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): June 15, 1999
TRINET CORPORATE REALTY TRUST, INC.
(Exact name of Registrant as specified in its charter)
Maryland
(State of Incorporation)
1-11918 94-3175659
(Commission File Number) (IRS Employer ID Number)
One Embarcadero Center, 33rd Floor
San Francisco, CA 94111-3722
(Address of principal executive offices) (Zip Code)
(415) 391-4300
(Registrant's telephone number, including area code)
<PAGE>
2
Item 5. Other Events.
On June 16, 1999, TriNet Corporate Realty Trust, Inc.
("Registrant") announced that it entered into an Agreement and Plan of Merger,
dated as of June 15, 1999, with Starwood Financial Trust ("Starwood Financial"),
pursuant to which TriNet will merge with and into a subsidiary of Starwood
Financial, with Registrant surviving as a subsidiary of Starwood Financial (the
"Merger"). Following the Merger, Starwood Financial is expected to qualify as a
real estate investment trust for federal income tax purposes.
In the Merger: (i) each issued and outstanding share of common
stock, par value $0.01 per share, of Registrant will be exchanged for 1.15
shares of Starwood Common Stock (as defined below); (ii) each issued and
outstanding share of 9-3/8% Series A Cumulative Redeemable Preferred Stock, par
value $0.01 per share, of Registrant will be converted into one 9-3/8% Series B
Cumulative Redeemable Preferred Share, par value $0.01 per share, of Starwood
Incorporated (as defined below); (iii) each issued and outstanding share of 9.2%
Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share, of
Registrant will be converted into one 9.2% Series C Cumulative Redeemable
Preferred Share, par value $0.01 per share, of Starwood Incorporated; and (iv)
each issued and outstanding share of 8% Series C Cumulative Redeemable Preferred
Share, par value $0.01 per share, of Registrant will be converted into one 8%
Series D Cumulative Redeemable Preferred Share, par value $0.01 per share, of
Starwood Incorporated. The Merger is expected to close in the third or fourth
quarter of 1999, subject to receipt of approval by Registrant's shareholders and
Starwood Financial's shareholders (the largest of whom are subject to
shareholder agreements with Registrant, as described below) and satisfaction of
customary closing conditions.
Contemporaneously with the consummation of the Merger,
Starwood Financial will acquire all of the outstanding ownership interests in
Starwood Financial Advisors, LLC, Starwood Financial's external advisor, in
exchange for aggregate consideration of four million Class A Shares (the
"Advisor Transaction"). This transaction will be accomplished principally
through a merger of the advisor's controlling shareholder with and into a
subsidiary of Starwood Financial. The closings of the Merger and the Advisor
Transaction are mutually conditional.
Prior to the consummation of the Merger and the Advisor
Transaction (defined below), Starwood Financial intends to change its form from
a Maryland trust to a Maryland corporation through a merger with and into
Starwood Financial, Incorporated ("Starwood Incorporated"), a Maryland
corporation and a wholly-owned subsidiary of Starwood Financial formed solely to
effect such merger (the "Incorporation Merger"), which will be the surviving
entity. In the Incorporation Merger, the Class B Common Shares, par value $0.01
per share, of Starwood Financial will be converted into shares of common stock,
par value $0.001 per share ("Starwood Common Stock"), of Starwood Incorporated
on a 49-for-one basis and the Class A Common Shares, par value $1.00 per share,
of Starwood Financial ("Class A Shares") will be converted into shares of
Starwood Common Stock on a one-for-one basis.
<PAGE>
3
Following completion of the Incorporation Merger but prior to
the effective time of the Merger with Registrant, Starwood Incorporated intends
to pay a dividend of an aggregate of one million shares of Starwood Common Stock
pro rata to all holders of Starwood Common Stock as of such time.
Starwood Financial's principal shareholders, who together
represent approximately 99% of the outstanding voting power of Starwood
Financial, have entered into agreements with Registrant, pursuant to which,
among other things, those shareholders have granted to Registrant irrevocable
proxies to vote their shares in favor of the Merger, and against any proposal
that would compete with the Merger. Those Shareholders have also agreed to vote
all of their Starwood Financial shares in favor of the Advisor Transaction and
the Incorporation Merger. Registrant has agreed with Starwood Financial that if
the Merger Agreement is terminated under certain circumstances, Registrant will
pay Starwood Financial certain fees and expenses. Starwood Financial has agreed
with Registrant that if the Merger Agreement is terminated under certain other
circumstances, Starwood Financial will pay Registrant certain fees and expenses.
On June 16, Registrant issued a press release (attached as
Exhibit 99.1 hereto) summarizing the above-described transactions.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
Exhibit Number (Referenced to
Item 601 of Regulation S-K) Description of Exhibit
----------------------------- -----------------------
2 Agreement and Plan of Merger, dated as
of June 15, 1999, by and between
Starwood Financial Trust, ST Merger Sub,
Inc., and TriNet Corporate Realty Trust,
Inc.
99.1 Press Release, dated June 16, 1999
99.2 Supplemental Information--Events
Involving the Registrant Leading to the
Transaction
<PAGE>
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
TRINET CORPORATE REALTY TRUST, INC.
By: /s/ Geoffrey M. Dugan
-------------------------------
Name: Geoffrey M. Dugan
Title: Vice President, Administration,
General Counsel and Secretary
Dated: June 22, 1999
Exhibit 2
EXECUTION COPY
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of June 15, 1999
by and among
STARWOOD FINANCIAL TRUST,
ST MERGER SUB, INC.
and
TRINET CORPORATE REALTY TRUST, INC.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER ................................................... 2
Section 1.1. The Merger ........................................... 2
Section 1.2. Closing .............................................. 2
Section 1.3. Effective Time ....................................... 3
Section 1.4. Charter and Bylaws ................................... 3
Section 1.5. Directors ............................................ 3
Section 1.6. Officers ............................................. 3
Section 1.7. Election Not to Proceed With Incorporation Merger .... 3
ARTICLE II EFFECTS OF THE MERGER; EXCHANGE OF CERTIFICATES .............. 4
Section 2.1. Effect on Stock ...................................... 4
(a) Stock Owned by TriNet or Its Subsidiaries ............ 4
(b) Conversion of TriNet Stock into New Starwood Stock ... 4
(c) Shares of New Starwood and Starwood Sub Stock ........ 5
Section 2.2. Exchange of Certificates ............................. 5
(a) Exchange Agent ....................................... 5
(b) Starwood to Provide Merger Consideration ............. 5
(c) Exchange Procedure ................................... 5
(d) Record Dates; Distributions with Respect to
Unexchanged Shares ................................. 6
(e) No Further Ownership Rights in TriNet Capital Stock .. 6
(f) Unclaimed Merger Consideration ....................... 7
(g) No Fractional Shares ................................. 7
(h) Withholding .......................................... 7
(i) No Dissenters' Rights ................................ 8
(j) Adjustments to Prevent Dilution ...................... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES ............................... 8
Section 3.1. Representations and Warranties of TriNet ............. 8
(a) Organization, Standing and Corporate Power of TriNet . 8
(b) TriNet Subsidiaries; Interests in Other Persons ...... 8
(c) Capital Structure .................................... 9
(d) Authority; Noncontravention; Consents ................ 10
(e) SEC Documents; Financial Statements;
Undisclosed Liabilities ............................ 11
(f) Absence of Certain Changes or Events ................. 11
i
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
(g) Litigation ........................................... 12
(h) Absence of Changes in Benefit Plans; ERISA
Compliance ......................................... 12
(i) Taxes ................................................ 13
(j) No Loans or Payments to Employees, Officers or
Directors .......................................... 14
(k) Brokers; Schedule of Fees and Expenses ............... 15
(l) Compliance with Laws ................................. 15
(m) Contracts; Debt Instruments .......................... 15
(n) Environmental Matters ................................ 16
(o) TriNet Properties .................................... 16
(p) Opinion of Financial Advisor ......................... 18
(q) State Takeover Statutes; Rights Agreement ............ 19
(r) Investment Company Act of 1940 ....................... 19
(s) Proxy Statement and Registration Statement ........... 19
(t) Vote Required ........................................ 19
(u) Year 2000 Issues ..................................... 19
Section 3.2. Representations and Warranties of Starwood
and Starwood Sub ................................... 20
(a) Organization, Standing and Corporate
Power of Starwood .................................. 20
(b) Starwood Subsidiaries; Interests in Other Persons .... 20
(c) Capital Structure .................................... 22
(d) Authority; Noncontravention; Consents ................ 23
(e) SEC Documents; Financial Statements;
Undisclosed Liabilities ............................ 24
(f) Absence of Certain Changes or Events ................. 25
(g) Litigation ........................................... 25
(h) Absence of Changes in Benefit Plans;
ERISA Compliance ................................... 26
(i) Taxes ................................................ 27
(j) No Loans or Payments to Employees, Officers
or Directors ....................................... 27
(k) Brokers; Schedule of Fees and Expenses ............... 28
(l) Compliance with Laws ................................. 28
(m) Contracts; Debt Instruments .......................... 28
(n) Environmental Matters ................................ 29
(o) Starwood Properties .................................. 29
ii
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
(p) Opinion of Financial Advisor ......................... 31
(q) State Takeover Statutes .............................. 31
(r) 1940 Act ............................................. 31
(s) Proxy Statement and Registration Statement ........... 31
(t) Vote Required ........................................ 32
(u) Year 2000 Issues ..................................... 32
(v) Operations of Starwood Sub and New Starwood .......... 32
(w) No Ownership of TriNet Stock ......................... 32
ARTICLE IV COVENANTS .................................................... 32
Section 4.1. Conduct of Business by TriNet ........................ 32
Section 4.2. Conduct of Business by Starwood ...................... 35
Section 4.3. Other Actions ........................................ 37
ARTICLE V ADDITIONAL COVENANTS ......................................... 38
Section 5.1. Preparation of the Registration Statement and
the Proxy Statement; Shareholders' Meetings;
Consents ........................................... 38
Section 5.2. Access to Information; Confidentiality ............... 39
Section 5.3. Commercially Reasonable Efforts; Notification ........ 39
Section 5.4. Affiliates ........................................... 40
Section 5.5. Tax Treatment ........................................ 40
Section 5.6. No Solicitation of Transactions ...................... 40
Section 5.7. Public Announcements ................................. 41
Section 5.8. AMEX De-Listing; NYSE Listing ........................ 42
Section 5.9. Letters of Accountants ............................... 42
Section 5.10. Transfer and Gains Taxes; Shareholder Demand Letters . 42
Section 5.11. Benefit Plans and Other Employee Arrangements ........ 42
(a) Benefit Plans ........................................ 42
(b) Stock Incentive Plans ................................ 43
Section 5.12. Indemnification; Directors' and Officers' Insurance .. 44
Section 5.13. The TriNet Rights Plan ............................... 46
Section 5.14. Coordination of Dividends ............................ 46
Section 5.15. [Intentionally deleted.] ............................. 46
Section 5.16. Environmental Reports ................................ 46
iii
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
ARTICLE VI CONDITIONS PRECEDENT ......................................... 46
Section 6.1. Conditions to Each Party's Obligation to
Effect the Merger .................................. 46
(a) Shareholder Approvals ................................ 46
(b) Listing of Shares .................................... 46
(c) Registration Statement ............................... 47
(d) No Injunctions or Restraints ......................... 47
(e) Incorporation Merger and Advisor Transaction ......... 47
Section 6.2. Conditions to Obligations of Starwood ................ 47
(a) Representations and Warranties ....................... 47
(b) Performance of Obligations of TriNet ................. 47
(c) Material Adverse Effect .............................. 47
(d) Opinions Relating to REIT Status ..................... 48
(e) Other Tax Opinion .................................... 48
(f) Consents ............................................. 48
Section 6.3. Conditions to Obligation of TriNet ................... 48
(a) Representations and Warranties ....................... 48
(b) Performance of Obligations of Starwood ............... 48
(c) Material Adverse Effect .............................. 48
(d) Opinions Relating to REIT and Partnership Status ..... 48
(e) Other Tax Opinion .................................... 49
(f) Consents ............................................. 49
(g) Incorporation Merger Representations ................. 49
(h) Advisor Transaction Representations .................. 49
(i) Lock-Up Agreements; Stockholders' Agreement .......... 49
(j) Election of REIT Status .............................. 49
ARTICLE VII BOARD ACTIONS ................................................ 50
Section 7.1. Board Actions ........................................ 50
Section 7.2. TriNet Subsidiary Boards ............................. 50
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER ............................ 50
Section 8.1. Termination .......................................... 50
Section 8.2. Expenses ............................................. 52
iv
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
Section 8.3. Effect of Termination ................................ 55
Section 8.4. Amendment ............................................ 55
Section 8.5. Extension; Waiver .................................... 55
ARTICLE IX GENERAL PROVISIONS ........................................... 56
Section 9.1. Survival ............................................. 56
Section 9.2. Notices .............................................. 56
Section 9.3. Interpretation ....................................... 56
Section 9.4. Counterparts ......................................... 57
Section 9.5. Entire Agreement; No Third-Party Beneficiaries ....... 57
Section 9.6. GOVERNING LAW ........................................ 57
Section 9.7. Assignment ........................................... 57
Section 9.8. Enforcement .......................................... 57
Section 9.9. Exhibits; Disclosure Letters ......................... 57
ARTICLE X CERTAIN DEFINITIONS .......................................... 58
Section 10.1. Certain Definitions .................................. 58
1940 Act .................................................................... 19
Additional Acceleration Event ............................................... 37
Advisor Affiliate Lock-Up Agreement ......................................... 2
Advisor Transaction ......................................................... 1
Advisor Transaction Agreement ............................................... 1
affiliate ................................................................... 58
Agreement ................................................................... 1
AMEX ........................................................................ 42
Ancillary Agreements ........................................................ 58
Base Amount ............................................................. 52, 54
Bear, Stearns ............................................................... 28
Bylaws ...................................................................... 3
Certificate ................................................................. 4
change of control ........................................................... 58
Charter ..................................................................... 3
Closing ..................................................................... 2
Closing Date ................................................................ 3
Code ........................................................................ 1
Confidentiality Agreement ................................................... 39
Defaulted TriNet Lease ...................................................... 47
Effective Time .............................................................. 3
Employee Plan ............................................................... 58
v
<PAGE>
INDEX OF DEFINED TERMS
(Continued)
Page
Environmental Law ........................................................... 16
ERISA ....................................................................... 13
Event of Default ............................................................ 37
Exchange Act ................................................................ 11
Exchange Agent .............................................................. 5
Exchange Ratio .............................................................. 4
Final TriNet Dividend ....................................................... 6
GAAP ........................................................................ 11
GECC ........................................................................ 37
Governmental Entity ......................................................... 10
Greenhill ................................................................... 15
Hazardous Materials ......................................................... 16
Incorporation Merger ........................................................ 1
Incorporation Merger Agreement .............................................. 1
indebtedness ................................................................ 15
Indemnified Liabilities ..................................................... 44
Indemnified Parties ......................................................... 44
Indemnifying Parties ........................................................ 44
Irrevocable Proxies ......................................................... 52
Knowledge ................................................................... 58
Law ......................................................................... 58
Laws ........................................................................ 10
LF Offshore Fund ............................................................ 23
LF Onshore Fund ............................................................. 23
LF Securities Purchase Agreement ............................................ 23
Liens ....................................................................... 8
Lock-Up Agreements .......................................................... 2
Market Price ............................................................ 43, 44
Merger ...................................................................... 1
Merger Consideration ........................................................ 4
MGCL ........................................................................ 2
New Starwood ................................................................ 1
New Starwood Articles Supplementary ......................................... 4
New Starwood Board .......................................................... 3
New Starwood Common Stock ................................................... 1
New Starwood Preferred Stock ................................................ 4
New Starwood Series B Preferred Stock ....................................... 4
New Starwood Series C Preferred Stock ....................................... 4
New Starwood Series D Preferred Stock ....................................... 4
Offshore Fund Warrant ....................................................... 23
Onshore Fund Warrant ........................................................ 23
Option Standstill Agreement ................................................. 2
Optionholder ................................................................ 43
Person ...................................................................... 58
Proxy Statement ............................................................. 10
Qualifying Income ........................................................... 52
vi
<PAGE>
INDEX OF DEFINED TERMS
(Continued)
Page
Registration Statement ...................................................... 10
REIT ........................................................................ 1
REIT Requirements ........................................................... 52
Rights Agreement ............................................................ 19
SDAT ........................................................................ 3
Securities Act .............................................................. 11
SFA ......................................................................... 1
SFA II ...................................................................... 1
Shareholder Agreement ....................................................... 2
Starwood .................................................................... 1
Starwood Advisor Transaction Shareholder Approval ........................... 32
Starwood Affiliate Lock-Up Agreement ........................................ 2
Starwood Benefit Plan ....................................................... 26
Starwood Break-Up Expenses .................................................. 53
Starwood Break-Up Fee ....................................................... 52
Starwood Break-Up Fee Tax Opinion ........................................... 52
Starwood Class A Common Shares .............................................. 22
Starwood Class B Common Shares .............................................. 1
Starwood CMBS ............................................................... 21
Starwood Competing Transaction .............................................. 41
Starwood Disclosure Letter .................................................. 20
Starwood Encumbrances ....................................................... 29
Starwood ERISA Affiliate .................................................... 26
Starwood Expense Fee Base Amount ............................................ 53
Starwood Filed SEC Documents ................................................ 25
Starwood Financial Statement Date ........................................... 25
Starwood Incorporation Merger Shareholder Approval .......................... 32
Starwood Lease .............................................................. 30
Starwood Loans .............................................................. 21
Starwood Material Adverse Effect ............................................ 20
Starwood Merger Shareholder Approval ........................................ 32
Starwood Office Space Leases ................................................ 30
Starwood Pledged Ground Lease ............................................... 21
Starwood Properties ......................................................... 29
Starwood Rent Roll .......................................................... 31
Starwood SEC Documents ...................................................... 24
Starwood Series A Preferred Shares .......................................... 22
Starwood Shareholder Approvals .............................................. 32
Starwood Shareholders Meeting ............................................... 38
Starwood Stock Options ...................................................... 22
Starwood Stock Plan ......................................................... 22
Starwood Sub ................................................................ 1
Starwood Subsidiary ......................................................... 58
Starwood Tax Protection Agreement ........................................... 28
Starwood Warrants ........................................................... 23
Stock Dividend .............................................................. 5
vii
<PAGE>
INDEX OF DEFINED TERMS
(Continued)
Page
Subsidiary .................................................................. 58
Superior TriNet Competing Transaction ....................................... 50
Surviving Corporation ....................................................... 1
Takeover Statute ............................................................ 40
Tax Return .................................................................. 14
Taxes or Tax ................................................................ 14
Taxing Authority ............................................................ 13
Transfer and Gains Taxes .................................................... 42
TriNet ...................................................................... 1
TriNet Benefit Plan ......................................................... 12
TriNet Break-Up Expenses .................................................... 54
TriNet Break-Up Fee ......................................................... 54
TriNet Break-Up Fee Tax Opinion ............................................. 54
TriNet Common Stock ......................................................... 1
TriNet Competing Transaction ................................................ 41
TriNet Disclosure Letter .................................................... 8
TriNet Encumbrances ......................................................... 16
TriNet ERISA Affiliate ...................................................... 12
TriNet Expense Fee Base Amount .............................................. 54
TriNet Filed SEC Documents .................................................. 11
TriNet Financial Statement Date ............................................. 11
TriNet Lease ................................................................ 17
TriNet Managed Subsidiary ................................................... 58
TriNet Management Company Owners ............................................ 2
TriNet Management Company Stock Purchase Agreement .......................... 2
TriNet Material Adverse Effect .............................................. 8
TriNet Non-Managed Subsidiary ............................................... 58
TriNet Office Space Lease ................................................... 17
TriNet Preferred Stock ...................................................... 1
TriNet Properties ........................................................... 16
TriNet Proxy Default ........................................................ 52
TriNet Rent Roll ............................................................ 18
TriNet Revolver ............................................................. 34
TriNet SEC Documents ........................................................ 11
TriNet Series A Preferred Stock ............................................. 1
TriNet Series B Preferred Stock ............................................. 1
TriNet Series C Preferred Stock ............................................. 1
TriNet Shareholder Approvals ................................................ 19
TriNet Shareholders Meeting ................................................. 38
TriNet Stock Options ........................................................ 9
TriNet Stock Plans .......................................................... 9
TriNet Subsidiary ........................................................... 58
TriNet Tax Protection Agreement ............................................. 15
Year 2000 Ready ............................................................. 19
viii
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
Schedule A Starwood shareholders executing Starwood Shareholder Agreement
Schedule B Starwood shareholders executing Starwood Affiliate Lock-Up
Agreements
Schedule C Persons executing Advisor Affiliate Lock-Up Agreements
Schedule D Persons Executing Option Standstill Agreements
Schedule E TriNet Management Company Owners
Schedule F Directors of New Starwood
Schedule G Directors of the Surviving Corporation
Schedule H Officers of New Starwood
Schedule I Officers of the Surviving ^ Corporation
===========
Exhibit A Incorporation Merger Agreement
Exhibit B Advisor Transaction Agreement
Exhibit C Form of Starwood Shareholder Agreement
Exhibit D Form of Starwood Affiliate Lock-Up Agreement
Exhibit E Form of Advisor Affiliate Lock-Up Agreement
Exhibit F Form of Option Standstill Agreement
Exhibit G TriNet Management Company Stock Purchase Agreement
Exhibit H Form of Charter of the Surviving Corporation
Exhibit I Form of Bylaws of the Surviving Corporation
Exhibit J Form of Charter of New Starwood
Exhibit K Form of Bylaws of New Starwood
Exhibit L Form of Articles Supplementary for each class of New Starwood
Preferred Stock
Exhibit M Form of Katten Muchin & Zavis Tax Opinion
Exhibit N Form of Mayer, Brown & Platt LLP Tax Opinion
Exhibit O Form of Rogers & Wells LLP Tax Opinion Exhibit P Form of Paul,
Weiss, Rifkind, Wharton & Garrison Tax Opinion
Exhibit Q Form of Affiliate Letter
ix
<PAGE>
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of June 15, 1999, by and
among STARWOOD FINANCIAL TRUST, a Maryland real estate investment trust
("Starwood"), ST MERGER SUB, INC., a Maryland corporation ("Starwood Sub"), and
TRINET CORPORATE REALTY TRUST, INC., a Maryland corporation ("TriNet").
RECITALS
A. The Boards of Trustees or Directors, as the case may be, of
Starwood, Starwood Sub and TriNet each have determined that it is advisable and
in the best interest of their respective companies and shareholders that upon
the terms and subject to the conditions set forth in this Agreement, Starwood
Sub will merge with and into TriNet, with TriNet being the surviving corporation
(the "Surviving Corporation"), in a merger (the "Merger") in which each issued
and outstanding share of common stock, par value $.01 per share, of TriNet (the
"TriNet Common Stock"), each issued and outstanding share of 9 3/8% Series A
Cumulative Redeemable Preferred Stock, par value $.01 per share, of TriNet
(the"TriNet Series A Preferred Stock"), each issued and outstanding share of
9.2% Series B Cumulative Redeemable Preferred Stock, par value $.01 per share,
of TriNet (the "TriNet Series B Preferred Stock") and each issued and
outstanding share of 8% Series C Cumulative Redeemable Preferred Stock, par
value $.01 per share, of TriNet (the "TriNet Series C Preferred Stock," and
together with the TriNet Series A Preferred Stock and the TriNet Series B
Preferred Stock, the "TriNet Preferred Stock") will be converted into the
applicable Merger Consideration (as defined below).
B. The parties intend that for federal income tax purposes the Merger
will qualify as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that, following the Merger,
Starwood will continue to be subject to taxation as a real estate investment
trust (a "REIT") and TriNet will be a qualified REIT subsidiary of Starwood, in
each case within the meaning of the Code.
C. Prior to the consummation of the Merger, Starwood intends to merge
with and into Starwood Financial, Inc., a newly formed Maryland corporation
("New Starwood"), for the purpose of changing Starwood's form from a Maryland
real estate investment trust to a Maryland corporation (the "Incorporation
Merger"), all in accordance with the terms of the Agreement and Plan of Merger,
dated the date hereof, between New Starwood and Starwood, a copy of which is
attached as Exhibit A hereto (the "Incorporation Merger Agreement"). As part of
the Incorporation Merger, the Class B Common Shares of beneficial interest, par
value $.01 per share, of Starwood ("Starwood Class B Common Shares") will be
converted into shares of common stock, par value $.001 per share, of New
Starwood ("New Starwood Common Stock") on the basis of 49 Starwood Class B
Common Shares for one share of New Starwood Common Stock. Upon consummation of
the Incorporation Merger, New Starwood will succeed to all of Starwood's rights,
obligations and liabilities under this Agreement.
D. Contemporaneously with the consummation of the Merger, (i) STW
Holdings I, Inc., a Delaware corporation which owns 99.9% of the membership
interests of Starwood Advisors II, LLC, a Delaware limited liability company
("SFA II"), which in turn owns 99.9% of the membership interests of Starwood
Advisors, LLC, a Delaware limited liability company ("SFA"), will merge with and
into a subsidiary of New Starwood, with such subsidiary of New Starwood being
the surviving corporation and (ii) Starwood Capital Group, LLC, a Connecticut
limited liability company which owns 0.1% of the membership interests of each of
SFA and SFA II, will contribute those interests to New Starwood, in accordance
with the terms of the Agreement and Plan of Merger and Interest Contribution
Agreement, dated the date hereof, a copy of which is attached as Exhibit B
hereto (the "Advisor Transaction Agreement"). The transactions contemplated by
the Advisor Agreement are referred to herein as the "Advisor Transaction." Upon
consummation of the Incorporation Merger, New Starwood will succeed to all of
Starwood's rights, obligations and liabilities under the Advisor Transaction
Agreement.
<PAGE>
E. Contemporaneously with the execution and delivery of this Agreement,
certain holders of Starwood Common Stock named in Schedule A hereto have entered
into an agreement with Starwood and TriNet, substantially in the form of Exhibit
C hereto (the "Shareholder Agreement"), pursuant to which, among other things,
those holders have granted to TriNet irrevocable proxies to vote their shares in
favor of the Merger, this Agreement, the Incorporation Merger, the Incorporation
Merger Agreement, the Advisor Transaction and the Advisor Transaction Agreement
and against any proposal which would compete with the Merger.
F. Contemporaneously with the execution and delivery of this Agreement,
(i) the Persons listed on Schedule B hereto have entered into agreements, each
substantially in the form of Exhibit D hereto (each a "Starwood Affiliate
Lock-Up Agreement"), in which such Persons have agreed to certain restrictions
on transfers of shares of New Starwood Common Stock by such Persons, (ii) the
Persons listed on Schedule C hereto have entered into agreements, each
substantially in the form of Exhibit E hereto (each an "Advisor Affiliate
Lock-Up Agreement" and each such agreement together with each Starwood Affiliate
Lock-Up Agreement, the "Lock-Up Agreements"), in which such Persons agreed to
certain restrictions on transfers of shares of New Starwood Common Stock by such
Persons and (iii) the Persons listed on Schedule D hereto have entered into
agreements, each substantially in the form of Exhibit F hereto (each an "Option
Standstill Agreement") in which such Persons have agreed to certain restrictions
on exercises of options to purchase TriNet Common Stock by such Persons.
G. Contemporaneously with the execution and delivery of this Agreement,
the persons named in Schedule E hereto (the "TriNet Management Company Owners")
have entered into a stock purchase agreement, a copy of which is attached as
Exhibit G hereto (the "TriNet Management Company Stock Purchase Agreement")
pursuant to which the TriNet Management Company Owners have agreed to sell to
the purchasers named therein, and such purchasers have agreed to acquire, all of
the interests of the TriNet Management Company Owners in TriNet Management
Operating Company, Inc.
AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time (as hereinafter defined), Starwood Sub shall be
merged with and into TriNet in accordance with the Maryland General Corporation
Law (the "MGCL"), whereupon the separate corporate existence of Starwood Sub
shall cease and TriNet shall continue as the Surviving Corporation.
(b) The Merger shall have the effects set forth in the MGCL.
Accordingly, from and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities, liabilities and duties of Starwood Sub and
TriNet.
Section 1.2. Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. New York City time on the fifth business day after
satisfaction or waiver of the conditions set forth in
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Article VI (the "Closing Date"), at the offices of Rogers & Wells LLP, 200 Park
Avenue, New York, New York 10166, unless another date or place is agreed to in
writing by the parties.
Section 1.3. Effective Time. On the Closing Date, the parties shall
execute and file Articles of Merger or other appropriate documents in accordance
with the MGCL, and shall make all other filings or recordings required with
respect to the Merger under the MGCL. The Merger shall become effective upon
acceptance for record of the Articles of Merger by the State Department of
Assessments and Taxation of Maryland (the "SDAT") or at such other time or times
as may be agreed by Starwood, Starwood Sub and TriNet and specified in the
Articles of Merger but not exceeding 30 days after acceptance of the Articles of
Merger for record by the SDAT (the time the Merger becomes effective being the
"Effective Time"), it being understood that the parties shall cause the
Effective Time to occur as soon as practicable after the Closing Date.
