INVESTOR RIGHTS AGREEMENT
among
STARWOOD FINANCIAL TRUST,
STARWOOD MEZZANINE INVESTORS, L.P.,
SOFI-IV SMT HOLDINGS, L.L.C.,
B HOLDINGS, L.L.C.,
LAZARD FRERES REAL ESTATE FUND II L.P.,
LAZARD FRERES REAL ESTATE OFFSHORE FUND II L.P.
and
LF MORTGAGE REIT
December 15, 1998
TABLE OF CONTENTS
Page
Section 1. Definitions and Usage...........................................1
Section 2. Covenants of the Company........................................6
Section 3. Registration...................................................10
Section 4. Piggyback Registration.........................................13
Section 5. Registration Procedures and Termination........................14
Section 6. Holder's Obligations...........................................17
Section 7. Expenses of Registration.......................................18
Section 8. Indemnification; Contribution..................................18
Section 9. Holdback.......................................................22
Section 10. Election of Trustees...........................................22
Section 11. Transfers......................................................24
Section 12. Amendment, Modification and Waivers; Further Assurances........29
Section 13. Assignment; Benefit............................................29
Section 14. Miscellaneous..................................................30
Section 15. Representative.................................................31
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INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered
into this 15th day of December, 1998, among Starwood Financial Trust, a Maryland
real estate investment trust (the "Company"), Starwood Mezzanine Investors,
L.P., a Delaware limited partnership ("Starwood Mezzanine"), SOFI-IV SMT
Holdings, L.L.C., a Delaware limited liability company ("SOFI IV"), B Holdings,
L.L.C., a Delaware limited liability company ("BLLC", and together with Starwood
Mezzanine and SOFI IV, "Starwood"), and Lazard Freres Real Estate Fund II L.P.,
a Delaware limited partnership (the "Onshore Fund"), Lazard Freres Real Estate
Offshore Fund II L.P., a Delaware limited partnership ("Offshore Fund"), and LF
Mortgage REIT, a Maryland real estate investment trust ("Private REIT" and
collectively with Onshore Fund and Offshore Fund, the "Investors"). Each of the
Investors is referred to herein as an "Investor". Unless otherwise indicated,
capitalized terms used herein are used herein as defined in Section 1.1.
RECITALS
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of the
date hereof, among the Company and the Investors (the "Purchase Agreement"), the
Investors are purchasing an aggregate of 4,400,000 Series A Preferred Shares of
beneficial interest, $.01 par value per share, of the Company (the "Preferred
Shares") and warrants ("Warrants"), to purchase 6,000,000 Class A Shares of
beneficial interest, $1.00 par value per share, of the Company ("Class A
Shares"); and
WHEREAS, the parties hereto desire to set forth the rights and the
obligations of the parties hereto with respect to the Preferred Shares, the
Warrants and the Class A Shares issuable upon exercise of the Warrants;
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions and Usage.
1.1. Definitions. As used in this Agreement:
"Advisor" means Starwood Financial Advisors, L.L.C. and its successors
and assigns.
"Affiliate" of any Person means a Person which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, such Person.
"Beneficially Owning" and "Beneficially Own" shall mean owning Class A
Shares, Warrants and/or Preferred Shares directly, indirectly or constructively
by a Person through the application of Section 318(a) of the Code, as modified
by Section 856(d)(5) of the Code, or Section 544 of the Code, as modified by
Section 856(h) of the Code.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which all U.S. securities exchanges or any recognized trading market on
which any securities of the Company are listed or included for quotation, are
authorized or required to close.
"Class A Shares" shall have the meaning set forth in the Recitals.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Holder" shall mean (i) each Lazard Holder, (ii) any Person as
long as such Person together with its Affiliates owns Registrable Common
Securities equal to (or exercisable, convertible or exchangeable for) 50% of the
aggregate number of Class A Shares underlying Warrants issued pursuant to the
Purchase Agreement and (iii) any Person that acquired Registrable Common
Securities from a member of the Investor Group pursuant to the exercise of
foreclosure remedies under a financing arrangement or any subsequent Transferee
of such Person and, in each case, such Person agrees in writing to be bound by
the provisions of this Agreement.
"Competitor" shall mean any Person the primary business of which is to
acquire or originate debt or debt-like interests in real estate and/or real
estate related assets; provided, however, that in determining if any Person is a
Competitor, (i) any co-investment made by such Person with the Company or any
Affiliate of the Company and (ii) in the case of any member of the Investor
Group only, any debt or interest owned by such Person on the date of
determination shall be disregarded.
