__________], without recourse and
without representation or warranty by the undersigned, express or
implied, of any nature, except as expressly stated in that certain
Asset Purchase and Sale Agreement dated as of December __, 1998.";
3.5.4.2. For each Purchased Asset which is a Loan and for the D.C.
Retail Asset, an Assignment executed by the Seller Party in question assigning
to the applicable Buyer Party the rights of such Seller Party in the security
for such Loan and the D.C. Retail Asset owned by such Seller Party;
3.5.4.3. For each Purchased Asset which is a Loan and for the D.C.
Retail Asset, an assignment in customary form to the applicable Buyer Party of
the applicable Seller Party's rights as secured party under any financing
statements related to any Loan as to which such Buyer Party has requested an
assignment;
3.5.4.4. To the extent in Seller's Possession, the original Collateral
Documents, or Preferred Equity Documents, as applicable, or if the originals are
not within Seller's Possession, copies thereof to the extent such are in
Seller's Possession;
3.5.4.5. The Asset Files to Buyer and the Asset File for the Remic
Interest to MD3 Cayman L.P.;
3.5.4.6. For each Purchased Asset which is a Loan and for the D.C.
Retail Asset, a notice to the Borrower of the sale of the Loan from such Seller
Party to such Buyer Party, in form and substance acceptable to Buyer and each
Seller Party as to each of its Assets, or such other form as is mutually agreed
upon by such Seller Party and such Buyer Party, executed by Seller;
3.5.4.7. The Oxford Participation Agreement, together with an original
of the Certificate attached thereto in favor of the applicable Buyer Party, in
each case, dated the Closing Date and executed by an authorized signatory of
Fund II;
3.5.4.8. The D.C. Retail Participation Agreement, dated the Closing
Date and executed by an authorized signatory of Fund I; and
3.5.4.9. Such other documents or instruments as Buyer may reasonably
request and which are reasonably necessary or desirable to complete the
transactions contemplated by this Agreement.
3.6. Risk of Loss. Sellers shall deliver, and Buyer shall take,
physical possession of the original Notes, Collateral Documents, Preferred
Equity Documents and the Asset Files for each of the Assets other than the Remic
Interest on the Closing Date at the Closing Location. In the case of the Remic
Certificates, SDJ shall deliver, and SCBGP in its capacity as a general partner
of MD3 Cayman L.P. shall take, physical possession of the Certificates (subject
to the rights of any lender or repurchase facility purchaser holding the
Certificates) and the Asset Files for the Remic Interest on the Closing Date at
the Closing Location. From and after, such delivery of the original Notes,
Certificates, Collateral Documents, Preferred Equity Documents and Asset Files
to Buyer, Sellers shall have no responsibility with respect thereto or otherwise
with respect to the Assets, and all risks of loss or damage with respect to the
Notes, Collateral Documents, Certificates, Preferred Equity Documents or Asset
Files or any other document(s) transferred hereunder, shall thereafter inure to
the Buyer. In the event that Buyer shall designate, in writing to Sellers on or
before the Closing Date, any attorney, escrow agent, custodian delivery or
courier service, or any other person or entity, other than Buyer, to take
delivery, from Sellers, of the original Notes, Certificates, Collateral
Documents, Preferred Equity Documents and Asset Files on the Closing Date, Buyer
shall have all the risk of loss or damage to the original Notes, Certificates,
Collateral Documents, Preferred Equity Documents and Asset Files, and any other
documents transferred hereunder from and after such delivery. Any and all costs
and expenses associated with shipping the original Notes, Certificates,
Collateral Documents, Preferred Equity Documents and Asset Files to any location
other than that specified as the Closing Location shall be borne by the Buyer.
3.7. Transfer and Recordation Taxes; Other Costs. Buyer shall pay all
federal state, county and city transfer, filing and recording fees and taxes,
costs and expenses, and any federal, state, county and city documentary taxes,
if any, relating to the filing or recording of any document or instrument
contemplated hereby, or the assignment of any Collateral Documents or the
Preferred Equity Documents, except formation expenses for MD3. Buyer shall also
be solely responsible for the payment of any and all costs of title insurance
premiums, survey costs, and other expenses of title examination ordered by
Buyer. Each party shall bear its own fees, costs and expenses incurred in
connection with obtaining the Required Consents. As to each Required Consent,
the Seller Party or Seller Parties in question, on the one hand, and the Buyer,
on the other hand, shall each pay one-half of all fees, costs and expenses
required to be paid to any third parties in order to obtain the Required
Consents. Upon written request, Sellers and Buyer shall sign and deliver on the
Closing Date all transfer tax and related forms reasonably required by the other
party or required by applicable law. MD3 Cayman L.P. shall pay the formation
expenses of MD3 Cayman L.P. as to which SCB and SCBGP will jointly pay 85% and
SDJ will pay 15% as additional contributions. Regardless of whether the
transactions contemplated hereunder are completed, Buyer and Seller shall each
pay all of their respective expenses in negotiating and carrying out its
obligations under this Agreement and the transactions contemplated hereby,
including the costs of its due diligence consultants, its counsel and title
insurance.
ARTICLE IV
Representations And Warranties Of Buyer
4.1. Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers on the Closing Date as follows:
4.1.1. Identity. Starwood is a real estate investment trust and is duly
organized, validly existing and in good standing under the laws of the State of
Maryland. SFT, SCB, SCBGP and SDC are each corporations, duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.1.2. Authority. Each Buyer Party has taken all necessary action under
its Governing Instruments to authorize its execution, delivery and performance
of, and has the power and authority to execute, deliver and perform its
obligations under, this Agreement and all related documents and all the
transactions contemplated hereby and thereby, including but not limited to the
power and authority to purchase the Purchased Assets in accordance with this
Agreement.
4.1.3. Binding on Buyer; Enforceability. Assuming due authorization,
execution and delivery hereof by Sellers, this Agreement and all the obligations
of Buyer hereunder are legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms, except as such
enforcement may be limited by (a) the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally, and (b) the laws governing the availability of
specific performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
4.1.4. Conflict with Existing Laws or Contracts. Assuming the Required
Consents are obtained, the execution and delivery of this Agreement and the
other Sale Documents does not, and the performance by each Buyer Party of its
obligations hereunder and thereunder will not, conflict with any provision of
any law or regulation to which such Buyer Party is subject or conflict with or
result in a breach of or constitute a default under the Governing Instruments of
such Buyer Party or any of the terms, conditions or provisions of any other
agreement or instrument to which such Buyer Party is a party, or by which it is
bound, or any order or decree applicable to such Buyer Party, nor will such
execution, delivery and performance result in the creation or imposition of any
lien on any of Buyer Party's assets or properties that could materially and
adversely affect the ability of any Buyer Party to discharge its obligations
under and complete the transactions contemplated by this Agreement. Assuming the
Required Consents are obtained, each Buyer Party has obtained all consents,
approvals, authorizations and orders of any courts or governmental agencies or
bodies required for the due execution, delivery and performance by each Buyer
Party of this Agreement and the other Sale Documents. Other than the Required
Consents, nothing in the Due Diligence Materials, or of which any Buyer Party is
otherwise aware, requires Sellers to obtain any consents, authorizations or
approvals from any party to consummate the transactions contemplated hereby.
4.1.5. Legal Action Against Buyer. There are no judgments, orders or
decrees of any kind against any Buyer Party that are unpaid or unsatisfied or of
record in accordance with their terms for a period in excess of sixty (60) days,
except to the extent that execution thereon is stayed pending appeal, nor is
there any legal action, suit or other legal or administrative proceeding pending
against any Buyer Party in any court or by or before any other governmental
agency or instrumentality which, if concluded adversely to such Buyer Party,
could materially adversely affect the ability of Buyer to carry out the
transactions contemplated by this Agreement.
4.1.6. Bankruptcy or Debt of Buyer. No Buyer Party is insolvent and the
consummation of the transactions contemplated by this Agreement will not render
any Buyer Party insolvent. No Buyer Party has filed any petition seeking or
acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any law relating to bankruptcy
or insolvency, nor has any such petition been filed against any Buyer Party. No
general assignment of any Buyer Party's property has been made for the benefit
of creditors, and no receiver, conservator, master, liquidator or trustee has
been appointed for any Buyer Party or any of its property. As of the Closing
Date, Buyer will have sufficient capital or net worth to meet its obligations
hereunder.
4.1.7. Sophisticated Investor. Each Buyer Party (a) is a sophisticated
investor, (b) has such knowledge and experience in the origination, sale and/or
purchase of performing and non-performing or distressed loans, including loans
secured by real estate or other types of collateral, as well as knowledge and
experience in other financial and business matters, as to enable it to utilize
the information made available in connection with the sale of the Purchased
Assets to evaluate the merits and risks of a prospective acquisition and
ownership of the Purchased Assets and to make an informed decision with respect
thereto, (c) has the ability to make, and is responsible for making, its own
independent investigation and evaluation of the Purchased Assets and the
economic, credit or other risks involved in a purchase of the Purchased Assets,
including the ability to resell or otherwise liquidate any of the Purchased
Assets, and (d) is able to bear the economic risks associated with the
acquisition and ownership of the Purchased Assets, including the risk of a total
loss of the purchase price for the Purchased Assets and/or the risk that it may
be required to hold the Purchased Assets for an indefinite period of time. Each
Buyer Party is purchasing the Purchased Assets for its own account and not for
resale or with a view toward distribution within the meaning of the Act.