Section 1.4. Charter and Bylaws. The charter and bylaws of Starwood
Sub, substantially in the forms set forth in Exhibits H and I hereto, shall, by
amendment of the charter and bylaws of TriNet in the manner provided by Maryland
law, become the charter (the "Charter") and bylaws (the "Bylaws") of the
Surviving Corporation upon the Effective Time until further amended in
accordance with applicable Maryland law. The charter and bylaws of New Starwood,
substantially in the forms set forth in Exhibits J and K hereto, shall continue
to be in effect as the charter and bylaws of New Starwood as of and after the
Effective Time until amended in accordance with Maryland law.
Section 1.5. Directors. Immediately following the Effective Time, the
Board of Directors of New Starwood (the "New Starwood Board") and certain
committees of the New Starwood Board shall consist of the persons named on
Schedule F hereto, each of whom shall be a member of the class indicated on
Schedule F. Immediately following the Effective Time, the Board of Directors of
the Surviving Corporation shall consist of the persons named on Schedule G
hereto. If any person referred to in the preceding sentences should for any
reason be unable or unwilling to serve, such person's replacement shall be
selected before the Effective Time by mutual agreement of Starwood, Starwood Sub
and TriNet or after the Effective Time by the New Starwood Board.
Section 1.6. Officers. The executive officers of New Starwood
immediately following the Effective Time shall include the persons named on
Schedule H hereto; the executive officers of the Surviving Corporation
immediately following the Effective Time shall include the persons named on
Schedule I hereto. Each executive officer shall hold the position indicated on
Schedules H and/or I hereto. If any such person should for any reason be unable
or unwilling to serve, such person's replacement shall be selected before the
Effective Time by mutual agreement of Starwood, Starwood Sub and TriNet or after
the Effective Time by the New Starwood Board.
Section 1.7. Election Not to Proceed With Incorporation Merger.
Notwithstanding anything in this Agreement to the contrary, if after the date of
this Agreement and before the mailing of the Proxy Statement (as defined in
Section 3.1(d)) Starwood reasonably determines that the consummation of the
Incorporation Merger would have an adverse impact on Starwood, Starwood may
elect not to proceed with the Incorporation Merger and Starwood shall provide
prompt written notice to TriNet of any such determination. In such event, (i)
all references in this Agreement and the exhibits hereto to "New Starwood" shall
be deemed to refer to and become references to Starwood and all references to
shares of common or preferred stock of New Starwood shall be deemed to refer to
and become references to common shares of beneficial interest and preferred
shares of beneficial interest of Starwood in each case mutatis mutandis and (ii)
Starwood shall submit to its shareholders a proposal to amend its declaration of
trust and bylaws in the manner provided by Maryland law to substantially conform
such declaration of trust and bylaws, to the extent permitted under applicable
Maryland law governing Maryland real estate investment trusts, to the forms of
charter and bylaws of New Starwood, respectively, set forth in Exhibits
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J and K hereto, including, without limitation, to eliminate the Starwood Class B
Common Shares and cause the conversion of all Starwood Class B Common Shares
into Starwood Class A Common Shares on the basis of 49 Starwood Class B Common
Shares for one Starwood Class A Common Share and make such other changes as
Starwood and TriNet mutually agree. Starwood and TriNet agree to cooperate and
work together in good faith to amend and restate this Agreement and the exhibits
hereto to give effect to any determination made by Starwood in accordance with
this Section 1.7.
ARTICLE II
EFFECTS OF THE MERGER;
EXCHANGE OF CERTIFICATES
Section 2.1. Effect on Stock.
(a) Stock Owned by TriNet or Its Subsidiaries. As of the Effective
Time, any shares of capital stock of TriNet that are owned by TriNet or any
TriNet Subsidiary (as defined herein) automatically shall be cancelled and
retired and all rights with respect thereto shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of TriNet Stock into New Starwood Stock. At the
Effective Time, except as provided in Section 2.1(a), (A) each issued and
outstanding share of TriNet Common Stock shall be converted by virtue of the
Merger, automatically and without any action on the part of the holder thereof,
into 1.15 (the "Exchange Ratio") fully paid and nonassessable shares of New
Starwood Common Stock, (B) each issued and outstanding share of TriNet Series A
Preferred Stock shall, by virtue of the Merger, automatically and without any
action on the part of the holder thereof, be converted into and continue to
exist as one fully paid and nonassessable share of 9-3/8% Series B Cumulative
Redeemable Preferred Stock, par value $.001 per share, of New Starwood ("New
Starwood Series B Preferred Stock"), (C) each issued and outstanding share of
TriNet Series B Preferred Stock shall, by virtue of the Merger automatically and
without any action on the part of the holder thereof, be converted into and
continue to exist as one fully paid and nonassessable share of 9.2% Series C
Cumulative Redeemable Preferred Stock, par value $.001 per share, of New
Starwood ("New Starwood Series C Preferred Stock") and (D) each issued and
outstanding share of TriNet Series C Preferred Stock shall, by virtue of the
Merger, automatically and without any action on the part of the holder thereof,
be converted into and continue to exist as one fully paid and nonassessable
share of 8% Series D Cumulative Redeemable Preferred Stock, par value $.001 per
share, of New Starwood ("New Starwood Series D Preferred Stock"), and together
with the New Starwood Series B Preferred Stock and the New Starwood Series C
Preferred Stock, the "New Starwood Preferred Stock"). The preferences, other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of New Starwood Preferred Stock shall be as set forth in the Articles
Supplementary of New Starwood attached hereto as Exhibit L (the "New Starwood
Articles Supplementary"), and are identical to the preferences, other rights,
voting powers, restrictions, limitations at to dividends and other
distributions, qualifications and terms and conditions of redemption of the
corresponding series of TriNet Preferred Stock except for the additional voting
rights of each class of New Starwood Preferred Stock. At the Effective Time,
each holder of a certificate representing any shares of TriNet Common Stock or
TriNet Preferred Stock (or affidavit of loss in lieu thereof) (a "Certificate")
shall cease to have any rights with respect thereto, except the right to
receive, upon surrender of such Certificate in accordance with Section 2.2(c), a
certificate or certificates representing the shares of New Starwood Common Stock
or New Starwood Preferred Stock, as applicable, into which those shares are
converted pursuant to this Section 2.1(b) and any cash in lieu of fractional
shares of New Starwood Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate (the "Merger Consideration") and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(d), in each case
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without interest and less any required withholding taxes. Notwithstanding the
foregoing, the right of each TriNet shareholder to receive shares of stock of
New Starwood under this Section 2.1 will be subject to the ownership limitations
and other related provisions contained in New Starwood's charter and bylaws.
(c) Shares of New Starwood and Starwood Sub Stock. Prior to the
Effective Time, the Board of Directors of Starwood will declare a stock dividend
(the "Stock Dividend") of a total of one million shares of New Starwood Common
Stock payable prior to the Effective Time pro rata to all holders of record of
New Starwood Common Stock as of a record date prior to the Effective Time to be
determined by New Starwood, with a provision for a cash payment in lieu of
fractional shares equal to the arithmetic mean of the closing sales price per
share of the New Starwood Common Stock on the principal stock exchange on which
New Starwood Common Stock is then listed on each of the three trading days
immediately after the payment date for the Stock Dividend. Upon the Effective
Time, each share of stock of New Starwood (including, but not limited to, shares
of New Starwood outstanding as a result of the Stock Dividend) and each share of
stock of Starwood Sub outstanding immediately prior to the Effective Time shall
remain outstanding and shall represent one share of validly issued, fully paid
and nonassessable stock of the same class and designation.
Section 2.2. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Starwood shall appoint
a bank or trust company that is reasonably acceptable to TriNet to act as
exchange agent (the "Exchange Agent") for the exchange of certificates
representing shares of stock of New Starwood for Certificates representing
issued and outstanding shares of TriNet Common Stock and TriNet Preferred Stock.
(b) Starwood to Provide Merger Consideration. Starwood shall provide,
or cause to be provided, to the Exchange Agent on and after the Effective Time
from time to time as required pursuant to Section 2.2(c) and 2.2(g), for the
benefit of the holders of TriNet Common Stock and TriNet Preferred Stock,
certificates representing the shares of New Starwood Common Stock and New
Starwood Preferred Stock into which the issued and outstanding shares of TriNet
Common Stock and TriNet Preferred Stock are converted pursuant to Section
2.1(b), together with the cash payable in respect of fractional shares pursuant
to Section 2.2(g).
(c) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate or Certificates whose shares were converted into the Merger
Consideration pursuant to Section 2.1, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in a form and have such other provisions as Starwood may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the applicable Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Starwood, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the applicable Merger Consideration and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(d), and the Certificate so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of TriNet Common Stock or TriNet
Preferred Stock which is not registered in the transfer records of TriNet,
payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such payment either shall pay any transfer or other taxes required by reason of
such payment being made to a person other than the registered holder of such
Certificate or establish to the satisfaction of Starwood that such tax or taxes
have been paid or are not applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate
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shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the applicable Merger Consideration, without
interest, into which the shares theretofore represented by such Certificate
shall have been converted pursuant to Section 2.1 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(d). No
interest will be paid or will accrue on the applicable Merger Consideration upon
the surrender of any Certificate or on any amount payable pursuant to Section
2.2(d) or Section 2.2(g).
(d) Record Dates; Distributions with Respect to Unexchanged Shares.
(i) To the extent reasonably necessary to ensure satisfaction
of the requirements of Section 857(a)(1) of the Code and to avoid the imposition
of federal income taxes for the taxable year of TriNet ending at the Effective
Time, TriNet shall authorize a dividend (the "Final TriNet Dividend") to holders
of shares of TriNet Common Stock, the record date for which shall be the close
of business on the last business day prior to the Effective Time, in an amount
sufficient to permit TriNet to satisfy such requirements. The aggregate amount
required by TriNet to pay any Final TriNet Dividend will be deposited with the
Exchange Agent by TriNet upon the Effective Time. If TriNet determines it
necessary to declare the Final TriNet Dividend, it shall notify Starwood at
least 10 days prior to the date for the TriNet Shareholders Meeting (as defined
in Section 5.1(b)), and Starwood shall declare a dividend per share to holders
of Starwood Common Stock (or New Starwood Common Stock, if payable after the
effective time of the Incorporation Merger), the record date for which shall be
the close of business on the last business day prior to the Effective Time, in
an amount per share equal to the quotient obtained by dividing (x) the Final
TriNet Dividend per share of TriNet Common Stock paid by TriNet by (y) the
Exchange Ratio. The dividends payable hereunder to holders of TriNet Common
Stock shall be paid by the Exchange Agent upon presentation of the Certificates
of TriNet Common Stock for exchange in accordance with this Article II.
(ii) All shares of New Starwood Common Stock to be issued
pursuant to the Merger shall be deemed issued and outstanding as of the
Effective Time and whenever a dividend or other distribution is declared by New
Starwood in respect of the New Starwood Common Stock, the record date for which
is at or after the Effective Time, that declaration shall include dividends or
other distributions in respect of all shares of New Starwood Common Stock
issuable pursuant to this Agreement. Notwithstanding the foregoing, no dividends
or other distributions with respect to New Starwood Common Stock or New Starwood
Preferred Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares represented
thereby, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.2(g), in each case until the surrender of such
Certificate in accordance with this Article II. Subject to the effect of
applicable abandoned property, escheat or similar laws, in addition to the
payment of any Final TriNet Dividend under Section 2.2(d)(i), following
surrender of any such Certificate there shall be paid to the holder of such
Certificate without interest, (A) at the time of such surrender, the amount of
any cash payable in lieu of any fractional share of TriNet Common Stock to which
such holder is entitled pursuant to Section 2.2(g) and (B) if such Certificate
is exchangeable for one or more whole shares of New Starwood Common Stock or New
Starwood Preferred Stock, (x) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of New Starwood Common Stock
or New Starwood Preferred Stock, and (y) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and with a payment date subsequent to
such surrender payable with respect to such whole shares of New Starwood Common
Stock or New Starwood Preferred Stock.
(e) No Further Ownership Rights in TriNet Capital Stock. All Merger
Consideration paid upon the surrender of Certificates in accordance with the
terms of this Article II (and any cash paid pursuant to Section 2.2(g)) shall be
deemed to have been paid in full satisfaction of all rights pertaining to
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the shares of TriNet Common Stock and TriNet Preferred Stock theretofore
represented by such Certificates; subject, however, to the obligation of TriNet
to pay, without interest, any dividends, including any Final TriNet Dividend, or
make any other distributions with a record date prior to the Effective Time
which may have been declared or paid by TriNet on such shares in accordance with
the terms of this Agreement or prior to the date of this Agreement and which
remain unpaid at the Effective Time and have not been paid prior to such
surrender, and there shall be no further registration of transfers on the stock
transfer books of TriNet of the shares of TriNet Common Stock or TriNet
Preferred Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are properly presented to New
Starwood they shall be cancelled and exchanged as provided in this Article II.
(f) Unclaimed Merger Consideration. Any portion of the Merger
Consideration delivered to the Exchange Agent pursuant to this Agreement that
remains unclaimed for 12 months after the Effective Time shall be redelivered by
the Exchange Agent to New Starwood, upon demand, and any holders of Certificates
who have not theretofore complied with Section 2.2(b) shall thereafter look only
to New Starwood for delivery of the Merger Consideration, subject to applicable
abandoned property, escheat and other similar laws. New Starwood shall have no
liability to any holder of shares of TriNet Common Stock or TriNet Preferred
Stock for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any Merger Consideration
remaining unclaimed by any holder of shares of TriNet Common Stock or TriNet
Preferred Stock on the day immediately prior to the time such amounts otherwise
would escheat to or become the property of any governmental entity shall, to the
extent permitted by law, become the property of New Starwood, free and clear of
any claim or interest of any Persons previously entitled thereto.
(g) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of
New Starwood Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote, to receive dividends or to any other rights of a stockholder of
New Starwood.
(ii) Notwithstanding any other provision of this Agreement,
each holder of shares of TriNet Common Stock who would otherwise have been
entitled to receive a fraction of a share of New Starwood Common Stock (after
taking into account all Certificates delivered by such holder) shall receive,
from the Exchange Agent upon surrender of such holder's Certificates in
accordance with Section 2.1, a cash payment in lieu of such fractional shares of
New Starwood Common Stock equal to the same fractional proportion of the
arithmetic mean of the closing sales price per share of the New Starwood Common
Stock on the principal stock exchange on which the New Starwood Common Stock is
then listed (less, if New Starwood Common Stock is trading cum dividend on any
of those days, the amount of the dividend, if any, declared by Starwood pursuant
to Section 2.2(d)) on each of the three trading days immediately after the
Closing Date.
(h) Withholding. New Starwood or the Exchange Agent shall be entitled
to deduct and withhold from the Merger Consideration otherwise payable pursuant
to this Agreement to any holder of shares of TriNet Common Stock or TriNet
Preferred Stock such amounts as New Starwood or the Exchange Agent is required
to deduct and withhold with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by New Starwood or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of TriNet Common Stock or TriNet Preferred Stock, as
the case may be, in respect of which such deduction and withholding was made by
New Starwood or the Exchange Agent.
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(i) No Dissenters' Rights. No dissenters' or appraisal rights shall be
available with respect to the Merger.
(j) Adjustments to Prevent Dilution. In the event that TriNet changes
the number of shares of TriNet Common Stock or securities convertible or
exchangeable into or exercisable for such shares, or Starwood or New Starwood
changes the number of shares of New Starwood Common Stock or securities
convertible or exchangeable into or exercisable for shares of New Starwood
Common Stock, issued and outstanding prior to the Effective Time as a result of
a reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision, issuer tender or exchange
offer, or other similar transaction involving TriNet, Starwood or New Starwood,
the Merger Consideration and the Exchange Ratio shall be equitably adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of TriNet. Except as set
forth in the letter of even date herewith (with sections organized in accordance
with Section 9.9) signed by the President or Chief Executive Officer and the
Chief Financial Officer of TriNet and delivered to Starwood prior to the
execution of this Agreement (the "TriNet Disclosure Letter"), TriNet represents
and warrants to Starwood as follows:
(a) Organization, Standing and Corporate Power of TriNet. TriNet is a
corporation duly organized and validly existing under the laws of the State of
Maryland and has the requisite corporate power and authority to carry on its
business as now being conducted. TriNet is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing of its properties or management of properties
for others makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed, individually or in the aggregate, would
not have a material adverse effect on the business, properties, financial
condition or results of operations of TriNet and the TriNet Subsidiaries, taken
as a whole (a "TriNet Material Adverse Effect"; for purposes of this agreement,
however, "TriNet Material Adverse Effect" does not include any such effect
directly resulting from or directly attributable to (i) the execution of this
Agreement and each Ancillary Agreement to which TriNet is a party or the
proposed consummation of the transactions contemplated by this Agreement and
each Ancillary Agreement to which TriNet is a party or the public announcement
thereof and (ii) changes in the U.S. economy, the U.S. securities markets, the
real estate industry or the real estate finance industry that generally affect,
to the same extent, all participants in the industries in which TriNet operates,
or changes in law.
(b) TriNet Subsidiaries; Interests in Other Persons.
(i) Section 3.1(b)(i) of the TriNet Disclosure Letter sets
forth each TriNet Subsidiary and the ownership interest therein of TriNet and
each other TriNet Subsidiary. All the outstanding shares of capital stock of
each TriNet Subsidiary that is a corporation have been duly authorized and
validly issued and are fully paid and nonassessable and are not subject to any
preemptive rights, and are owned by TriNet, by another TriNet Subsidiary or by
TriNet and another TriNet Subsidiary, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens"), and equity interests in each TriNet
Subsidiary that is a partnership, limited liability company or trust have been
duly authorized, validly issued, and are owned by TriNet, by another TriNet
Subsidiary or by TriNet and another TriNet Subsidiary free and clear of all
Liens. Each TriNet Subsidiary is duly organized and validly existing under the
laws of its jurisdiction of organization and has the requisite power and
authority to carry on its business as now being conducted. Each TriNet
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Subsidiary is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership,
leasing of its properties or management of properties for others makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed, individually or in the aggregate, would not reasonably be
expected to result in a TriNet Material Adverse Effect.
(ii) Except for the capital stock of, or other equity
interests in, the TriNet Subsidiaries, TriNet does not own, directly or
indirectly (including through any TriNet Subsidiary), any capital stock or other
equity interest, with a fair market value as of the date of this Agreement
greater than $1,000,000 in any Person or which represents 5% or more of the
outstanding voting power, capital stock or other ownership interest of any class
in any Person. Section 3.1(b)(ii) of the TriNet Disclosure Letter indicates each
TriNet Managed Subsidiary. Neither TriNet nor any TriNet Subsidiary is in
default of any provision of any material documents governing or otherwise
relating to its rights in any TriNet Subsidiary other than such defaults that
would not, individually or in the aggregate, reasonably be expected to result in
a TriNet Material Adverse Effect. All such documents, other than the charter and
bylaws of any TriNet Subsidiary which is a corporation, are set forth in Section
3.1(b)(ii) of the TriNet Disclosure Letter and are in full force and effect and
true and correct copies of all such documents have been previously delivered or
made available to Starwood.
(iii) There are no outstanding contractual obligations of
TriNet or any TriNet Subsidiary to repurchase, redeem or otherwise acquire any
shares of stock of TriNet or any capital stock, voting securities or other
ownership interests in TriNet or any TriNet Subsidiary, and there are no
outstanding contractual obligations of TriNet or any TriNet Subsidiary to make
any investment of $500,000 or more, individually, or more than $2,000,000 in the
aggregate during the 12 months after the Effective Time (in each case, in the
form of a loan, capital contribution or otherwise) in any Person (other than a
TriNet Subsidiary).
(c) Capital Structure. The authorized stock of TriNet consists of
40,000,000 shares of TriNet Common Stock, 15,000,000 shares of TriNet Preferred
Stock and 25,000,000 shares of excess stock, par value $.01 per share. As of
June 1, 1999, (i) 24,946,094 shares of TriNet Common Stock, 2,000,000 shares of
TriNet Series A Preferred Stock, 1,300,000 shares of TriNet Series B Preferred
Stock and 4,000,000 shares of TriNet Series C Preferred Stock constitute all of
the issued and outstanding shares of stock of TriNet, (ii) no options to
purchase shares of TriNet Common Stock were available for issuance under
TriNet's 1993 Stock Incentive Plan, (iii) options to purchase 11,084 shares of
TriNet Common Stock were available for issuance under TriNet's 1995 Stock
Incentive Plan, (iv) options to purchase 620,577 shares of TriNet Common Stock
were available for issuance under TriNet's 1997 Stock Incentive Plan (the 1993
Stock Incentive Plan, the 1995 Stock Incentive Plan and the 1997 Stock Incentive
Plan are collectively referred to as the "TriNet Stock Plans"), (v) no shares of
TriNet Common Stock were issued but had not yet vested under restricted stock
grants made pursuant to the TriNet Stock Plans, (vi) 1,615,225 shares of TriNet
Common Stock were reserved for issuance upon exercise of outstanding stock
options to purchase shares of TriNet Common Stock granted to employees and
directors of TriNet under the TriNet Stock Plans (the "TriNet Stock Options")
and (vii) 500,000 shares of TriNet's Series D Junior Participating Preferred
Stock were reserved for issuance pursuant to the Rights Agreement (as defined in
Section 3.1(q)). On the date of this Agreement, except as set forth above in
this Section 3.1(c), no shares of stock or other voting securities of TriNet
were issued, reserved for issuance or outstanding. There are no outstanding
stock appreciation rights relating to the capital stock of TriNet. All
outstanding shares of stock of TriNet are duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of TriNet having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which shareholders of TriNet may vote. Except as set forth in
this Section 3.1(c), there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements,
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arrangements or undertakings of any kind to which TriNet or any TriNet
Subsidiary is a party or by which such entity is bound, obligating TriNet or any
TriNet Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock, voting securities or other ownership
interests of TriNet or any TriNet Subsidiary or obligating TriNet or any TriNet
Subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking other
than to TriNet or a TriNet Subsidiary other than to a wholly owned TriNet
Subsidiary; Section 3.1(c) of the TriNet Disclosure Letter sets forth the amount
of any such securities issuable by TriNet on an agreement by agreement basis.
(d) Authority; Noncontravention; Consents. TriNet has the requisite
corporate power and authority to enter into this Agreement and each Ancillary
Agreement to which TriNet is a party and, subject to receipt of the TriNet
Shareholder Approval, to consummate the transactions contemplated by this
Agreement (including the Ancillary Agreements to which TriNet is a party). The
execution and delivery of this Agreement and any other agreement contemplated by
this Agreement (including the Ancillary Agreements to which TriNet is a party)
by TriNet and the consummation by TriNet of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of TriNet, subject to receipt of the TriNet Shareholder Approval. This
Agreement and each Ancillary Agreement to which TriNet is a party have been duly
executed and delivered by TriNet and constitute the valid and binding
obligations of TriNet enforceable against TriNet in accordance with their terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and to general principles of equity. The execution and
delivery of this Agreement and each Ancillary Agreement to which TriNet is a
party by TriNet does not, and the consummation of the transactions contemplated
hereby and thereby and compliance by TriNet with the provisions of this
Agreement and each Ancillary Agreement to which TriNet is a party does not and
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to loss
of a material benefit under, or result in the creation of any Lien upon any of
the properties or assets of TriNet or any TriNet Subsidiary under, (i) the
charter or bylaws of TriNet or the comparable charter or organizational
documents or partnership or similar agreement (as the case may be) of any TriNet
Subsidiary, each as amended, restated or supplemented to the date of this
Agreement; (ii) any loan or credit agreement, note, bond, mortgage, indenture,
reciprocal easement agreement, lease or other agreement, instrument, permit,
concession, contract, franchise or license applicable to TriNet or any TriNet
Subsidiary or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or regulation
(collectively, "Laws") applicable to TriNet, any TriNet Subsidiary or their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) reasonably be expected to result
in a TriNet Material Adverse Effect or (y) materially delay or prevent the
consummation of the Merger. No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state or local government
or any court, administrative or regulatory agency or commission or other
governmental authority or agency (a "Governmental Entity"), is required by or
with respect to TriNet or any TriNet Subsidiary in connection with the execution
and delivery of this Agreement or any Ancillary Agreement to which TriNet is a
party or the other agreements contemplated by this Agreement by TriNet or the
consummation by TriNet and the TriNet Subsidiaries of any of the other
transactions contemplated hereby and thereby, except for (i) the filing with the
SEC of (x) a joint proxy statement relating to the approval by TriNet's
shareholders and Starwood's shareholders of the transactions contemplated by
this Agreement and, as to Starwood's shareholders, the Incorporation Merger
Agreement and the Advisor Transaction Agreement (as amended or supplemented from
time to time, the "Proxy Statement") and a registration statement relating to
the issuance of the Merger Consideration and the New Starwood Common Stock to be
issued in the Advisor Transaction (the "Registration Statement"), and (y) such
reports under Section 13 and 16 of the Securities Exchange Act of
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1934, as amended (the "Exchange Act"), as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, (ii) the
acceptance for record of the Articles of Merger for the Merger by the SDAT,
(iii) such filings as may be required in connection with the payment of any
Transfer and Gains Taxes (as defined below), and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations and filings as
are set forth in Section 3.1(d) of the TriNet Disclosure Letter or (A) as may be
required under (x) federal, state, local or foreign environmental laws or (y)
the "blue sky" laws of various states or (B) which, if not obtained or made,
would not prevent or delay in any material respect the consummation of any of
the transactions contemplated by this Agreement or any Ancillary Agreement or
otherwise prevent TriNet from performing its obligations hereunder or thereunder
in any material respect or be reasonably expected to result, individually or in
the aggregate, in a TriNet Material Adverse Effect.
(e) SEC Documents; Financial Statements; Undisclosed Liabilities.
TriNet has filed all reports, schedules, forms, statements and other documents
required to be filed with the SEC since January 1, 1996 (collectively, the
"TriNet SEC Documents"). All of the TriNet SEC Documents (other than preliminary
materials or materials that were subsequently amended), as of their respective
filing dates, complied in all material respects with all applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act and, in each case, the rules and regulations promulgated thereunder
applicable to such TriNet SEC Documents. None of the TriNet SEC Documents at the
time of filing contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except to the extent such statements have been amended,
modified or superseded by later filed TriNet SEC Documents. None of the TriNet
SEC Documents is, as of the date hereof, the subject of any confidential
treatment request by TriNet. Except to the extent such statements have been
amended, modified or superseded by later TriNet Filed SEC Documents (as defined
below), the consolidated financial statements of TriNet, as applicable, included
in the TriNet SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of interim
financial statements, as permitted by the applicable rules and regulations of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presented in all material
respects, in accordance with the applicable requirements of GAAP, the
consolidated financial position of TriNet and the TriNet Subsidiaries taken as a
whole, as of the dates thereof and the consolidated results of operations and
cash flows for the periods then ended (subject, in the case of interim financial
statements, to normal year-end adjustments). Except as set forth in the TriNet
SEC Documents filed with the SEC prior to the date of this Agreement (the
"TriNet Filed SEC Documents"), neither TriNet nor any TriNet Managed Subsidiary
has, nor, to TriNet's Knowledge, does any TriNet Non-Managed Subsidiary have,
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of TriNet or in the notes thereto and which, individually or in
the aggregate, would reasonably be expected to result in a TriNet Material
Adverse Effect.
(f) Absence of Certain Changes or Events. Except as disclosed in the
TriNet Filed SEC Documents since December 31, 1998 (the "TriNet Financial
Statement Date") and to the date of this Agreement, TriNet, the TriNet Managed
Subsidiaries and, to TriNet's Knowledge, the TriNet Non-Managed Subsidiaries
have conducted their business only in the ordinary course and there has not been
(i) any events which have occurred or circumstances which have arisen that,
individually or in the aggregate have resulted in or would reasonably be
expected to result in a TriNet Material Adverse Effect, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of TriNet's stock, except for (A) regular
quarterly
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dividends on the TriNet Common Stock not in excess of $.65 per share of TriNet
Common Stock, (B) regular quarterly dividends on TriNet Series A Preferred Stock
not in excess of $.585938 per share of TriNet Series A Preferred Stock, (C)
regular quarterly dividends on TriNet Series B Preferred Stock not in excess of
$.575 per share of TriNet Series B Preferred Stock, (D) regular quarterly
dividends on TriNet Series C Preferred Stock not in excess of $.50 per share of
TriNet Series C Preferred Stock and (E) any distributions by any TriNet
Subsidiaries to other TriNet Subsidiaries or to TriNet, (iii) any split,
combination or reclassification of any of TriNet's stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for, or giving the right to acquire by exchange or exercise,
shares of its stock or any issuance of an ownership interest in, any TriNet
Subsidiary that is not wholly owned by TriNet, (iv) any damage, destruction or
loss, whether or not covered by insurance, that individually or in the aggregate
has resulted in or would reasonably be expected to result in a TriNet Material
Adverse Effect or (v) any change in accounting methods, principles or practices
materially affecting its assets, liabilities or business, except insofar as may
have been disclosed in the TriNet SEC Documents filed with the SEC prior to the
date of this Agreement or required by a change in applicable Law or GAAP. All
dividends on TriNet Common Stock and TriNet Preferred Stock which have been
declared prior to the date of this Agreement have been paid in full, except for
(i) the dividend in the amount of $.65 per share that is payable to holders of
record of TriNet Common Stock on June 30, 1999 and the dividends in the amount
of $.585938, $.575 and $.50 that is payable to holders of record on June 15,
1999 of TriNet Series A Preferred Stock, TriNet Series B Preferred Stock and
TriNet Series C Preferred Stock, respectively, and (ii) dividends which the
failure to pay has not resulted in and would not reasonably be expected to
result in a TriNet Material Adverse Effect.