"control" of a Person shall mean the power, direct or indirect, (i) to
vote or direct the voting of more than 50% of the outstanding shares of voting
stock or voting units of such Person, or (ii) to direct or cause the direction
of the management and policies of such Person, whether by contract or otherwise
(and correlative words shall have correlative meanings).
"Control Principal Group" means Xxxxxx X. Xxxxxxx and any three of
Xxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxx, Xxxxx X. Xxxxxxxxxxx, Xxxx
X. Xxxxx, Xxxxxxx X. Xxxxx and Xxxxxxxx X. Xxxxxxxxxx.
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"Designated Affiliates" means Lazard Freres Real Estate Investors
L.L.C. ("LFREI"), LF Real Estate Investors Company ("LFREIC") and any Person
controlled by LFREI, LFREIC or the Control Principal Group the primary business
of which is to acquire, own or originate debt or debt-like interests in real
estate and/or real estate related assets or securities of the Company but only
if one or more Persons that are Existing Holders, directly or indirectly, own at
least 95% of the economic interest in such Person.
"Disposing Shareholder" is defined in Section 11.4(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Existing Holder" shall mean, as of any date of determination, (i) each
direct or indirect partner, member or shareholder of an Investor on the date of
this Agreement ("Current Holders") and (ii) Persons to whom any Current Holder
that is either a shareholder that does not have a controlling interest in, a
limited partner of or a non- managing member of any member of the Investor Group
has transferred its ownership interest in an Investor or Designated Affiliate
and all subsequent transferees of such ownership interests prior to the date of
determination.
"Fair Market Value" as of any date on which the same is being
calculated shall mean the average closing price of the Class A Shares on the
American Stock Exchange or the exchange or national quotation system on which
the Class A Shares are primarily traded for the twenty (20) Business Days
preceding the calculation date.
"Holder" shall mean (i) any Preferred Holder and (ii) any Common
Holder.
"Investor Group" shall mean each Investor and any Designated Affiliate,
but only if such Person agrees in writing to become bound by the terms of this
Agreement and "member of the Investor Group" means any such Person.
"Lazard Affiliate" means Lazard Freres Real Estate Investors L.L.C.
("LFREI"), LF Real Estate Investors Company ("LFREIC") and any Person controlled
by LFREI, LFREIC or a Designated Affiliate, the primary business of which is to
acquire, own or originate debt or debt-like interests in real estate and/or real
estate related assets or securities of the Company.
"Lazard Holders" means each Investor, any Designated Affiliate and each
Existing Holder, but only if such Person has agreed in writing to be bound by
the terms of this Agreement.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Piggyback Registration" shall have the meaning set forth in Section
4.1(b).
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"Preferred Holder" shall mean (i) each Lazard Holder, (ii) any Person
as long as such Person together with its Affiliates owns Registrable Preferred
Securities equal to 50% of the aggregate number of Preferred Shares issued
pursuant to the Purchase Agreement and (iii) any Person that acquired
Registrable Preferred Securities from a member of the Investor Group pursuant to
the exercise of foreclosure remedies under a financing arrangement or any
subsequent Transferee of such Person and, in each case, such Person agrees in
writing to be bound by the provisions of this Agreement.
"Preferred Shares" is defined in the Recitals.
"Purchase Agreement" shall have the meaning set forth in the Recitals.
"Purchase Offer" is defined in Section 11.4(b).
"Register", "registered", and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering by the Commission of effectiveness of such registration statement or
document.
"Registrable Common Securities" shall mean: (i) the Warrants issued to
an Investor pursuant to the Purchase Agreement; (ii) the Class A Shares issuable
to a Common Holder upon exercise of the Warrants issued to an Investor pursuant
to the Purchase Agreement; (iii) any Class A Shares, Warrants or other
securities issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange by the Company for, or in
replacement by the Company of, such Class A Shares or Warrants; and (iv) any
securities issued in exchange for such Class A Shares, Warrants or other
securities that are Registrable Common Securities in any merger, reorganization,
recapitalization or combination of the Company; provided, however, that
Registrable Common Securities shall not include any securities which have
theretofore been Transferred in an offering registered under the Securities Act
or which have been Transferred pursuant to Rule 144 or any similar rule
promulgated by the Commission pursuant to the Securities Act.