4.1.8. Decision to Purchase. Buyer's offer and decision to purchase the
Purchased Assets are based upon its own independent expert evaluations of the
Asset Files, other materials deemed relevant by Buyer and its agents, the real
property related to the Purchased Assets in question, the Secured Properties and
on the representations and warranties made by the applicable Seller Parties in
this Agreement, the partnership agreement for MD3 Cayman L.P., the Oxford
Participation Agreement, the Menlo Letter and the D.C. Retail Participation
Agreement. In entering into this Agreement, Buyer has not relied upon any oral
or written information, or any representations or warranties whatsoever, from
Sellers or their Affiliates or any of their respective directors, officers,
managers, employees, agents, legal counsel or other representatives, other than
the representations and warranties set forth in this Agreement (subject,
however, to the limitations set forth in this Agreement), the partnership
agreement for MD3 Cayman L.P., the Oxford Participation Agreement, the Menlo
Letter and the D.C. Retail Participation Agreement. Buyer further acknowledges
that no Affiliate of any Seller Party or director, officer, manager, employee,
agent, legal counsel or other representative of any Seller Party or any
Affiliate of any Seller Party has been authorized to make, and that Buyer has
not relied upon, any statements or representations other than those specifically
contained in this Agreement.
4.1.9. Access to Information. Buyer has been able to conduct such due
diligence, investigations, inspections, review and analysis of the Due Diligence
Materials and related information furnished by the Sellers, the Assets, the real
property and other Property related to the Assets in question and the Secured
Property as Buyer deemed necessary, proper or appropriate with respect to the
purchase and acquisition of the Purchased Assets. This Section 4.1.9 shall not
be deemed to limit any rights any Buyer Party or Buyer may have under this
Agreement with respect to a breach of any Seller Party's representations and
warranties under this Agreement, the partnership agreement for MD3 Cayman L.P.,
the Oxford Participation Agreement, the Menlo Letter and the D.C. Retail
Participation Agreement.
ARTICLE V
Representations And Warranties Of SellerS
5.1. Representations and Warranties of Sellers. Subject to the
applicable provisions and limitations set forth in Sections 5.3 through 5.5
below, each Seller Party represents and warrants to Buyer, as of the Closing
Date as follows (it being understood that each Seller Party is only making the
following representations and warranties as to itself and the Assets in which it
owns an interest as of the Closing Date; provided that, in the case of each
Seller Party owning a Preferred Equity Interest in a Loan, such Seller Party and
the Seller Party holding such Loan shall be deemed to have made the following
representations and warranties jointly and severally as to such Loan and such
Preferred Equity Interest):
5.1.1. Identity. Fund I, Fund II, PMAH and PIHLP are each Delaware
limited partnerships; Atlantic and Indian are each New York limited liability
companies and SDJ is a Cayman Islands exempted company.
5.1.2. Authority. Such Seller Party has taken all necessary action
under its Governing Instruments to authorize its execution, delivery and
performance of, and has the power and authority to execute, deliver and perform
its obligations under, this Agreement and all related documents executed by such
Seller Party in connection herewith and to consummate all the transactions
contemplated hereby and thereby (such documents, collectively the "Sale
Documents"), including but not limited to the power and authority to sell,
assign and transfer the Purchased Assets in which such Seller Party has an
interest in accordance with this Agreement.
5.1.3. Binding on Seller; Enforceability. Assuming due authorization,
execution and delivery hereof and thereof by Buyer, this Agreement and the other
Sale Documents and all the obligations of such Seller Party hereunder are legal,
valid and binding obligations of such Seller Party, enforceable against such
Seller Party in accordance with their terms, except as such enforcement may be
limited by: (a) the effect of bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting the enforcement of creditors' rights generally
and (b) the rules governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity, regardless
of whether considered in a proceeding in equity or at law.
5.1.4. Conflict with Existing Laws or Contracts. Assuming that the
Required Consents and any other consents or approvals which are reflected in the
Due Diligence Materials are obtained, the execution and delivery of this
Agreement and the other Sale Documents does not, and the performance by such
Seller Party of its obligations hereunder and thereunder will not, conflict with
any material provision of any material law or regulation to which such Seller
Party is subject or conflict with or result in a breach of or constitute a
default under the Governing Instruments of such Seller Party or any of the
terms, conditions or provisions of any agreement or instrument to which such
Seller Party is a party or by which it is bound or any order or decree
applicable to such Seller Party, nor will such execution, delivery and
performance result in the creation or imposition of any lien on any of such
Seller Party's assets or properties that could materially and adversely affect
the ability of such Seller Party to discharge its obligations under and complete
the transactions contemplated by this Agreement. Assuming that the Required
Consents and any other consents or approvals which are reflected in the Due
Diligence Materials are obtained, such Seller Party has obtained all consents,
approvals, authorizations and orders of any courts or governmental agencies or
bodies required for the due execution, delivery and performance by such Seller
Party of its obligations under this Agreement and the other Sale Documents.
5.1.5. Legal Action Against Sellers. There is no legal action, suit or
other legal or administrative proceeding pending or overtly threatened in
writing against such Seller Party in any court or by or before any other
governmental agency or instrumentality or arbitration which, if concluded
adversely to Sellers, would materially adversely affect the ability of such
Seller Party to carry out the transactions contemplated by this Agreement.
5.1.6. Bankruptcy or Debt of Sellers. Such Seller Party is not
insolvent or in the hands of a receiver, conservator or bankruptcy trustee, has
not committed an act of bankruptcy or insolvency and is not a debtor in any
bankruptcy proceeding.
Notwithstanding anything to the contrary contained in this Agreement,
including this Section 5.1, in the event of an occurrence or matter which would
otherwise constitute a breach of any of the representations or warranties set
forth in this Section 5.1 as to one or more Assets, and which occurrence or
matter also constitutes a breach of any of the representations and warranties
set forth in Section 5.2, then such occurrence or matter shall be deemed to be a
breach of such representations and warranties set forth in Section 5.2 only, and
not a breach of the representations or warranties set forth in this Section 5.1.
5.2. Limited Representations and Warranties by Sellers as to Each Loan.
Subject to the applicable provisions and limitations of Sections 5.3 through 5.5
below, each Seller Party hereby represents and warrants as to itself and those
of the Assets in which it has an ownership interest as of Closing Date as
follows (it being understood that each Seller Party is only making the following
representations and warranties as to itself and the Assets in which it owns an
interest; provided that, in the case of each Seller Party owning a Preferred
Equity Interest in a Loan, such Seller Party and the Seller Party holding such
Loan shall be deemed to have made the following representations and warranties
jointly and severally as to such Loan and such Preferred Equity Interest):
5.2.1. Sole Ownership. Such Seller Party is, together with any other
Seller Party holding an interest in the Purchased Asset in question or, in the
case of the Remic Interest, such Remic Interest in question, the sole legal,
record (if applicable), beneficial owner and holder of such Purchased Asset or,
has good and (assuming all Required Consents and any other consents or approvals
reflected in the Due Diligence Materials are obtained) marketable title to each
such Purchased Asset or Remic Interest, as applicable, and such Purchased Asset
or Remic Interest, as applicable is, as of the Closing, free and clear of any
liens, pledges, charges, security interests, options, participations or other
encumbrances of any kind or description (other than the repurchase financing
arrangements affecting the Remic Interest entered into by MD3 Cayman L.P. in
connection with the Closing), and such Seller Party has full right to sell,
transfer and assign such Purchased Asset or Remic Interest, as applicable,
without the consent of any third party, except for the Required Consents and
satisfaction of all conditions to transfers of the Assets in question reflected
in the Due Diligence Materials. The Purchased Asset Schedule correctly
identifies the owner of each applicable Purchased Asset, and SDJ is the owner of
the Remic Interest.
5.2.2. Accuracy of Final Asset Schedule. All information pertaining to
such Assets set forth in columns 1 and 2 of the Asset Schedule is true and
correct in all material respects. All of the Notes, Certificate, Security
Documents, Operative Documents and Preferred Equity Documents are listed on
Schedule 4 hereto and constitute all of the Notes, Certificates, Security
Documents, Operative Documents and Preferred Equity Documents (whether or not in
Seller's Possession), including all written amendments thereto or other
modifications thereof and, to such Seller Party's Actual Knowledge, there are no
other amendments or modifications thereto. To such Seller Party's Actual
Knowledge, there are no material consents required for the performance by such
Seller Party of its obligations under this Agreement and the Sale Documents
other than the Required Consents set forth on Schedule 3 hereto and any consents
or approvals reflected in the Due Diligence Materials.
5.2.3. No Release. As to each Purchased Asset and except as disclosed
in the Due Diligence Materials (a) neither the Note, the Certificates, the
Security Documents, the Operative Documents nor the Preferred Equity Documents
relating to such Purchased Asset have been satisfied, released, canceled or
subordinated in whole or in part, (b) in the case of each Loan, such Seller
Party has not released all or any portion of the collateral covered by such
Collateral Documents from the lien of the Security Documents related thereto and
(c) in the case of each Loan, such Seller Party has not executed any instrument
of release, cancellation or satisfaction with respect to such Security Document
or Note.
5.2.4. Asset Documents. Except as disclosed in the Due Diligence
Materials, the copies of the Note, the Certificates, the Security Documents, the
Operative Documents and the Preferred Equity Documents (and of any documents
modifying or amending the terms of such Note, Certificate, Security Document,
Operative Documents or Preferred Equity Documents) relating to such Asset
included in the Due Diligence Materials are true and complete copies of the
documents they purport to be.
5.2.5. No Discharge of Note; No Voidance of Obligations. Except as
disclosed in the Due Diligence Materials, as to each Purchased Asset which is a
Loan, the Note relating to such Asset has not been discharged in a bankruptcy
proceeding (in whole or part) such that any applicable mortgage, deed of trust,
pledge or other security instrument, if any, creating a lien on the Secured
Property relating to such Asset, has been released and all guarantors or
sureties, if any, of such Note or the obligations contained therein or in any of
the Security Documents have been discharged. No court of competent jurisdiction
has entered a final judgment holding that any debtor under such Note, and any
guarantor, pledgor or surety of the Purchased Asset in question, is relieved of
its obligation to pay the holder of such Note or to perform its obligation in
connection with any judgment arising from such Note or pledge or guaranty, as
applicable.
5.2.6. Due Diligence Materials. To Seller's Actual Knowledge, attached
hereto as Schedule 4 is a true and complete list of the Due Diligence Materials.