(g) Litigation. Except as disclosed in the TriNet Filed SEC Documents,
and other than personal injury and other routine tort litigation arising from
the ordinary course of operations of TriNet and the TriNet Subsidiaries which
are covered by adequate insurance, there is no suit, action or proceeding
pending (in which service of process has been received by an employee of TriNet)
or, to the Knowledge of TriNet, threatened against or affecting TriNet or any
TriNet Managed Subsidiary or, to the Knowledge of TriNet, any TriNet Non-Managed
Subsidiary that, individually or in the aggregate, would reasonably be expected
to (i) result in a TriNet Material Adverse Effect or (ii) prevent the
consummation of any of the transactions contemplated herein, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against TriNet or any TriNet Managed Subsidiary or to the
Knowledge of TriNet any TriNet Non-Managed Subsidiary having or that would have,
any such effect. Section 3.1(g) of the TriNet Disclosure Letter lists and
briefly describes each litigation pending against TriNet, any TriNet Managed
Subsidiary or, to the Knowledge of TriNet, any TriNet Non-Managed Subsidiary,
other than personal injury and routine tort litigation arising from the ordinary
course of business of TriNet and the TriNet Subsidiaries, which would reasonably
be expected to result in a TriNet Material Adverse Effect.
(h) Absence of Changes in Benefit Plans; ERISA Compliance.
(i) Except as disclosed in the TriNet Filed SEC Documents,
since the TriNet Financial Statement Date, there has not been any adoption or
amendment in any material respect, or the undertaking of any additional
obligation, by TriNet, any TriNet Subsidiary or any TriNet ERISA Affiliate (as
defined below) of any TriNet Benefit Plan (as defined below). For purposes of
this Agreement, "TriNet Benefit Plan" shall mean any Employee Plan sponsored or
maintained by TriNet, any TriNet Subsidiary or any TriNet ERISA Affiliate, or
with respect to which TriNet, any TriNet Subsidiary or any TriNet ERISA
Affiliate has any obligation to contribute, has liability under or is otherwise
a party to, or which otherwise provides benefits for any current or former
employees, officers, directors or other independent contractors (or their
dependents and beneficiaries) of TriNet or any TriNet Subsidiary. For purposes
of this Agreement, "TriNet ERISA Affiliate" means any entity required to be
aggregated with any of TriNet or any TriNet Subsidiary under Sections 414(b),
(c), (m) or (o) of the Code or Section 4001
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of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Section 3.1(h)(i) of the TriNet Disclosure Letter sets forth each TriNet Benefit
Plan.
(ii) Except as described in the TriNet Filed SEC Documents or
as would not reasonably be expected to result in a TriNet Material Adverse
Effect, (A) all TriNet Benefit Plans, including any such plan that is an
"employee benefit plan" as defined in Section 3(3) of ERISA, have been made
available to Starwood and are in compliance with the terms of such plan and all
applicable requirements of law, including ERISA and the Code and, without
limitation, the requirements of ERISA and all tax rules for which favorable tax
treatment is intended, and (B) there are no liabilities or obligations with
respect to any such TriNet Benefit Plan, whether accrued, contingent or
otherwise (other than obligations by TriNet and the TriNet Subsidiaries to make
contributions, and for such plan to pay benefits and administrative costs,
incurred in the ordinary course), nor to the Knowledge of TriNet are any such
liabilities or obligations expected to be incurred. The execution of, and
performance of the transactions contemplated in, this Agreement will not (either
alone or together with the occurrence of any additional or subsequent events)
constitute an event under any TriNet Benefit Plan, policy, program, arrangement
or agreement, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee or director, will not result in any "golden parachute payments"
being due (as defined for purposes of Section 280G of the Code), or result in
any breach or violation of, or a default under, any of the TriNet Benefit Plans.
The only severance agreements or severance policies applicable to TriNet or the
TriNet Subsidiaries are the agreements and policies specifically referred to in
Section 3.1(h)(ii) of the TriNet Disclosure Letter.
(iii) Without limiting the foregoing, each TriNet Benefit Plan
which is intended to be tax-qualified under Section 401(a) of the Code has been
determined by the IRS to be so qualified and such determination has not been
modified, revoked or limited, and no circumstances have occurred that would
adversely affect the tax-qualified status of any such plan. No TriNet Benefit
Plan is or has ever been subject to Part III of Subtitle B of Title I of ERISA
or Title IV of ERISA or Section 412 of the Code. None of TriNet or any TriNet
Subsidiary, or any "party in interest" (as defined in Section 3(14) of ERISA) or
any "disqualified person" (as defined in Section 4975 of the Code) with respect
to any TriNet Benefit Plan, has engaged in a non-exempt "prohibited transaction"
within the meaning of Section 4975 of the Code or Section 406 of ERISA that
would reasonably be expected to result in a TriNet Material Adverse Effect. No
TriNet Benefit Plan provides for health or life insurance for employees after
termination of employment (except as required by law).
(iv) All of the TriNet Stock Options issued under the TriNet
1997 Stock Incentive Plan have been issued to directors of TriNet.
(i) Taxes.
(i) Each of TriNet, each TriNet Managed Subsidiary and, to the
Knowledge of TriNet, each TriNet Non-Managed Subsidiary has timely filed all Tax
Returns and reports required to be filed by it (after giving effect to any
filing extension properly granted by a Governmental Entity having authority to
do so). Each such Tax Return is true, correct and complete in all material
respects except as disclosed in writing to Starwood. TriNet, each TriNet Managed
Subsidiary and to the Knowledge of TriNet, each TriNet Non-Managed Subsidiary
has paid (or TriNet has paid on their behalf), within the time and manner
prescribed by law, all Taxes that are due and payable except as otherwise
disclosed in writing to Starwood. The United States federal income Tax Returns
of TriNet, each TriNet Managed Subsidiary and, to the Knowledge of TriNet, each
TriNet Non-Managed Subsidiary have not been audited by any Governmental Entity
responsible for tax matters (a "Taxing Authority"). There are no audits by any
Taxing Authority currently being conducted with regard to Taxes or Tax Returns
of TriNet, any
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TriNet Managed Subsidiary or, to the Knowledge of TriNet, any TriNet Non-Managed
Subsidiary, and, to the Knowledge of TriNet, there are no pending audits or
current inquiries being made by any Taxing Authority with respect to any Taxes
or Tax Returns. The most recent financial statements contained in the TriNet SEC
Documents filed with the SEC prior to the date of this Agreement reflect an
adequate reserve for all material Taxes (including real estate taxes) payable by
TriNet, by each TriNet Managed Subsidiary and, to the Knowledge of TriNet, each
TriNet Non-Managed Subsidiary for all taxable periods and portions thereof
through the date of such financial statements. Since the TriNet Financial
Statement Date, TriNet has incurred no liability for federal taxes, other than
withholding and employment taxes, under the Code or IRS Notice 88-19. To the
Knowledge of TriNet, no event has occurred, and no condition or circumstance
exists, which presents a material risk that any material Tax described in the
preceding sentence will be imposed upon TriNet or any TriNet Subsidiary. No
deficiencies for any Taxes have been proposed, asserted or assessed against
TriNet or any of the TriNet Subsidiaries and no requests for waivers of the time
to assess any such Taxes have been granted and remain in effect or are pending.
As used in this Agreement, "Taxes" or "Tax" shall mean any federal, state, local
or foreign income, gross receipts, license, payroll, employment withholding,
property, recording, stamp, sales, excise or other tax or similar governmental
charges of any nature whatsoever, together with any penalties, interest or
additions thereto and "Tax Return" shall mean any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
(ii) TriNet (A) for each taxable year beginning with the
taxable year ended on December 31, 1993, has been subject to taxation as a REIT
within the meaning of the Code and has satisfied the requirements to qualify as
a REIT for such years, (B) has operated, and intends to continue to operate, in
such a manner as to qualify as a REIT through the end of its taxable year ending
at the Effective Time and (C) has not taken or omitted to take any action which
could reasonably be expected to result in a challenge to its status as a REIT,
and no such challenge is pending or, to TriNet's Knowledge, threatened. Each
TriNet Subsidiary which is a partnership or limited liability company or files
Tax Returns as a partnership for federal income tax purposes has since its
acquisition by TriNet been classified for federal income tax purposes as a
partnership or disregarded entity and not as an association taxable as a
corporation, or a "publicly traded partnership" within the meaning of Section
7704(b) of the Code that is treated as a corporation for federal income tax
purposes under Section 7704(a) of the Code. Neither TriNet nor any TriNet
Subsidiary holds any asset (x) the disposition of which would be subject to
rules similar to Section 1374 of the Code as announced in IRS Notice 88-19 or
(y) that is subject to a consent filed pursuant to Section 341(f) of the Code
and the regulations thereunder.
(iii) As of the date hereof, TriNet does not have any earnings
and profits attributable to TriNet or any other corporation in any non-REIT year
within the meaning of Section 857 of the Code.
(iv) To the Knowledge of TriNet, TriNet qualifies as a
"domestically controlled" REIT within the meaning of Section 897(h)(4)(B) of the
Code, as of the date hereof.
(j) No Loans or Payments to Employees, Officers or Directors. Except as
disclosed in the TriNet Filed SEC Documents or as otherwise specifically
provided for in this Agreement, there is no (i) loan outstanding from or to any
employee, officer or director of TriNet or any TriNet Subsidiary which, in the
aggregate together with all such loans, has a principal amount in excess of
$500,000, (ii) employment or severance agreement which, in the aggregate
together with all such agreements, provides for payments in excess of $500,000
by TriNet or any TriNet Subsidiary or material consulting contract, or any
material policy, agreement, program or arrangement of TriNet or any TriNet
Subsidiary, (iii) agreement which, in the aggregate together with all other
agreements, requires material payments to be made on a change of control or
otherwise as a result of the consummation of the Merger or any of the other
transactions contemplated by this Agreement with respect to any employee,
officer or director of TriNet or any TriNet Managed Subsidiary or, to the
Knowledge of TriNet, any TriNet Non-Managed Subsidiary or (iv) any agreement to
appoint or nominate any person as a director of
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TriNet, any TriNet Managed Subsidiary or, to the Knowledge of TriNet, any TriNet
Non-Managed Subsidiary.
(k) Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than Greenhill & Co., LLC
("Greenhill"), the fees and expenses of which, as set forth in a letter
agreement between TriNet and such financial advisor, have previously been
disclosed to Starwood and will be paid by TriNet, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Merger or any of the other transactions contemplated by this Agreement
based upon arrangements made by or on behalf of TriNet or any TriNet Subsidiary.
(l) Compliance with Laws. Except as disclosed in the TriNet Filed SEC
Documents, none of TriNet, any of the TriNet Managed Subsidiaries and, to the
Knowledge of TriNet, any of the TriNet Non-Managed Subsidiaries has violated or
failed to comply with any statute, law, ordinance, regulation, rule, judgment,
decree or order of any Governmental Entity applicable to its business,
properties or operations, except for violations and failures to comply that
would not, individually or in the aggregate, reasonably be expected to result in
a TriNet Material Adverse Effect.
(m) Contracts; Debt Instruments.
(i) None of TriNet, any TriNet Managed Subsidiary and, to
TriNet's Knowledge, any TriNet Non-Managed Subsidiary has received written
notice that it is in violation of or in default under, in any material respect
(nor does there exist any condition which upon the passage of time or the giving
of notice or both would cause such a violation of or default under), any
material loan or credit agreement, note, bond, mortgage or indenture or any
material lease, permit, concession, franchise or license, or any material
agreement to acquire real property, or any other material contract, agreement,
arrangement or understanding, to which it is a party or by which it or any of
its properties or assets is bound, except for violations or defaults that would
not, individually or in the aggregate, reasonably be expected to result in a
TriNet Material Adverse Effect.
(ii) Section 3.1(m)(ii) of the TriNet Disclosure Letter sets
forth (A) a detailed list of all indebtedness of TriNet, the TriNet Managed
Subsidiaries and, to TriNet's Knowledge, the TriNet Non-Managed Subsidiaries,
under which an aggregate principal amount in excess of $5,000,000 per item is
outstanding or may be incurred, other than (i) indebtedness payable to TriNet or
a wholly owned TriNet Subsidiary and (ii) indebtedness which is reflected in the
financial statements set forth in TriNet Filed SEC Documents and (B) the
respective principal amounts outstanding thereunder or, in the case of financial
products the notional amounts thereof, on March 31, 1999. For purposes of this
Section 3.1(m)(ii) and Section 3.2(m)(ii), "indebtedness" shall mean, with
respect to any person, without duplication, (A) all indebtedness of such person
for borrowed money, whether secured or unsecured, (B) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person, (C) all capitalized lease obligations of such
person, (D) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof), and (E) all
guarantees of such person of any such indebtedness of any other person. TriNet
has previously delivered or made available to Starwood true and correct copies
of all of the material agreements relating to the indebtedness disclosed in
Section 3.1(m)(ii) of the TriNet Disclosure Letter.
(iii) None of TriNet, any TriNet Managed Subsidiary and, to
TriNet's Knowledge, any TriNet Non-Managed Subsidiary has entered into or is
subject, directly or indirectly, to any TriNet Tax Protection Agreements. As
used herein, a "TriNet Tax Protection Agreement" is an agreement, oral or
written, (A) that has as one of its purposes to permit a Person to take the
position that such Person
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could defer federal taxable income that otherwise might have been recognized
upon a transfer of property to TriNet or a TriNet Subsidiary or attributable to
the acquisition or ownership of an interest in any TriNet Subsidiary that is
treated as a partnership for federal income tax purposes and (B) that (i)
prohibits or restricts in any manner the disposition of any assets of TriNet or
any TriNet Subsidiary, (ii) requires that TriNet or any TriNet Subsidiary
maintain, increase or put in place, or replace, indebtedness, whether or not
secured by one or more of the TriNet Properties or (iii) requires that TriNet or
any TriNet Subsidiary offer to any person or entity at any time the opportunity
to guarantee or otherwise assume, directly or indirectly, the risk of loss for
federal income tax purposes for indebtedness or other liabilities of TriNet or
any TriNet Subsidiary.
(n) Environmental Matters. Except as disclosed in the TriNet Filed SEC
Documents, (i) none of TriNet or the TriNet Subsidiaries or, to TriNet's
Knowledge, any other Person has caused or permitted the presence of any
hazardous substances, hazardous materials, toxic substances or waste materials
(collectively, "Hazardous Materials") or under any of the TriNet Properties and
none of TriNet or the TriNet Subsidiaries has any Knowledge of the presence of
any Hazardous Materials on or under any of the TriNet Properties except to the
extent the presence of such Hazardous Materials would not, individually or in
the aggregate, reasonably be expected to result in a TriNet Material Adverse
Effect, (ii) none of TriNet or any of the TriNet Subsidiaries or, to TriNet's
Knowledge, any other Person, has caused or permitted any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the TriNet Properties as a result of any
construction on or operation or use of such properties and none of TriNet or any
of the TriNet Subsidiaries has any Knowledge of any spills, releases, discharges
or disposal of Hazardous Materials having occurred or presently occurring on,
under or from the TriNet Properties as a result of any construction on or
operation or use of any such property, in each of the foregoing cases, which
presence or occurrence would, individually or in the aggregate, reasonably be
expected to result in a TriNet Material Adverse Effect; (iii) in connection with
the construction on or operation and use of the TriNet Properties, TriNet and
the TriNet Managed Subsidiaries and, to TriNet's Knowledge, the TriNet
Non-Managed Subsidiaries, have not failed to comply in any material respect with
any applicable local, state and federal environmental law, regulation, ordinance
or administrative and judicial orders relating to the generation, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials (any of the foregoing, an "Environmental Law"), except to the extent
such failure to comply would not, individually or in the aggregate, reasonably
be expected to result in a TriNet Material Adverse Effect. TriNet has previously
delivered or made available to Starwood complete copies of all reports on and
results of investigations, testing or analysis that are in the possession of or
available to any of them with respect to the environmental condition of the
TriNet Properties or with respect to environmental compliance of operations
conducted on or from any such Property.
(o) TriNet Properties.
(i) TriNet, a TriNet Subsidiary or, to the Knowledge of
TriNet, a TriNet Non-Managed Subsidiary owns fee simple title to or has a valid
leasehold interest in, each of the real properties reflected on the most recent
balance sheet of TriNet included in the TriNet Filed SEC Documents or as
identified in Section 3.1(o) of the TriNet Disclosure Letter (the "TriNet
Properties"), which are all of the real estate properties owned or leased by
them, free and clear of liens, mortgages or deeds of trust, claims against
title, charges which are liens, security interests or other encumbrances on
title, any rights of way, written agreements or reservations of an interest in
title ("TriNet Encumbrances") except for (a) debt or other liabilities
identified on Section 3.1(m)(ii) of the TriNet Disclosure Letter, (b) inchoate
liens imposed for construction work in progress, (c) mechanics', workmen's and
repairmen's liens (other than inchoate liens for work in progress) which have
heretofore been bonded over or which, individually or in the aggregate, are not
reasonably expected to result in a TriNet Material Adverse Effect or the
discharge of which is the responsibility of a lessee of the applicable TriNet
Property, (d) Taxes not
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yet due and payable or which are being contested in good faith with adequate
reserves as required by GAAP, (e) leases entered into in the ordinary course of
TriNet's business and subleases under such leases as tenants only with no
options to purchase except as listed on Section 3.1(o) of the TriNet Disclosure
Letter, (f) matters affecting title to multi-tenant office real estate a portion
of which has been leased to TriNet or a TriNet Subsidiary, as tenants only,
primarily for office purposes (each such lease, a "TriNet Office Space Lease")
and (g) other TriNet Encumbrances, if any, which would not, individually or in
the aggregate, reasonably be expected to result in a TriNet Material Adverse
Effect;
(ii) Valid policies of title insurance have been issued
insuring TriNet's or a TriNet Subsidiary's fee simple title or leasehold estate
to the TriNet Properties (other than leasehold estates consisting of a tenant's
interest under the TriNet Office Space Leases) except as noted therein, and such
policies are, at the date hereof, in full force and effect and no claim has been
made against any such policy which is currently pending which would, if
determined adversely, individually or in the aggregate, reasonably be expected
to result in a TriNet Material Adverse Effect (with respect to TriNet
Non-Managed Subsidiaries, the foregoing representation is made only to the
Knowledge of TriNet);
(iii) None of TriNet and the TriNet Managed Subsidiaries and,
to the Knowledge of TriNet, the TriNet Non-Managed Subsidiaries has received
written notice of any violation of any federal, state or municipal law,
ordinance, order, regulation or requirement affecting any portion of any of the
TriNet Properties issued by any Governmental Entity that has not otherwise been
resolved which would, individually or in the aggregate, reasonably be expected
to result in a TriNet Material Adverse Effect;
(iv) None of TriNet and the TriNet Managed Subsidiaries and,
to the Knowledge of TriNet, the TriNet Non-Managed Subsidiaries has received
notice of or has Knowledge of, any condemnation or rezoning or proceedings that
are pending or to the Knowledge of TriNet and its Subsidiaries, threatened with
respect to any of the TriNet Properties which would, individually or in the
aggregate, reasonably be expected to result in a TriNet Material Adverse Effect;
(v) Except as would not, individually or in the aggregate,
reasonably be expected to result in a TriNet Material Adverse Effect, each
tenant of a TriNet Property (or subtenant if TriNet or the applicable TriNet
Subsidiary is itself a tenant), owned or leased by TriNet or a TriNet Managed
Subsidiary, or, to the Knowledge of TriNet, a TriNet Property owned or leased by
a TriNet Non-Managed Subsidiary, or, to the Knowledge of TriNet, a subtenant
thereof in which subtenant's rent TriNet or a TriNet Subsidiary participates or
otherwise shares with the tenant, has entered into a lease or a sublease, if
applicable, for the possession of such TriNet Property (each lease or other
right of occupancy affecting or relating to a TriNet Property under which TriNet
or a TriNet Subsidiary is the lessor or sublessor is referred to herein as a
"TriNet Lease"); except as disclosed in the TriNet Filed SEC Documents or except
as would not, individually or in the aggregate, reasonably be expected to result
in a TriNet Material Adverse Effect, each TriNet Lease of a TriNet Property
owned or leased by TriNet or a TriNet Managed Subsidiary, or, to the Knowledge
of TriNet, each TriNet Property owned or leased by a TriNet Non-Managed
Subsidiary, is in full force and effect and none of TriNet and any of the TriNet
Managed Subsidiaries and, to the Knowledge of TriNet, the TriNet Non-Managed
Subsidiaries has received written notice of any defense to the obligations of
the tenant thereunder or any claim asserted or threatened by any such tenant or
guarantor of the tenant's obligations, which defense or claim, if sustained,
would reasonably be expected to result in a TriNet Material Adverse Effect; and
except as would not individually or in the aggregate reasonably be expected to
result in a TriNet Material Adverse Effect, (a) the lessor under each TriNet
Lease of a TriNet Property owned or leased by TriNet or a TriNet Managed
Subsidiary, or, to the Knowledge of TriNet, each TriNet Property owned or leased
by a TriNet Non-Managed Subsidiary, has complied with its obligations under such
TriNet Lease, (b) as of the date hereof no tenant with respect to any TriNet
Property owned by TriNet, any TriNet Managed Subsidiary or, to the Knowledge of
TriNet, any TriNet Non-Managed Subsidiary is in default in the payment of
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fixed, base or minimum rent or other rental obligations payable to TriNet or a
TriNet Subsidiary beyond the expiration of all applicable grace periods and (c)
none of TriNet and any of the TriNet Managed Subsidiaries and, to the Knowledge
of TriNet, the TriNet Non-Managed Subsidiaries has notice of any default by the
tenant under such TriNet Lease; (vi) The rent roll provided by TriNet to
Starwood lists each TriNet Lease in effect as of the date hereof and, as of the
date hereof, the following information for each TriNet Lease (other than the
TriNet Office Space Leases): (a) tenant's name, (b) rentable square feet, (c)
current rental rate, (d) scheduled rental increases, (e) current expiration date
and (f) to the extent the landlord may be obligated to perform the following
within the five year period after the Effective Time: each existing obligation
of the landlord to construct, add to or expand a building (not including for
this purpose tenant improvements in the ordinary course) and each option of a
tenant of a TriNet Property to require TriNet or any TriNet Subsidiary to
construct, add to or expand a building (the "TriNet Rent Roll"). TriNet has made
available to Starwood true, correct and complete copies of all TriNet Leases,
including all material amendments, modifications, supplements, renewals,
extensions and guarantees related thereto, as of the date hereof. Except for
discrepancies that, either individually or in the aggregate, would not
reasonably be expected to result in a TriNet Material Adverse Effect, all
information set forth in the TriNet Rent Roll is true, correct and complete as
of the date thereof;
(vii) The mortgages and deeds of trust encumbering the TriNet
Properties are not (i) cross-defaulted to any indebtedness other than
indebtedness of TriNet or any of the TriNet Subsidiaries or (ii)
cross-collateralized to any property not owned by TriNet or any of the TriNet
Subsidiaries;
(viii) TriNet and the TriNet Managed Subsidiaries and, to the
Knowledge of TriNet, the TriNet Non-Managed Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are customary in the business in which they are engaged and such
insurance is adequate for the value of their properties; all policies of
insurance insuring TriNet and the TriNet Managed Subsidiaries and, to the
Knowledge of TriNet, the TriNet Non-Managed Subsidiaries or their respective
businesses and assets, are in full force and effect except as would not
reasonably be expected to result in a TriNet Material Adverse Effect and TriNet
and the TriNet Managed Subsidiaries and, to the Knowledge of TriNet, the TriNet
Non-Managed Subsidiaries are in compliance with the terms of such policies and
there are no claims by TriNet and the TriNet Managed Subsidiaries and, to the
Knowledge of TriNet, the TriNet Non-Managed Subsidiaries under any such policy
as to which any insurance company is denying liability or defending under a
reservation of rights clause, other than claims which (i) are for less than
$250,000 or as disclosed in Section 3.1(o)(viii) of the TriNet Disclosure Letter
or (ii) would not otherwise, individually or in the aggregate, reasonably be
expected to result in a TriNet Material Adverse Effect (it being understood that
any such claim which is for an amount in excess of $250,000 shall not, solely by
reason of such fact, be deemed reasonably likely to have a TriNet Material
Adverse Effect); and
(ix) Section 3.1(o)(ix) of the TriNet Disclosure Letter lists
each letter of intent or term sheet executed by TriNet or a TriNet Subsidiary
relating to a proposed TriNet Lease of more than 50,000 square feet, which
imposes a legally binding obligation on TriNet or a TriNet Subsidiary and which
is not otherwise disclosed pursuant to TriNet SEC Filed Documents or another
section of this Agreement or the TriNet Rent Roll.
(p) Opinion of Financial Advisor. The Board of Directors of TriNet has
received the written opinion of Greenhill dated June 15, 1999 satisfactory to
TriNet and its Board of Directors, a copy of which opinion was provided to
Starwood, to the effect that, as of the date of such opinion, the Exchange Ratio
is fair from a financial point of view to the holders of TriNet Common Stock. It
is agreed and
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understood that such opinion is for the benefit of TriNet's Board of Directors
and may not be relied upon by Starwood or its affiliates.
(q) State Takeover Statutes; Rights Agreement.
(i) TriNet has taken all actions necessary, if any, to exempt
the Merger, this Agreement and the transactions contemplated by this Agreement
from the operation of any Takeover Statute (as defined below) of the State of
Maryland, including, without limitation, Sections 3-602 and 3-603 of the MGCL.
(ii) TriNet has taken all actions necessary to ensure that the
Rights Agreement, dated as of February 25, 1998, as amended, between TriNet and
First Chicago Trust Co. of New York, as Rights Agent (the "Rights Agreement") is
inapplicable to this Agreement, the Merger and the other transactions
contemplated hereby.
(r) Investment Company Act of 1940. None of TriNet or any of the TriNet
Subsidiaries is, or at the Effective Time will be, required to be registered
under the Investment Company Act of 1940, as amended (the "1940 Act").
(s) Proxy Statement and Registration Statement. The information
furnished by TriNet for inclusion or incorporation by reference in the
Registration Statement and any amendment or supplement thereto will not, as of
the date the Registration Statement is declared effective by the SEC, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information furnished by TriNet for inclusion or
incorporation by reference in the Proxy Statement will not, on the date the
Proxy Statement is first mailed or furnished to securityholders of TriNet or
Starwood or on the respective meeting dates, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. Notwithstanding the foregoing, TriNet makes no
representation or warranty with respect to any information furnished by Starwood
for inclusion or incorporation by reference in any of the foregoing documents.
(t) Vote Required. The affirmative vote of the holders of at least
two-thirds of the outstanding shares of TriNet Common Stock is the only vote of
the holders of any class or series of TriNet's stock necessary (under applicable
law or otherwise) to approve the Merger, this Agreement and the other
transactions contemplated hereby (the "TriNet Shareholder Approval").
(u) Year 2000 Issues.
(i) To the best Knowledge of TriNet, based on representations
and warranties made by third parties and publicly available information, the
software, hardware and equipment of TriNet owned, leased or licensed by it and
used in the conduct of its business, as well as the elevator systems in those of
TriNet's Properties for which TriNet has the responsibility under the applicable
lease agreements to address Year 2000 compliance, and the heating, ventilation
and air conditioning, fire and safety and other automated building systems at
those of the TriNet Properties for which TriNet has the responsibility under the
applicable lease agreements to address Year 2000 compliance are or will be on or
before December 31, 1999 Year 2000 Ready, except to the extent that the failure
to be Year 2000 Ready would not reasonably be expected to result in a TriNet
Material Adverse Effect.
(ii) "Year 2000 Ready" means that the software, hardware,
equipment and systems will: (A) handle properly entered date information
involving any and all dates before, during and/or after
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January 1, 2000, including accepting input, providing output and performing date
calculations in whole or in part; (B) operate accurately and without
interruption on and in respect of any and all dates before, during and/or after
January 1, 2000 and without any change in performance; and (C) store and provide
properly entered date input information without creating any ambiguity as to the
century.
Section 3.2. Representations and Warranties of Starwood and Starwood
Sub. Except as set forth in the letter of even date herewith (with section
references organized in accordance with Section 9.9) signed by the President or
Chief Executive Officer and the Chief Financial Officer of Starwood and
delivered to TriNet prior to the execution of this Agreement (the "Starwood
Disclosure Letter"), each of Starwood and Starwood Sub, jointly and severally,
represents and warrants to TriNet as follows:
(a) Organization, Standing and Corporate Power of Starwood. Starwood is
a real estate investment trust duly organized and validly existing under the
laws of the State of Maryland. Starwood Sub is a corporation duly organized and
validly existing under the laws of the State of Maryland. Each of Starwood and
Starwood Sub has the requisite corporate power and authority to carry on its
business as now being conducted. Each of Starwood and Starwood Sub is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing of
its properties or management of properties for others makes such qualification
or licensing necessary, except where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse effect on
the business, properties, financial condition or results of operations or
prospects of Starwood and the Starwood Subsidiaries, taken as a whole (a
"Starwood Material Adverse Effect"); for purposes of this agreement, however,
"Starwood Material Adverse Effect" does not include any such effect directly
resulting from or directly attributable to (i) the execution of this Agreement
and each Ancillary Agreement to which Starwood is a party or the proposed
consummation of the transactions contemplated by this Agreement and each
Ancillary Agreement to which Starwood is a party or the public announcement
thereof and (ii) changes in the U.S. economy, the U.S. securities markets, the
real estate industry or the real estate finance industry that generally affect,
to the same extent, all participants in the industries in which Starwood
operates or changes in law.