"Registrable Preferred Securities" shall mean: (i) the Preferred Shares
issued to an Investor pursuant to the Purchase Agreement; (ii) any Preferred
Shares or other securities issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange by the Company for, or in
replacement by the Company of, such Preferred Shares; and (iii) any securities
issued in exchange for such Preferred Shares or other securities that are
Registrable Preferred Securities in any merger, reorganization, recapitalization
or combination of the Company; provided, however, that Registrable Preferred
Securities shall not include any securities which have theretofore been
Transferred in an offering registered under the Securities Act or which have
been Transferred pursuant to Rule 144 or any similar rule promulgated by the
Commission pursuant to the Securities Act.
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"Registrable Securities" shall mean the Registrable Preferred
Securities and the Registrable Common Securities.
"Registration Expenses" shall have the meaning set forth in Section 7.
"REIT" means a real estate investment trust.
"REIT Requirements" shall mean the requirements for the Company to
qualify as a REIT under the Code.
"Representative" means a Person designated by the Lazard Holders from
time to time to receive notices, grant approvals, waivers and consents and
otherwise act on behalf of the Lazard Holders pursuant to this Agreement as set
forth in Section 15.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, all as the same may be
in effect at the time.
"Selling Holder" shall mean, with respect to a specified registration
pursuant to this Agreement, a Holder if its Registrable Securities are included
in such registration.
"Shelf Registration" shall have the meaning set forth in Section 3.1.
"Starwood Holder" means SOFI-IV or Starwood Mezzanine or the direct or
indirect managing members and general partners of each.
"Transfer" shall mean and include the act of selling, giving,
transferring, creating a trust (voting or otherwise), assigning or otherwise
disposing of (and correlative words shall have correlative meanings).
"Underwriters' Representative" shall mean the managing underwriter, or,
in the case of a co-managed underwriting, the managing underwriter designated as
the Underwriters' Representative by the co-managers.
"Violation" shall have the meaning set forth in Section 8.1.
1.2. Usage.
(i) References to Registrable Securities "owned" by the Holder shall
include Registrable Securities beneficially owned by such Person but which are
held of record in the name of a nominee, trustee, custodian, or other agent.
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(ii) Unless this Agreement specifically provides otherwise, references
to a document are to it as amended, waived and otherwise modified from time to
time in accordance with the terms thereof and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to time
(and references to any provision thereof shall include references to any
successor provision).
(iii) References to Sections are to sections hereof, unless the context
otherwise requires.
(iv) The definitions set forth herein are equally applicable both to
the singular and plural forms and the feminine, masculine and neuter forms of
the terms defined.
(v) The term "including" and correlative terms shall be deemed to be
followed by "without limitation" whether or not followed by such words or words
of like import.
(vi) The term "hereof" and similar terms refer to this Agreement as a
whole.
(vii) The "date of" any notice or request given pursuant to this
Agreement shall be determined in accordance with Section 14.2.
(viii) References to "Preferred Shares issued pursuant to the Purchase
Agreement" shall be determined based on the number of Preferred Shares issued
pursuant to the Purchase Agreement as adjusted for stock splits,
recapitalizations and similar transactions.
Section 2. Covenants of the Company.
2.1. As long as the Lazard Holders own, in the aggregate, at least 50%
of the Preferred Shares issued pursuant to the Purchase Agreement:
(a) Filings. Within five business days after the Company files
with the Commission copies of its annual reports, quarterly reports,
other current reports and proxy statements pursuant to the Exchange
Act, the Company will furnish a copy of the same to the Representative.