None of the Excluded Documents not listed on Schedule 4 amend, modify,
terminate, release, cancel, assign, subordinate, create a defense, impose
liability upon the owner of an Asset or otherwise adversely affect any of the
Assets.
5.2.7. Future Funding Obligations. Except for the Series B Obligation
and except as disclosed on the Asset Schedule or in the Due Diligence Materials,
no Borrower or any related Interested Person has any right to the disbursement
of additional loan proceeds in the case of Loans or additional equity
contributions in the case of Preferred Equity Interests, as applicable, by such
Seller Party with respect to the Assets, and there are no conditions or
circumstances which if satisfied or occurring at any time in the future would
give rise to a right of such Borrower or any related Interested Person to such a
disbursement.
5.2.8. Cross-Collateralization. Except as disclosed in the Due
Diligence Materials, the Assets which are Loans are not cross-collateralized
with any other loans made or held by such Seller Party or its Affiliates, or to
Seller's Actual Knowledge, any other Person.
5.2.9. Violations. Except as disclosed in the Due Diligence Materials,
such Seller Party has not received any written notice of, and otherwise does not
have Actual Knowledge of, any condemnation, or building code, zoning or other
legal violations with respect to the Secured Property in question and, to
Seller's Actual Knowledge, no Secured Property has been subject to any
unrepaired casualty loss.
5.2.10. Borrower Litigation. Except as disclosed in the Due Diligence
Materials, such Seller Party has not received any written notice of, and
otherwise does not have Actual Knowledge of, any actions, suits or proceedings
against the Borrower or other obligors, guarantors or pledgors in respect to any
Asset or the related Property which if determined adversely would materially and
adversely affect the Asset in question.
5.2.11. Borrower Bankrupcy. Except as disclosed in the Due Diligence
Materials, such Seller Party has not received any written notice of, and
otherwise does not have Actual Knowledge that (a) the Borrower or any other
obligor, guarantor or pledgor in respect to any Loan is a party to any
bankruptcy, reorganization, insolvency or similar proceeding, (b) any of the
partners, members or shareholders of any Borrower in which such Seller Party
holds a Preferred Equity Interest is a party to a bankruptcy, reorganization,
insolvency or similar proceeding or (c) the owner of a Secured Property is a
party to a bankruptcy, reorganization, insolvency or similar proceeding.
5.2.12. Default. Except as disclosed in the Due Diligence Materials,
such Seller Party has not (a) given a notice of default to any Borrower in
respect of any Loan (and is not now considering giving such a notice), (b)
accelerated any Loan, (c) commenced any foreclosure action or proceeding under a
power of sale in respect to any Loan or other Asset or (d) exercised its rights
under the Preferred Equity Documents to become the general partner or managing
member, as applicable, of any Borrower.
5.2.13. Delinquent Charges. Except as disclosed in the Due Diligence
Materials, such Seller Party has not received any written notice of, and
otherwise does not have Actual Knowledge of, any (a) delinquent property taxes,
ground rents, water charges, sewer rents, assessments (including assessments
payable in future installments), or other outstanding charges that could
adversely affect any Secured Property in any material respect, (b) delinquent
premiums in respect to insurance policies required to be maintained pursuant to
the Collateral Documents or Preferred Equity Documents, as applicable, with
respect to the Secured Property in question or (c) termination, cancellation or
non-renewal with respect to any of such insurance policies.
5.2.14. Leases. Except as disclosed in the Due Diligence Materials, (a)
such Seller Party has not received written notice of, and otherwise does not
have Actual Knowledge of any material default under, or termination of, any Key
Leases and (b) such Seller Party has not consented to the termination of any
ground leases or Key Leases, or to the sale, defeasance, or refinancing of any
Senior Loan.
5.2.15. Prepayment. Except as disclosed in the Due Diligence Materials,
such Seller Party has not received any notice of prepayment with respect to any
Loan and, to such Seller Party's Actual Knowledge, (other than with respect to
the Loan identified as "Park LaBrea" on the Asset Schedule), no Borrower or
other Person has notified such Seller Party or LFREI that it intends to send, or
has sent, such notice of prepayment.
5.2.16. Senior Loan Documents. To such Seller Party's Actual Knowledge
and except as disclosed in the Due Diligence Materials, (a) the copies of the
documents evidencing the Senior Loans included in the Due Diligence Materials
are true and complete copies thereof and have not been modified or amended and
(b) such Seller Party has not received any notice of default or acceleration of
any Senior Loan or of the commencement of foreclosure or other enforcement of
rights and remedies in respect to any Senior Loan by the holder of such Senior
Loan.
5.2.17. Servicing. None of the Assets are serviced by third party
servicers. Except as disclosed in the Due Diligence Materials, such Seller Party
reasonably believes that it has complied with its responsibilities under the
provisions of the Notes, Security Documents and Preferred Equity Documents which
pertain to the receipt, distribution and retention of the cash flow from the
Secured Property or from the borrower under the Senior Loan and any other
Interested Persons to the Borrower in question, as applicable (collectively, the
"Cash Management Provisions") in all material respects, and no Person (or
counsel purportedly representing such Person) has asserted, in writing that such
Cash Management Provisions have not been adhered to in all material respects.
5.2.18. Enforceability. To such Seller's Actual Knowledge and except as
disclosed in the Due Diligence Materials, no Person (or counsel purportedly
representing such Person) has asserted, in writing, that any of the Notes, the
Certificates, the Collateral Documents, the Security Documents, the Operative
Documents or the Preferred Equity Documents are unenforceable in whole or in
part.
5.2.19. Title Policy. Except as reflected in the Due Diligence
Materials, no claims have been, or as of the Closing Date will have been, made
by such Seller Party under any title policy to which any Asset is subject.
Except as reflected in the Due Diligence Materials, such Seller Party has
received no written notice of a change in (a) the principal place of business,
chief executive office or principal residence of any debtor under a UCC-1
financing statement included in the Security Documents or (b) the name, identity
or corporate structure of any such debtor.
5.2.20. Delinquency. To such Seller's Actual Knowledge and except as
disclosed in the Due Diligence Materials, as of the Closing Date there is no
monetary or material non-monetary default beyond applicable periods of grace as
to any Loan and, as of the Closing Date, no Preferred Equity Interest is in
default beyond applicable periods of grace in any material respect under any of
the Preferred Equity Documents.
5.2.21. Key Personnel. Douglas N. Wells, Klaus P. Kretschmann, Robert
P. Freeman, Anthony E. Meyer, John Moore and Henry Herms are the Persons
primarily responsible for the administration and servicing of the Assets on
behalf of the Seller Parties and are the only Persons who have served as
directors and/or managers of any Borrower pursuant to the rights of certain of
the Seller Parties to appoint directors and/or managers of certain of the
Borrowers.
5.2.22. No Claims. Except as disclosed in the Due Diligence Materials
and except for the Wiener Litigation, no Borrower or other Interested Person is
prosecuting any litigation against such Seller Party with respect to any Asset
owned by such Seller Party, and no such Seller Party has received written notice
from, and does not otherwise have Actual Knowledge of, any Borrower or
Interested Person threatening litigation against such Seller Party with respect
to any Asset owned by such Seller Party.
5.2.23. Series B Obligation. None of the applicable Seller Parties have
received a request or demand for payment of the Series B Obligation and the
Series B Obligation has not been paid or satisfied. The repayment obligations of
the applicable Seller Parties under the Series B Obligation does not exceed
$12,000,000.
5.2.24. No Material Adverse Effect. To such Seller Party's Actual
Knowledge and except as disclosed in the Due Diligence Materials, there is no
confidential fact or circumstance with respect to any Asset in the Excluded
Documents or of which such Seller Party has Actual Knowledge which has not been
disclosed to Buyer or its representatives (in all cases that is particular to
the Asset, Borrower or Interested Person in question, and not to assets or
Persons of such type, the location of the asset or financial, capital or real
estate or related markets generally) that is materially adverse to the Asset in
question or to the ability of the Seller Party in question to consummate the
transactions contemplated hereby with respect to such Asset.
5.2.25. No Payments. Except as disclosed on Schedule 5, since the
Cut-Off Date, no payments have been, or will be, made on any of the Assets other
than payment of Current Amounts, fees, if any, and indemnification or
reimbursable expenses, if any.
5.2.26. No Escrows. No Seller Party is, with respect to any Purchased
Asset, itself collecting or holding in escrow funds from the applicable Borrower
or Interested Persons in respect to such Purchased Asset for the purpose of
applying such funds toward the annual payments of real estate taxes,
governmental assessments, hazard insurance premiums, private mortgage insurance
premiums, security deposits, utility deposits, replacement reserves or for any
other purposes.
5.2.27. Withholding. SDJ hereby represents and warrants that its
interest in the Remic Interest to be contributed to MD 3 Cayman L.P. at Closing
pursuant to this Agreement does not constitute a United States real property
interest as defined in Section 897(c) of the Internal Revenue Code of 1986, as
amended, and that the distribution to SDJ described in Section 2.1(c) of this
Agreement may be made to it free and clear of, and without deduction or
withholding for, any taxes, levies, imposts, duties, deductions, charges or
withholdings assessed, imposed or levied under the loans of the United States or
other governmental authority. Fund I hereby represents and warrants that the
purchase price for the Purchased Asset in respect to the D.C. Retail Asset and
the Oxford Asset may be made to it free and clear of, and without deduction or
withholding for, any taxes, levies, imposts, duties, deductions, charges or
withholdings assessed, imposed or levied under the laws of the United States or
any other governmental authority.