(b) Starwood Subsidiaries; Interests in Other Persons.
(i) Section 3.2(b)(i) of the Starwood Disclosure Letter sets
forth each Starwood Subsidiary and the ownership interest therein of Starwood
and each other Starwood Subsidiary. Starwood Sub has no Subsidiaries. All the
outstanding shares of capital stock of each Starwood Subsidiary that is a
corporation have been duly authorized, validly issued and are fully paid and
nonassessable and are not subject to any preemptive rights, and are owned by
Starwood, by another Starwood Subsidiary or by Starwood and another Starwood
Subsidiary, free and clear of all Liens, and all equity interests in each
Starwood Subsidiary that is a partnership or limited liability company or trust
have been duly authorized, validly issued, are not subject to preemptive rights
and are owned by Starwood or by Starwood and another Starwood Subsidiary free
and clear of all Liens. Each Starwood Subsidiary is duly organized and validly
existing under the laws of its jurisdiction of organization and has the
requisite power and authority to carry on its business as now being conducted.
Each Starwood Subsidiary is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties or management of properties for others
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed, individually or in the aggregate, would not reasonably
be expected to result in a Starwood Material Adverse Effect.
(ii) Except for the capital stock of or other equity interests
in the Starwood Subsidiaries, neither Starwood nor Starwood Sub owns, directly
or indirectly (including through any Starwood Subsidiary), any capital stock or
other equity interest, with a fair market value as of the date of this Agreement
greater than $1,000,000 in any Person or which represents 5% or more of the
outstanding
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voting power, outstanding capital stock or other ownership interest of any class
in any Person. Neither Starwood nor any Starwood Subsidiary is in default of any
provision of any material documents governing or otherwise relating to its
rights in any Starwood Subsidiary other than such defaults that would not,
individually or in the aggregate, reasonably be expected to result in a Starwood
Material Adverse Effect. All such documents, other than the charter and bylaws
of any Starwood Subsidiary which is a corporation, are set forth in Section
3.2(b)(ii) of the Starwood Disclosure Letter and are in full force and effect
and true and correct copies of all such documents have been previously delivered
or made available to TriNet.
(iii) None of Starwood or any Starwood Subsidiary has given
any notice (that is still outstanding) of any monetary or non-monetary default,
breach, violation or event of acceleration and there is no default in the
payment of principal or interest or other monetary default beyond the expiration
of any applicable grace period or, to the Knowledge of Starwood, any
non-monetary default, breach, violation or event of acceleration beyond the
expiration of any applicable grace period existing under any of the loans
disclosed in Section 3.2(b)(iii) of the Starwood Disclosure Letter (the
"Starwood Loans" ) that could, individually or in the aggregate, reasonably be
expected to result in a Starwood Material Adverse Effect and Starwood has
received no notice of any such default, breach or violation. None of Starwood or
any Starwood Subsidiary has received any written notice of any default, breach
or violation by Starwood or a Starwood Subsidiary of any of the terms of any
Starwood Loans, and to the Knowledge of Starwood, 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 Starwood Material Adverse Effect, and, to the Knowledge
of Starwood, no person has any right of offset against Starwood or a Starwood
Subsidiary in respect of any Starwood Loans which would, individually or in the
aggregate, reasonably be expected to result in a Starwood Material Adverse
Effect. To the Knowledge of Starwood, there is no monetary default or any
material default, breach, violation or event of acceleration under (x) by the
applicable borrower, any loan or security ranking in priority senior to any
Starwood Loans (y) by the applicable tenant, any ground lease mortgaged or
pledged to Starwood or a Starwood Subsidiary as security for a Starwood Loan
(each such ground lease, a "Starwood Pledged Ground Lease") or (z) by the
applicable pledgor, any partnership agreement, limited liability company
agreement or other governing documentation for any entity in which less than all
of ownership interests have been pledged to Starwood or a Starwood Subsidiary to
secure a Starwood Loan, which would, individually or in the aggregate,
reasonably be expected to result in any circumstance under (x), (y) or (z)
reasonably be expected to result in a Starwood Material Adverse Effect. Starwood
or a Starwood Subsidiary owns each Starwood Loan free and clear of all liens and
encumbrances, except for liens securing debt and participations which are listed
in Section 3.2(b)(iii) of the Starwood Disclosure Letter. Starwood has made
available to TriNet true, correct and complete copies of (A) all material
documents evidencing or securing the Starwood Loans, except that with respect to
Starwood Loans which are in the nature of collateralized mortgage backed
securities ("Starwood CMBS"), Starwood has made such items available only to the
extent in Starwood's files, (B) all intercreditor and similar agreements with
lenders whose loans are senior to the Starwood Loans, except that with respect
to the Starwood CMBS and Starwood Loans in the nature of a participation
interest, such items are made available only to the extent in Starwood's files,
(C) to the extent in Starwood's files, all documents evidencing or securing such
senior loans and, to the extent in Starwood's files, the Starwood Pledged Ground
Leases, (D) all participation agreements relating to Starwood Loans which
consist of loan participations except that with respect to the Starwood CMBS and
items described in (C) above and (E) below, such items are made available only
to the extent in Starwood's files, (E) to the extent in Starwood's files, all
partnership agreements of partnerships interests in which have been pledged as
security for any Starwood Loan and (F) all material amendments and modifications
of the foregoing documents described in clauses (A), (B), (C), (D) and (E)
above, except with respect to the Starwood CMBS and Starwood Loans in the nature
of a participation interest, such items are made available only to the extent in
Starwood's files. Section 3.2(b)(iii) of the Starwood Disclosure Letter sets
forth a list, as of the date hereof unless otherwise
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indicated, of the following: (A) all loans (including loan participations) held
by Starwood or any of its Subsidiaries and the holder of, and borrower with
respect to, each such loan (except with respect to Starwood CMBS), (B) the
outstanding principal balance of each such loan (the term "principal balance" to
include, for this purpose, all accrued and unpaid interest, other than interest
accrued during the current month or other payment period), except with respect
to Starwood CMBS, only the principal balance of the Starwood CMBS is indicated),
(C) in the case of any loan which entitles the lender to a share of cash flow or
revenues, the amount received by Starwood or its Subsidiary in the year ended
December 31, 1998 on account of such cash flow or revenues, (D) with respect to
Starwood Loans which are in the nature of a participation interest in which
Starwood and the participants participate in payments thereunder entirely on a
pari passu basis, the percentage interest of Starwood or the applicable Starwood
Subsidiary, (E) the amount of any remaining monetary commitments of Starwood and
its Subsidiaries with respect to such loans, (F) the amount of impounds or
reserves deposited with Starwood or a Starwood Subsidiary by a borrower or other
obligor in respect of a Starwood Loan, (G) to the Knowledge of Starwood, the
outstanding principal balance as of April 30, 1999 of loans senior to the
Starwood Loans and (H) a general description of the categories of collateral
securing each Starwood Loan. To the Knowledge of Starwood, each Starwood Loan
(other than Starwood CMBS and Starwood participations, as to which the
representation is made only to the Knowledge of Starwood) is secured by valid,
perfected security interests or liens the invalidity or nonperfection of which
would not, individually or in the aggregate, reasonably be expected to result in
a Starwood Material Adverse Effect, subject only to senior loans identified
elsewhere in this Agreement or in Starwood's files, to the extent such files
were made available to TriNet (or which were otherwise made available to TriNet)
and indebtedness described in the Starwood Disclosure Letter and to Starwood
Encumbrances. None of Starwood, any of its Subsidiaries, and, to the Knowledge
of Starwood, the lead lender in respect of any Starwood Loan which consists of a
loan participation, has waived the borrower's obligations with respect to any
Starwood Loan which would be reasonably expected to result in a Starwood
Material Adverse Effect. To the Knowledge of Starwood, no property which serves
as security (or the equity interests with respect to which serve as security)
for any Starwood Loan has been affected by any casualty which has not been fully
restored or by any condemnation or eminent domain proceeding which would be
reasonably expected to result in a Starwood Material Adverse Effect.
Representations and Warranties in this Agreement as to Starwood CMBS and
participations are qualified by the Knowledge of Starwood to the extent relating
to the loans underlying such assets.
(iv) There are no outstanding contractual obligations of
Starwood or any Starwood Subsidiary to repurchase, redeem or otherwise acquire
any shares of beneficial interest, stock or other ownership interests in
Starwood or any Starwood Subsidiary, and, other than the Starwood Loans, there
are no outstanding contractual obligations of Starwood or any Starwood
Subsidiary to make any investment of $500,000 or more, individually, or more
than $2,000,000 in the aggregate during the 12 months after the Effective Time
(in each case, in the form of a loan, capital contribution or otherwise) in any
Person.
(c) Capital Structure. The authorized shares of beneficial interest of
Starwood consists of 109,400,000 shares of beneficial interest, of which
70,000,000 shares are designated Class A Common Shares, par value $1.00 per
share (the "Starwood Class A Common Shares" ), and 35,000,000 shares are
designated Class B Common Shares, par value $.01 per share (the "Starwood Class
B Common Shares") and 4,400,000 shares are designated preferred shares, par
value $.01 per share. As of June 1, 1999, (i) 52,470,951 Starwood Class A Common
Shares, 26,235,475 Starwood Class B Common Shares and 4,400,000 9.5% Series A
Preferred Shares of Starwood ("Starwood Series A Preferred Shares") constitute
all of the issued and outstanding shares of beneficial interest of Starwood,
(ii) options to purchase 5,439,884 Starwood Class A Common Shares (the "Starwood
Stock Options") were available for grant under Starwood's 1996 Long-Term
Incentive Plan (as amended and restated as of March 13, 1998) (the "Starwood
Stock Plan"), of which 2,427,603 options to purchase Starwood Class A Common
Shares are
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outstanding, (iii) 2,975,400 of Starwood Class A Common Shares were reserved for
issuance upon the exercise of warrants issued to Lazard Freres Real Estate Fund
II, L.P. (the "LF Onshore Fund" ) pursuant to a Securities Purchase Agreement
(the "LF Securities Purchase Agreement"), dated December 15, 1998, by and among
Starwood, LF Mortgage REIT, LF Onshore Fund and Lazard Freres Real Estate
Offshore Fund II, L.P. (the "LF Offshore Fund") (the "Onshore Fund Warrant"),
(iv) 3,024,600 shares of Starwood Class A Common Shares were reserved for
issuance upon the exercise of warrants issued to the LF Offshore Fund pursuant
to the LF Securities Purchase Agreement (the "Offshore Fund Warrant") and
together with the Onshore Fund Warrant, the "Starwood Warrants") and (v) 535,418
Starwood Class A Common Shares were reserved for issuance upon conversion of the
outstanding Starwood Class B Common Shares. The authorized stock of Starwood Sub
consists of 1,000 shares of common stock, par value $.01 per share, all of which
are outstanding and held by Starwood on the date hereof. On the date of this
Agreement, except as set forth in this Section 3.2(c), no shares of beneficial
interest, stock or other voting securities of Starwood or Starwood Sub were
issued, reserved for issuance or outstanding. There are no outstanding share
appreciation rights relating to the beneficial interest or stock of Starwood or
Starwood Sub. All outstanding shares of beneficial interest or stock of Starwood
and Starwood Sub are, and all shares which may be issued pursuant to this
Agreement will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of Starwood or Starwood Sub having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which shareholders of Starwood may vote.
Starwood Class B Common Shares may be converted for Starwood Class A Common
Shares on the basis of one Starwood Class A Common Share for 49 Starwood Class B
Common Shares at the option of the holder of Starwood Class B Common Shares.
Except as set forth in this Section 3.2(c), and except for the Starwood Stock
Options, the Starwood Warrants and the Starwood Class B Common Shares as of the
date of this Agreement there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which Starwood or any Starwood Subsidiary is a party or by which such entity
is bound, obligating Starwood or any Starwood Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of beneficial
interest, stock, voting securities or other ownership interests of Starwood or
of any Starwood Subsidiary or obligating Starwood or any Starwood Subsidiary to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking, other than to Starwood
or a wholly owned Starwood Subsidiary; Section 3.2(c) of the Starwood Disclosure
Letter sets forth the amount of any such securities issuable by Starwood on an
agreement by agreement basis.
(d) Authority; Noncontravention; Consents. Starwood has the requisite
corporate power and authority to enter into this Agreement, the Incorporation
Merger Agreement and the Advisor Transaction Agreement and each other Ancillary
Agreement to which Starwood is a party and, subject to receipt of the Starwood
Shareholder Approvals, to consummate the transactions contemplated by this
Agreement, the Incorporation Merger Agreement, the Advisor Transaction Agreement
and each other Ancillary Agreement to which Starwood is a party. Starwood Sub
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement, the Incorporation Merger Agreement, the Advisor
Transaction Agreement and each other Ancillary Agreement to which Starwood is a
party by Starwood and the consummation by Starwood of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of Starwood, subject to receipt of the Starwood Shareholder
Approvals. The execution and delivery of this Agreement by Starwood Sub and the
consummation by Starwood Sub of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of Starwood Sub. This
Agreement, the Incorporation Merger Agreement, the Advisor Transaction Agreement
and each other Ancillary Agreement to which Starwood is a party have been duly
executed and delivered by Starwood and, in the case of this Agreement, by
Starwood Sub, and constitute the valid and binding obligations of Starwood and
Starwood Sub, as applicable, and are enforceable
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against Starwood and Starwood Sub, as applicable, in accordance with their
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and to general principles of equity. The execution and
delivery of this Agreement, the Incorporation Merger Agreement, the Advisor
Transaction Agreement and each other Ancillary Agreement to which Starwood is a
party by Starwood and the execution and delivery of this Agreement by Starwood
Sub do not, and the consummation of the transactions contemplated hereby and
thereby and compliance by Starwood and Starwood Sub, as applicable, with the
provisions of this Agreement, the Incorporation Merger Agreement, the Advisor
Transaction Agreement and each other Ancillary Agreement to which Starwood is a
party do not and will not conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of Starwood or any Starwood Subsidiary under, (i)
subject to receipt of the Starwood Shareholder Approvals, the amended and
restated declaration of trust or the amended and restated bylaws of Starwood or
the comparable charter or organizational documents or partnership or similar
agreement (as the case may be) of any Starwood Subsidiary, each as amended,
restated or supplemented to the date of this Agreement, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement, lease
or other agreement, instrument, permit, concession, contract, franchise or
license applicable to Starwood or any Starwood Subsidiary or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any Laws applicable to Starwood
or any Starwood Subsidiary or their respective properties or assets, other than,
in the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) reasonably
be expected to result in a Starwood Material Adverse Effect or (y) materially
delay or prevent the consummation of the Merger, the Incorporation Merger and
the Advisor Transaction. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Starwood or any Starwood Subsidiary in connection with the
execution and delivery of this Agreement, the Incorporation Merger Agreement,
the Advisor Transaction Agreement and each other Ancillary Agreement to which
Starwood is a party, by Starwood or Starwood Sub or the consummation by Starwood
or the Starwood Subsidiaries of any of the transactions contemplated hereby and
thereby, except for (i) the filing with the SEC of (x) the Proxy Statement and
the Registration Statement and (y) such reports under Sections 13 and 16 of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (ii) the acceptance for record of
the Articles of Merger for the Merger by the SDAT, (iii) such filings as may be
required in connection with the payment of any Transfer and Gains Taxes, and
(iv) such other consents, approvals, orders, authorizations, registrations,
declarations and filings as are set forth in Section 3.2(d) of the Starwood
Disclosure Letter or (A) as may be required under (x) federal, state or local
environmental laws or (y) the "blue sky" laws of various states or (B) which, if
not obtained or made, would not prevent or delay in any material respect the
consummation of the Merger or any of the transactions contemplated by this
Agreement or any Ancillary Agreement or otherwise prevent Starwood from
performing its obligations hereunder or thereunder in any material respect or be
reasonably expected to result in, individually or in the aggregate, a Starwood
Material Adverse Effect.
(e) SEC Documents; Financial Statements; Undisclosed Liabilities.
Starwood has filed all reports, schedules, forms, statements and other documents
required to be filed with the SEC since March 18, 1998 (collectively, the
"Starwood SEC Documents"). All of the Starwood SEC Documents (other than
preliminary materials or materials that were subsequently amended), as of their
respective filing dates, complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act and, in each case, the
rules and regulations promulgated thereunder applicable to such Starwood SEC
Documents. None of the Starwood SEC Documents at the time of filing contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
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made, not misleading, except to the extent such statements have been amended,
modified or superseded by later filed Starwood SEC Documents. None of the
Starwood SEC Documents is, as of the date hereof, the subject of any
confidential treatment request by Starwood. Except to the extent such statements
have been amended, modified or superseded by later Starwood Filed SEC Documents
(as defined below), the consolidated financial statements of Starwood, as
applicable, included in the Starwood SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of interim financial statements, as
permitted by the applicable rules and regulations of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented in all material respects, in accordance with
the applicable requirements of GAAP, the consolidated financial position of
Starwood and the Starwood Subsidiaries, taken as a whole, as of the dates
thereof and the consolidated results of operations and cash flows for the
periods then ended (subject, in the case of interim financial statements, to
normal year-end adjustments). Except as set forth in the Starwood SEC Documents
filed with the SEC prior to the date of this Agreement (the "Starwood Filed SEC
Documents"), neither Starwood nor any Starwood Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Starwood or
in the notes thereto and which, individually or in the aggregate, would
reasonably be expected to result in a Starwood Material Adverse Effect.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Starwood Filed SEC Documents, since December 31, 1998 (the "Starwood Financial
Statement Date") and to the date of this Agreement, Starwood and the Starwood
Subsidiaries have conducted their business only in the ordinary course and there
has not been (i) any events which have occurred or circumstances which have
arisen that, individually or in the aggregate have resulted in or would
reasonably be expected to result in a Starwood Material Adverse Effect, nor has
there been any occurrence or circumstance that with the passage of time would
reasonably be expected to result in a Starwood Material Adverse Change, (ii) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to any of Starwood's beneficial
interest or Starwood Sub's stock, except for (A) regular quarterly dividends not
in excess of $.42 per Starwood Class A Common Share, (B) regular quarterly
dividends not in excess of $200,000 in the aggregate for all Starwood Class B
Common Shares, (C) regularly quarterly dividends not in excess of $4.75 Starwood
Series A Preferred Share and (D) any distributions by any Starwood Subsidiaries
to other Starwood Subsidiaries or to Starwood, in each case, with customary
record and payment dates, (iii) any split, combination or reclassification of
any of Starwood's beneficial interest or Starwood Sub's stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, or giving the right to acquire by exchange or
exercise, shares of its stock or any issuance of an ownership interest in any
Starwood Subsidiary that is not wholly owned by Starwood, (iv) any damage,
destruction or loss, whether or not covered by insurance, that, individually or
in the aggregate, has resulted in or would reasonably be expected to result in a
Starwood Material Adverse Effect or (v) any change in accounting methods,
principles or practices by Starwood or any Starwood Subsidiary materially
affecting its assets, liabilities or business, except insofar as may have been
required by a change in applicable Law or GAAP. All dividends on Starwood Common
Stock and Starwood Preferred Stock which have been declared prior to the date of
this Agreement have been paid in full.
(g) Litigation. Except as disclosed in the Starwood Filed SEC Documents
and other than personal injury and other routine tort litigation arising from
the ordinary course of operations of Starwood and the Starwood Subsidiaries
which are covered by adequate insurance, there is no suit, action or proceeding
pending (in which service of process has been received by an employee of
Starwood) or, to the Knowledge of Starwood and Starwood Sub, threatened against
or affecting Starwood or any Starwood Subsidiary that, individually or in the
aggregate, could reasonably be expected to (i) result in a Starwood Material
Adverse Effect or (ii) prevent the consummation of any of the transactions
contemplated by this
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Agreement, the Advisor Transaction Agreement or the Incorporation Merger
Agreement or any other Ancillary Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Starwood or any Starwood Subsidiary having, or that would have, any such
effect. Section 3.2(g) of the Starwood Disclosure Letter lists and briefly
describes each litigation pending as of the date hereof against Starwood or any
Starwood Subsidiary other than personal injury and routine tort litigation
arising from the ordinary course of business of Starwood and the Starwood
Subsidiaries, which would reasonably be expected to result in a Starwood
Material Adverse Effect.
(h) Absence of Changes in Benefit Plans; ERISA Compliance.
(i) Except as disclosed in the Starwood Filed SEC Documents
since the Starwood Financial Statement Date, there has not been any adoption or
amendment in any material respect, or the undertaking of any additional
obligation by Starwood, any Starwood Subsidiary or any Starwood ERISA Affiliate
(as defined below) of any Starwood Benefit Plan (as defined below). For purposes
of this Agreement, "Starwood Benefit Plan" shall mean any Employee Plan
sponsored or maintained by Starwood, any Starwood Subsidiary or any Starwood
ERISA Affiliate, or with respect to which Starwood, any Starwood Subsidiary or
any Starwood ERISA Affiliate has any obligation to contribute, has liability
under or is otherwise a party to, or which otherwise provides benefits for any
current or former employees, officers, directors or other independent
contractors (or their dependents and beneficiaries) of Starwood or any Starwood
Subsidiary. For purposes of this Agreement, "Starwood ERISA Affiliate" means any
entity required to be aggregated with any of Starwood or any Starwood Subsidiary
under Sections 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.
Section 3.2(h)(i) of the Starwood Disclosure Letter sets forth each Starwood
Benefit Plan.
(ii) Except as described in the Starwood Filed SEC Documents
or as would not reasonably be expected to result in a Starwood Material Adverse
Effect, (A) all Starwood Benefit Plans, including any such plan that is an
"employee benefit plan" as defined in Section 3(3) of ERISA, have been made
available to TriNet and are in compliance with the terms of such plan and all
applicable requirements of law, including ERISA and the Code and, without
limitation, the requirements of ERISA and all tax rules for which favorable tax
treatment is intended, and (B) there are no liabilities or obligations with
respect to any such Starwood Benefit Plan, whether accrued, contingent or
otherwise (other than obligations by Starwood and the Starwood Subsidiaries to
make contributions, and for such plan to pay benefits and administrative costs,
incurred in the ordinary course), nor to the Knowledge of Starwood are any such
liabilities or obligations expected to be incurred. The execution of, and
performance of the transactions contemplated in, this Agreement will not (either
alone or together with the occurrence of any additional or subsequent events)
constitute an event under any Starwood Benefit Plan, policy, program,
arrangement or agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee or director, will not result in any
"golden parachute payments" being due (as defined for purposes of Section 280G
of the Code), or result in any breach or violation of, or a default under, any
of the Starwood Benefit Plans. The only severance agreements or severance
policies applicable to Starwood or the Starwood Subsidiaries are the agreements
and policies specifically referred to in Section 3.2(h)(ii) of the Starwood
Disclosure Letter.
(iii) Without limiting the foregoing, each Starwood Benefit
Plan which is intended to be tax-qualified under Section 401(a) of the Code has
been determined by the IRS to be so qualified and such determination has not
been modified, revoked or limited, and no circumstances have occurred that would
adversely affect the tax-qualified status of any such plan. No Starwood Benefit
Plan is or has ever been subject to Part III of Subtitle B of Title I of ERISA
or Title IV of ERISA or Section 412 of the Code. None of Starwood or any
Starwood Subsidiary, or any "party in interest" (as defined in Section 3(14) of
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ERISA) or any "disqualified person" (as defined in Section 4975 of the Code)
with respect to any Starwood Benefit Plan, has engaged in a non-exempt
"prohibited transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA that would reasonably be expected to result in a Starwood
Material Adverse Effect. No Starwood Benefit Plan provides for health or life
insurance for employees after termination of employment (except as required by
law).
(i) Taxes.
(i) Each of Starwood and each Starwood Subsidiary has timely
filed with the appropriate taxing authority all Tax Returns and reports required
to be filed by it (after giving effect to any filing extension properly granted
by a Governmental Entity having authority to do so). Each such Tax Return is
true, correct and complete in all material respects. Starwood and each Starwood
Subsidiary has paid (or Starwood has paid on their behalf), within the time and
manner prescribed by law, all Taxes that are due and payable. The United States
federal income Tax Returns of Starwood and each Starwood Subsidiary have not
been audited by any Taxing Authority. There are no audits by any Taxing
Authority currently being conducted with regard to Taxes or Tax Returns of
Starwood or any Starwood Subsidiary, and to the Knowledge of Starwood, there are
no pending audits or current inquiries being made by any Taxing Authority with
respect to any Taxes or Tax Returns. The most recent financial statements
contained in the Starwood SEC Documents filed with the SEC prior to the date of
this Agreement reflect an adequate reserve for all material Taxes (including
real estate Taxes) payable by Starwood and each Starwood Subsidiary for all
taxable periods and portions thereof through the date of such financial
statements. Since the Starwood Financial Statement Date, Starwood has incurred
no liability for federal taxes, other than withholding and employment taxes,
under the Code or IRS Notice 88-19. To the Knowledge of Starwood, no event has
occurred, and no condition or circumstance exists, which presents a material
risk that any material Tax described in the preceding sentence will be imposed
upon Starwood or any Starwood Subsidiary. No deficiencies for any Taxes have
been proposed, asserted or assessed against Starwood or any of the Starwood
Subsidiaries and no requests for waivers of the time to assess any such Taxes
have been granted and remain in effect or are pending.
(ii) Starwood (A) for its taxable year ended on December 31,
1998 has satisfied the requirements to qualify for taxation as a REIT under the
Code for such year, (B) has operated, and intends to continue to operate, in
such a manner as to qualify as a REIT and (C) has not taken or omitted to take
any action which could reasonably be expected to result in a challenge to its
status as a REIT, and no such challenge is pending or, to Starwood's Knowledge,
threatened. Each Starwood Subsidiary which is a partnership or limited liability
company or files Tax Returns as a partnership for federal income tax purposes
has since its acquisition by Starwood been classified for federal income tax
purposes as a partnership or disregarded entity and not as an association
taxable as a corporation or a "publicly traded partnership" within the meaning
of Section 7704(b) of the Code that is treated as a corporation for federal
income tax purposes under Section 7704(a) of the Code. Starwood distributed all
of its earnings and profits accumulated in non-REIT years (within the meaning of
Section 857 of the Code) on or before December 31, 1998. Neither Starwood nor
any Starwood Subsidiary holds any assets the disposition of which would be
subject to rules similar to Section 1374 of the Code as announced in IRS Notice
88-19.
(iii) To the best Knowledge and belief of Starwood, Starwood
qualifies as a "domestically controlled" REIT within the meaning of Section
897(h)(4)(B) of the Code, as of the date hereof.
(j) No Loans or Payments to Employees, Officers or Directors. Except as
disclosed in the Starwood Filed SEC Documents or as otherwise specifically
provided for in this Agreement, there is no (i) loan outstanding from or to any
employee, officer, director or trustee of Starwood or any Starwood Subsidiary
which, in the aggregate together with all such loans, has a principal amount in
excess of
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$500,000, (ii) employment or severance agreement which, in the aggregate
together with all such agreements, provides for payments in excess of $500,000
by Starwood or any Starwood Subsidiary or material consulting contract, policy,
agreement, program or arrangement of Starwood or any Starwood Subsidiary, (iii)
agreements which, in the aggregate together with all other agreements, requires
material payments to be made on a change of control or otherwise as a result of
the consummation of any of the transactions contemplated by this Agreement with
respect to any employee, officer, director or trustee of Starwood or any
Starwood Subsidiary or (iv) any agreement to appoint or nominate any person as a
director of Starwood, New Starwood or any Starwood Subsidiary.
(k) Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than Bear, Stearns & Co., Inc.
("Bear, Stearns"), Bank of America Securities LLC and Houlihan Lokey Howard &
Zukin, the fees and expenses of which, as set forth in letter agreements between
Starwood and each such financial advisor, have previously been disclosed to
TriNet and will be paid by Starwood, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
Merger or any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Starwood or any other Starwood Subsidiary.
(l) Compliance with Laws. Except as disclosed in the Starwood Filed SEC
Documents, none of Starwood or any of the Starwood Subsidiaries has violated or
failed to comply with any statute, law, ordinance, regulation, rule, judgment,
decree or order of any Governmental Entity applicable to its business,
properties or operations, except for violations and failures to comply that
would not, individually or in the aggregate, reasonably be expected to result in
a Starwood Material Adverse Effect.
(m) Contracts; Debt Instruments.
(i) None of Starwood or any Starwood Subsidiary has received
written notice that it is in violation of or in default under, in any material
respect (nor does there exist any condition which upon the passage of time or
the giving of notice or both would cause such a violation of or default under),
any material loan or credit agreement, note, bond, mortgage, indenture or any
material lease, permit, concession, franchise or license, or any material
agreement to acquire real property, or any other material contract, agreement,
arrangement or understanding, to which it is a party or by which it or any of
its properties or assets is bound, except for violations or defaults that would
not, individually or in the aggregate, reasonably be expected to result in a
Starwood Material Adverse Effect.
(ii) Section 3.2(m)(ii) of the Starwood Disclosure Letter sets
forth (A) a detailed list of all indebtedness of Starwood and the Starwood
Subsidiaries under which an aggregate principal amount in excess of $5,000,000
per item is outstanding or may be incurred other than (i) indebtedness payable
to Starwood or a wholly owned Starwood Subsidiary and (ii) indebtedness which is
reflected in the financial statements set forth in the Starwood Filed SEC
Documents, and (B) the respective principal amounts outstanding thereunder or,
in the case of financial products the notional amounts thereof, on March 31,
1999. Starwood has previously delivered to TriNet true and correct copies of all
of the agreements relating to the indebtedness disclosed in Section 3.2(m)(ii)
of the Starwood Disclosure Letter.