(b) Affiliate Transactions. The Company agrees that until the
date that a majority of members of the Board of Trustees are
Independent Trustees (the "Restricted Period"), it will obtain the
written consent of the Representative which consent will not be
unreasonably withheld and which consent or denial of consent will not
be unreasonably delayed, prior to entering into any Interested
Transaction unless any such Interested Transaction has been approved by
a majority of the Independent Trustees of the Company. In addition, as
to all contracts or other transactions between the Company and any
Trustee or any Affiliate of a Trustee, such interested Trustee shall
recuse himself from any vote by the Board of Trustees on such agreement
or transaction; provided that the presence of such interested Trustee
shall count for the determination of the presence of a quorum at any
meeting. For purposes of this Section 2.1(b) only the following terms
shall be defined as set forth below:
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"Independent Trustees" shall mean a Trustee who qualifies as a
"Non- Employee Director" of the Company within the meaning of Rule
16b-3(b)(3) of the Exchange Act and who is not (i) a Person directly or
indirectly owning, controlling or holding 3% or more of the outstanding
economic or voting interest of the Advisor or SCG, (ii) a Person
directly or indirectly owning, controlling or holding 10% or more of
the economic interest of any borrower under any loan made by the
Company with an outstanding principal balance in excess of $3 million
(a "Borrower") or any Person that provides mortgage servicing, or real
estate or financial advisory or consulting services to the Company and
that received fees from the Company for such services in excess of
$100,000 for the prior fiscal year or is expected to receive in excess
of $100,000 per annum during the current fiscal year (a "Service
Provider") or an Affiliate of such Borrower or Service Provider, (iii)
an officer, director, employee, member or partner of the Advisor or
SCG, (iv) a spouse, sibling, lineal descendent, parent, grandparent,
sibling of parents or first cousin, including adoptive relationships
and with respect to siblings and parents, in-laws (a "Relative") of any
Person described in clause (i), or (v) a Relative of a Borrower or any
Person described in clause (iii) residing in the same household as such
Person.
"Interested Transactions" means to:
(i) merge, consolidate with, or otherwise acquire all
or any portion of the business, assets or securities of any
Affiliate of SAHI or SCG or sell, transfer or assign any
portion of the Company's business, assets or securities to any
Affiliate of SAHI or SCG;
(ii) make any loans or other advances of money to, or
guarantee with or for the benefit of, any Affiliate of SAHI or
SCG or any officer, director, partner, trustee or shareholder
(both direct and indirect) of any Affiliate of SAHI or SCG;
(iii) sell, lease, transfer or otherwise dispose of
any property or assets from, entertain or maintain any
contract, agreement or understanding with, or otherwise enter
into, or be a party to, any transaction with, any Affiliate of
SAHI or SCG or any officer, director, partner, trustee or
shareholder (both direct and indirect) of any Affiliate of
SAHI or SCG;
(iv) take any actions which would result in one or
more publicly-traded classes of the Company's equity
securities no longer having the attributes of public
ownership; or
(v) take any actions beneficial to any Affiliate of
SAHI or SCG which would be detrimental to a material number of
public shareholders of the Company;
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provided, however, the actions described in (i), (ii) and (iii) above,
shall not constitute an Interested Transaction if (1) the action taken
has been determined by the Independent Trustees to be pursuant to the
reasonable requirements of the Company's business and upon fair and
reasonable terms which are no less favorable to the Company than would
be obtained in a comparable arm's length transaction with an
independent third-party and (2) the transaction involves less than
$500,000.
"SAHI" means B Holdings, L.L.C., a Connecticut limited
liability company, Starwood Mezzanine Investors, L.P., a Delaware
limited partnership, and SOFI-IV SMT Holdings, L.L.C.
"SCG" means Starwood Capital Group, L.L.C.
2.2. Additional Covenants. As long as the Lazard Holders own, in the
aggregate, at least 25% of the Preferred Shares issued pursuant to the Purchase
Agreement:
(a) REIT Qualification. The Company will use best efforts to
qualify to be taxed as a REIT unless the Representative approves
otherwise, which approval or denial of approval will not be
unreasonably delayed.
(b) Securities Issuances. The Company will obtain the consent
of the Representative before issuing any Debt (as defined below), or
any shares of beneficial interest in the Company ("Shares") that are
pari passu or that have a preference or priority over the Preferred
Shares as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the
Company and any securities convertible or exchangeable into or
exercisable for any such pari passu, preference or priority Shares
(collectively, "Senior and Parity Securities"), if after giving effect
to such issuance (and such conversion, exchange or exercise) the
Company's outstanding Debt to Equity (as defined below) ratio would
exceed 8:1 as of the date of issuance. Within 45 days of the end of
each fiscal quarter, the Company will deliver to the Representative a
certificate signed by the Chief Financial Officer of the Company
stating that as of the end of such fiscal quarter either (i) the Debt
to Equity ratio of the Company is less than or equal to 8:1 or that
(ii) the Debt to Equity ratio of the Company is greater than 8:1.