5.3. Limitations on Sellers' Representations and Warranties. The
representations and warrantie s set forth in Section 5.2 are subject to the
following specific limitations:
5.3.1. Except with respect to Section 5.2.1, the representations and
warranties shall not apply, and Buyer shall have no basis for asserting a breach
of a representation or warranty with respect to, any matters disclosed in the
Due Diligence Materials or of which Buyer was otherwise aware of prior to
executing this Agreement (it being agreed that Buyer shall not be deemed to be
aware of any Buyer Excluded Matters);
5.3.2. No representation or warranty is made with respect to any Asset
or Purchased Asset with respect to which any Buyer Party is an Interested
Person; and
5.3.3. If, in connection with any Purchased Asset, Buyer (or any
successor or assign of Buyer) procures title insurance or is entitled to receive
the benefit of title insurance by endorsement or otherwise with respect to such
Purchased Asset, to the extent that such insurance provides coverage with
respect to any matters addressed by any of the representations and warranties
set forth in Section 5.2, then, with respect to such matters, Buyer shall first
pursue its remedies in respect of such title insurance.
5.4. Disclaimer of Representations and Warranties.
5.4.1. Buyer acknowledges that no Seller Party or Affiliate of any
Seller Party or director, officer, manager, attorney, agent, employee,
accountant, consultant, advisor or representative of any Seller Party or any
Affiliate of any Seller Party is authorized to make any representations or
warranties regarding the transactions contemplated hereby and, except for the
representations and warranties set forth in this Agreement, the Oxford
Participation Agreement, the DC Retail Participation Agreement, the Menlo Letter
and the MD3 Cayman L.P. partnership agreement, no Seller Party nor any Affiliate
of any Seller Party nor any director, officer, manager, attorney, agent,
employee, accountant, consultant, advisor or representative of any Seller Party
or any Affiliate of any Seller Party has made any representation or warranty
whatsoever, express or implied, regarding the Assets, or any part thereof,
including any warranties of a transferor under the Uniform Commercial Code.
Buyer is entering into this Agreement based solely upon Buyer's own evaluations
and inspections of the Assets and the representations and warranties of the
Seller Parties contained herein, the Oxford Participation Agreement, the DC
Retail Participation Agreement, the Menlo Letter and the MD3 Cayman L.P.
partnership agreement, and has not relied upon any written information (other
than the Due Diligence Materials), or oral information from Sellers or any
Affiliate of any Seller Party or any director, officer, manager, attorney,
agent, employee, accountant, consultant, advisor or representative of any Seller
Party or any Affiliate of any Seller Party, other than the representations and
warranties of each of the Seller Parties expressly contained herein, the Oxford
Participation Agreement, the DC Retail Participation Agreement, the Menlo Letter
and the MD3 Cayman L.P. partnership agreement. Sellers and Buyer understand that
if any of the Sellers' representations or warranties are breached, Buyer's
rights and remedies are limited as set forth herein. In no event shall a breach
of a representation or warranty in this Article V be deemed to constitute, bad
faith, misconduct or fraud even in the event that it is shown that any Seller
Party or any Affiliate of any Seller Party, or any of its or their respective
directors, officers, managers, attorneys, agents, employees, accountants,
consultants, advisors or representatives, knew or should have known of the
existence of information which was inconsistent with any of the representations
and warranties provided in this Article V.
5.4.2. Effects of Closing Over Known Unsatisfied Conditions or Breached
Representations, Warranties or Covenants. Notwithstanding anything to the
contrary set forth herein, if any party elects to proceed with the Closing
knowing of any failure to be satisfied of any condition in its favor or the
breach of any representation, warranty or covenant by any other party, the
condition that is unsatisfied or the representation, warranty or covenant which
is breached as of the Closing Date shall be deemed to be waived by such party,
and such party shall be deemed to fully release and forever discharge such other
party and the Indemnified Parties on account of any and all claims, demands or
charges, known or unknown, with respect to the same.
5.4.3. Materiality. Except as otherwise provided in Section 9.3(b) with
respect to intentional breaches of representations and warranties and
notwithstanding anything to the contrary set forth herein, no Seller Parties
shall be in breach of any representation or warranty set forth in this Agreement
if such breach together with all other breaches by Sellers, if any, does not
result in an aggregate adverse effect on the value of all of the Purchased
Assets on the date hereof (which value shall conclusively be deemed to equal the
Purchase Price) (the "Applicable Value") in an amount (calculated subject to the
limitations contained in Section 9.3) which is equal to or greater than one
percent (1%) of the Purchase Price (the "Threshold Amount"). Breaches of such
representations and warranties in excess of the Threshold Amount shall be deemed
material.
5.4.4. Insurance Policies. To the extent that the Asset Files for any
Purchased Asset contain Insurance Policies, the applicable Seller Party agrees
to deliver all such documents held by such Seller Party to the Buyer (in the
same form as so held, whether an original or a copy); provided, however, such
Seller Party makes no warranties, representations, or guarantees, whether
expressed or implied, with respect to the Insurance Policies. By way of
illustration and not limitation, such Seller Party makes no warranties,
representations, or guarantees, expressed or implied, with respect to the
existence of coverage under the Insurance Policies, the effectiveness of the
Insurance Policies, the amount of coverage under the Insurance Policies or the
effect of this transaction, if any, on the Insurance Policies. It shall be the
sole obligation, and at the sole expense, of the Buyer to determine whether the
Insurance Policies are in effect, to take such actions necessary or appropriate
to obtain or continue coverage under the Insurance Policies, and to insure that
the issuers of the Insurance Policies are notified of the purchase and transfer
of the Purchased Assets hereunder; provided that the applicable Seller Parties
shall cooperate reasonably with Buyer in connection therewith.
5.5. Excluded Matters. The parties hereby acknowledge that Thomas M.
Mulroy (a) was previously employed by LFREI which is the general partner of Fund
I and Fund II and has certain affiliations with the other Sellers, (b) has been
since his employment by LFREI, and is currently, employed by Starwood and (c)
may have knowledge of facts or circumstances obtained during the period of his
employment by LFREI with respect to the Assets of which either (x) Sellers are
not otherwise aware (it being understood that each Seller Party shall, as to the
Assets which it owns, be deemed to be aware of and have actual knowledge of the
information set forth in Schedule 1 and 1A hereto, the Due Diligence Materials
and the Excluded Documents) and which have not been disclosed to Sellers by
Thomas M. Mulroy ("Seller Excluded Matters") or (y) Buyer is not otherwise aware
(it being understood that Buyer shall be deemed to be aware of the information
set forth in the Due Diligence Documents listed on Schedule 4 hereto) and which
have not been disclosed to Buyer by Thomas M. Mulroy ("Buyer Excluded Matters").
Notwithstanding anything to the contrary contained in this Agreement or the Sale
Documents, Buyer shall not be deemed to be aware, or otherwise have any
knowledge, of any Buyer Excluded Matters and the knowledge of Thomas M. Mulroy
with respect to such Buyer Excluded Matters shall not be imputed to Buyer for
the purposes of Section 5.3.1 or otherwise. Notwithstanding anything to the
contrary contained in this Agreement or the Sale Documents, Sellers shall not be
deemed to have Actual Knowledge, or otherwise have any knowledge, of or to
otherwise be in breach of any representation or warranty (whether or not
qualified to any Seller's Actual Knowledge) by reason of any Seller Excluded
Matters and the knowledge of Thomas M. Mulroy with respect to such Seller
Excluded Matters shall not be imputed to Sellers.
5.6. Termination of Representations and Warranties. Subject to such
other limitations as may otherwise be set forth in this Agreement, each of the
representations and warranties in Section 5.1 and Section 5.2.1 shall survive
the Closing without limitation (the "Surviving Representations") and the
representations and warranties in Section 5.2 and elsewhere shall survive
Closing for one year (except for the representations contained in Section 5.2.27
which shall survive until the expiration of the applicable statute of
limitations in respect to the withholding described therein under the Internal
Revenue Code of 1986, as amended); provided, however, that any and all claims
under or in respect to the representations and warranties (other than in respect
to Surviving Representations) must be made, if at all, on or before the first
year anniversary of the Closing. Claims under the representations and warranties
shall be subject to the terms and conditions set forth in this Agreement,
including any limitations on such representations and warranties set forth in
Article V or any other Article hereof.
ARTICLE VI
Certain Covenants Of Sellers And Buyer
6.1. Further Assurances. After the Closing Date, upon the reasonable
request of Buyer, each Seller Party shall do, execute, acknowledge and deliver,
and will cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may reasonably be required to facilitate the consummation of the
transactions contemplated hereby, without payment of any further consideration
other than reimbursement for reasonable out-of-pocket costs and expenses
incurred by such Seller Party.
6.2. Buyer Covenants. Buyer covenants and agrees with Sellers as
follows:
6.2.1. Inspection by Sellers. Buyer agrees that Sellers shall have the
continuing right, at reasonable intervals and during normal business hours, at
Sellers' sole cost and expense and without unreasonably interfering with Buyer's
business, to use, inspect and make extracts from or copies of any documents or
records relating to the Purchased Assets (other than those relating to periods
after the Closing Date which are subject to confidentiality agreements entered
into after the Closing Date in the ordinary course of Buyer's business which
prevent Buyer from disclosing the same to Sellers) in Buyer's possession (to the
extent pertaining to the period prior to and including the Closing Date) and all
tax returns and other tax related information and all financial information (to
the extent pertaining to the period prior to and including the Closing Date)
relating to the Purchased Assets now or hereafter in Buyer's possession (or
reasonably obtainable by Buyer), upon Sellers' reasonable notice to Buyer;
provided that, except in the case of the Oxford Asset, the D.C. Retail Asset and
the Remic Interest as to which there shall be no limitation, such information
shall only include such information as is necessary or desirable for tax or
accounting purposes or required by applicable law, rule or regulation. Buyer
shall give Sellers at least fifteen (15) days written notice prior to destroying
or otherwise discarding any document in the Asset Files to be acquired
hereunder. In the event Buyer transfers possession of the Purchased Assets
and/or the Asset Files to be acquired hereunder, (a) Buyer shall endeavor to
impose the same document retention and document access requirements on Buyer's
transferee as are imposed on Buyer under the terms of this Section for the
Agreement to assure that Sellers have continuing access to the Asset Files and
(b) Buyer shall use reasonable efforts to ensure that Sellers shall be entitled
to the same degree of access with respect to the information covered by this
Section 6.2.2 as Buyer is entitled to; provided that if Buyer is unable to
obtain such access rights for Sellers, Buyer shall, on request of Sellers (at
the applicable Seller's sole cost and expense), use all reasonable efforts to
obtain the information requested by the Seller in question using Buyer's access
rights.