(iii) None of Starwood or any Starwood Subsidiary has entered
into or is subject, directly or indirectly, to any Starwood Tax Protection
Agreements. As used herein, a "Starwood Tax Protection Agreement" is an
agreement, oral or written, (A) that has as one of its purposes to permit a
Person to take the position that such Person could defer federal taxable income
that otherwise might have been recognized upon a transfer of property to
Starwood or a Starwood Subsidiary or attributable to the acquisition or
ownership of an interest in any Starwood Subsidiary that is treated as a
partnership for federal income tax purposes and (B) that (i) prohibits or
restricts in any manner the disposition of any
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assets of Starwood or any Starwood Subsidiary, (ii) requires that Starwood or
any Starwood Subsidiary maintain, increase or put in place, or replace,
indebtedness, whether or not secured by one or more of the Starwood Properties
or (iii) requires that Starwood or any Starwood Subsidiary offer to any person
or entity at any time the opportunity to guarantee or otherwise assume, directly
or indirectly, the risk of loss for federal income tax purposes for indebtedness
or other liabilities of Starwood or any Starwood Subsidiary.
(n) Environmental Matters. Except as disclosed in the Starwood Filed
SEC Documents, (i) none of Starwood or the Starwood Subsidiaries or, to
Starwood's Knowledge, any other Person has caused or permitted the presence of
any Hazardous Materials on or under any of the Starwood Properties or any of the
properties securing the Starwood Loans and none of Starwood or the Starwood
Subsidiaries has any Knowledge of the presence of any Hazardous Materials on or
under any of the Starwood Properties or any of the properties securing the
Starwood Loans except to the extent the presence of such Hazardous Materials,
individually or in the aggregate, would not reasonably be expected to result in
a Starwood Material Adverse Effect, (ii) none of Starwood, any of the Starwood
Subsidiaries or, to Starwood's Knowledge, any other Person, has caused or
permitted any unlawful spills, releases, discharges or disposal of Hazardous
Materials to have occurred or be presently occurring on or from the Starwood
Properties or any of the properties securing the Starwood Loans as a result of
any construction on or operation or use of such properties and none of Starwood
or the Starwood Subsidiaries has any Knowledge of any spills, releases,
discharges or disposal of Hazardous Materials having occurred or presently
occurring on, under or from the Starwood Properties or any of the properties
securing the Starwood Loans as a result of any construction on or operation or
use of any such property, in each of the foregoing cases, which presence or
occurrence would, individually or in the aggregate, reasonably be expected to
result in a Starwood Material Adverse Effect; (iii) in connection with the
construction on or operation and use of the Starwood Properties, Starwood and
the Starwood Subsidiaries and, to Starwood's Knowledge, the owners or operators
of the properties securing the Starwood Loans have not failed to comply in any
material respect with any applicable Environmental Law, except to the extent
such failure to comply, individually or in the aggregate, would not reasonably
be expected to result in a Starwood Material Adverse Effect. Starwood has
previously delivered or made available to TriNet complete copies of all reports
on and results of investigations, testing or analysis that are in the possession
of or available to any of them with respect to the environmental condition of
the Starwood Properties or with respect to environmental compliance of
operations conducted on or from any such Property.
(o) Starwood Properties.
(i) Starwood or a Starwood Subsidiary owns fee simple title to
or has a valid leasehold interest in, each of the real properties reflected on
the most recent balance sheet of Starwood included in the Starwood Filed SEC
Documents or as identified in Section 3.2(o) of the Starwood Disclosure Letter
(the "Starwood Properties"), which are all of the real estate properties owned
or leased by them, free and clear of liens, mortgages or deeds of trust, claims
against title, charges which are liens, security interests or other encumbrances
on title, any rights of way, written agreements or reservations of an interest
in title ("Starwood Encumbrances") except for (a) debt or other liabilities
identified on Section 3.1(m)(ii) of the Starwood Disclosure Letter, (b) inchoate
liens imposed for construction work in progress, (c) mechanics', workmen's and
repairmen's liens (other than inchoate liens for work in progress) which have
heretofore been bonded over or which, individually or in the aggregate, are not
reasonably expected to result in a Starwood Material Adverse Effect or the
discharge of which is the responsibility of a lessee of the applicable Starwood
Property, (d) Taxes not yet due and payable or which are being contested in good
faith with adequate reserves as required by GAAP, (e) leases entered into in the
ordinary course of Starwood's business and subleases under such leases as
tenants only with no options to purchase except as listed on Section 3.2(o) of
the Starwood Disclosure Letter, (f) matters affecting title to multi-tenant
office real estate a portion of which has been leased to Starwood or a
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Starwood Subsidiary, as tenants, primarily for office purposes (each such lease,
a "Starwood Office Space Leases") and (g) other Starwood Encumbrances, if any,
which, individually or in the aggregate, would not, individually or in the
aggregate, reasonably be expected to result in a Starwood Material Adverse
Effect;
(ii) Valid policies of title insurance have been issued (or,
in the case of title policies with regard to Starwood Loans secured by real
estate mortgages or deeds of trust, if not issued, the insurer is obligated to
issue a title policy with respect thereto) insuring (i) Starwood's or a Starwood
Subsidiary's fee simple title or leasehold estate to the Starwood Properties,
(other than leaseholds with respect to Starwood Office Space Leases) and (ii)
the real estate mortgages or deeds of trust pertaining to Starwood Loans (other
than Starwood CMBS and participations) originated by Starwood or a Starwood
Subsidiary or, to the Knowledge of Starwood, any other Starwood Loans or
Starwood participations (excluding Starwood CMBS) secured by a real estate
mortgage or deed of trust, and except as noted therein, and such policies are,
at the date hereof, in full force and effect and no claim has been made against
any such policy which is currently pending which would, if decided adversely,
individually or in the aggregate, reasonably be expected to result in a Starwood
Material Adverse Effect;
(iii) None of Starwood or the Starwood Subsidiaries has
received written notice of any violation of any federal, state or municipal law,
ordinance, order, regulation or requirement affecting any portion of any of the
Starwood Properties issued by any Governmental Entity that has not otherwise
been resolved which would, individually or in the aggregate, reasonably be
expected to result in a Starwood Material Adverse Effect;
(iv) None of Starwood or the Starwood Subsidiaries has
received notice of or has Knowledge of, any condemnation or rezoning or
proceedings that are pending or, to the Knowledge of Starwood, threatened with
respect to any of the Starwood Properties which would, individually or in the
aggregate, reasonably be expected to result in a Starwood Material Adverse
Effect;
(v) Except as would not, individually or in the aggregate,
reasonably be expected to result in a Starwood Material Adverse Effect, each
tenant (or subtenant if Starwood or a Starwood Subsidiary is itself a tenant),
of a Starwood Property owned or leased by Starwood or the applicable Starwood
Subsidiary, or, to the Knowledge of Starwood, a subtenant thereof in which
subtenant's rent Starwood or a Starwood Subsidiary participates or otherwise
shares with the tenant, has entered into a lease or a sublease, if applicable,
for the possession of such Starwood Property (each lease or other right of
occupancy affecting or relating to a Starwood Property under which Starwood or a
Starwood Subsidiary is the lessor is referred to herein as a "Starwood Lease");
except as disclosed in the Starwood Filed SEC Documents, each Starwood Lease
owned or leased by Starwood or a Starwood Subsidiary, is in full force and
effect and none of Starwood or the Starwood Subsidiaries has received written
notice of any defense to the obligations of the tenant thereunder or any claim
asserted or threatened by any such tenant or guarantor of the tenant's
obligations, which defense or claim, if sustained, would be reasonably expected
to result in a Starwood Material Adverse Effect; and except as would not
individually or in the aggregate reasonably be expected to result in a Starwood
Material Adverse Effect, (a) the lessor under each Starwood Lease owned or
leased by Starwood or a Starwood Subsidiary, has complied with its obligations
under such Starwood Lease, (b) no tenant with respect to any Starwood Property
owned or leased by Starwood or any Starwood Subsidiary is in default in the
payment of fixed, base or minimum rent or other rental obligation payable to
Starwood or a Starwood Subsidiary beyond the expiration of any applicable grace
or cure period and (c) none of Starwood or the Starwood Subsidiaries has notice
of any default by the tenant under such Starwood Lease;
(vi) The mortgages and deeds of trust encumbering the Starwood
Properties are not (i) cross-defaulted to any indebtedness other than
indebtedness of Starwood or any of the Starwood
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Subsidiaries or (ii) cross-collateralized to any property not owned by Starwood
or any of the Starwood Subsidiaries;
(vii) The rent roll provided by Starwood to TriNet lists each
Starwood Lease in effect as of the date hereof and the following information as
of the date hereof for each Starwood Lease (other than Starwood Office Space
Leases): (a) tenant's name, (b) rentable square feet, (c) current rental rate,
(d) scheduled rental increases, (e) current expiration date and (f) to the
extent the landlord may be obligated to perform the following within five years
after the Effective Time: each obligation of the landlord to construct, add to
or expand a building (not including for this purpose tenant improvements in the
ordinary course) and each option of a tenant of a Starwood Property to require
Starwood or any Starwood Subsidiary to construct, add to or expand a building
(the "Starwood Rent Roll"). Starwood has made available to TriNet true, correct
and complete copies of all Starwood Leases, including all material amendments,
modifications, supplements, renewals, extensions and guarantees related thereto,
as of the date hereof. Except for discrepancies that, either individually or in
the aggregate, would not reasonably be expected to result in a Starwood Material
Adverse Effect, all information set forth in the Starwood Rent Roll is true,
correct and complete as of the date thereof; and
(viii) Starwood and the Starwood Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are customary in the business in which they are engaged
and such insurance is adequate for the value of their properties; all policies
of insurance insuring Starwood and the Starwood Subsidiaries or their respective
businesses and assets, are in full force and effect except as would not
reasonably be expected to result in a Starwood Material Adverse Effect; Starwood
and the Starwood Subsidiaries are in compliance with the terms of such policies
and there are no claims by Starwood or the Starwood Subsidiaries under any such
policy as to which any insurance company is denying liability or defending under
a reservation of rights clause, other than claims which (i) are for less than
$250,000 or as disclosed in Section 3.2(o)(vii) of the Starwood Disclosure
Letter or (ii) would not otherwise, individually or in the aggregate, reasonably
be expected to result in a Starwood Material Adverse Effect (it being understood
that any such claim which is for an amount in excess of $250,000 shall not,
solely by reason of such fact, be deemed reasonably likely to result in a
Starwood Material Adverse Effect).
(p) Opinion of Financial Advisor. The Board of Trustees of Starwood has
received the opinion of Bear Stearns, Starwood's financial advisor, satisfactory
to Starwood's Board of Trustees, a written copy of which was or, upon receipt by
Starwood's Board of Trustees will be, provided to TriNet, to the effect that, as
of the date of such opinion, the Exchange Ratio is fair to Starwood from a
financial point of view. It is agreed and understood that such opinion is for
the benefit of Starwood's Board of Trustees and may not be relied upon by TriNet
or its affiliates.
(q) State Takeover Statutes. Starwood and Starwood Sub each has taken
all actions necessary, if any, to exempt the Merger, this Agreement and the
transactions contemplated by this Agreement from the operation of any Takeover
Statute of the State of Maryland, including, without limitation, Sections 3-602
and 3-603 of the MGCL.
(r) 1940 Act. None of Starwood or any of the Starwood Subsidiaries is,
or at the Effective Time will be, required to be registered under the 1940 Act.
(s) Proxy Statement and Registration Statement. The information
furnished by Starwood and Starwood Sub for inclusion or incorporation by
reference in the Registration Statement and any amendment or supplement thereto
will not, as of the date the Registration Statement is declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order the make the
statements therein not misleading. The information
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furnished by Starwood for inclusion or incorporation by reference in the Proxy
Statement will not, on the dates the Proxy Statement first is mailed or
furnished to securityholders of TriNet or Starwood or on the respective meeting
dates, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Notwithstanding the foregoing, Starwood and Starwood Sub make no representation
or warranty with respect to any information furnished by TriNet for inclusion or
incorporation by reference in any of the foregoing documents.
(t) Vote Required. The affirmative vote of the holders of at least
two-thirds of the outstanding Starwood Class A Common Shares and Starwood Class
B Common Shares voting as a single class is the only vote of the holders of any
class or series of Starwood's beneficial interest necessary (under applicable
law or otherwise) to approve the Merger, this Agreement, the Incorporation
Merger and the Incorporation Merger Agreement (the "Starwood Merger Shareholder
Approval" and the "Starwood Incorporation Merger Shareholder Approval"). The
approval of a majority of the outstanding Starwood Class A Common Shares and
Starwood Class B Common Shares voting as a single class is the only vote of the
holders of any class or series of Starwood's beneficial interest necessary
(under applicable law or otherwise) to approve the Advisor Transaction and the
Advisor Transaction Agreement (the "Starwood Advisor Transaction Shareholder
Approval") and together with the Starwood Merger Shareholder Approval and the
Starwood Incorporation Merger Shareholder Approval, the "Starwood Shareholder
Approvals").
(u) Year 2000 Issues.
(i) To the best Knowledge of Starwood and Starwood Sub, based
on representations and warranties made by third parties and publicly available
information, the software, hardware and equipment of Starwood owned, leased or
licensed by it and used in the conduct of its business, as well as the elevator
systems in those of the Starwood Properties for which Starwood has the
responsibility under the applicable lease agreements to address Year 2000
compliance, and the heating ventilation and air conditioning, fire and safety
and other automated building systems at those of the Starwood Properties for
which Starwood has the responsibility under the applicable lease agreements to
address Year 2000 compliance are or will be on or before December 31, 1999 Year
2000 Ready, except to the extent that the failure to be Year 2000 Ready would
not reasonably be expected to result in a Starwood Material Adverse Effect.
(v) Operations of Starwood Sub and New Starwood. Each of New Starwood
and Starwood Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and the Incorporation Merger and has
not engaged in any business activities or conducted any operations other than in
conjunction with such transactions.
(w) No Ownership of TriNet Stock. As of the date of this Agreement,
none of Starwood and the Starwood Subsidiaries owns, and as of the Closing Date
(immediately prior to the Effective Time), none of Starwood and the Starwood
Subsidiaries will own, any shares of capital stock of TriNet.
ARTICLE IV
COVENANTS
Section 4.1. Conduct of Business by TriNet. Except as set forth in
Section 4.1 of the TriNet Disclosure Letter, and as contemplated by this
Agreement and the Ancillary Agreements to which TriNet is a party, during the
period from the date of this Agreement to the earlier of (i) the termination of
this Agreement and (ii) the Effective Time, TriNet shall, and shall cause each
of the TriNet Managed
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Subsidiaries and shall use commercially reasonable efforts to cause each TriNet
Non-Managed Subsidiary to, carry on its businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent therewith, use commercially reasonable efforts to preserve
intact in all material respects its current business organization, goodwill,
ongoing businesses and TriNet's status as a REIT within the meaning of the Code.
Without limiting the generality of the foregoing, from the date of this
Agreement to the earlier of (i) the termination of this Agreement and (ii) the
Effective Time, except as set forth in Section 4.1 of the TriNet Disclosure
Letter, and as contemplated by this Agreement and the Ancillary Agreements,
TriNet shall not (and shall not authorize, commit or agree to) and shall cause
the TriNet Managed Subsidiaries and shall use commercially reasonable efforts to
cause the TriNet Non-Managed Subsidiaries not to (and not to authorize or commit
or agree to):
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of TriNet's stock, or any stock or other equity
interests in any TriNet Subsidiary that is not directly or indirectly wholly
owned by TriNet or any TriNet Subsidiary, except (v) in the case of TriNet, for
regular quarterly dividends not in excess of $.65 per share of TriNet Common
Stock and on and after December 1, 1999 $.70 per share of TriNet Common Stock,
$.585938 per share of TriNet Series A Preferred Stock, $.575 per share of TriNet
Series B Preferred Stock and $.50 per share of TriNet Series C Preferred Stock,
(w) any other distributions by any other wholly owned TriNet Subsidiaries, (x)
the Final TriNet Dividend to be paid pursuant to Section 2.2(d)(i), (y) other
dividends necessary in order for TriNet to maintain its status as a REIT and (z)
required distributions under the organizational documents governing the TriNet
Subsidiaries or under other agreements to which the TriNet Subsidiaries are a
party; (ii) split, combine or reclassify any capital stock or partnership
interests or issue or authorize the issuance of any other securities in respect
of, in lieu of, or in substitution for, shares of such stock or partnership
interests or (iii) purchase, redeem or otherwise acquire any shares of stock of
TriNet or any options, warrants or rights to acquire, or security convertible
into, shares of stock of TriNet except in connection with the use of TriNet
Common Stock to pay the exercise price or tax withholding obligation upon the
exercise of a TriNet Stock Option issued under any of the TriNet Stock Plans as
presently permitted under those plans;
(b) issue, deliver or sell, or grant any option or other right in
respect of, any shares of capital stock, any other voting or redeemable
securities of TriNet or any TriNet Subsidiary or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible or redeemable securities except to TriNet or a TriNet
Subsidiary, except as permitted or required in connection with the exercise of
outstanding options under the TriNet Option Plans or under any TriNet dividend
reinvestment plan currently in effect, and except as permitted under Section
4.1(e);
(c) amend TriNet's charter or bylaws, or any other comparable charter
or organizational documents of any TriNet Subsidiary, except as otherwise
contemplated by this Agreement or except for amendments to the organizational
documents of the TriNet Subsidiaries to reflect the admission of new equity
members and for other administrative matters;
(d) merge, consolidate or enter into any other business combination
transaction with any Person;
(e) (i) acquire or agree to acquire by merging or consolidating with,
or by purchasing all or a substantial portion of the equity securities or assets
of, or by any other manner, any business or any corporation, partnership,
limited liability company, joint venture, association, business trust or other
business organization or division thereof or interest therein or any assets;
(ii) mortgage or otherwise encumber or subject to any Lien or sell, lease or
otherwise dispose of any of its material properties or assets or assign or
encumber the right to receive income, dividends, distributions and the like or
agree to
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do any of the foregoing, other than leases with respect to TriNet Properties
which are entered into in the ordinary course of TriNet's business, consistent
with past practice; or (iii) incur indebtedness for borrowed money or guarantee
any indebtedness of another person, other than a TriNet Subsidiary, issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of TriNet or any TriNet Subsidiary, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, prepay or refinance any
indebtedness or make any loans, advances or capital contributions to, or
investments in, any other Person other than the TriNet Subsidiaries, except that
TriNet and the TriNet Subsidiaries may borrow and re-borrow, up to the limits in
effect on the date of this Agreement, under the Amended and Restated Credit
Agreement, dated as of June 1, 1998 among TriNet, Morgan Guaranty Trust Company
and the other lenders named therein (the "TriNet Revolver") and TriNet and the
TriNet Subsidiaries may refinance indebtedness outstanding on the date of this
Agreement when it matures, provided that the replacement indebtedness may be
prepaid at any time without penalty;
(f) make any election relating to Taxes, other than an election which
is not reasonably expected to affect the amount or timing of items of income,
gain, loss or deductions of greater than $5,000,000 on a cumulative basis or
Taxes in any year of greater than $500,000 (unless such action is required by
law or necessary to preserve TriNet's status as a REIT or any TriNet Subsidiary
as a partnership for federal tax purposes);
(g) (i) change in any material manner any of its methods, principles or
practices of accounting in effect at the TriNet Financial Statement Date, or
(ii) settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy in each case
relating to taxes, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ended December
31, 1997, except, in the case of clause (i), as may be required by the SEC,
applicable Law or GAAP and, in the case of clause (ii), as may be required by
applicable Law;
(h) except as otherwise previously agreed to by Starwood in writing,
adopt any new employee benefit plan, incentive plan, severance plan, bonus plan,
stock option or similar plan, grant new stock appreciation rights or amend any
existing plan or rights, or enter into or amend any employment agreement or
similar agreement or arrangement or, except in the ordinary course consistent
with past practice, grant or become obligated to grant any increase in the
compensation of officers or employees, except such changes as are required by
law or which are not more favorable to participants than provisions currently in
effect;
(i) settle any stockholder derivative or class action claims arising
out of or in connection with any of the transactions contemplated by this
Agreement; (j) enter into or amend or otherwise modify any of the material terms
of any agreement or arrangement with persons that are affiliates or, as of the
date hereof, are officers or directors of TriNet or any TriNet Subsidiary
without prior written notice to Starwood and the approval of a majority of the
"independent" members of the Board of Directors of TriNet; or
(k) expend more than $3,000,000 in the aggregate for capital
expenditures or commit to do the foregoing other than those projects, repairs or
renovations in progress on the date hereof or which are required to be performed
by TriNet under a TriNet Lease or existing letter of intent to which TriNet or a
TriNet Subsidiary is a party, in each case as described in Section 4.1(k) of the
TriNet Disclosure Letter, and other than to fund, to the extent necessary, the
operations of the properties in the event of a tenant default.
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Section 4.2. Conduct of Business by Starwood. Except as set forth in
Section 4.2 of the Starwood Disclosure Letter, and as contemplated by this
Agreement and the Ancillary Agreements to which Starwood is a party, during the
period from the date of this Agreement to the earlier of (i) the termination of
this Agreement and (ii) the Effective Time, Starwood shall, and shall cause the
Starwood Subsidiaries to, carry on its and their businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent therewith, use commercially reasonable
efforts to preserve intact in all material respects its current business
organization, goodwill, ongoing businesses and Starwood's status as a REIT
within the meaning of the Code. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the earlier of
(i) the termination of this Agreement and (ii) the Effective Time, except as set
forth in Section 4.2 of the Starwood Disclosure Letter, and as contemplated by
this Agreement and the Ancillary Agreements, Starwood shall not (and shall not
authorize, commit or agree to) and shall cause the Starwood Subsidiaries not to
(and not to authorize or commit or agree to):
(a) (i) declare, set aside or pay any dividends on, or make any
distributions in respect of, any of Starwood's shares of beneficial interest or
any stock or other equity interests in any Starwood Subsidiary that is not
directly or indirectly wholly owned by Starwood except (u) in the case of
Starwood, for aggregate dividends on Starwood's common shares of beneficial
interest not in excess of the greater of (A) 100% of the consolidated funds from
operations of Starwood and the Starwood Subsidiaries and (B) 100% of the
consolidated REIT taxable income of Starwood and the Starwood Subsidiaries, in
each case for the applicable dividend period, and for dividends required to be
paid on Starwood's preferred shares of beneficial interest in accordance with
their terms, (v) any distributions by any other wholly owned Starwood
Subsidiary, (w) dividends payable by Starwood pursuant to Section 2.2(d)(i), (x)
other dividends necessary in order for Starwood to maintain its status as a REIT
and (z) required distributions under the organizational documents governing the
Starwood Subsidiaries or under other agreements to which the Starwood
Subsidiaries are a party; (ii) split, combine or reclassify any shares of
beneficial interest or partnership interests or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for such
shares of beneficial interest or partnership interests, except pursuant to the
Advisor Transaction and the Incorporation Merger or (iii) purchase, redeem or
otherwise acquire any shares of beneficial interest of Starwood or any options,
warrants or rights to acquire, or security convertible into, shares of
beneficial interest of Starwood, except in connection with the use of Starwood
Common Stock to pay the exercise price or withholding tax obligation upon the
exercise of any Starwood Stock Option, upon the exercise of any Starwood
Warrants or under the Starwood Stock Plan as presently permitted under that
plan;
(b) issue, deliver or sell, or grant any option or other right in
respect of, any shares of beneficial interest, any other voting or redeemable
securities of Starwood or any Starwood Subsidiary or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible or redeemable securities except to Starwood or a
Starwood Subsidiary except (i) pursuant to the Advisor Transaction, the
Incorporation Merger and the Stock Dividend, (ii) for issuances of shares of
beneficial interest of Starwood in an amount not to exceed in the aggregate
19.9% of the aggregate issued and outstanding shares of beneficial interest of
Starwood on the date of this Agreement and (iii) for issuances of Starwood Class
B Common Shares upon the exercise of outstanding Starwood Stock Options pursuant
to Section 6.1 of Starwood's Declaration of Trust;
(c) amend Starwood's declaration of trust, bylaws or other comparable
charter or organizational documents of Starwood or any Starwood Subsidiary,
except as otherwise contemplated by this Agreement, pursuant to the Advisor
Transaction and the Incorporation Merger or except for amendments to the
organizational documents of the Starwood Subsidiaries to reflect the admission
of new equity members and for other administrative matters;
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(d) subject to Section 4.2(b) hereof, merge, consolidate or enter into
any other business combination with any Person except for any merger,
consolidation or business combination, as a result of which (i) Starwood is the
surviving or successor Person or the ultimate parent of the surviving or
successor Person and (ii) no change of control of Starwood will occur;
(e) subject to Section 4.2(b) hereof, (i) acquire or agree to acquire
by purchasing all or a substantial portion of the equity securities or assets
of, or by any other manner, any business or any corporation, partnership,
limited liability company, joint venture, association, business trust or other
business organization or division thereof or interest therein or any assets in
transactions involving capital, securities, assets or indebtedness, or any
combination thereof, of Starwood or Starwood Subsidiaries in excess of
$250,000,000, for all such transactions in the aggregate, except (x) for
acquisitions of businesses whose primary activities are similar or closely
related to the businesses currently conducted by Starwood or any of the
Subsidiaries or whose assets consist primarily of assets similar to the Starwood
Loans, (y) as otherwise necessary in order for Starwood to maintain its status
as a REIT and (z) that Starwood may originate or otherwise acquire assets of
types similar to the Starwood Loans in the ordinary course of its business
without restriction; (ii) other than in the ordinary course of business or in
connection with (x) borrowings under Starwood's existing credit lines, (y)
refinancings of outstanding indebtedness of Starwood and (z) securitizations of
Starwood Loans, mortgage or otherwise materially encumber or subject to any Lien
or sell, lease or otherwise dispose of any of its material properties or assets
or assign or materially encumber the right to receive income, dividends,
distributions and the like or agree to do any of the foregoing; (iii) incur
indebtedness for borrowed money or guarantee any indebtedness of another person,
issue or sell any debt securities or warrants or other rights to acquire any
debt securities of Starwood or any Starwood Subsidiary; guarantee any debt
securities of another person; enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or prepay or
refinance any indebtedness if, as a result of any of the activities described in
this clause (iii), the ratio of Starwood's consolidated debt to consolidated
equity, as determined in accordance with GAAP and based the most recent
consolidated balance sheet of Starwood included in the Starwood SEC Documents
filed through the time of the activity in question, would exceed 2.0:1.0 or (iv)
make any loans, advances or capital contributions to, or investments in, any
other person other than loans, advances, capital contributions or investments
which are (A) specifically permitted by this Agreement, (B) consistent with the
types of activities Starwood engages in the ordinary course of its business or
(C) not in excess of $100,000,000 in the aggregate;
(f) (i) change in any material manner any of its methods, principles or
practices of accounting in effect at the Starwood Financial Statement Date or
(ii) settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy in each case relating to taxes,
except in the case of settlements or compromises relating to taxes on real
property or sales taxes in an amount not to exceed, individually or in the
aggregate, $5,000,000, except, in the case of clause (i), as may be required by
the SEC, applicable Law or GAAP and, in the case of clause (ii) as may be
required by applicable Law;
(g) except as provided in this Agreement, adopt any new employee
benefit plan, incentive plan, severance plan, bonus plan, stock option or
similar plan, grant new stock appreciation rights or amend any existing plan or
rights, or enter into or amend any employment agreement or similar agreement or
arrangement (other than as contemplated under Section 5.11) or, except in the
ordinary course consistent with past practice, grant or become obligated to
grant any increase in the compensation of officers or employees, except such
changes as are required by law or which are not more favorable to participants
than provisions currently in effect;
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(h) enter into, amend or otherwise modify any of the material terms of,
any agreement or arrangement with persons that are affiliates or, as of the date
hereof, are officers or trustees of Starwood or any Starwood Subsidiary, except
that in connection with the transactions contemplated by the Advisor Transaction
Agreement, Starwood may terminate the Financial Advisory Agreement, dated as of
March 18, 1998, between Starwood and the Starwood Advisors L.L.C.
(i) expend more than $3,000,000 in the aggregate for capital
expenditures or commit to do the foregoing other than those projects, repairs or
renovations in progress on the date hereof or which are required to be performed
by Starwood under a Starwood Lease or existing letter of intent to which
Starwood or a Starwood Subsidiary is a party, in each case as described in
Section 4.2(i) of the Starwood Disclosure Letter; or
(j) other than after consultation with TriNet, settle any stockholder
derivative or class action claims arising out of or in connection with any of
the transactions contemplated by this Agreement; provided, however, that
Starwood shall not enter into any such settlement which provides, as part of the
settlement, for an injunction to be issued against the consummation of the
transactions contemplated by this Agreement.
Section 4.3. Other Actions.
(a) Each of TriNet and Starwood shall use its commercially reasonable
efforts not to, and shall use its commercially reasonable efforts to cause its
respective subsidiaries not to take any action that would result in (i) any of
the representations and warranties of such party (without giving effect to any
"Knowledge" qualification) set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
(without giving effect to any "Knowledge" qualification) that are not so
qualified becoming untrue in any material respect or (iii) any of the conditions
to the Merger set forth in Article VI not being satisfied.