"Debt" means, without duplication, any consolidated
indebtedness of the Company and its subsidiaries, whether or not
contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the
balance of deferred and unpaid purchase price of any property
(including pursuant to capital leases), if and to the extent such
indebtedness would appear as a liability upon a balance sheet of the
Company prepared on a consolidated basis in accordance with generally
accepted accounting principles, and also includes, to the extent not
otherwise included, (i) the Company's pro rata share (determined as
provided below)
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of the Debt of any unconsolidated joint ventures in which the Company
has an interest except for Debt of the joint venture owed to the
Company or its subsidiaries, (ii) the liquidation value and any
accumulated and unpaid dividends thereon of the Preferred Shares, (iii)
the liquidation value and any accumulated and unpaid dividends thereon
of any Senior or Parity Securities and (iv) the guarantee of the
principal amount and any accrued interest thereon that has not been
paid on the date due, after the tolling of any applicable grace
periods, of any Debt of any Person which is of the type that would be
included within this definition if such Person were the Company;
provided, however, that Debt will not include any such balance that
constitutes an accrued expense, a trade payable, deferred taxes, a
borrower deposit, any Debt incurred on the Closing Date in connection
with the Asset Purchase Agreement and listed on Schedule II, an escrow
obligation, the portion of any Debt of a Person consolidated with the
Company attributable to any minority interest to the extent not
guaranteed by the Company or its subsidiaries, or Incentive
Arrangements or obligations or payments thereunder. The Company's pro
rata share of the Debt of any unconsolidated joint venture shall be
determined based on the Company's percentage interest (on an economic
basis) in such venture without regard to the nature of such interest.
For example, if the Company has a 1% general partnership interest in an
entity with $100 in Debt, its pro rata share of the Debt of such entity
would be $1. Debt shall not include any non-recourse Debt of
unconsolidated joint ventures if the Company's only interest is as a
limited partner, limited liability company member or holder of a
similar interest that has limited liability or if the partners of such
entity are exculpated from liability for such Debt (other than
customary non-recourse carveouts).
"Equity" shall mean book shareholders' equity determined in
accordance with generally accepted accounting principles excluding any
amount attributable to all outstanding Preferred Shares and Senior or
Parity Securities (i.e., the account balance and any cumulative and
unpaid dividends thereon).
"Incentive Arrangements" means any earn-out agreements, stock
appreciation rights, "phantom" stock plans, employment agreements,
non-competition agreements, subscription and stockholders agreements
and other incentive and bonus plans and similar arrangements made in
connection with acquisitions of businesses by the Company or the
retention of executives, officers or employees by the Company but shall
not include the amount of any deferred purchase price (whether
structured as an earn-out or otherwise) that is determinable at the
date of issuing any Debt or Senior and Parity Securities and the
liability for payment of which is not dependent on the happening of an
event or fulfillment of a condition that has not yet occurred as of
such date of issuance.
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(c) Declaration of Trust. The Company will obtain the consent
of the Representative prior to amending Section 1.4 of the Company's
Declaration of Trust which consent will not be unreasonably withheld
and which consent or denial of consent will not be unreasonably
delayed.
2.3. Preferred Share Redemption. The Company shall not repurchase and
redeem any Preferred Shares if such repurchase and redemption would cause or
result in the Lazard Holders owning, in the aggregate, less than 25% of the
Preferred Shares issued pursuant to the Purchase Agreement unless all
outstanding Preferred Shares are simultaneously repurchased or redeemed.
2.4. Ownership Limit Waivers by Board of Trustees. The Board of
Trustees of the Company shall waive the Ownership Limit (as defined in Section
11.1(j) of the Declaration of Trust and Section 9.1(j) of the Articles
Supplementary) in accordance with Section 11.12 of the Declaration of Trust and
Section 9.12 of the Articles Supplementary with respect to the acquisition and
ownership of (i) any Class A Shares or Warrants by any member of the Investor
Group that acquires such Class A Shares or Warrants from any member of the
Investor Group or (ii) any Preferred Shares by any Person that acquires
Preferred Shares from any member of the Investor Group or from any Lazard Holder
that received more than 9.8% of the outstanding Preferred Shares as a
distribution from a member of the Investor Group; provided, however, in each
case that such Preferred Shares, Class A Shares or Warrants were originally
acquired by the Investors pursuant to the Purchase Agreement and the waiver
shall only apply to ownership of such Shares or Warrants and not to any other
securities of the Company owned by such Person; provided, further, that the
Board of Trustees shall not be required to waive the Ownership Limit until such
Person has provided a representation letter to the Board of Trustees
substantially in the form of Exhibit A hereto provided, further, that the Board
of Trustees shall not be required to waive the Ownership Limit if such waiver
would result in the Company being "closely held" within the meaning of Section
856(h) of the Code. Any waiver granted pursuant to this Section 2.3 shall
terminate and be of no further force and effect as of the Termination Date (as
defined in Exhibit A). The Company shall have no obligation to grant a waiver
pursuant to this Section 2.4 to (i) any transferee of a member of the Investor
Group if the Investor Group then owns, in the aggregate 9.8% or less of the
Preferred Shares issued pursuant to the Purchase Agreement or (ii) any
transferee of a Lazard Holder (other than a member of the Investor Group) if
such Lazard Holder then individually owns 9.8% or less of the Preferred Shares
issued pursuant to the Purchase Agreement.