6.2.2. Notice of Litigation. Buyer shall promptly after acquiring
knowledge of the same notify Sellers of any claim, demand or legal proceeding
asserted, filed or threatened against any Seller Party or any known by Buyer to
be an Affiliate of any Seller Party, by any Person, that arises from or relates
to any of the Purchased Assets.
6.2.3. Further Assurances. After the Closing Date, upon the reasonable
request of Sellers, Buyer shall do, execute, acknowledge and deliver, and will
cause to be done, executed, acknowledged and delivered, all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may reasonably be required to facilitate the consummation of the transaction
contemplated hereby, without payment of any further consideration other than
reimbursement for reasonable out-of-pocket costs and expenses incurred by Buyer.
6.3. Seller Covenants. The applicable Seller Parties covenant and agree
with Buyer as follows:
6.3.1. Net Worth of Fund II. Fund II together with Offshore II agrees
to maintain an aggregate net worth (determined in accordance with GAAP) of
$50,000,000 until the first anniversary of the date hereof; provided, however,
that if Buyer files a bona fide claim against Fund II pursuant to Section 9.3
prior to the first anniversary of the date hereof, Fund II together with
Offshore II shall maintain an aggregate net worth (determined in accordance with
GAAP) until such claim is finally adjudicated or settled in an amount equal to
the lesser of (x) $50,000,000 or (y) the amount of such claim multiplied by 1.5.
If Offshore II allows any of its limited partners to withdraw from Offshore II
to establish a new limited partnership with the same general partner as Offshore
II or any Affiliate thereof, such new limited partnership's net worth shall be
taken into account in determining compliance with this Section 6.3.1 if such
limited partnership joins in this Agreement to the same extent as Offshore II
pursuant to a joinder in substantially the form of the joinder by Offshore II
contained in this Agreement.
6.3.2. Reserve Units. Fund I and Offshore each severally and not
jointly represent and warrant to Buyer that (a) Fund I has furnished a true and
correct copy of the Fund I Partnership Agreement and of the partnership
agreement for Offshore to Buyer, (b) neither Fund I nor Offshore has heretofore
called any of the Reserve Units, (c) Reserve Units in an aggregate amount of $
22,460,200 are available to be called under and in accordance with the Fund I
Partnership Agreement and the partnership agreement of Offshore and (d) attached
hereto as Schedule 6 is a true and correct list of their partners and their
partner's respective percentages of Reserve Unit obligations (subject to
non-material rounding errors). Fund I and Offshore each agrees as to itself and
its partnership agreement only that it will not (i) pledge its Reserve Units or
otherwise transfer its rights with respect to its Reserve Units; (ii) amend,
permit or cause the amendment of, the Fund I Partnership Agreement or the
Offshore partnership agreement, as applicable to terminate, cancel or waive the
obligations of the partners in Fund I or Offshore, as applicable with respect to
such Reserve Units, or release any obligations with respect to its Reserve
Units; (iii) make any new Partnership Investment (as defined in the Fund I
Partnership Agreement and the Offshore partnership agreement, respectively); or
(iv) permit its Reserve Unit obligation to lapse. Notwithstanding the foregoing,
it is understood and agreed that Fund I and/or Offshore may call, pledge or
otherwise deal with its Reserve Units (i) for payment of Fund I or Offshore, as
applicable, expenses incurred in the ordinary course of business (but
nonetheless will not be permitted to make any new Partnership Investments), (ii)
in connection with the D.C. Retail Participation, the Oxford Participation, the
Remic Interests and MD3 Cayman L.P (and in each case the related Assets) and the
continuing obligations through December 21, 1998 in respect to the Hedge
relating to the Asset identified as "1500 Broadway" on the Asset Schedule and
with its continuing obligations, if any, to the senior lender under that certain
Agreement, dated September 21, 1995, by Fund I to said senior lender relating to
the Wiener Litigation in connection with the Asset identified as "1500 Broadway"
on the Asset Schedule and (iii) continuing obligations under the ISDA Agreement
and related documents pursuant to which the Hedges were issued; provided that
Fund I and Offshore shall not enter into any new hedging arrangements pursuant
thereto after the Closing Date. If and to the extent the term of Fund I or
Offshore, as applicable, as the same may be extended in accordance with the Fund
I Partnership Agreement or the Offshore Partnership Agreement, as applicable,
expires and the obligations of Fund I and Offshore have not terminated pursuant
to the last sentence of this Section 6.3.2, then Fund I and/or Offshore, as
applicable shall timely call an aggregate amount of Reserve Units in an amount
equal to the lesser of (i) the Reserve Units then outstanding and (ii) the sum
of (x) 150% of the amount of such claim and retain such amount as a reserve on
account of such claim in the case of outstanding claims under Section 9.3 and
(y) the amount reasonably necessary for Fund I and Offshore, respectively to
satisfy their respective obligations under the Letter Agreement and any Guaranty
then in effect. Attached hereto as Schedule 6 is a true and correct list of the
partners in Fund I. The obligations of Fund I and Offshore under this Section
6.3.2 shall terminate and be of no further force and effect on the later to
occur of (a) the first anniversary of the date hereof, (b) the date on which all
bona fide claims pending against Fund I under Section 9.3 are finally
adjudicated or settled and (c) the date on which either (i) Fund I and Offshore
shall have transferred their interests in SDJ or SDJ shall have transferred its
interest in MD3 Cayman L.P. in accordance with Section 7.1(a) or (c) or Section
7.5 of the partnership agreement of MD3 Cayman L.P., in either case to a third
party which is either (x) not an Affiliate of SDJ, Fund I or Offshore or (y) a
Buyer Party or an Affiliate of a Buyer Party or (ii) MD3 Cayman L.P. shall have
sold, transferred or otherwise disposed of the Remic Interest and shall have no
further obligations in respect to any Financing (as defined in the partnership
agreement of MD3 Cayman L.P.) as to which Fund I and Offshore have any
obligation under the Letter Agreement or in respect to any Guaranty (as defined
in the Letter Agreement) and in either case the conditions to the termination of
the obligations of Fund I and Offshore under the Letter Agreement have been
satisfied.
ARTICLE VII
REMEDIES
7.1. Limitation on Remedies. Notwithstanding anything contained in this
Agreement or any document, instrument or agreement referred to herein and in
addition to all other limitations on remedies available to Buyer on account of
the failure of any Seller Party to observe or perform any term or provision
hereof or thereof or the breach by any Seller Party of any representation or
warranty contained herein or therein, by executing and delivering the Agreement
each of Sellers and Buyer hereby absolutely and irrevocably waives: (a) any
right to consequential or punitive damages arising out of or relating to the
transactions contemplated hereby, (b) except as permitted under Article IX, any
remedy with respect to any default or breach by any party hereto that is not
material (as determined in accordance with Section 5.4.3) and (c) any right to
offset amounts due to any Seller Parties on the one hand or Buyer on the other
hand under any other contract or agreement between Sellers or any Seller Party
or any of their respective Affiliates on one hand, and Buyer or any Affiliate of
Buyer on the other hand, against any damages on account of default by any of the
Seller Parties hereunder on the one hand or Buyer on the other hand.
ARTICLE VIII
Notices
8.1. Notices. Except as otherwise provided for herein, all notices,
approvals, consents and other communications required or permitted hereunder
shall be in writing and shall be deemed to have been duly given or sent (a) when
received (or the first Business Day after the date of receipt if the date of
receipt is not a Business Day), if dispatched by registered or certified mail
(return receipt requested), (b) when received (or the first Business Day after
the date of receipt if the date of receipt is not a Business Day), if delivered
in hand or by facsimile transmission with a copy thereof sent by reputable
overnight courier which requires a signature of the receiving party or (c) on
the following Business Day, if dispatched by a reputable overnight courier which
requires a signature of the receiving party, in each case to the party intended
at its address as follows (or at such other address as may hereafter be
specified by such party from time to time by like notice):
If to Sellers: c/o Lazard Freres Real Estate Investors L.L.C.
30 Rockefeller Plaza
New York, NY 10020
Phone: 212-632-2607
Fax: 212-332-5980
Attention: Mr. Douglas N. Wells
with copies to: Lazard Freres Real Estate Investors L.L.C.
30 Rockefeller Plaza
New York, NY 10020
Phone: 212-632-2660
Fax: 212-332-5980
Attention: Marjorie L. Reifenberg, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Phone: 212-468-8123
Fax: 212-468-7900
Attention: Frederick Z. Lodge, Esq.
If to Buyer: c/o Starwood Financial Trust
1114 Avenue of the Americas
27th Floor
New York, NY 10031
Phone: (212) 930-9410
Fax: (212) 930-9411
Attention: Mr. Jay Sugarman
with copies to: c/o Starwood Financial Trust
1114 Avenue of the Americas
27th Floor
New York, NY 10031
Phone: (212) 930-9436
Fax: (212) 930-9449
Attention: Mr. Spencer B. Haber
Katten Muchin & Zavis
525 West Monroe Street
Chicago, IL 60661-3693
Phone: (312) 902-5200
Fax: (312) 902-1061
Attention: Nina B. Matis, Esq.
Kenneth M. Jacobson, Esq.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. No failure or delay in the routing of any
such notice, demand, request, consent, approval, declaration or other
communication within any organization to the individual designated to receive
the same or a copy thereof shall in any way qualify the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
Refusal of any party to accept delivery of any notice delivered in accordance
herewith shall be deemed receipt of such notice. If a notice is undeliverable
due a change in the address, phone number or fax number for such party, and such
party has not properly given a notice changing its address, phone number or fax
number, as applicable, such notice shall be deemed delivered on the date that it
was first attempted to be delivered (it being understood that the foregoing
shall not be deemed to limit the obligation of a party sending a notice by
facsimile to send a copy thereof by reputable overnight courier as provided
above).