(b) Starwood shall, in connection with the transactions contemplated by
this Agreement, take all actions necessary to give effect to the exchange or
redemption rights in favor of joint venture partners of TriNet or any TriNet
Subsidiaries that are listed in Section 4.3(b) of the TriNet Disclosure Letter.
Such actions shall include, without limitation, the assumption of the
obligations of TriNet and any TriNet Subsidiary with respect to such exchange or
redemption rights that are disclosed in Section 4.3(b) of the TriNet Disclosure
Letter and the entering into of registration rights agreements with such joint
venture partners comparable to those heretofore entered into by TriNet or such
TriNet Subsidiary and that are listed in Section 4.3(b) of the TriNet Disclosure
Letter.
(c) Starwood shall notify TriNet of (i) any foreclosure by a lender on
shares of beneficial interest of Starwood pledged to secure indebtedness of a
shareholder of Starwood who is a party to the Shareholder Agreement, or (ii) the
occurrence of an "Event of Default" (an "Event of Default") or "Additional
Acceleration Event" (an "Additional Acceleration Event" ) under the Credit and
Guaranty Agreement among Starwood Opportunity Fund IV, L.P., a Delaware limited
partnership, SOFI-IV SMT Holdings, L.L.C., a Delaware limited liability company,
certain guarantors listed therein and General Electric Capital Corporation, a
New York corporation ("GECC" ), in each case within two business days after such
foreclosure, Event of Default or Additional Acceleration Event, as the case may
be.
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ARTICLE V
ADDITIONAL COVENANTS
Section 5.1. Preparation of the Registration Statement and the Proxy
Statement; Shareholders' Meetings; Consents.
(a) As soon as practicable following the date of this Agreement, TriNet
and Starwood shall jointly (i) prepare and file the Proxy Statement with the
SEC, with appropriate requests for confidential treatment, in form and substance
satisfactory to each of Starwood and TriNet, and Starwood will provide on a
supplemental basis to the SEC the Registration Statement, in which the Proxy
Statement will be included as a prospectus. Each of TriNet and Starwood shall
use its commercially reasonable efforts to cause and enable Starwood to (i)
respond to any comments of the staff of the SEC and (ii) have the Registration
Statement declared effective under the Securities Act and the rules and
regulations promulgated thereunder as promptly as practicable after such filing
and to keep the Registration Statement effective as long as is necessary to
consummate the Merger and the Advisor Transaction. Each of TriNet and Starwood
will use its commercially reasonable efforts to cause the Proxy Statement to be
mailed to TriNet's shareholders and Starwood's shareholders, respectively, as
promptly as practicable after the Registration Statement is declared effective
under the Securities Act. Each party will notify the other promptly of the
receipt of any comments from the SEC and of any request by the SEC for
amendments or supplements to the Registration Statement or the Proxy Statement
or for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives and the SEC with
respect to the Registration Statement or the Proxy Statement. The Registration
Statement and the Proxy Statement shall comply in all material respects with all
applicable requirements of Law. Whenever any event occurs which is required to
be set forth in an amendment or supplement to the Registration Statement or the
Proxy Statement, Starwood or TriNet, as the case may be, shall promptly inform
the other of such occurrences and cooperate in filing with the SEC and/or
mailing to the shareholders of Starwood and the shareholders of TriNet such
amendment or supplement in a form reasonably acceptable to Starwood and TriNet.
(b) TriNet will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "TriNet Shareholders Meeting") (but in no event shall such
meeting be held sooner than 20 business days following the date the Proxy
Statement is mailed to its shareholders), for the purpose of obtaining the
TriNet Shareholder Approval. Starwood will, as soon as practicable following the
date of this Agreement, duly call, give notice of, convene and hold a meeting of
its shareholders (the "Starwood Shareholders Meeting") (but in no event shall
such meeting be held sooner than 20 business days following the date the Proxy
Statement is mailed to its shareholders), for the purpose of obtaining the
Starwood Shareholder Approvals and, if necessary, the approval of its
shareholders to amend the declaration of trust and bylaws of Starwood in the
manner contemplated by Section 1.7. TriNet and Starwood will cooperate in good
faith to seek to ensure that the TriNet Shareholder Meeting and the Starwood
Shareholder Meeting are held on the same day, as close together in time as is
reasonably practicable. Starwood covenants that Starwood will, through its Board
of Trustees, recommend to its shareholders approval of the Merger, this
Agreement, the Advisor Transaction, the Advisor Transaction Agreement, the
Incorporation Merger and the Incorporation Merger Agreement and the transactions
contemplated hereby and thereby and further covenants that the Proxy Statement
will include such recommendation. TriNet covenants that, subject to Section 7.1,
TriNet will, through its Board of Directors, recommend to its shareholders
approval of the Merger, this Agreement and the other transactions contemplated
hereby and thereby and further covenants that the Proxy Statement will include
such recommendation. Starwood shall furnish all information concerning New
Starwood and the holders of New Starwood Common Stock as may reasonably be
requested in connection with any action required to be taken under any
applicable state securities or "blue sky" laws in
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connection with the issuance of New Starwood Common Stock and New Starwood
Preferred Stock pursuant to the Merger and the Advisor Transaction, and TriNet
shall furnish all information concerning TriNet and the holders of TriNet Common
Stock and TriNet Preferred Stock as may be reasonably requested in connection
with any such action. In connection with the preparation of the Proxy Statement
and the Registration Statement, Starwood shall use reasonable efforts to cause
to be delivered to TriNet, prior to the mailing of the Proxy Statement to
TriNet's shareholders and Starwood's shareholders, the opinion dated the date of
the Proxy Statement of Katten Muchin & Zavis, substantially in the form of
Exhibit M, regarding the historical treatment of certain partnerships, Mayer,
Brown & Platt, substantially in the form attached hereto as Exhibit N, regarding
the historical qualification of Starwood as a REIT under the Code, and the
opinion of Rogers & Wells LLP, substantially in the form attached hereto as
Exhibit O, regarding the prospective qualification of New Starwood as a REIT
under the Code. In issuing its opinion, Rogers & Wells LLP shall be permitted to
rely on the opinion of Mayer, Brown & Platt and on the opinion of Paul, Weiss,
Rifkind, Wharton & Garrison described in the next sentence. In connection with
the preparation of the Proxy Statement and the Registration Statement, TriNet
shall use reasonable efforts to cause to be delivered to Starwood, prior to the
mailing of the Proxy Statement to TriNet's shareholders and Starwood's
shareholders, the opinion dated the date of the Proxy Statement of Paul, Weiss,
Rifkind, Wharton & Garrison substantially in the form attached hereto as Exhibit
P regarding the qualification of TriNet as a REIT under the Code.
Section 5.2. Access to Information; Confidentiality. Each of TriNet and
Starwood shall, and shall cause each of its respective Subsidiaries to, afford
to the other party and to the officers, employees, accountants, counsel,
financial advisors and other representatives of such other party, reasonable
access during normal business hours during the period prior to the Effective
Time to all their respective properties, books, contracts, commitments,
personnel and records and, during such period, each of TriNet and Starwood
shall, and shall cause each of its respective subsidiaries to, furnish promptly
to the other party (a) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of federal or state securities laws and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.
Each of TriNet and Starwood will hold, and will use commercially reasonable
efforts to cause its respective officers and employees (and those of its
respective subsidiaries), accountants, counsel, financial advisors and other
representatives and affiliates to hold any nonpublic information in confidence
to the extent required by, and in accordance with, and will comply with the
provisions of the letter agreement between TriNet and Starwood dated as of
February 25, 1999, as amended to date (as so amended, the "Confidentiality
Agreement").
Section 5.3. Commercially Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of Starwood and TriNet agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other in doing, all things necessary,
proper or advisable to fulfill all conditions applicable to such party pursuant
to this Agreement and to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated hereby,
including (i) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings and the taking of all reasonable steps as
may be necessary to obtain an approval, waiver or exemption from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals, waivers or exemption from non-governmental third
parties; (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging the Merger, the Advisor Transaction, the
Incorporation Merger or the consummation of the transactions contemplated by
this Agreement, the Advisor Transaction Agreement, the Incorporation Merger
Agreement and the other Ancillary Agreements including seeking to have any stay
or temporary
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restraining order entered by any court or other Governmental Entity vacated or
reversed and (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and fully to carry out
the purposes of, this Agreement, the Advisor Transaction Agreement, the
Incorporation Merger Agreement and the other Ancillary Agreements. In connection
with and without limiting the foregoing, TriNet, Starwood and their respective
Boards of Directors or Trustees, as applicable, shall (x) take all action
necessary so that no "fair price," "business combination," "moratorium,"
"control share acquisition" or any other anti-takeover statute or similar
statute enacted under state or federal laws of the United States or similar
statute or regulation (a "Takeover Statute") is or becomes applicable to the
Merger or the Advisor Transaction, and (y) if any Takeover Statute becomes
applicable, take all action necessary so that the Merger or the Advisor
Transaction may be consummated as promptly as practicable on the terms
contemplated by this Agreement or the Advisor Transaction Agreement, as
applicable, and otherwise to minimize the effect of such Takeover Statute on the
Merger and the Advisor Transaction. From the date hereof through the Effective
Time, TriNet shall timely file with the SEC all TriNet SEC Documents required to
be so filed. From the date hereof through the Effective Time, Starwood shall
timely file with the SEC all Starwood SEC Documents required to be so filed.
Subject to the provisions of the Advisor Transaction Agreement, the
Incorporation Merger Agreement and Section 2.1(b)(ii), Starwood shall consummate
the Advisor Transaction and the Incorporation Merger as promptly as reasonably
practicable following the satisfaction or waiver of the conditions set forth in
Article VI of this Agreement. Without the consent of TriNet (which will not
unreasonably be withheld or delayed), Starwood will not consent to any amendment
or other modification, waive any material right or condition under the Advisor
Transaction Agreement or the Incorporation Merger Agreement or terminate the
Advisor Transaction Agreement.
(b) TriNet shall give prompt notice to Starwood, and Starwood shall
give prompt notice to TriNet, if (i) any representation or warranty made by it
contained in this Agreement, the Advisor Transaction Agreement or the
Incorporation Merger Agreement that is qualified as to materiality becomes
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becomes untrue or inaccurate in any material respect or (ii)
it fails to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, the Advisor Transaction Agreement or the Incorporation Merger
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
Section 5.4. Affiliates. Prior to the Closing Date, TriNet and Starwood
shall exchange letters identifying all persons who are, at the time this
Agreement is submitted for approval to the shareholders of TriNet and Starwood,
their respective "affiliates" for purposes of Rule 145 under the Securities Act.
TriNet and Starwood shall use their respective commercially reasonable efforts
to cause each of their respective affiliates to deliver on or prior to the
Closing Date a written agreement substantially in the form attached as Exhibit Q
hereto.
Section 5.5. Tax Treatment. Each of Starwood and TriNet shall use its
commercially reasonable efforts to (a) cause the Merger to qualify as a tax-free
reorganization under Section 368(a) of the Code and (b) obtain the opinions of
counsel referred to in Sections 5.1(b), 6.2(e) and 6.3(e).
Section 5.6. No Solicitation of Transactions.
(a) Subject to Section 7.1, TriNet shall not directly or indirectly,
through any officer, director, trustee, employee, agent, investment banker,
financial advisor, attorney, accountant, broker, finder or other representative,
initiate, solicit, encourage or facilitate (including by way of furnishing
nonpublic information or assistance) any inquiries or the making of any proposal
or other action that constitutes, or may reasonably be expected to lead to, any
TriNet Competing Transaction (as defined
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below), or enter into or maintain or continue discussions or negotiate with any
person in furtherance of such inquiries or to obtain a TriNet Competing
Transaction, or agree to or endorse any TriNet Competing Transaction, or
authorize or permit any of its officers, directors, trustees, employees or
agents, attorneys, investment bankers, financial advisors, accountants, brokers,
finders or other representatives to take any such action. TriNet shall notify
Starwood in writing (as promptly as practicable) of all of the relevant details
relating to all inquiries and proposals which it or any of its Subsidiaries or
any such officer, director, employee, agent, investment banker, financial
advisor, attorney, accountant, broker, finder or other representative may
receive relating to any of such matters and if such inquiry or proposal is in
writing, TriNet shall deliver to Starwood a copy of such inquiry or proposal.
For purposes of this Agreement, "TriNet Competing Transaction" shall mean any of
the following (other than the transactions expressly provided for in this
Agreement or described in the TriNet Disclosure Letter): (i) any merger,
consolidation, share exchange, business combination or similar transaction
involving TriNet (or any of its Subsidiaries), as the case may be; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of 20% or
more of the assets of TriNet and its Subsidiaries, taken as a whole, in a single
transaction or series of related transactions, excluding any bona fide financing
transactions which do not, individually or in the aggregate, have as a purpose
or effect the sale or transfer of control of such assets; (iii) any tender offer
or exchange offer for 20% or more of the outstanding equity securities of TriNet
(or any of its Subsidiaries), or (iv) any public announcement of a proposal,
plan or intention to do any of the foregoing or any agreement to engage in any
of the foregoing.
(b) Starwood shall not directly or indirectly, through any officer,
director, trustee, employee, agent, investment banker, financial advisor,
attorney, accountant, broker, finder or other representative, initiate, solicit,
encourage or facilitate (including by way of furnishing nonpublic information or
assistance) any inquiries or the making of any proposal or other action that
constitutes, or may reasonably be expected to lead to, any Starwood Competing
Transaction (as defined below), or enter into or maintain or continue
discussions or negotiate with any person in furtherance of such inquiries or to
obtain a Starwood Competing Transaction, or agree to or endorse any Starwood
Competing Transaction, or authorize or permit any of its officers, directors,
trustees, employees or agents, attorneys, investment bankers, financial
advisors, accountants, brokers, finders or other representatives to take any
such action. Starwood shall notify TriNet in writing (as promptly as
practicable) of all of the relevant details relating to all inquiries and
proposals which it or any of its Subsidiaries or any such officer, director,
employee, agent, investment banker, financial advisor, attorney, accountant,
broker, finder or other representative may receive relating to any of such
matters and if such inquiry or proposal is in writing, Starwood shall deliver to
TriNet a copy of such inquiry or proposal. For purposes of this Agreement,
"Starwood Competing Transaction" shall mean any of the following (other than the
transactions expressly provided for in this Agreement, the Incorporation Merger
Agreement and the Advisor Transaction Agreement or described in the Starwood
Disclosure Letter): (i) any merger, consolidation, share exchange, business
combination or similar transaction involving Starwood (or any of its
Subsidiaries), as the case may be, which is required under applicable Law or
under the rules of the principal securities exchange on which the Starwood
Common Stock is then listed to be submitted to Starwood's shareholders for
approval, (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of more than 20% of the assets of Starwood and its Subsidiaries,
taken as a whole, in a single transaction or series of related transactions,
excluding any bona fide financing transactions which do not, individually or in
the aggregate, have as a purpose or effect the sale or transfer of control of
such assets; (iii) any tender offer or exchange offer for more than 20% of the
outstanding equity securities of Starwood (or any of its Subsidiaries); or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Section 5.7. Public Announcements. Starwood and TriNet will consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the Merger or any other transactions contemplated by this Agreement,
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and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange. The parties agree that the initial press release to be
issued with respect to the Merger will be in the form agreed to by the parties
hereto prior to the execution of this Agreement.
Section 5.8. AMEX De-Listing; NYSE Listing. Starwood shall prepare and
submit to the NYSE a listing application covering the New Starwood Common Stock
(including the New Starwood Common Stock to be issued in the Merger and the
Advisor Transaction) and New Starwood Preferred Stock and shall use its
commercially reasonable efforts to have the NYSE approve for listing, upon
official notice of issuance, the New Starwood Common Stock and New Starwood
Preferred Stock. In the event that all such securities are approved for listing
on the NYSE, Starwood shall take such steps as are necessary to cause all
Starwood securities listed on the American Stock Exchange ("AMEX") to be
de-listed as of the Effective Time.
Section 5.9. Letters of Accountants.
(a) TriNet shall use its reasonable best efforts to cause to be
delivered to Starwood and TriNet a "comfort" letter of PricewaterhouseCoopers
LLP, TriNet's independent public accountants, dated and delivered the date on
which the Registration Statement shall become effective and as of the Effective
Time, and addressed to Starwood and TriNet, in form and substance reasonably
satisfactory to Starwood and TriNet and reasonably customary in scope and
substance for letters delivered by independent public accountants in connection
with transactions such as those contemplated by this Agreement.
(b) Starwood shall use its reasonable best efforts to cause to be
delivered to TriNet and Starwood a "comfort" letter of PricewaterhouseCoopers
LLP, Starwood's independent public accountants, dated and delivered the date on
which the Registration Statement shall become effective and as of the Effective
Time, and addressed to TriNet and Starwood, in form and substance reasonably
satisfactory to TriNet and Starwood and reasonably customary in scope and
substance for letters delivered by independent public accountants in connection
with transactions such as those contemplated by this Agreement.
Section 5.10 Transfer and Gains Taxes; Shareholder Demand Letters.
Starwood and TriNet shall cooperate in the preparation, execution and filing of
all returns, questionnaires, applications or other documents regarding any real
property transfer or gains, sales, use, transfer, value added stock transfer and
stamp taxes, any transfer, recording, registration and other fees and any
similar taxes which become payable in connection with the transactions
contemplated by this Agreement (together with any related interests, penalties
or additions to tax, "Transfer and Gains Taxes"). Within 30 days after the
Effective Time, Starwood shall send the shareholder demand letters required by
Treasury Regulation ss. 1.857-8 to the appropriate shareholders of TriNet for
TriNet's taxable year ended on the Effective Time.
Section 5.11 Benefit Plans and Other Employee Arrangements
(a) Benefit Plans. Subject to subsection (b) below, upon and after the
Effective Time, Starwood (or its respective successors or assigns) shall provide
benefits to former employees of TriNet and its Subsidiaries that are no less
favorable in the aggregate to such employees than those provided to other
similarly situated employees of Starwood at any applicable time after the
termination of the benefits provided to such employees by TriNet and the TriNet
Subsidiaries. With respect to any Starwood Benefit Plan which is an "employee
benefit plan" as defined in Section 3(3) of ERISA and any other service based
benefits (including vacations) in which employees of TriNet or Starwood or their
respective
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Subsidiaries may participate, solely for purposes of determining eligibility to
participate, vesting and entitlement to benefits but not for purposes of accrual
of pension benefits, service with TriNet, Starwood or any of their respective
Subsidiaries shall be treated as service with Starwood; provided, however, that
such service shall not be recognized to the extent that such recognition would
result in a duplication of benefits under both a TriNet Benefit Plan and a
Starwood Benefit Plan (or is not otherwise recognized for such purposes under
the benefit plan of Starwood). Notwithstanding the above, Starwood shall
specifically assume TriNet's obligations under the change of control agreements
and TriNet employee severance policy listed or described in Section 5.11(a) of
the TriNet Disclosure Letter and honor all obligations arising thereunder.
(b) Stock Incentive Plans. Each holder (each an "Optionholder") of a
TriNet Stock Option shall have the right, within 10 business days after receipt
by such Optionholder of written notice from New Starwood of the "Market Price"
(as defined below) and subject to such rules and procedures (including, without
limitation, any requirement that written forms be executed by each Optionholder)
as the Board of Directors of TriNet may establish in its sole discretion, to
elect one of the following choices with respect to the disposition of any such
Optionholder's TriNet Stock Options held by the Optionholder immediately prior
to the Effective Time in connection with the Merger:
(i) Each Optionholder (other than the members of the Board of
Directors of TriNet, each of whom agreed, subject to certain exceptions, not to
exercise his TriNet Stock Options pursuant to the terms and provisions of an
Option Standstill Agreement) may elect to receive, with respect to any such
Optionholder's TriNet Stock Options (each of which TriNet Stock Options shall be
deemed to have become vested immediately prior to the Effective Time), cash in
an amount equal to the difference between (x) the Market Price of the shares of
TriNet Common Stock subject to such TriNet Stock Options and (y) the exercise
price of such TriNet Stock Options, in which event, following receipt by such
Optionholder of such cash amount, such Optionholder shall thereafter cease to
have any right to purchase TriNet Common Stock or shares of New Starwood Common
Stock in connection with the exercise of the TriNet Stock Options and all such
TriNet Stock Options shall be cancelled and terminated; or
(ii) Each Optionholder may elect, with respect to any of such
Optionholder's outstanding TriNet Stock Options, that such TriNet Stock Option
shall be assumed by Starwood and shall be deemed to constitute an option to
acquire, on substantially the same terms and conditions as were applicable under
such TriNet Stock Option (including, without limitation, as to vesting and
exercisability, it being understood that in the case of an election under this
clause (ii), (A) in the case of TriNet Stock Options held by Optionholders that
are either members of the Board of Directors of TriNet on the date hereof or are
persons listed in Section 5.11(b) of the TriNet Disclosure Letter (each of whom
is a party to an Agreement Regarding Change of Control with TriNet), such TriNet
Stock Options shall accordingly vest immediately prior to the Effective Time and
(B) in the case of TriNet Stock Options held by all other Optionholders,
notwithstanding the foregoing, no effect shall be given to any provisions
governing the terms of such TriNet Stock Options that would result in the
acceleration of vesting of such TriNet Stock Options in connection with the
execution and delivery of this Agreement or the completion of the Merger),
subject to the requirements of Section 424(a) of the Code with respect to
incentive stock options, the same number of shares of New Starwood Common Stock
as a holder of such TriNet Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such TriNet Stock Option in
full immediately prior to the Effective Time at a price per share equal to the
aggregate exercise price for the shares subject to such TriNet Stock Option
divided by the number of full shares of New Starwood Common Stock deemed to be
purchasable pursuant to such TriNet Stock Option; provided, however, that the
number of shares of Starwood Common Stock that may be purchased upon exercise of
each such TriNet Stock Option shall not include any fractional share but shall
be rounded upward to the next whole number of shares, or if rounding up would
disqualify an option as an incentive stock option, shall be rounded down to the
nearest whole number and cash shall be paid to each affected optionee as
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compensation for such fractional share in accordance with methodology set forth
in Section 2.2(g)(ii) hereof; provided, further, however, that prior to, or
simultaneously with, the Effective Time, New Starwood shall use its reasonable
best efforts to cause to become effective under the Securities Act, a
Registration Statement on Form S-8 in compliance with the rules promulgated
under the Securities Act covering that number of shares of New Starwood Common
Stock that would become issuable upon the exercise of all TriNet Options. The
term "Market Price" shall mean the average of the closing prices of the New
Starwood Common Stock on the principal stock exchange on which New Starwood
Common Stock is listed for the five (5) consecutive trading days beginning with
the fourth trading day after the Effective Time.
(iii) Each Starwood Stock Option shall continue in accordance
with its terms and conditions, including, without limitation, vesting and
exercisability.
(iv) Immediately prior to the Effective Time, TriNet shall
take all actions necessary to terminate the TriNet Stock Plans, TriNet's
management incentive (bonus) plans, Automatic Dividend Reinvestment Plan,
Management Stock Purchase Plan and Dividend Equivalent Rights Program (other
than with respect to Dividend Equivalent Rights Awards outstanding on the date
hereof and provisions of the Dividend Equivalent Rights Program with respect to
the vesting of such awards).
Section 5.12 Indemnification; Directors' and Officers' Insurance
(a) (i) TriNet shall, and, from and after the Effective Time, Starwood
(collectively, the "Indemnifying Parties") shall, jointly and severally,
indemnify, defend and hold harmless each Person who is now or has been at any
time prior to the date hereof or who becomes prior to the Effective Time, an
officer or director of TriNet or any TriNet Subsidiary (the "Indemnified
Parties") against, by paying directly on behalf of the Indemnified Parties, to
the extent permitted by law, all losses, claims, damages, costs, expenses
(including attorneys' fees and expenses), liabilities, judgments and amounts
that are or are to be paid in settlement of, with the approval of the
Indemnifying Parties (which approval shall not be unreasonably withheld or
delayed), or otherwise in connection with any threatened or actual claim,
action, suit, proceeding or investigation based on or arising out of the fact
that such person is or was a director or officer of TriNet or any TriNet
Subsidiary at or prior to the Effective Time, whether asserted or claimed prior
to, or at or after, the Effective Time ("Indemnified Liabilities"), including
all Indemnified Liabilities based on, or arising out of, or pertaining to this
Agreement, the Merger, or the transactions contemplated by this Agreement, in
each case to the full extent a corporation is permitted under the MGCL to
indemnify its own directors or officers, as the case may be (and Starwood will
pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law subject
to the limitations set forth in Section 5.12(a)(iii)).
(ii) Any Indemnified Parties proposing to assert the right to
be indemnified under this Section 5.12 shall, promptly after receipt of notice
of commencement of any action against such Indemnified Parties in respect of
which a claim is to be made under this Section 5.12 against TriNet and, from and
after the Effective Time, Starwood, notify the Indemnifying Parties of the
commencement of such action, enclosing a copy of all papers served; provided,
that the failure to so notify shall not limit in any way or otherwise affect the
obligations of the Indemnifying Parties, except to the extent such failure to
notify materially prejudices such party. If any such action is brought against
any of the Indemnified Parties and such Indemnified Parties notify the
Indemnifying Parties of its commencement, the Indemnifying Parties will assume
the defense of such action and will pay the costs and expenses of the defense;
provided, however, that the Indemnifying Parties will be entitled to participate
in and, to the extent that they elect by delivering written notice to such
Indemnified Parties promptly after receiving notice of the commencement of the
action from the Indemnified Parties, to assume the defense of the action and
after notice from the Indemnifying Parties to the Indemnified Parties of their
election to
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assume the defense, the Indemnifying Parties will not be liable to the
Indemnified Parties for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
Indemnified Parties in connection with the defense. The Indemnifying Parties
shall not settle any such action without the consent of the Indemnified Parties;
provided, however, that such consent shall not be unreasonably withheld, it
being understood that it shall not be deemed unreasonable to withhold such
consent if the settlement includes any admission of wrongdoing or payment of any
money by or on the part of the Indemnified Parties or any decree or restriction
on the Indemnified Parties or their officers or directors; provided, further,
that no Indemnifying Parties, in the defense of any such action shall, except
with the consent of the Indemnified Parties consent to entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Parties of a release
from all liability with respect to such action. The Indemnified Parties will
have the right to employ their own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
Indemnified Parties unless (i) the employment of counsel by the Indemnified
Parties has been authorized in writing by the Indemnifying Parties, (ii) the
Indemnified Parties have reasonably concluded (based on advice of counsel) that
there may be legal defenses available to them that are different from or in
addition to those available to the Indemnifying Parties, (iii) a conflict or
potential conflict exists (based on advice of counsel to the Indemnified
Parties) between the Indemnified Parties and the Indemnifying Parties (in which
case the Indemnifying Parties will not have the right to direct the defense of
such action on behalf of the Indemnified Parties) or (iv) the Indemnifying
Parties have not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the Indemnifying Parties.
(iii) It is understood that the Indemnifying Parties shall
not, in connection with any proceeding or related proceedings, be liable for the
reasonable fees, disbursements and other charges of more than one separate firm
(and one local counsel in each jurisdiction in which such counsel is reasonably
required) at any one time for all such Indemnified Parties unless (a) the
employment of more than one counsel has been authorized in writing by the
Indemnifying Parties, (b) any of the Indemnified Parties has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to them that are different from or in addition to those available to
other Indemnified Parties or (c) a conflict or potential conflict exists (based
on advice of counsel to the Indemnified Parties) between any of the Indemnified
Parties and the other Indemnified Parties, in each case of which the
Indemnifying Parties shall be obligated to pay the reasonable fees and expenses
of such additional counsel or counsels.
(iv) The Indemnifying Parties will not be liable for any
settlement of any action or claim effected without their written consent (which
consent shall not be unreasonably withheld or delayed).
(b) Without limiting any of the obligations under paragraph (a) of this
Section 5.12, Starwood agrees that all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Parties as
provided in TriNet's charter or bylaws as in effect as of the date hereof with
respect to matters occurring on or prior to the Effective Time shall survive the
Merger as obligations of New Starwood and continue in full force and effect for
a period of six years from the Effective Time.
(c) At or prior to the Effective Time, Starwood shall purchase
directors' and officers' liability insurance "tail" policy coverage for TriNet's
directors and executive officers for a period of six years which will provide
the directors and officers with coverage on substantially similar terms as (but
which shall be no less favorable than those) currently provided by TriNet to
such directors and officers for claims based on activity prior to the Effective
Time; provided, however, that Starwood shall have no obligation to pay aggregate
premiums for such coverage in excess of $350,000.
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(d) The indemnification provided by this Section 5.12 shall (i) be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, as a matter of law or otherwise, as to action in the Indemnitee's
capacity as a director or officer of TriNet and shall continue as to an
Indemnitee who has ceased to serve in such capacity and (ii) be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her personal representatives and shall be binding on all successors and
assigns of Starwood and TriNet.
Section 5.13 The TriNet Rights Plan. TriNet has taken and shall take,
in a timely manner, all steps necessary to ensure that the entering into of this
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated hereby or thereby and any other action or combination of actions or
any other transactions contemplated hereby and thereby do not and will not
result in the grant of any rights to any person to exercise or receive
certificates for Rights or acquire any property in respect of Rights under the
Rights Agreement. TriNet shall not redeem the Rights issued under the Rights
Agreement, or terminate the Rights Agreement, prior to the Effective Time (other
than in accordance with the preceding sentence) unless required to do so by a
court of competent jurisdiction; provided, however, that TriNet may take any of
the foregoing actions if the Board of Directors of TriNet shall have accepted a
proposal for a Superior TriNet Competing Transaction in accordance with the
terms of Section 7.1.