Section 3. Registration.
3.1. The Company shall use its best efforts to cause a registration
statement covering resales of the Registrable Common Securities to be declared
effective by the Commission in accordance with the Securities Act for an
offering on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act (the "Shelf Registration") within one year from the date of this
Agreement.
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3.2. If the Company shall receive from the Representative on behalf of
Preferred Holders owning a majority of the Registrable Preferred Securities on
any one occasion not earlier than seven years after the date of this Agreement,
a written request that the Company effect a shelf registration with respect to
resales of all but not less than all of the Registrable Preferred Securities
held by such Preferred Holders, the Company will use its best efforts to file
such shelf registration and have it declared effective as soon as reasonably
practical (the "Preferred Registration Statement") (including, without
limitation, filing post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws, and appropriate compliance
with the Securities Act) as would permit or facilitate the sale and distribution
of all or such portion of such Registrable Preferred Securities as are specified
in such request. The Company shall only be required to comply with this Section
3.2 on one occasion and to effect one Preferred Registration Statement; provided
that the Company will effect additional registrations if it violates Section 3.5
to the extent required to comply with its obligations under Section 3.5.
3.3. Each Holder will provide at least five (5) Business Days notice of
its intention to effect a resale of any Registrable Securities pursuant to the
Shelf Registration or Preferred Registration Statement to the Company and the
Company's transfer agent. In no event will any Holder be permitted to Transfer
any Registrable Securities in violation of federal and state securities laws,
including pursuant to the Shelf Registration or Preferred Registration Statement
if such registration has been suspended pursuant to Section 3.4 or prior to
delivery by the Company of the requested number of prospectuses. A Holder may
Transfer Registrable Securities at any time including periods during which the
Shelf Registration or Preferred Registration Statement is suspended if such
Transfer is otherwise in compliance with applicable state and federal securities
law. Any notice given pursuant to this Section 3.3 shall be addressed to the
attention of the Secretary of the Company and the Company's transfer agent, and
shall specify the maximum number of Registrable Securities to be sold, the
intended methods of disposition thereof and the number of copies of the
prospectus included in the Shelf Registration or Preferred Registration, as
applicable, as the Holder requests.
3.4. Subject to the provisions of this Section 3.4, the Company shall
be entitled to postpone or suspend the filing, effectiveness, supplementing or
amending of any registration statement otherwise required to be prepared and
filed pursuant to this Section 3, if the Board of Trustees of the Company
reasonably determines that such registration and the Transfer of Registrable
Securities contemplated thereby would materially interfere with, or require
premature disclosure of, any material financing, acquisition, disposition,
reorganization or other transaction involving the Company, including the filing
of a registration statement covering primary sales of securities by the Company,
as to which, in each instance of the Company determining that the registration
and Transfer would require premature disclosure, the Company has a bonafide
business purpose for preserving the confidentiality thereof and the Company
promptly gives the Representative notice of such determination, provided that
the Company shall not suspend or postpone the filing, effectiveness,
supplementing or amending of the shelf registration statement on more than two
occasions during any
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12-month period or for any period longer than 90 days. The notice by the Company
required by this Section 3.4 will include the Company's estimate of the length
of the suspension or postponement. Upon receipt of such notice, each Holder
agrees to cease making offers or Transfers of Registrable Securities pursuant to
such registration statement during such suspension period. The Company will give
prompt notice to the Representative of the expiration or early termination of
any suspension or postponement pursuant to this Section 3.4. The Representative
and each Holder hereby acknowledges that any notice given by the Company
pursuant to this Section 3.4 may constitute material non-public information and
that the United States securities laws prohibit any Person who has material
non-public information about a company from purchasing or selling securities of
such company or from communicating such information to any other Person under
circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell such securities.