ARTICLE IX
Indemnities
9.1. Buyer's Release of Claim. Effective as to each Asset or Purchased
Asset on the Closing Date in respect to such Asset and Purchased Asset, Buyer
hereby releases and forever discharges the Indemnified Parties of and from any
and all causes of action, claims, demands and remedies of whatsoever kind or
nature that Buyer now has, whether known or unknown, or may in the future have,
against such Indemnified Party in any manner, on account of, arising out of or
related to the Assumed Liabilities (it being understood that the foregoing is
not intended to be a waiver of any of the rights of the Buyer under Section 9.3
hereof).
9.2. Buyer's Indemnification. Buyer hereby agrees to indemnify, hold
harmless and defend any Indemnified Party, from and against any losses, causes
of action, liabilities, claims, demands, obligations, damages, costs and
expenses, including accountants' fees and attorneys' fees of whatsoever kind or
nature, whether known or unknown, to which the Indemnified Parties may become
subject on account of, arising out of or relating to the Assumed Liabilities.
9.3. Sellers' Indemnification. (a) Subject to the terms, conditions and
limitations set forth in this Agreement, each of the Seller Parties, severally
and not jointly, hereby agrees to indemnify, hold harmless, defend and
compensate Buyer for any losses (including loss of value of any Purchased
Asset), causes of action, liabilities, claims, demands, obligations, damages,
costs and expenses, including accountants' fees and attorneys' fees of
whatsoever kind or nature (collectively, "Indemnified Amounts") whether known or
unknown, to which Buyer may become subject on account of, arising out of or
relating to (a) a breach of the representations and warranties of such Seller
Party set forth herein, (b) the Wiener Litigation or (c) the Hedge Claim.
(b) Except as provided below with respect to intentional breaches of
representations and warranties and as to any obligation any Seller Party may
have to indemnify Buyer in regard to the Wiener Litigation or any Hedge Claim
pursuant to Section 9.3 (a), no Seller Party shall have any obligation to
indemnify the Buyer in respect to any Indemnified Amounts resulting from a
breach of its representations or warranties unless and until the aggregate
adverse effect on the value of the Purchased Asset resulting from such breaches
exceeds the Threshold Amount; provided, that the aggregate amount required to be
paid by Sellers pursuant to this Section 9.3 shall not with respect to any
Purchased Asset exceed the Purchase Price for such Asset (the "Maximum Amount").
Except for claims in respect to Surviving Representations, claims under this
Section must be brought by Buyer within one year from the date hereof if at all.
Notwithstanding the foregoing, to the extent that any Seller Party's breach of
any representation or warranty is intentional, Buyer shall be entitled to
recover all Indemnified Amounts (whether or not in excess of the Threshold
Amount) in respect of each Asset affected by such intentional breach (up to the
Maximum Amount for each such Asset) resulting solely from such breach without
regard to the limitations contained in this Section 9.3. Notwithstanding
anything to the contrary contained herein, no Indemnified Amounts as to which
Buyer is fully indemnified in respect to either the Wiener Litigation, the Hedge
Claim or intentional breaches of representations and warranties shall be taken
into account in determining whether the Threshold Amount has been exceeded.
(c) In connection with Sellers' obligations under this Section, to the
extent that the D.C. Retail Loans and/or the Remic Interest, are sold prior to
the end of the one year survival period set forth in Section 5.6, Fund I and
Offshore shall not distribute the net proceeds they receive from such sale to
their partners until the end of such survival period; provided, however, that if
Buyer files a bona fide claim against Fund I under this Section 9.3 prior to the
end of the one year survival period, no such net proceeds shall be distributed
to any of Fund I's or Offshore partners, until such claim is finally adjudicated
or settled, except that Fund I and Offshore may distribute that aggregate
amount, if any, by which such net proceeds received exceed an amount equal to
150% of Buyer's claim.
(d) The Buyer acknowledges and agrees that, from and after the Closing,
its sole and exclusive remedy with respect to any claims relating to breaches of
representations and warranties by any or all of the Sellers shall be its right
of indemnification under the provisions of this Section 9.3.
9.4. Notice of Claim. Promptly after receipt by any of the Indemnified
Parties or Buyer, as the case may be (the "Injured Party"), of notice of the
commencement of any action to which this Article of the Agreement shall apply,
the Injured Party so notified shall notify the other party (the "Responsible
Party"), in writing, of the commencement of such action if a claim with respect
to such action is to be made against the Responsible Party under this Article.
The failure by any of Injured Party to notify the Responsible Party shall not
relieve the Responsible Party from any liability that the Responsible Party may
have to the Injured Party, except to the extent that the Responsible Party is
prejudiced by the failure of such notification. In case any such action is
brought against any Injured Party, and an Injured Party notifies the Responsible
Party of the commencement of such action, the Responsible Party shall be
entitled to participate in such action and, to the extent that the Responsible
Party may wish to assume the defense of such action, with counsel selected by
the Responsible Party and approved by such Injured Party (not to be unreasonably
withheld or delayed), and after notice from the Responsible Party to such
Injured Party of Responsible Party's election so to assume the defense of such
action, the Responsible Party shall not be liable to such Injured Party under
this Article of the Agreement for any legal or other defense expenses
subsequently incurred by such Injured Party in connection with the defense of
such action. If the Responsible Party so assumes defense of such Injured Party,
such Injured Party shall reasonably cooperate with the Responsible Party at
Responsible Party's sole cost and expense in connection with such defense;
provided that the foregoing shall not require such Injured Party to waive or
adversely affect any claim of priviledge it may have; provided that the
foregoing shall not require such Responsible Party to waive or adversely affect
any claim of privilege it may have. If the Injured Party elects, at its cost and
expense, to retain separate counsel in respect to any matter as to which the
Responsible Party has so assumed defense of such Injured Party, the Responsible
Party shall, at the sole cost and expense of the Injured Party, reasonably
cooperate with the Injured Party in connection with such defense.
9.5. Injured Party's Own Counsel. Notwithstanding any other provision
of this Article, if, in any action or claim as to which indemnity is or may be
available, the Injured Party's reasonably determine that, singularly or
collectively, the Injured Party's interests are, or may be, adverse, in whole or
in part, to the interests of the Responsible Party or that there may be legal
defenses available to the Injured Party's that are different from, in addition
to or inconsistent with the defenses available to the Responsible Party, the
Injured Party's, singularly or collectively, may retain their own counsel in
connection with such action or claim and shall be indemnified by the Responsible
Party for any legal and other expense reasonably incurred in connection with
investigating or defending such action or claim. In no event, however, shall the
Responsible Party be liable for the fees and expenses of more than one counsel
for all Injured Parties in connection with any one action or in connection with
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations; provided that the foregoing shall not require such
Responsible Party to waive or adversely affect any claim of privilege it may
have.
9.6. Settlement. The Responsible Party shall not be liable for any
settlement of any such action covered by this Article IX effected without such
Party's express written consent, but if any such action is settled with the
express written consent of the Responsible Party, or if there is a final
judgment for the plaintiff in any such action, the Responsible Party shall
indemnify, hold harmless and defend the Injured Party from and against any loss
or liability by reason of such settlement or judgment as, and in, the manner
described in this Article.
ARTICLE X
Miscellaneous Provisions
10.1. Severability. Each provision of this Agreement is intended to be
severable. If any term, covenant, condition or other provision herein is
unlawful, invalid or unenforceable for any reason whatsoever, and such
illegality, invalidity or unenforceability does not affect the remaining parts
of this Agreement, then all such remaining parts hereof shall be valid and
enforceable and have full force and effect as though the invalid or
unenforceable provision had not been included herein.
10.2. Rights Cumulative; Waivers. Except to the extent expressly
limited in this Agreement, the rights of each of the parties under this
Agreement are cumulative and may be exercised as often as such party considers
appropriate. Without limitation on the foregoing, if in light of the terms and
conditions of this Agreement a party disputes the position taken by the other
party then either party may seek judicial resolution of such dispute. Except to
the extent expressly limited in this Agreement, failure to exercise or any delay
in exercising any of such rights shall not operate as a waiver or variation of
that or any other such right. Except to the extent expressly limited in this
Agreement, defective or partial exercise of any such right shall not preclude
any other or further exercise of that or any other right. No act, course of
conduct or negotiation on the part of any party shall in any way preclude such
party from exercising any such right or constitute a suspension or variation of
any such right. Neither party's waiver of the other's breach of any term,
covenant or condition contained in this Agreement shall be deemed a waiver of
any subsequent breach of the same or any other term, covenant or condition in
this Agreement.
10.3. Headings. The headings appearing in this Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of any Section of this Agreement.
10.4. Construction. Unless the context otherwise requires, singular
nouns and pronouns, when used herein, shall be deemed to include the plurals of
such nouns or pronouns and pronouns of one gender shall be deemed to include the
equivalent pronouns of the other gender. The words "including" or "included"
shall be deemed to be followed by the phrase "without limitation." The language
in all parts of this Agreement shall in all cases be construed according to its
fair meaning and not against the drafting party.
10.5. Time of the Essence. Time shall be of the essence with respect to
any time periods prescribed herein.