Section 5.14 Coordination of Dividends. Each of Starwood and TriNet
shall coordinate with the other regarding the declaration and payment of
dividends in respect of New Starwood Common Stock and TriNet Common Stock and
the record dates and payment dates relating thereto, it being the intention of
Starwood and TriNet that any holder of TriNet Common Stock shall not receive two
dividends, or fail to receive one dividend, for any single calendar quarter with
respect to such holder's TriNet Common Stock and/or New Starwood Common Stock
such holder receives in exchange therefor pursuant to the Merger.
Section 5.15. [Intentionally deleted.]
Section 5.16. Environmental Reports. Within 21 days after the date of
this Agreement, Starwood shall deliver to TriNet Phase I environmental
assessments with regard to the Starwood Properties listed in Section 5.16 of the
Starwood Disclosure Letter.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of TriNet and Starwood to effect the Merger
and to consummate the other transactions contemplated by this Agreement on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Effective Time of the following conditions:
(a) Shareholder Approvals. The TriNet Shareholder Approval and the
Starwood Merger Shareholder Approval and the Starwood Advisor Transaction
Shareholder Approval shall have been obtained.
(b) Listing of Shares. The NYSE or the AMEX shall have approved for
listing the New Starwood Common Stock (including the New Starwood Common Stock
to be issued in the Merger and the Advisor Transaction) and the New Starwood
Preferred Stock.
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(c) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings by the SEC seeking a stop order.
(d) 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 Merger, the Incorporation Merger or the Advisor Transaction
shall be in effect.
(e) Incorporation Merger and Advisor Transaction. Unless Starwood shall
have delivered the written notice to TriNet contemplated by Section 1.7, the
Incorporation Merger shall have occurred in accordance with the Incorporation
Merger Agreement. The Advisor Transaction Agreement shall be in full force and
effect and the Advisor Transaction shall occur simultaneously with the Merger in
accordance with the Advisor Transaction Agreement.
Section 6.2. Conditions to Obligations of Starwood. The obligation of
Starwood to effect the Merger and the Advisor Transaction on the Closing Date
are further subject to the following conditions, any one or more of which may be
waived by Starwood:
(a) Representations and Warranties. The representations and warranties
of TriNet set forth in this Agreement that are qualified by any "materiality,"
"Material Adverse Effect" or similar qualification or limitation shall be true
and correct, and the other representations and warranties of TriNet set forth in
this Agreement shall be true and correct in all material respects, in each case
on and as of the Closing Date as though made on and as of the Closing Date,
except to the extent the representation or warranty is expressly limited by its
terms to another date (in which case it shall be true and correct as of such
other date), and Starwood shall have received a certificate (which certificate
may be qualified by Knowledge to the same extent as such representations and
warranties are so qualified) signed on behalf of TriNet by the President and the
Chief Financial Officer of TriNet to such effect.
(b) Performance of Obligations of TriNet. TriNet shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time, and Starwood shall have
received a certificate signed on behalf of TriNet by the President and the Chief
Financial Officer of TriNet to such effect.
(c) Material Adverse Effect. Since the date of this Agreement, no
events shall have occurred and no circumstances shall have occurred that,
individually or in the aggregate, have resulted in or would reasonably be
expected to result in a TriNet Material Adverse Effect. This condition shall be
deemed not satisfied if on the Closing Date there are Defaulted TriNet Leases,
other than the TriNet Leases described in Section 3.1(o)(v) of the TriNet
Disclosure Letter, that in the aggregate represent in excess of 5% of the
consolidated rental income of TriNet and the TriNet Subsidiaries for the fiscal
quarter of TriNet most recently completed. For purposes of this Section, a
TriNet Lease becomes a "Defaulted TriNet Lease" when (i) a material uncured
default in the payment of monetary obligations due from the tenant or guarantor
under the TriNet Lease has occurred and is continuing beyond the applicable
notice and grace periods set forth in the applicable TriNet Lease and the
amounts of such monetary obligations are not the subject of a good faith dispute
between TriNet and the tenant or guarantor, (ii) the tenant or guarantor under
the TriNet Lease, pursuant to any bankruptcy law applicable to it, commences a
voluntary case, consents to the entry of an order for relief, consents to the
appointment of a custodian of it or a substantial part of its property or makes
a general assignment for the benefit of its creditors or (iii) a court of
competent jurisdiction enters an order or decree with regard to a tenant or
guarantor under a TriNet Lease under any applicable bankruptcy law for relief in
an involuntary case, appoints a custodian for the
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tenant or guarantor or any substantial part of its property or orders the
winding up or liquidation of the tenant.
(d) Opinions Relating to REIT Status. Starwood shall have received an
opinion dated as of the Closing Date of Paul, Weiss, Rifkind, Wharton &
Garrison, substantially in the form of Exhibit P attached hereto, regarding the
qualification of TriNet as a REIT under the Code and the treatment of the TriNet
Subsidiaries that are partnerships, limited liability companies or joint
ventures as partnerships or disregarded entities under the Code, and Paul,
Weiss, Rifkind, Wharton & Garrison shall have permitted Rogers & Wells LLP to
rely on its opinion for purposes of delivering the opinion required by Section
6.3(d).
(e) Other Tax Opinion. Starwood shall have received an opinion dated as
of the Closing Date from Rogers & Wells LLP in form reasonably satisfactory to
TriNet (subject to customary assumptions and qualifications, and based on
customary representations) to the effect that the Merger will qualify as a
tax-free reorganization under Section 368(a) of the Code.
(f) Consents. All consents and waivers from third parties necessary in
connection with the consummation of the Merger shall have been obtained, other
than such consents and waivers from third parties, which (i) if not obtained,
would not result, individually or in the aggregate, in a TriNet Material Adverse
Effect or (ii) Starwood has previously acknowledged are consents or waivers
which, if not obtained, would not individually result in a TriNet Material
Adverse Effect.
Section 6.3. Conditions to Obligation of TriNet. The obligations of
TriNet to effect the Merger and to consummate the other transactions
contemplated by this Agreement to occur on the Closing Date are further subject
to the following conditions, any one or more of which may be waived by TriNet:
(a) Representations and Warranties. The representations and warranties
of Starwood set forth in this Agreement that are qualified by any "materiality,"
"Material Adverse Effect" or similar qualification or limitation shall be true
and correct, and the other representations and warranties of Starwood set forth
in this Agreement shall be true and correct in all material respects, in each
case on and as of the Closing Date as though made on and as of the Closing Date,
except to the extent the representation or warranty is expressly limited by its
terms to another date (in which case it shall be true and correct as of such
other date), and TriNet shall have received a certificate (which certificate may
be qualified by knowledge to the same extent as such representations and
warranties are so qualified) signed on behalf of Starwood by the Chief Executive
Officer and the Chief Financial Officer of Starwood to such effect.
(b) Performance of Obligations of Starwood. Starwood shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and TriNet shall have
received a certificate signed on behalf of Starwood by the Chief Executive
Officer and the Chief Financial Officer of Starwood to such effect.
(c) Material Adverse Effect. Since the date of this Agreement, no
events shall have occurred and no circumstances shall have occurred that,
individually or in the aggregate, have resulted in or would reasonably be
expected to result in a Starwood Material Adverse Effect.
(d) Opinions Relating to REIT and Partnership Status. TriNet shall have
received the opinions dated as of the Closing Date of Katten Muchin & Zavis
substantially in the form of Exhibit M attached hereto regarding the historical
treatment of Starwood Subsidiaries that are partnerships, limited liability
companies or joint ventures as partnerships or disregarded entities under the
Code, the opinion of
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Mayer, Brown & Platt substantially in the form of Exhibit N attached hereto
regarding the historical qualification of Starwood as a REIT under the Code and
the opinion of Rogers & Wells LLP substantially in the form of Exhibit O
attached hereto regarding the prospective qualification of New Starwood, as a
REIT under the Code and the treatment of Starwood Subsidiaries that are
partnerships, limited liability companies or joint ventures as partnerships or
disregarded entities under the Code. Katten Muchin & Zavis and Mayer Brown &
Platt shall have permitted Rogers & Wells LLP to rely on their opinions for
purposes of delivering its opinion required by this Section 6.3(d).
(e) Other Tax Opinion. TriNet shall have received an opinion dated as
of the Closing Date from Paul Weiss, Rifkind, Wharton & Garrison in form
reasonably satisfactory to Starwood (subject to customary assumptions and
qualifications, and based on customary representations) to the effect that the
Merger will qualify as a tax-free reorganization under Section 368(a) of the
Code.
(f) Consents. All consents and waivers from third parties necessary in
connection with the consummation of the Merger shall have been obtained, other
than (i) such consents and waivers from third parties, which, if not obtained,
would not result, individually or in the aggregate, in a Starwood Material
Adverse Effect and (ii) any consent necessary under or in respect of the TriNet
Revolver.
(g) Incorporation Merger Representations. Unless Starwood shall have
delivered the written notice to TriNet contemplated in Section 1.7, the
representations and warranties of New Starwood set forth in the Incorporation
Merger Agreement shall be true and correct in all material respects on and as of
the Closing Date, as though made on and as of the Closing Date, except to the
extent the representation or warranty is expressly limited by its terms to
another date, and the Incorporation Merger shall have been effected in
accordance with the Incorporation Merger Agreement. TriNet shall have received a
certificate confirming the foregoing (which certificate may be qualified by
Knowledge to the same extent as such representations and warranties are so
qualified) signed on behalf of New Starwood by the Chief Executive Officer and
the Chief Financial Officer of New Starwood to such effect.
(h) Advisor Transaction Representations. The representations and
warranties of the Advisor set forth in the Advisor Transaction Agreement shall
be true and correct in all material respects on and as of the Closing Date, as
though made on and as of the Closing Date, except to the extent the
representation or warranty is expressly limited by its terms to another date,
and the parties to the Advisor Transaction Agreement shall have complied in all
material respects with their obligations under that Agreement. TriNet shall have
received a certificate confirming the foregoing (which certificate may be
qualified by Knowledge to the same extent as such representations and warranties
are so qualified) signed on behalf of the Advisor by the Chief Executive Officer
and the Chief Financial Officer of the Advisor.
(i) Lock-Up Agreements; Stockholders' Agreement. The Lock-Up Agreements
and the Stockholders' Agreement shall remain in full force and effect and no
party thereto shall be in violation of or shall have notified TriNet or Starwood
of its intention to violate any of such agreements.
(j) Election of REIT Status. Starwood shall have elected to be subject
to taxation as a REIT under the Code for its taxable year ended December 31,
1998 by having properly and timely filed Form 1120-REIT prior to the Closing
Date and shall have included the information set forth in Section 856(c)(6)(A)
of the Code in a schedule attached to such tax return.
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ARTICLE VII
BOARD ACTIONS
Section 7.1. Board Actions. Notwithstanding Section 5.6 or any other
provision of this Agreement to the contrary, to the extent required by the
obligations of the Board of Directors of TriNet under the MGCL, as determined by
the Board of Directors of TriNet in good faith after consultation with outside
counsel, TriNet may:
(a) disclose to its shareholders any information required to be
disclosed under applicable law;
(b) take and disclose to its shareholders (but not earlier than five
business days after first notifying Starwood thereof) a position contemplated by
Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with respect to a
Competing Transaction;
(c) in response to an unsolicited request therefor, participate in
discussions or negotiations with or furnish information with respect to it
pursuant to a confidentiality agreement which is at least as favorable to it as
the Confidentiality Agreement, or otherwise respond to or deal with any person
in connection with a proposal for a Superior TriNet Competing Transaction,
provided that it shall have notified Starwood of such unsolicited requests or
its participation in discussions or negotiations in accordance with Section 5.6;
and
(d) approve or recommend (and in connection therewith withdraw or
modify its approval or recommendation of this Agreement and the Merger) a
Superior TriNet Competing Transaction (as defined below) or enter into an
agreement with respect to such Superior TriNet Competing Transaction (for
purposes of this Agreement, "Superior TriNet Competing Transaction" means a bona
fide proposal for a TriNet Competing Transaction made by a third party which a
majority of the members of the Board of Directors of TriNet determines in good
faith (after consultation with its financial advisor) to be more favorable to
its common shareholders than the Merger).
Section 7.2. TriNet Subsidiary Boards. On the Closing Date, TriNet
shall use commercially reasonable efforts to cause the directors and officers of
each of the TriNet Subsidiaries to submit their resignations from such
positions, effective as of the Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1. Termination. This Agreement may be terminated at any time
prior to the acceptance for record of the Articles of Merger for the Merger by
the SDAT, whether before or after the TriNet Shareholder Approval and the
Starwood Shareholder Approvals are obtained:
(a) by mutual written consent duly authorized by the respective Board
of Directors of TriNet, the Board of Directors of Starwood Sub and the Board of
Trustees of Starwood;
(b) by Starwood, upon a breach of any representation, warranty,
covenant or agreement on the part of TriNet set forth in this Agreement, or if
any representation or warranty of TriNet shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b), as
the case may be, would be incapable of being satisfied by December 31, 1999 (as
otherwise extended);
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(c) by Starwood upon a failure of the condition set forth in Section
6.2(c);
(d) by TriNet, upon a breach of any representation, warranty, covenant
or agreement on the part of Starwood set forth in this Agreement, or if any
representation or warranty of Starwood shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a) or Section 6.3(b), as the
case may be, would be incapable of being satisfied by December 31, 1999 (as
otherwise extended);
(e) by TriNet upon a failure of the condition set forth in Section
6.3(c);
(f) by either Starwood or TriNet, if any judgment, injunction, order,
decree or action by any Governmental Entity of competent authority preventing
the consummation of the Merger shall have become final and nonappealable;
(g) by either Starwood or TriNet, if the Merger shall not have been
consummated before December 31, 1999; provided, however, that a party that has
materially breached a representation, warranty or covenant of such party set
forth in this Agreement shall not be entitled to exercise its right to terminate
under this Section 8.1(g);
(h) by Starwood or TriNet if, upon a vote at a duly held TriNet
Shareholders Meeting or any adjournment thereof, the TriNet Shareholder Approval
shall not have been obtained, as contemplated by Section 5.1;
(i) by Starwood if (i) prior to the TriNet Shareholders Meeting, the
Board of Directors of TriNet shall have withdrawn or modified in any manner
adverse to Starwood its approval or recommendation of the Merger or this
Agreement in connection with, or approved or recommended, any TriNet Competing
Transaction, (ii) TriNet shall have entered into any agreement with respect to
any TriNet Competing Transaction or (iii) the Board of Directors of TriNet or
any committee thereof shall have resolved to do any of the foregoing;
(j) by TriNet if TriNet shall previously or concurrently have
consummated a transaction constituting a Superior TriNet Competing Transaction
or shall previously or concurrently have entered into a definitive agreement
providing for a Superior TriNet Competing Transaction, but only upon payment of
all amounts then required, by reason of such termination, to be paid pursuant to
Section 8.2(b);
(k) by TriNet upon a termination of the Advisor Transaction Agreement
or, if Starwood has not previously delivered to TriNet the written notice
contemplated by Section 1.7, upon termination of the Incorporation Merger
Agreement;
(l) by TriNet within 15 days after receiving written notice from
Starwood pursuant to Section 4.3(c) that (a) (i) a lender on shares of
beneficial interest of Starwood pledged to secure indebtedness of a shareholder
of Starwood who is party to the Shareholder Agreement has foreclosed on such
Shares and the number of Starwood Class A Common Shares held by all parties to
the Shareholder Agreement after giving effect to such foreclosure represents
less than two-thirds of the aggregate number of then outstanding Starwood Class
A Common Shares and Starwood Class B Common Shares or (ii) an Event of Default
or an Additional Acceleration Event shall have occurred and be continuing and
(b) the lender (in the case of a foreclosure) or GECC or its successors and
assigns (in the case of an Event of Default or Additional Acceleration Event),
as the case may be, has not agreed in writing (in a manner reasonably
satisfactory to TriNet) to vote in favor of this Agreement, the Merger, the
Advisor Transaction Agreement and the Advisor Transaction, all shares of
beneficial interest in Starwood with respect to which such lender or GECC (or
its successors and assigns), as the case may be, has received the right to
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exercise voting and consensual rights in connection with such foreclosure, Event
of Default or Additional Acceleration Event; or
(m) by Starwood or TriNet if, upon a vote at a duly held Starwood
Shareholders Meeting or any adjournment thereof, the Starwood Merger Shareholder
Approval or the Starwood Advisor Transaction Shareholder Approval shall not have
been obtained, as contemplated by Section 5.1; provided, however, that TriNet
shall have no right to terminate this Agreement pursuant to this Section 8.1(m)
if (i) the irrevocable proxies which TriNet holds pursuant to the Shareholder
Agreement (the "Irrevocable Proxies") are valid instruments as of the time of
the Starwood Shareholders Meeting or any adjournment thereof and (ii) TriNet
shall have failed to exercise its rights under the Irrevocable Proxies to cause
the shares of beneficial interest of Starwood held by the shareholders of
Starwood who are parties to the Shareholder Agreement to be voted in favor of
the Merger and the Advisor Transaction at the Starwood Shareholders Meeting or
any adjournment thereof (such failure of TriNet being referred to herein as a
"TriNet Proxy Default").
Section 8.2. Expenses.
(a) Except as otherwise specified in this Section 8.2 or agreed in
writing by the parties, all out-of-pocket costs and expenses incurred in
connection with this Agreement, the Merger, and the other transactions
contemplated hereby shall be paid by the party incurring such cost or expense.
(b) TriNet agrees that if this Agreement shall be terminated pursuant
to Section 8.1(b), (h), (i) or (j) then TriNet will pay to Starwood, or as
directed by Starwood, an amount equal to the Starwood Break-Up Expenses (as
defined below). In addition, TriNet agrees that if (w) this Agreement shall be
terminated pursuant to Section 8.1(b) by reason of a breach by TriNet of any
representation or warranty set forth in this Agreement (and not by reason of any
such representation or warranty of TriNet having become untrue after the date of
this Agreement) and within 12 months following such termination TriNet shall
consummate a transaction constituting a change of control of TriNet or enter
into a definitive agreement providing for such a transaction, (x) this Agreement
shall be terminated pursuant to Section 8.1(c) and within 12 months following
such termination, TriNet shall consummate a transaction constituting a Superior
TriNet Competing Transaction or enter into a definitive agreement providing for
a transaction which will constitute a Superior TriNet Competing Transaction, (y)
this Agreement shall be terminated pursuant to Section 8.1(h) and within nine
months following such termination, TriNet shall consummate a transaction
constituting a change of control of TriNet or enter into a definitive agreement
providing for a transaction which will constitute a change of control of TriNet,
or (z) this Agreement is terminated pursuant to Section 8.1(i) or Section
8.1(j), or pursuant to Section 8.1(b), by reason of a breach by TriNet of a
covenant set forth in this Agreement, then TriNet will pay as directed by
Starwood a fee in an amount equal to the Starwood Break-Up Fee (as defined
below). Payment of any of such amounts shall be made, as directed by Starwood,
by wire transfer of immediately available funds promptly, but in no event later
than two business days after the amount is due as provided herein. The "Starwood
Break-Up Fee" shall be an amount equal to the lesser of (i) $50,000,000 (the
"Base Amount") and (ii) the sum of (A) the maximum amount that can be paid to
Starwood for the taxable year in which this Agreement is terminated without
causing Starwood to fail to meet the requirements of Sections 856(c)(2) and (3)
of the Code determined as if the payment of such amount did not constitute
income described in Sections 856(c)(2) and (3) of the Code ("Qualifying
Income"), as determined by outside counsel or independent accountants to
Starwood, and (B) in the event Starwood receives a letter from outside counsel
(the "Starwood Break-Up Fee Tax Opinion") indicating that Starwood has received
a ruling from the IRS holding that the receipt by Starwood of the Base Amount
would either constitute Qualifying Income as to Starwood with respect to
Starwood's proportionate share thereof or would be excluded from Starwood's
gross income for purposes of Sections 856(c)(2) and (3) of the Code (the "REIT
Requirements"), the Base Amount less the amount payable under clause (A) above.
In the event that Starwood is not able to receive
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the full Base Amount, TriNet shall place the unpaid amount (i.e., the difference
between the Base Amount and the Starwood Break-Up Fee) in escrow and shall not
release any portion thereof to Starwood unless and until TriNet receives any one
or a combination of the following: (i) a letter(s) from Starwood's outside
counsel or independent accountants indicating the maximum amount that can be
paid at that time to Starwood without causing Starwood to fail to meet the REIT
Requirements for any relevant taxable year together with an IRS ruling or
opinion of tax counsel to the effect that such payment would not be treated as
included in income for any prior taxable year, in which event such maximum
amount shall be paid to Starwood, or (ii) a Starwood Break-Up Fee Tax Opinion,
in which event TriNet shall pay to Starwood the unpaid Base Amount. TriNet's
obligation to pay any unpaid portion of the Starwood Break-Up Fee (provided
TriNet has otherwise complied with its obligations under this provision) shall
terminate (and any amount still held in such escrow shall be released to TriNet)
on the date that is five years from the date the Starwood Break-Up Fee first
becomes due under this Agreement. The "Starwood Break-Up Expenses" shall be an
amount equal to the lesser of (i) the total amount of costs and expenses
incurred by Starwood in connection with the preparation, negotiation, execution
and delivery of this Agreement (including, without limitation, fees and
disbursements of counsel, investment bankers and accountants and out-of-pocket
expenses), up to a maximum amount of $3,500,000 and which are supported by
invoices or other reasonable documentation (the "Starwood Expense Fee Base
Amount") and (ii) the sum of (A) the maximum amount that can be paid to Starwood
for the taxable year in which this Agreement is terminated without causing
Starwood to fail to meet the requirements of Sections 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute Qualifying
Income, as determined by outside counsel or independent accountants to Starwood
and (B) in the event Starwood receives a Starwood Break-Up Fee Tax Opinion
indicating that Starwood has received a ruling from the IRS holding that
Starwood's receipt of the Starwood Expense Fee Base Amount would either
constitute Qualifying Income as to Starwood with respect to Starwood's
proportionate share thereof or would be excluded from Starwood's gross income
for purposes of the REIT Requirements, the Starwood Expense Fee Base Amount less
the amount payable under clause (A) above. Notwithstanding anything in the
foregoing to the contrary, if this Agreement is terminated but Starwood
acquires, directly or indirectly, substantially all of the assets or stock of
the Advisor or any of its direct or indirect Subsidiaries within 12 months after
such termination, then TriNet shall have no obligation to pay to Starwood any
Starwood Break-Up Expenses which are directly and solely attributable to the
Advisor Transaction and if any such Starwood Break-Up Expenses have already been
paid by TriNet, Starwood shall reimburse TriNet for those expenses promptly
after the consummation of the acquisition of the Advisor. In the event that
Starwood is not able to receive the full amount of the Starwood Break-Up
Expenses, TriNet shall place the unpaid amount (i.e., the difference between the
Starwood Expense Fee Base Amount and the Starwood Break-Up Expenses) in escrow
and shall not release any portion thereof to Starwood unless and until TriNet
receives any one or combination of the following: (i) a letter(s) from
Starwood's outside counsel or independent accountants indicating the maximum
amount that can be paid at that time to Starwood without causing Starwood to
fail to meet the REIT Requirements for any relevant taxable year, together with
an IRS ruling or opinion of tax counsel to the effect that such payment would
not be treated as included in income for any prior taxable year, in which event
such maximum amount shall be paid to Starwood, or (ii) a Starwood Break-Up Fee
Tax Opinion indicating that Starwood's receipt of the Starwood Expense Fee Base
Amount would satisfy the REIT Requirements, in which event TriNet shall pay to
Starwood the unpaid Starwood Expense Fee Base Amount. TriNet's obligation to pay
any unpaid portion of the Starwood Break-Up Expenses (provided TriNet has
otherwise complied with its obligations under this provision) shall terminate
(and any amount still held in such escrow shall be released to TriNet) on the
date that is five years from the date the Starwood Break-Up Expenses first
become due under this Agreement.
(c) Starwood agrees that if this Agreement shall be terminated pursuant
to Section 8.1(d), 8.1(k) or 8.1(l) or, in the absence of a TriNet Proxy
Default, pursuant to Section 8.1(m), then Starwood will pay, as directed by
TriNet, an amount equal to the TriNet Break-Up Expenses (as defined below). In
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addition, Starwood agrees that if (w) this Agreement shall be terminated
pursuant to Section 8.1(d) by reason of a breach by Starwood of a representation
or warranty set forth in this Agreement (and not by reason of any such
representation or warranty of Starwood having become untrue after the date of
this Agreement) and within 12 months following such termination Starwood shall
consummate a transaction constituting a change of control of Starwood or enter
into a definitive agreement providing for a transaction which will constitute a
change of control of Starwood, (x) this Agreement shall be terminated pursuant
to Section 8.1(e) and within 12 months following such termination, Starwood
shall consummate a transaction constituting a Superior Starwood Competing
Transaction or enter into a definitive agreement providing for a transaction
which will constitute a Superior Starwood Competing Transaction; (y) this
Agreement shall be terminated pursuant to Section 8.1(k), Section 8.1(l) or
pursuant to Section 8.1(d), by reason of a breach by Starwood of a covenant set
forth in this Agreement; or (z) this Agreement shall be terminated pursuant to
Section 8.1(m) in the absence of a TriNet Proxy Default, then Starwood will pay
as directed by TriNet a fee in an amount equal to the TriNet Break-Up Fee (as
defined below). Payment of any of such amounts shall be made, as directed by
TriNet, by wire transfer of immediately available funds promptly, but in no
event later than two business days after the amount is due as provided herein.
The "TriNet Break-Up Fee" shall be an amount equal to the lesser of (i)
$50,000,000 or, in the event of a termination of this Agreement pursuant to
Section 8.1(l) or, in the absence of a TriNet Proxy Default, pursuant to Section
8.1(m), $60,000,000 (the "Base Amount") and (ii) the sum of (A) the maximum
amount that can be paid to TriNet for the taxable year in which this Agreement
is terminated without causing it to fail to meet the requirements of Sections
856(c)(2) and (3) of the Code determined as if the payment of such amount did
not constitute Qualifying Income, as determined by outside counsel or
independent accountants to TriNet and (B) in the event TriNet receives a letter
from outside counsel (the "TriNet Break-Up Fee Tax Opinion") indicating that
TriNet has received a ruling from the IRS holding that TriNet's receipt of the
Base Amount would either constitute Qualifying Income or would be excluded from
gross income for purposes of Sections 856(c)(2) and (3) of the Code, the Base
Amount less the amount payable under clause (A) above. In the event that TriNet
is not able to receive the full Base Amount, Starwood shall place the unpaid
amount (i.e., the difference between the Base Amount and the TriNet Break-Up
Fee) in escrow and shall not release any portion thereof to TriNet unless and
until Starwood receives any one or a combination of the following: (i) a
letter(s) from TriNet's outside counsel or independent accountants indicating
the maximum amount that can be paid at that time to TriNet without causing
TriNet to fail to meet the REIT Requirements for any relevant taxable year
together with an IRS ruling or opinion of tax counsel to the effect that such
payment would not be treated as included in income for any prior taxable year,
in which event such maximum amount shall be paid to TriNet, or (ii) a TriNet
Break-Up Fee Tax Opinion, in which event Starwood shall pay to TriNet the unpaid
Base Amount. Starwood's obligation to pay the TriNet Break-Up Fee (provided
Starwood has otherwise complied with its obligations under this provision) shall
terminate (and any amount still held in such escrow shall be released to
Starwood) on the date that is five years from the date the TriNet Break-Up Fee
first becomes due under this Agreement. The "TriNet Break-Up Expenses" shall be
an amount equal to the lesser of (i) the total amount of costs and expenses
incurred by TriNet in connection with the preparation, negotiation, execution
and delivery of this Agreement (including, without limitation, fees and
disbursements of counsel, investment bankers and accountants and out-of-pocket
expenses), up to a maximum amount of $3,500,000 and which are supported by
invoices or other reasonable documentation (the "TriNet Expense Fee Base
Amount") and (ii) the sum of (A) the maximum amount that can be paid to TriNet
for the taxable year in which this Agreement is terminated without causing it to
fail to meet the requirements of Sections 856(c)(2) and (3) of the Code
determined as if the payment of such amount did not constitute Qualifying
Income, as determined by outside counsel or independent accountants to TriNet
and (B) in the event TriNet receives a TriNet Break-Up Fee Tax Opinion
indicating that TriNet has received a ruling from the IRS holding that TriNet's
receipt of the TriNet Expense Fee Base Amount would either constitute Qualifying
Income or would be excluded from gross income for purposes of the REIT
Requirements the TriNet Expense Fee Base Amount less the amount payable under
clause (A) above. In the event that TriNet is not able to receive the full
TriNet Expense Fee Base Amount, Starwood
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shall place the unpaid amount (i.e., the difference between the TriNet Expense
Fee Base Amount and the TriNet Break-Up Expenses) in escrow and shall not
release any portion thereof to TriNet unless and until Starwood receives any one
or a combination of the following: (i) a letter(s) from TriNet's outside counsel
or independent accountants indicating the maximum amount that can be paid at
that time to TriNet without causing TriNet to fail to meet the REIT Requirements
for any relevant taxable year together with an IRS ruling or opinion of tax
counsel to the effect that such payment would not be treated as included in
income for any prior taxable year, in which event such maximum amount shall be
paid to TriNet, or (ii) a TriNet Break-Up Fee Tax Opinion indicating that
TriNet's receipt of the TriNet Expense Fee Base Amount would satisfy the REIT
Requirements, in which event Starwood shall pay to TriNet the unpaid TriNet
Expense Fee Base Amount. Starwood's obligation to pay any unpaid portion of the
TriNet Break-Up Expenses (provided Starwood has otherwise complied with its
obligations under this provision) shall terminate (and any amount still held in
such escrow shall be released to Starwood) on the date that is five years from
the date the TriNet Break-Up Expenses first become due under this Agreement.