3.5. Subject to Section 3.4, the Company shall use its best efforts to
keep any Shelf Registration filed pursuant to Section 3.1 continuously effective
until the Common Holders no longer hold any Registrable Common Securities and
shall use its best efforts to keep any Preferred Registration Statement filed
pursuant to Section 3.2 continuously effective until the Registrable Preferred
Securities included in such Preferred Registration Statement are no longer owned
by the Preferred Holders or no longer meet the definition of Registrable
Preferred Securities.
3.6. Notwithstanding anything in this Agreement to the contrary but
subject to the Company's obligations to grant waivers pursuant to Section 2.4,
no Transfer of Registrable Securities may be effected if as a result thereof in
the reasonable judgment of the Company, the Company would not satisfy the REIT
Requirements in any respect or if such Transfer would result in any Person who
has not received a waiver pursuant to Section 2.4 Beneficially Owning Class A
Shares, Warrants or Preferred Shares in excess of the ownership limitation
provisions of the REIT Requirements or the Amended and Restated Declaration of
Trust of the Company, as amended from time to time.
3.7. A registration pursuant to this Section 3 shall be on such
appropriate registration form of the Commission as shall be selected by the
Company and shall permit the disposition of the Registrable Securities in
accordance with the intended method or methods of disposition specified in each
notice given pursuant to Sections 3.1 and 3.2.
3.8. The Holders shall have the right to determine if any Registration
pursuant to this Section 3 shall involve an underwritten offering. At the
request of the Selling Holders, on one occasion after the sixth anniversary of
the date of this Agreement the Company shall cooperate on a reasonable basis in
a manner consistent with customary practices for an underwritten resale offering
with the Selling Holders and the Underwriters' Representative for such offering
in the marketing of the Registrable Securities, including making available on a
reasonable basis the officers, accountants, counsel, premises, books and records
of the Company for such purpose, but the Company shall not be required to incur
any material out-of-pocket expense pursuant to this paragraph that would not be
incurred by the Company
-12-
if the offering were not underwritten, including as a result of drafting or
filing any amendment to any registration statement that is then effective to the
extent that such amendment would set forth information in addition to that which
would typically be required in order to update the information set forth in such
registration statement (other than by incorporation by reference) if the
offering were not underwritten. The Selling Holders shall use best efforts to
time any underwritten offering so as not to materially interfere with the
Company's financing and capital raising efforts or materially disrupt the
Company's business, including delaying such offering if reasonably requested by
the Company as a result of such material interference or disruption. If any
Registration pursuant to Section 3 involves an underwritten offering (whether on
a "firm commitment," "best efforts" or "all reasonable efforts" basis or
otherwise), the Company shall select the underwriter or underwriters and manager
or managers to administer such underwritten offering; provided that each such
Person so selected shall be reasonably acceptable to the Representative. The
Company shall use reasonable efforts to and shall cause its officers,
accountants and counsel to cooperate on a reasonable and customary basis in
connection with any due diligence request made by potential purchasers in block
trades by the Investors.
Section 4. Piggyback Registration.
4.1. (a) At anytime after the second anniversary of this Agreement, if
the Company proposes to register equity securities for its own account under the
Securities Act in connection with the underwritten public offering solely for
cash on Form X-0, X-0, X-0, or S-11 (or any replacement or successor forms)
other than in connection with an offering that is primarily of debt securities
(the "Offering"), the Company shall promptly give to the Representative written
notice of such registration. Common Holders are not entitled pursuant to this
Section 4 to participate in any Registrations that are solely of resales of
securities by Persons other than the Company. This Section 4 shall terminate and
be of no further force and effect on the date that the Lazard Holders no longer
own, in the aggregate, at least 50% of the Preferred Shares issued pursuant to
the Purchase Agreement.
(b) Upon the written request of the Representative on behalf of each
Common Holder given as promptly as practicable but in any event within twenty
(20) days following the date of such notice, the Company shall cause to be
included in such registration statement and use its reasonable efforts to be
registered under the Securities Act the Registrable Common Securities that the
Representative on behalf of each Common Holder shall have requested to be
registered, subject to Sections 4.1(c) and 4.2; provided, however, that such
right of inclusion shall not apply to any registration statement covering an
offering of debt securities or convertible debt securities (any such
registration in which the Common Holders participate pursuant to this Section
4.1 being referred to as a "Piggyback Registration").
(c) The Company shall have the absolute right to delay, withdraw or
cease to prepare or file any registration statement for any offering referred to
in this Section 4 without any obligation or liability to the Common Holders, it
being understood that any Registrable
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Common Securities previously included in any such withdrawn Registration
Statement shall not cease to be Registrable Common Securities by reason of such
inclusion or withdrawal.