10.6. Assignment.
10.6.1. Assignment; Non-Transferable Rights. Buyer shall have the right
at Closing to assign its rights hereunder (including the Non-Transferable
Rights) and/or under the Sale Documents to SCB, SCBGP, SFT and SDC which are
wholly owned and controlled by Starwood. No assignment by Buyer of any of its
rights under this Agreement to any Person shall relieve Buyer of any of its
obligations hereunder or under the Sale Documents (including its obligations
under Article IX hereof). Notwithstanding anything to the contrary contained
herein, Buyer may not transfer, sell, assign or otherwise convey any
Non-Transferable Rights without the prior written consent of Sellers which may
be granted or withheld in Sellers' sole discretion; provided that each Buyer
Party shall be permitted to pledge its interest in any or all of the Purchased
Assets to Greenwich Capital Markets, Inc., Greenwich Financial Products, Inc.
and Lehman Brothers Holdings Inc. (or their respective successors and
affiliates) or any bank, commercial credit company, pension fund, insurance
company, broker/dealer or other institutional lender or credit provider (or
affiliates thereof) in connection with a financing of its interest therein and
if any such lender acquires any Purchased Asset by foreclosure (or other
remedial action) or deed-in-lieu of foreclosure it shall be entitled to benefit
from the Non-Transferable Rights. The Non-Transferable Rights shall be personal
to Buyer and any purported transfer, assignment or conveyance of any such rights
shall be null, void and of no force or effect. The purported unpermitted
transfer, sale, assignment or conveyance of Non-Transferable Rights, whether or
not subsequently rescinded, shall terminate Sellers' obligations under this
Agreement with respect to such Non-Transferable Rights. For purposes of this
provision, in any direct or indirect sale or transfer of any portion of the
beneficial interests in the Buyer (whether by merger, sale, agreement with
respect to the exercise of rights or otherwise) at whatever tier which results
in a change of Control of any Buyer Party other than Starwood shall constitute
an assignment of, or transfer of rights or benefits under, this Agreement (it
being understood that a change of Control of Starwood shall not be deemed an
assignment or transfer of rights under this Agreement). Except as set forth in
this subsection as to the Non-Transferable Rights or in Section 6.2.7, nothing
herein shall otherwise limit Buyer's rights to sell the Assets or, following
such sale, to assert its retained personal right on account of a breach of
representation, warranty or covenant hereunder with respect to such Assets.
10.6.2. Successors and Assigns. Subject to the foregoing, this
Agreement and the terms, covenants, conditions and other provisions hereof, and
the obligations, undertakings, rights and benefits herein and hereunder,
including the Schedules, shall bind and inure to the benefit of the undersigned
parties and their respective heirs, executors, administrators, personal
representatives, successors and assigns.
10.7. Integration. This Agreement, and the documents and materials
incorporated herein by reference, including the Confidentiality Agreements,
constitute the entire agreement of the parties with respect to the subject
matter hereof. If there is any inconsistency between the terms of this Agreement
and any prior agreements, correspondence or proposals regarding the Assets, the
terms of this Agreement shall govern. There are no promises or other agreements,
oral or written, express or implied, between the parties other than as set out
in this Agreement or the documents referenced herein or to be executed and
delivered pursuant to this Agreement. No change or modification of, or waiver
under, this Agreement shall be valid unless it is in writing and signed by duly
authorized representatives of both the Sellers and Buyer.
10.8. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
10.9. Survival. Except as expressly provided herein and except for the
provisions of Articles I, IV, V (subject to the applicable limitations contained
therein), VI, VII, VIII, IX and X and Sections 2.3, 2.4, 2.5, 3.6 and 3.7 which
shall survive the Closing, no representation, warranty and covenant herein made
by parties hereto shall survive the Closing.
10.10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS
AND OBLIGATIONS OF SELLERS AND BUYER HEREUNDER DETERMINED, IN ACCORDANCE WITH
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (AS PERMITTED BY
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW (OR ANY SIMILAR SUCCESSOR
PROVISION)) WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW RULE THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE INTERNAL LAWS OF THE
STATE OF NEW YORK TO THE RIGHTS AND DUTIES OF THE PARTIES.
10.11. Jurisdiction. For the purposes of any suit, action or proceeding
involving this Agreement, Buyer hereby expressly submits to the jurisdiction of
all federal and state courts sitting in the State of New York and agrees that
any order, process, notice of motion or other application to or by any such
court or a judge thereof may be served within or without such court's
jurisdiction by registered mail or by service in hand, provided that a
reasonable time for appearance is allowed, and Buyer agrees that such courts
shall have exclusive jurisdiction over any such suit, action or proceeding
commenced by either or both of said parties. In furtherance of such agreement,
Buyer agrees, upon the request of Sellers, to discontinue (or to the
discontinuance of) any such suit, action or proceeding pending in any other
jurisdiction.
10.12. Venue. Buyer hereby irrevocably waives any objection that it may
have now or hereafter to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in any federal or state
court sitting in the State of New York and hereby further irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
10.13. No Third-Party Beneficiaries. Any agreement to pay any amount
and any assumption of liability herein contained, express or implied, shall be
only for the benefit of the parties hereto and the Indemnified Parties, and
their respective successors and assigns. Such agreements and assumption shall
not inure to the benefit of the obligees of any indebtedness or any other party,
whomsoever, it being the intention of the parties hereto that no one (other than
the Indemnified Parties) shall be deemed to be a third party beneficiary of this
Agreement.
10.14. Brokerage Commissions. Buyer and Sellers hereby represent and
warrant to one another that no brokerage commissions, finders fees or advisory
fees (collectively, "Fees") shall be payable to any party in connection with the
sale of the Assets except such Fees as Sellers previously may have agreed in
writing to pay to certain third parties, which Fees will be payable by Sellers
pursuant to separate listing contracts or other agreements. In the event of a
claim made for any Fees in connection herewith by (a) a Person claiming through
one or more of the Seller Parties, then the Seller Party or Seller Parties in
question shall indemnify and defend Buyer from the same if it shall be based
upon any statement or agreement alleged to have been made by such Seller Party
or Seller Parties and (b) a Person claiming through Buyer or any of its
Affiliates, then Buyer shall indemnify and defend Sellers from the same if it
shall be based upon any statement or agreement alleged to have been made by
Buyer.
10.15. WAIVER OF TRIAL BY JURY. SELLERS AND BUYER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE LAW)
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR
RELATING TO THIS AGREEMENT AND AGREE THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE
A JUDGE SITTING WITHOUT A JURY.
10.16. Attorneys' Fees. If any action is brought by any party against
another party, the prevailing party shall be entitled to recover from the other
party reasonable attorneys' fees incurred in connection with the prosecution or
defense of such action. As used herein, attorneys' fees shall include the actual
fees, costs and expenses of counsel, administrative fees, printing, duplicating
and other expenses, freight and delivery charges, and fees billed for law clerks
and legal assistants.
10.17. No Personal Liability. The liabilities and obligations of the
parties to this Agreement are not the personal obligations of any holder of any
interest in any party to this Agreement or their respective principals,
partners, shareholders, trustees, members, managers, officers, directors,
agents, employees, or successors or assigns, or any other person, it being
expressly understood that all such liability of the foregoing persons is
expressly waived and released by all other parties to this Agreement as a
condition of, and as consideration for, the execution of this Agreement. Each of
the parties hereto acknowledges and agrees that the name "Starwood Financial
Trust" is a designation of Starwood and its Trustees (as Trustees but not
personally) under Starwood's Declaration of Trust, and all persons dealing with
Starwood shall look solely to Starwood's assets for the enforcement of any
claims against Starwood, and the Trustees, officers, agents and security holders
of Starwood assume no personal liability for obligations entered into on behalf
of Starwood, and their respective individual assets shall not be subject to the
claims of any person relating to such obligations.
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as
of the date first set forth above.
LAZARD FRERES REAL ESTATE FUND L.P., a Delaware
limited partnership
By: LAZARD FRERES REAL ESTATE INVESTORS L.L.C.,
a New York limited liability company,
its general partner
By: /s/ John A Moore
Name: John A. Moore
Its: Principal
LAZARD FRERES REAL ESTATE FUND II L.P., a Delaware
limited partnership
By: LAZARD FRERES REAL ESTATE INVESTORS L.L.C.,
a New York limited liability company, its
general partner
By: /s/ John A Moore
Name: John A. Moore
Its: Principal
PROMETHEUS MID-ATLANTIC HOLDING, L.P., a Delaware
limited partnership
By: Prometheus Mid-Atlantic Holding Corp. II,
a Delaware corporation, its general partner
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Its: President
ATLANTIC PREFERRED II LLC, a New York limited
liability company
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Its: Managing Member
<PAGE>
INDIAN PREFERRED LLC, a New York limited liability
company
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Its: Managing Member
PROMETHEUS INVESTMENT HOLDING, L.P., a Delaware
limited partnership
By: Prometheus Mid-Atlantic Holding Corp. III, a
Delaware corporation, its general partner
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Its: President
SDJ CAPITAL II, LTD., a Cayman Islands exempted
company
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Its: Director
Buyer: STARWOOD FINANCIAL TRUST, a Maryland real estate
investment trust
By: /s/ Jay Sugarman
Name: Jay Sugarman
Its: President
SFT II, INC., a Delaware corporation
By: /s/ Jay Sugarman
Name: Jay Sugarman
Its: President
<PAGE>
STARWOOD CAYMAN BONDS, INC., a
Delaware corporation
By: /s/ Jay Sugarman
Name: Jay Sugarman
Its: President
STARWOOD D.C. INC., a Delaware corporation
By: /s/ Jay Sugarman
Name: Jay Sugarman
Its: President
STARWOOD CAYMAN BONDS GP, INC., a Delaware
corporation
By: /s/ Jay Sugarman
Name: Jay Sugarman
Its: President
<PAGE>
SFT I, INC., a Delaware corporation
By: /s/ Jay Sugarman
Name: Jay Sugarman
Its: President
<PAGE>
Offshore hereby joins in this Agreement for the sole purpose of (a)
consenting, to the extent its consent is required, to the transactions
contemplated hereby, (b) making the representations, warranties and agreements
set forth in Section 6.3.2 and Section 9.3(c) of the Agreement, subject to the
applicable limitations thereon set forth in the Agreement and (c) confirming and
agreeing with Buyer that Offshore shall pay to Fund I, as to any Asset owned by
Fund I, its proportionate share (determined on the basis of its and Fund I's
investment in such Asset) of any obligation determined to be owed by Fund I to
Buyer under Section 9.3 subject to the limitations thereon set forth in this
Agreement.
LAZARD FRERES REAL ESTATE OFFSHORE FUND L.P.