(d) In the event that either Starwood or TriNet is required to file
suit to seek all or a portion of the amounts payable under this Section 8.2, and
such party prevails in such litigation, such party shall be entitled to all
expenses, including attorney's fees and expenses which it has incurred in
enforcing its rights hereunder; provided, that such expenses shall be considered
part of out-of-pocket expenses incurred in connection with this Agreement and
the other transactions within the definition of Starwood Break-Up Expenses or
TriNet Break-Up Expenses, as the case may be.
Section 8.3. Effect of Termination. In the event of termination of this
Agreement by either TriNet or Starwood as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Starwood or TriNet, other than the last sentence of
Section 5.2, Section 8.2, this Section 8.3 and Article IX and except to the
extent that such termination results from a willful breach by a party of any of
its representations or warranties or a breach by a party of any of its covenants
or agreements set forth in this Agreement and except that the remedies of
Starwood and TriNet set forth in Sections 8.2(b) and 8.2(c) shall be in addition
to any other remedies available to TriNet under law or principles of equity upon
the occurrence of the events contemplated in Sections 8.1(d) or 8.1(k).
Section 8.4. Amendment. This Agreement may be amended by the parties in
writing by action of their respective Boards of Directors or Trustees, as the
case may be, at any time before or after any TriNet or Starwood Shareholder
Approvals are obtained and prior to the filing of the Articles of Merger for the
Merger with the SDAT; provided, however, that, after any of the TriNet or
Starwood Shareholder Approvals are obtained, no such amendment, modification or
supplement shall alter the amount or change the form of the consideration to be
delivered to TriNet's or Starwood's shareholders or alter or change any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect TriNet's shareholders.
Section 8.5. Extension; Waiver. At any time prior to the Effective
Time, each of TriNet and Starwood may (a) extend the time for the performance of
any of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties of the other party contained
in this Agreement or in any document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 8.4, waive compliance with any of the
agreements or conditions of the other party contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
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ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Survival. None of the representations and warranties in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time. This Section 9.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time and all such provisions (including, but not limited to, Section
5.8, Section 5.11 and Section 5.12) shall survive the consummation of the
Merger.
Section 9.2. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) to the parties or sent by telecopy (providing confirmation of
transmission) at the following addresses or telecopy numbers (or at such other
address or telecopy number for a party as shall be specified by like notice):
(a) if to Starwood or Starwood Sub, to
c/o Starwood Financial Trust
1114 Avenue of the Americas, 27th Floor
New York, New York 10036
Attn: Spencer B. Haber and Nina Matis, Esq.
Fax: (212) 930-9400
with a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
Attn: John A. Healy, Esq.
Fax: (212) 878-8375
(b) if to TriNet, to
TriNet Corporate Realty Trust, Inc.
One Embarcadero Center
Suite 3150
San Francisco, California 94111
Attn: A. William Stein and Geoff Dugan, Esq.
Fax: (415) 391-3092
with a copy to:
Paul Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Attn: James M. Dubin, Esq.
Fax: (212) 757-3990
Section 9.3. Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and
56
<PAGE>
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
Section 9.4. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 9.5. Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Advisor Transaction Agreement, the Incorporation Merger
Agreement, the Confidentiality Agreement and the other agreements entered into
in connection with the transactions (a) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement and (b)
except for the provisions of Article II and Sections 5.11 and 5.12, are not
intended to confer upon any person other than the parties hereto any rights or
remedies.
Section 9.6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO CONFLICTS OF LAWS PRINCIPLES THEREOF, EXCEPT TO THE EXTENT THAT THE
MERGER OR OTHER TRANSACTIONS CONTEMPLATED HEREBY ARE REQUIRED TO BE GOVERNED BY
THE MGCL.
Section 9.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
Section 9.8. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in any New York State court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself (without
making such submission exclusive) to the personal jurisdiction of any federal
court located in the State of New York or any New York State court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
Section 9.9. Exhibits; Disclosure Letters. All Exhibits referred to
herein and in the TriNet Disclosure Letter and the Starwood Disclosure Letter
are intended to be and hereby are specifically made a part of this Agreement.
All references herein to Articles, Sections, Exhibits and Disclosure Letters
shall be deemed references to such parts of this Agreement, unless the context
otherwise requires. Each exception to a representation or warranty of Starwood
or TriNet that is set forth in the applicable Starwood or TriNet Disclosure
Letter is identified by reference to, or has been grouped under a heading
referring to, a specific individual Section of this Agreement.
57
<PAGE>
ARTICLE X
CERTAIN DEFINITIONS
Section 1. For purposes of this Agreement:
"Ancillary Agreements" means the Incorporation Merger Agreement, the
Advisor Transaction Agreement, the Shareholder Agreement, the Lock-Up Agreements
and the Option Standstill Agreement.
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person including as to Starwood,
without limitation, Starwood Hotels & Resorts, Starwood Hotels & Resorts
Worldwide, Inc. and Starwood Capital Group, LLC.
A "change of control" with respect to Starwood or TriNet means that the
common shareholders of Starwood or TriNet, as applicable, immediately prior to
the consummation of a merger, consolidation, acquisition of assets or
securities, or a disposition of assets or securities (other than a public
offering of common stock) own less than 50% of the equity of the surviving or
successor entity resulting from such transaction.
"Employee Plan" means any employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, equity
(or equity-based) leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, medical, accident, disability,
workmen's compensation or other insurance, severance, separation, termination,
change of control or other benefit plan, agreement (including any collective
bargaining agreement), practice, policy or arrangement of any kind, whether
written or oral, and whether or not subject to ERISA, including, but not limited
to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Knowledge" where used herein with respect to TriNet shall mean the
actual knowledge of the persons named in Section 10 of the TriNet Disclosure
Letter and where used with respect to Starwood shall mean the actual knowledge
of the persons named in Section 10 of the Starwood Disclosure Letter.
"Law" means any statute, law, regulation or ordinance of any
Governmental Entity applicable to Starwood or TriNet or any of their respective
Subsidiaries.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
"Starwood Subsidiary" means each Subsidiary of Starwood.
"Subsidiary" of any person means any corporation, partnership, limited
liability company, joint venture or other legal entity of which such person
(either directly or through or together with another Subsidiary of such person)
owns 50% or more of the voting stock, value of or other equity interests (voting
or non-voting) of such corporation, partnership, limited liability company,
joint venture or other legal entity.
"TriNet Managed Subsidiary" means each Subsidiary of TriNet in which
TriNet or another TriNet Managed Subsidiary acts as a general partner or
managing member or in a similar capacity.
"TriNet Non-Managed Subsidiary" means each Subsidiary of TriNet that is
not a TriNet Managed Subsidiary.
"TriNet Subsidiary" means each Subsidiary of TriNet.
58
<PAGE>
IN WITNESS WHEREOF, Starwood, Starwood Sub and TriNet have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
STARWOOD FINANCIAL TRUST
By /s/ Jay Sugarman
----------------------------------
Name: Jay Sugarman
Title: President and Chief
Executive Officer
ST MERGER SUB, INC.
By /s/ Jay Sugarman
----------------------------------
Name: Jay Sugarman
Title: President and Chief
Executive Officer
TRINET CORPORATE REALTY TRUST
By /s/ Robert W. Holman, Jr.
----------------------------------
Name: Robert W. Holman, Jr.
Title: Chairman and Chief
Executive Officer
<PAGE>
SCHEDULE A
STARWOOD SHAREHOLDERS EXECUTING STARWOOD SHAREHOLDER AGREEMENT
SOFI-IV SMT Holdings, L.L.C.
Starwood Mezzanine Investors, L.P.
B Holdings, L.L.C.
Sch. A
<PAGE>
SCHEDULE B
STARWOOD SHAREHOLDERS EXECUTING STARWOOD AFFILIATE LOCK-UP AGREEMENTS
SOFI-IV SMT Holdings, L.L.C.
Starwood Mezzanine Investors, L.P.
B Holdings, L.L.C.
Sch. B
<PAGE>
SCHEDULE C
PERSONS EXECUTING ADVISOR AFFILIATE LOCK-UP AGREEMENTS
Barry S. Sternlicht
Jay Sugarman
Madison F. Grose
Merrick R. Kleeman
Jonathan Eilian
Jeffrey G. Dishner
Jerry Silvey
James Babb
Ellis Rinaldi
Spencer B. Haber
Roger M. Cozzi
Jeffrey Rosenthal
Sch. C
<PAGE>
SCHEDULE D
PERSONS EXECUTING OPTION STANDSTILL AGREEMENTS
Robert W. Holman, Jr.
John G. McDonald
George R. Puskar
Willis Andersen, Jr.
Stephen B. Oresman
Sch. D
<PAGE>
SCHEDULE E
TRINET MANAGEMENT COMPANY OWNERS
A. William Stein
Robert W. Holman, Jr.
Sch. E
<PAGE>
SCHEDULE F
DIRECTORS OF NEW STARWOOD
Barry S. Sternlicht/Class II Jay Sugarman/Class II Jeffrey G.
Dishner/Class I Jonathan Eilian/Class I Merrick R. Kleeman/Class I
Robin Josephs/Class I William Matthes/Class II Kneeland C.
Youngblood/Class II Spencer B. Haber/Class II Madison F. Grose/Class I
Robert W. Holman, Jr./Class I John G. McDonald/Class II George R.
Puskar/Class I Willis Andersen, Jr./Class II Stephen B. Oresman/Class
II
Nominating Committee
The Board of New Simba will have a nominating committee consisting of at least
three members. John G. McDonald will be one member of the nominating committee.
The remaining members will be selected by the Board of New Simba.
Sch. F
<PAGE>
SCHEDULE G
DIRECTORS OF THE SURVIVING CORPORATION
Jay Sugarman
Spencer B. Haber
Madison F. Grose
Sch. G
<PAGE>
SCHEDULE H
OFFICERS OF NEW STARWOOD
Jay Sugarman Chief Executive Officer and President
A. William Stein President - Net Lease Division
Spencer B. Haber Executive Vice President - Finance, Chief
Financial Officer and Secretary
Elisa F. DiTommaso Senior Vice President - Finance and Treasurer
Timothy J. O'Connor Chief Operating Officer
Barbara Rubin Senior Vice President - Loan Servicing
Jo Ann Chitty Senior Vice President - Asset Management
Thomas M. Mulroy Senior Vice President - Investments
James H. Ida Senior Vice President - Investments
Jeffrey R. Digel Senior Vice President - Investments
Roger M. Cozzi Senior Vice President - Investments
Steven Blomquist Senior Vice President - Investments
Sch. H
<PAGE>
SCHEDULE I
OFFICERS OF THE SURVIVING CORPORATION
Jay Sugarman President
Spencer B. Haber Treasurer
Madison F. Grose Secretary
Sch. I
<PAGE>
The following schedules and exhibits have been omitted from the filed
Agreement and Plan of Merger. The registrant hereby undertakes to furnish
supplementally a copy of any omitted attachment to the Commission upon request.
TRINET CORPORATE REALTY TRUST, INC.
By: /s/ Geoffrey M. Dugan
-------------------------------
Name: Geoffrey M. Dugan
Title: Vice President, Administration,
General Counsel and Secretary
Dated: June 22, 1999
<PAGE>
Omitted Attachments
-------------------
Exhibit A Incorporation Merger Agreement
Exhibit B Advisor Transaction Agreement
Exhibit C Form of Starwood Shareholder Agreement
Exhibit D Form of Starwood Affiliate Lock-Up Agreement
Exhibit E Form of Advisor Affiliate Lock-Up Agreement
Exhibit F Form of Option Standstill Agreement
Exhibit G Tusk Management Company Stock Purchase Agreement
Exhibit H Form of Charter of the Surviving Corporation
Exhibit I Form of Bylaws of the Surviving Corporation
Exhibit J Form of Charter of New Starwood
Exhibit K Form of Bylaws of New Starwood
Exhibit L Form of Articles Supplementary for each class of New Starwood
Preferred Stock
Exhibit M Form of Katten Muchin & Zavis LLP Tax Opinion
Exhibit N Form of Mayer, Brown & Platt LLP Tax Opinion
Exhibit O Form of Rogers & Wells LLP Tax Opinion
Exhibit P Form of Paul, Weiss, Rifkind, Wharton & Garrison Tax Opinion
Exhibit Q Form of Affiliate Letter
Exhibit 99.1
<TABLE>
<CAPTION>
<S> <C>
AT STARWOOD FINANCIAL: AT TRINET:
Spencer B. Haber Elisa F. DiTommaso
Executive Vice President - Finance and CFO Senior Vice President - Finance and CFO
(212) 930-9400 (415) 391-4300
MEDIA INQUIRIES:
Walter Montgomery Michaelle Burstin
Robinson Lerer & Montgomery Financial Relations Board
(212) 484-6100 (310) 442-0599
</TABLE>
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
JUNE 16, 1999
STARWOOD FINANCIAL AND TRINET TO MERGE
IN $1.5 BILLION TRANSACTION
o Merger creates preeminent, nationwide real estate finance company in public
markets, with leading market positions in structured mortgage, mezzanine
and credit lease financing
o Transaction leverages complementary strengths, joining TriNet's rated
financing platform with Starwood's proprietary origination capabilities and
track record of growth
o Combined company will have $5 billion total market capitalization and more
than 250 borrower and corporate tenant relationships
NEW YORK, N.Y., and SAN FRANCISCO, Calif. - June 16, 1999 - Starwood Financial
Trust (ASE: APT) and TriNet Corporate Realty Trust (NYSE: TRI) have signed a
definitive agreement to merge in a $1.5 billion stock-for-stock transaction. The
combined company, which will be headquartered in New York, will have a book
equity capitalization of approximately $2 billion and a total market
capitalization of approximately $5 billion. The merger combines two leading
franchises in structured finance to create the country's preeminent publicly
traded finance company focused exclusively on the commercial real estate
industry, with existing relationships with more than 250 borrowers and corporate
customers nationwide.
Transaction Terms
Under the terms of the merger agreement, TriNet will merge into a newly
formed subsidiary of Starwood Financial through an exchange of shares in which
TriNet common shareholders will receive 1.15 shares of Starwood Financial for
each TriNet share they own. TriNet's preferred shareholders will receive
comparable preferred shares in Starwood Financial as a result of the merger.
TriNet's existing unsecured corporate debt will continue to be an obligation of
TriNet (as a subsidiary of Starwood Financial). The combined company will have
approximately 87 million common shares outstanding, approximately 67% of which
will be
-more-
<PAGE>
Starwood Financial and TriNet Merge in $1.5 Billion Transaction
Page 2 of 5
owned by shareholders of Starwood Financial and approximately 33% by former
shareholders of TriNet. As described below, in the proposed transaction Starwood
Financial will also acquire the operations of its external advisor and eliminate
its Class A/B share structure.
Preeminent Structured Finance Company in Real Estate Industry
The merger creates the largest publicly traded finance company focused
exclusively on commercial real estate and substantially expands the companies'
nationwide platform for providing real estate borrowers and corporate customers
with innovative, custom-tailored solutions to their structured financing needs.
With $2 billion of permanent book equity capital and a rated financing
capability, Starwood Financial will have capital resources comparable to the
largest publicly traded commercial finance companies. In addition, the combined
company will join Starwood Financial's track record of strong double-digit
growth in earnings per share with TriNet's attractive current dividend, while
maintaining conservative leverage ratios significantly below those of comparable
finance companies.
The transaction provides Starwood Financial and its shareholders with
an immediate presence in a sizable, lucrative and complementary credit-related
business line; rated financing capabilities; a substantial increase in equity
capital; significantly improved share liquidity; and the opportunity to enhance
its corporate structure by eliminating its external advisor and A/B share
structure. TriNet shareholders will benefit from improved growth prospects; a
vehicle for increasing revenues and profits from the finance orientation of the
combined company's business strategy; access to a franchise and management team
with proven capabilities for generating strong returns through the origination
of highly structured, value-added transactions; and an annual dividend higher
than that currently paid by TriNet.
"This transaction reinforces Starwood Financial's leadership in
structured real estate finance, creating an enterprise with funding capabilities
and infrastructure comparable to diversified commercial finance companies but
with more proprietary origination capabilities," said Barry S. Sternlicht,
Starwood Financial's chairman. "The combined company's attractive growth
prospects and current dividend yield, combined with its improved financing
capacity and liquidity, provide both companies' customers, shareholders, lenders
and employees with a clear `win-win' outcome."
Robert W. Holman, Jr., TriNet's chairman and chief executive officer,
said, "TriNet and Starwood Financial are a perfect strategic fit. We founded
TriNet to provide net lease real estate financing solutions to quality
corporations. This transaction provides us access to capital and a dynamic
vehicle to continue to capitalize on our proven investment capabilities and
market leadership in the expanding, profitable credit lease market. Starwood has
generated strong risk-adjusted returns through robust deal flow and innovative
financial structuring, which have led to its rapid earnings growth. TriNet's
complementary business line, strong organizational infrastructure and financial
flexibility will position the combined company to take the business to the next
level."
Jay Sugarman, chief executive officer of Starwood Financial, commented,
"As the leader in credit tenant lease finance with a solid 13-year track record
of growth, TriNet brings to Starwood a uniquely attractive and complementary
business platform, which we believe can be made more valuable with the
structured finance tools and capital resources Starwood can offer. We think the
combined company is positioned as the market leader in each of its core
financing
<PAGE>
Starwood Financial and TriNet Merge in $1.5 Billion Transaction
Page 3 of 5
businesses and we intend to use this coast-to-coast platform to continue to seek
out opportunities to add other finance-related businesses to our franchise."
Mr. Sugarman added, "By structuring the merger so as to retain an
unsecured funding capacity, the combined company will be able to optimize return
on equity by financing assets with either corporate debt or the match-funding
financing initiatives now underway at Starwood Financial."
Additional Transaction Terms
As part of the transaction, the entities that own Starwood Financial's
external advisor, Starwood Financial Advisors, will be merged into the combined
company in exchange for 4.0 million common shares of Starwood Financial. In
addition, the holders of all Starwood Financial Class B common shares have
agreed to exchange such shares into Class A common shares in connection with the
merger, eliminating the A/B structure and providing the combined company with a
single class of common stock. Immediately prior to the merger, Starwood
Financial will reorganize under Maryland law from a business trust to a
corporation, and simultaneously distribute a tax-free dividend to each of its
shareholders equal to approximately 0.019 common shares of the reorganized
company per Class A share. The combined company intends to continue to qualify
for taxation as a real estate investment trust under the Internal Revenue Code
of 1986, as amended. Starwood Financial intends to qualify for listing on the
New York Stock Exchange under the symbol "SFI."
The merger, which was unanimously approved by the Boards of Directors
of both companies, has been structured as a tax-free transaction and will be
accounted for as a purchase of TriNet by Starwood Financial. The merger of the
interests in Starwood Financial Advisors, which was unanimously approved by the
independent members of Starwood Financial's Board, has also been structured as a
tax-free transaction and will be reflected as a one-time charge to earnings upon
consummation. The transactions are expected to close in the late third quarter
or early fourth quarter of 1999.
Upon completion of the transactions, the combined company expects to
pay a quarterly dividend equivalent to approximately $2.40 per share per annum,
which equates to $2.76 per TriNet share as adjusted for the 1.15 exchange ratio,
or $0.16 per share (6.2%) higher than TriNet's existing dividend of $2.60 per
share.
Leading Board of Directors and Management Team
Following the merger, the combined company will be governed by a
15-member Board of Directors, consisting of 10 directors from Starwood Financial
and five directors from TriNet. Eight of the 15 directors will be independent.
The combined company's Board will include each of Starwood Financial's existing
eight directors and TriNet's five directors. In addition, Spencer B. Haber,
Starwood Financial's executive vice president and chief financial officer, and
Madison F. Grose, senior managing director of Starwood Capital Group, will join
the new Board of Directors.
The combined company's headquarters will be located in New York, N.Y.,
with super-regional offices in San Francisco, Calif.; Atlanta, Ga.; and
Hartford, Conn. Its 115 employees will be led by a highly experienced management
team that represents executives from both Starwood Financial and TriNet:
<PAGE>
Starwood Financial and TriNet Merge in $1.5 Billion Transaction
Page 4 of 5
Chief Executive Officer and President: Jay Sugarman
President - Net Lease Division: A. William Stein
Executive Vice President - Finance
and Chief Financial Officer: Spencer B. Haber
Senior Vice President - Finance
and Treasurer: Elisa F. DiTommaso
Chief Operating Officer: Timothy J. O'Connor
Senior Vice President - Asset Management: Jo Ann Chitty
Senior Vice President - Loan Servicing: Barbara Rubin
Senior Vice Presidents - Investments: Thomas M. Mulroy
James H. Ida
Jeffrey R. Digel
Roger M. Cozzi
Steven Blomquist
"Our ability to efficiently integrate the best practices and extensive
experience and skills of both companies is of paramount importance to the
success of this transaction," Mr. Sugarman said. "To ensure a seamless
integration, we have organized a series of task forces under the capable
direction of Bill Stein, TriNet's president, and Tim O'Connor, Starwood
Financial's COO, who are charged with jointly identifying best practices that
will be implemented nationwide and combining functions so that the organizations
and corporate cultures become one. Certain executives from both companies are
expected to relocate to assist in the integration process."
Minimizing Real Estate Risk
The combined company has identified approximately $200 million of
TriNet properties that it has targeted for disposition over the 12 months
following the merger. Such properties generally consist of buildings with
multiple tenants and other operating-intensive assets. In addition, Starwood
Financial is in discussions with a number of insurance companies regarding a
potential credit enhancement of a portion of combined company's operating lease
revenue tied to the expiration of certain of its net leases.
Both the property disposition pool and potential credit enhancement
arrangement are intended to minimize the re-leasing risks in TriNet's portfolio
and reduce the combined company's exposure to operating-intensive real estate
assets, which are inconsistent with its business strategy as a finance company.
The merger and related transactions are subject to the approval of the
shareholders of both companies and customary closing conditions. Shareholders
representing approximately 99% of the voting interest in Starwood Financial have
agreed to vote in favor of the merger and related transactions. The merger
agreement is not subject to termination by either party due to movements in the
market price of either company's shares.
Starwood Financial was advised in the merger by Bear Stearns & Co.,
Inc. as lead advisor and Banc of America Securities LLC as co-advisor. Starwood
Financial's independent trustee
<PAGE>
Starwood Financial and TriNet Merge in $1.5 Billion Transaction
Page 5 of 5
committee was advised in the Starwood Financial Advisors merger by Houlihan
Lokey Howard & Zukin. TriNet was advised in the merger by Greenhill & Co., LLC.
Starwood Financial and TriNet management will hold a joint conference
call and Webcast for investment professionals at 10:00 a.m. EDT today, June 16,
1999, which will be accessible to the general public via http://www.vcall.com.
TriNet Corporate Realty Trust Inc. is an industry leader in the
large-user corporate real estate market. It predominantly owns strategic,
suburban offices and warehouse properties net leased to large, well-known
companies. Its portfolio contains 145 properties, comprising approximately 19.5
million square feet in 25 states, and is 96% leased. Additional information on
TriNet Corporate Realty Trust Inc. is available on the company's Web site at
http://www.tricorp.com.
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 structured 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 financing solutions to
the real estate industry.
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 and TriNet believe
the expectations reflected in any forward-looking statements are based on
reasonable assumptions, the companies can give no assurance that their
expectations will be attained. Factors that could cause actual results to differ
materially from the companies' expectations include completion of the merger and
related transactions, the combined company's ability to achieve its property
disposition targets and its ability to secure a credit enhancement arrangement
on satisfactory terms, the combined company's ability to originate new
investments, the availability and cost of capital for future investments,
competition within the finance and real estate industries, real estate and
economic conditions, and other risks detailed from time to time in SEC reports
filed by Starwood Financial and TriNet.
For more information about Starwood Financial, please call
1-800-PRO-INFO and enter ticker symbol APT.
# # #
Exhibit 99.2
Supplemental Information--Events Involving the
Registrant Leading to the Transaction
Summarized below are the material events involving the Registrant which led to
the execution by the Registrant of the Merger Agreement and the announcement of
the proposed transaction between Starwood Financial and the Registrant.
Capitalized terms used in this Exhibit have the meanings given to them in Item 5
of the Form 8-K of the Registrant to which this Exhibit is attached.
In the fourth quarter of 1998, in light of the under-performance of the
Registrant's stock price, and the increasing difficulty companies like the
Registrant were encountering in raising funds in the equity capital markets, the
Registrant held discussions with several investment banking firms regarding
strategic alternatives that might be available to the Registrant to address
these concerns and provide greater access to capital and growth opportunities
going forward.
In early December 1998, the respective chief executive officers of the
Registrant and Starwood Financial met and held informal discussions regarding a
possible business combination transaction between the two companies. On January
7, 1999, Starwood Financial indicated to members of the Registrant's management
an interest in pursuing a business combination with the Registrant.
On January 11, 1999, the Registrant engaged Greenhill & Co., LLC ("Greenhill")
to act as its financial advisor "in connection with a review of strategic
alternatives [with respect to] raising capital through private equity funds,
advisors, insurance companies, pension funds or other institutional investors
and/or the execution of a financing recapitalization, acquisition, merger, sale,
privatization, joint venture or similar capital event involving the [Registrant]
or its assets."
After further discussions between the Registrant and Greenhill, on February 24,
1999, the Registrant's Board of Directors authorized Greenhill, in relation to a
possible sale, merger or recapitalization of the Registrant, to continue
discussions with Starwood Financial and, in addition, to approach three major
commercial finance companies, a major insurance and financial services company
and the four private real estate opportunity funds (the "Private Funds") that,
in Greenhill's view, were most capable of completing a transaction of the
proposed size. Greenhill made those approaches promptly following that date.
On March 2, 1999, the Registrant engaged Greenhill to pursue a transaction
similar to that described above and provided for a transaction fee, based on the
value of the transaction, in the event that a transaction were completed.
<PAGE>
2
During March 1999, extensive information was provided to and discussions were
held between Greenhill, on the Registrant's behalf, with Starwood Financial and
the Private Funds. The other parties approached by Greenhill declined to pursue
the opportunity. During the period March 31 to April 5, three proposals, each
subject to due diligence, arrangement of financing and other terms, were
received from the Private Funds. The fourth Private Fund declined to submit a
proposal. Starwood Financial also submitted a proposal during that period.
One of the Private Fund proposals indicated an interest in acquiring the
Registrant's common stock at a price range of $27-$28 per share, one at a price
of $27.50 per share and one at a price range of $28-$32 per share, in each case
in cash and subject to the various contingencies described above. The Registrant
was informed by Greenhill that extensive efforts were made, without success, to
persuade the first two parties to increase the amount of their proposals. In the
case of the third party, extensive efforts were made to clarify where within its
proposed price range it was most likely to complete a transaction. Upon further
discussion, it was reported by Greenhill that this third party was unwilling to
confirm a price at the midpoint of its range or higher and ultimately declined
the opportunity to pursue further due diligence on the Registrant or pursue a
transaction with the Registrant.
The original Starwood Financial proposal, which was subject to due diligence,
definitive documentation and other material terms, was for a stock for stock
merger on the basis of one share of Starwood Financial common stock, after
giving effect to the Advisor Transaction, for each share of Registrant common
stock.
The Registrant's Board of Directors met on April 21, 1999 to consider these
various proposals and a presentation made by the Registrant's management setting
forth its views of the Registrant's proposed strategy and several alternatives
for raising capital to grow the Registrant's core business and other operational
and financial initiatives to increase returns to its shareholders, as
alternatives to a change of control transaction. At the same meeting,
representatives of Starwood Financial made a presentation of its proposal to the
Board, and Greenhill presented to the Board the then current status of the
above-described proposals of the Private Funds. Based on these presentations,
the Registrant's Board of Directors determined that the Registrant should take
further steps to pursue a transaction with Starwood Financial and authorized
Greenhill and the Registrant's counsel, Paul, Weiss, Rifkind, Wharton & Garrison
("Paul, Weiss"), to further negotiate the key transaction terms with Starwood
Financial and, in particular, directed Greenhill to seek to improve upon
Starwood Financial's proposed exchange ratio of one Starwood Financial common
share for each share of common stock of the Registrant. Based on further
negotiations conducted by Greenhill and Paul, Weiss, on the Registrant's behalf,
Starwood Financial indicated a willingness to improve its proposal to an
exchange ratio of 1.15 Starwood Financial
<PAGE>
3
common shares, after giving effect to the Advisor Transaction, for each
Registrant common share.
On May 26, 1999, the Registrant's Board authorized the Registrant's advisors to
pursue a merger based on this improved proposal. On June 16, 1999, the
Registrant and Starwood Financial announced that they had entered into the
Merger Agreement dated as of June 15, 1999.