By: Luxstate, S.A., a Luxembourg societe
anonyme, its general partner
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Title: Director
<PAGE>
Offshore II hereby joins in this Agreement for the sole purpose of (a)
consenting, to the extent its consent is required, to the transactions
contemplated hereby, (b) making the representations, warranties and agreements
set forth in Section 6.3.1 and (c) confirming and agreeing with Buyer that
Offshore II shall pay to Fund II, as to any Asset owned by Fund II, its
proportionate share (determined on the basis of its and Fund II's investment in
such Asset) of any obligations determined to be owed by Fund II to Buyer under
Section 9.3 subject to the limitations thereon set forth in this Agreement.
LAZARD FRERES REAL ESTATE OFFSHORE FUND II L.P.
By: LF Real Estate Investors Company, a Cayman
Island exempted company, general partner
By: /s/ Robert P. Freeman
Name: Robert P. Freeman
Title: Director
--NEWS BULLETIN--
FROM:
STARWOOD FINANCIAL TRUST LAZARD FRERES REAL ESTATE INVESTORS
1114 AVENUE OF THE AMERICAS 30 ROCKEFELLER PLAZA
27TH FLOOR NEW YORK, NEW YORK 10020
NEW YORK, NEW YORK 10036
TRADED: ASE: APT
FOR FURTHER INFORMATION:
AT STARWOOD FINANCIAL TRUST AT THE FINANCIAL RELATIONS BOARD:
Jay Sugarman Laurie Berman (general info.) 310-442-0599
Chief Executive Officer Pamela King (investor info.) 212-661-8030
212-930-9400 Michaelle Burstin (media info.) 310-442-
0599
AT LAZARD FRERES REAL ESTATE
INVESTORS: AT GCI GROUP:
Arthur P. Solomon Jim Cox 212-546-2048
Senior Principal Loretta Mock 212-546-2309
212-632-6611
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
December 16, 1998
STARWOOD FINANCIAL AND LAZARD FRERES REAL ESTATE INVESTORS
ANNOUNCE $500 MILLION STRATEGIC TRANSACTION
Consolidates Starwood Financial's Leadership Position in Opportunistic Real
Estate Finance
o Starwood Financial acquires $280.3 million of mortgage and mezzanine loans
from Lazard Freres Real Estate Investors ("LFREI").
o LFREI invests $220.0 million in Starwood Financial through purchase of
perpetual preferred equity and warrants; Art Solomon agrees to join
Starwood Financial's Board of Trustees.
o Starwood Financial's book value increases to $2.1 billion in assets and
$1.0 billion in permanent equity; Starwood gains an important strategic
partner in LFREI.
NEW YORK, NY - December 16, 1998 - Starwood Financial Trust (ASE: APT) and
Lazard Freres Real Estate Investors, L.L.C. today announced that Starwood
Financial has acquired a portfolio of commercial mortgage and mezzanine loans
for $280.3 million from LFREI. Simultaneously, LFREI has purchased $220.0
million of Starwood Financial's newly issued Series A perpetual preferred shares
and warrants to purchase 6.0 million Class A common shares in a private
<PAGE>
Starwood Financial and Lazard Freres Real Estate Investors Announce
$500 Million Strategic Transaction
Page 2 of 4
placement. The transaction is expected to be immediately accretive to Starwood
Financial's earnings per share.
For Starwood Financial, the transaction consolidates its position as the largest
publicly-traded finance company focused exclusively on the commercial real
estate industry, and brings its permanent equity base to $1.0 billion to support
additional growth opportunities. For LFREI, the transaction accomplishes its
objective of forming a long-term strategic alliance with the leading operating
company in the structured commercial real estate lending business.
Barry S. Sternlicht, Chairman of Starwood Financial, commented "Over the past
five years, Lazard has been Starwood's primary competitor in providing
long-term, fixed rate mezzanine financing for commercial real estate. We are
pleased that as knowledgeable a player as Lazard has selected Starwood Financial
as the best platform in which to invest."
Jay Sugarman, Starwood Financial's President and Chief Executive Officer added,
"With the consolidation of Starwood's and Lazard's businesses and $220 million
in additional growth capital, Starwood Financial is poised to expand its
leadership position in opportunistic real estate finance. We look forward to
working with Lazard on a continuing basis to generate new value-added financing
transactions for Starwood Financial."
"We are very enthusiastic about the investment in Starwood Financial," said
Arthur P. Solomon, Senior Principal of LFREI. "Having the two most sophisticated
sources of mezzanine capital in the real estate business join forces at a time
when such capital is in great demand creates unique opportunities for both LFREI
and Starwood Financial."
The transaction was unanimously approved by Starwood Financial's Board of
Trustees and LFREI's Investment Committee and closed on December 15, 1998. The
transaction was not subject to a vote of Starwood Financial's shareholders and
is not subject to any further conditions. As part of the transaction, Mr.
Solomon will join Starwood Financial's Board of Trustees.
The Transaction
Starwood Financial acquired the mortgage and mezzanine loans from LFREI for
$280.3 million in cash and assumed debt. The LFREI portfolio included eight
senior and mezzanine loans which were acquired for $238.5 million and are backed
by a diverse portfolio of Class A office, multifamily and retail properties
located in San Francisco, San Jose, Los Angeles, New York, suburban Washington,
D.C., Philadelphia and Pittsburgh. The acquired loans have a weighted average
unleveraged yield to maturity of 13.15% and a weighted average maturity of 7.5
years.
As part of the transaction, Starwood Financial also purchased an 85% senior
participation in a portfolio of commercial mortgage-backed securities owned by
LFREI for $41.8 million. These securities are backed by a pool of 10 large
balance loans secured by first mortgages on office, multifamily, self storage,
retail, hotel and senior living properties. Starwood Financial's 85% interest
<PAGE>
Starwood Financial and Lazard Freres Real Estate Investors Announce
$500 Million Strategic Transaction
Page 3 of 4
in the securities is senior to a 15% interest retained by LFREI. The securities,
which have a face amount of $54.5 million, are rated "BB" and "B", and carry a
weighted average unleveraged yield of 11.66% and a weighted average maturity of
13.5 years.
In addition to using the proceeds from the sale of Series A preferred shares,
Starwood Financial funded the remaining purchase price with $12.4 million of
cash on hand and $47.9 million in existing debt assumed in conjunction with the
transaction. The weighted average interest rate on debt assumed by Starwood
Financial in the transaction is 7.48%.
The transfer of assets was accounted for as a purchase.
The Equity Investment
LFREI acquired $220.0 million of Starwood Financial's Series A perpetual
preferred shares and warrants to purchase 6.0 million Class A common shares in a
private placement. The 4.4 million shares of Series A perpetual preferred,
liquidation value $50.00 per share, carry a dividend yield of 9.50% per annum,
payable quarterly in arrears, and are callable without premium at Starwood
Financial's option on or after December 15, 2003. On each of December 15, 2005,
2006 and 2007, the dividend rate on the preferred shares will increase by 0.25%
per annum.
The warrants to purchase 6.0 million Class A shares of Starwood Financial's
common stock are exercisable on or after December 15, 1999 at a price of $35.00
per share and expire on December 15, 2005.
Adjusted to reflect the Lazard transaction, Starwood Financial's pro forma ratio
of debt to equity on a book value basis as of September 30, 1998 was
approximately 1.1 to 1.
Spencer Haber, Chief Financial Officer of Starwood Financial, said, "Starwood
Financial's leverage policies have always emphasized producing strong earnings
growth with substantially less leverage than comparable finance companies, even
prior to the recent capital markets volatility. This equity placement allows us
to continue along that path, fueling incremental growth without reliance on the
public equity markets. Starwood Financial's institutional track record and
sponsorship, as reflected in our existing shareholder base, provide it with
capital alternatives which may not be available to others. In this spirit, we
welcome LFREI as an important strategic investor in our Company."
Starwood Financial is the leading publicly-traded finance company focused
exclusively on the commercial real estate industry. The Company, which is taxed
as a real estate investment trust, provides specialized mortgage, mezzanine and
lease financing through its proprietary origination, acquisition and servicing
platform. The Company's mission is to maximize risk-adjusted returns on equity
by providing innovative and value-added structured financing solutions to the
real estate industry.
<PAGE>
Starwood Financial and Lazard Freres Real Estate Investors Announce
$500 Million Strategic Transaction
Page 4 of 4
Lazard Freres Real Estate Investors LLC (LFREI) is the real estate investment
affiliate of Lazard Freres & Co. LLC, a leading global investment bank. LFREI
manages several real estate investment funds including the LF Strategic Realty
Investors' funds, a strategic investment program capitalized with approximately
$2.4 billion in equity capital. Since its inception, LFREI has acquired sizable
investment stakes in a select group of leading real estate-related operating
companies, including American Apartment Communities; ARV Assisted Living, Inc.;
Atria Communities, Inc. (d/b/a Atria Senior Quarters); Bell Atlantic Properties
(renamed Atlantic American Properties); CenterTrust Retail Properties, Inc.
(formerly Alexander Haagen Properties, Inc.); Clivedon plc; Dermody Properties;
The Fortress Group; Kapson Senior Quarters (d/b/a Atria Senior Quarters);
Konover Property Trust (formerly FAC Realty Trust); RF&P Corporation (renamed
Commonwealth Atlantic Properties); and The Rubenstein Company, LP.
(Note: Statements in this press release which are not historical fact may be
deemed forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although Starwood Financial Trust believes the
expectations reflected in any forward-looking statements are based on reasonable
assumptions, the Company can give no assurance that its expectations will be
attained. Factors that could cause actual results to differ materially from
Starwood Financial Trust's expectations include completion of pending
investments, continued availability to originate new investments, the
availability and cost of capital for future investments, competition within the
real estate industry, real estate and economic conditions, and other risks
detailed from time to time in Starwood Financial Trust's SEC reports.)
For more information about Starwood Financial
Trust, please call 1-800-PRO-INFO and enter
ticker symbol APT.