4.2. If the Underwriters' Representative shall advise the Company that,
in its opinion, the amount or type of Registrable Common Securities requested to
be included in such registration would adversely affect such offering, or the
timing thereof, then the Company will include in such registration, to the
extent of the amount and class which the Company is so advised can be sold
without such adverse effect in such offering: first, securities proposed to be
sold by the Company; second, securities registered by the Company pursuant to
the Registration Rights Agreement among the Company, Mezzanine, SOFI IV and SAHI
Partners as in effect on the date hereof; and third, the Registrable Common
Securities and all other securities requested to be included in such
registration, pro rata based on the number of securities that have a right to be
included in such registration.
4.3. The Company shall only be required to comply with this Section 4
on the first four occasions that the requirements of Section 4.1(a) are
applicable; provided that if the Common Holders have requested to be included in
such registration and less than the lesser of (i) 300,000 Registrable Common
Securities (as adjusted for stock splits, recapitalizations and similar
transactions) or (ii) the number of Registrable Common Securities requested to
be included in such Piggyback Registration are actually sold, such Piggyback
Registration shall not count as a registration for purposes of this Section 4;
provided, further, that the Company shall have no obligations under this Section
4 after an aggregate of 600,000 Registrable Common Securities (as adjusted for
stock splits, recapitalizations and similar transactions) have been sold by the
Common Holders in any Piggyback Registration.
4.4. Prior to the inclusion of any Registrable Common Securities in any
Piggyback Registration, the Common Holder shall be required to agree to exercise
(if not previously exercised) at the closing of such offering Warrants for Class
A Shares in an amount equal to that to be sold pursuant to such Piggyback
Registration; provided, however, that no member of the Investor Group shall
perform a cashless exercise of such Warrants pursuant to any sale of Class A
Shares in a Piggyback Registration; provided, further that the Common Holder is
permitted to pay the exercise price of such Warrants with the proceeds of the
sale of such Class A Shares.
Section 5. Registration Procedures and Termination. Whenever required
under Section 3 to effect the registration of any Registrable Securities
(subject to Section 3.3), the Company shall, as promptly as practicable:
5.1. Prepare and file with the Commission a registration statement with
respect to such Registrable Securities and in the case of a Shelf Registration
or Preferred Registration Statement, use best efforts to cause such registration
statement to become effective and to notify the Representative of such
effectiveness in a timely manner.
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5.2. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act and rules thereunder with respect to the
disposition of all securities covered by such registration statement. If the
registration is for an underwritten offering, the Company shall amend the
registration statement or supplement the prospectus whenever required by the
terms of the underwriting agreement entered into pursuant to Section 5.5;
provided that if such underwritten offering is not by the Company such amendment
or supplement shall be at the expense of the Selling Holders to the extent that
such amendment would set forth information (other than by incorporation by
reference) in addition to that which would typically be required in order to
update the information set forth in such registration statement if the offering
were not underwritten. The Company shall amend the registration statement or
supplement the prospectus so that it will remain current and in compliance with
the requirements of the Securities Act for the period specified in Section 3.5,
and if during such period any event or development occurs as a result of which
the registration statement or prospectus contains a misstatement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the Company shall
promptly notify the Representative and one counsel to all Selling Holders
identified in writing by the Representative (the "Designated Counsel"), promptly
amend the registration statement or supplement the prospectus in a prompt manner
so that each will thereafter comply with the Securities Act and promptly furnish
to the Representative and the Designated Counsel such amended or supplemented
prospectus, which each Selling Holder shall thereafter use in the Transfer of
Registrable Securities covered by such registration statement. Following receipt
of such notice and pending any such amendment or supplement described in this
Section 5.2, each Holder shall cease making offers or Transfers of Registrable
Securities pursuant to the prior prospectus.
5.3. Furnish promptly to the Representative on behalf of each Selling
Holder of Registrable Securities, without charge, such numbers of copies of the
registration statement, any pre-effective or post-effective amendment thereto,
the prospectus, including each preliminary prospectus and any amendments or
supplements thereto, in each case in conformity with the requirements of the
Securities Act and the rules thereunder, and such other related documents as the
Representative on behalf of each Selling Holder may reasonably request in order
to facilitate the disposition of Registrable Securities owned by such Selling
Holder.
5.4. Use best efforts to obtain the withdrawal of any order suspending
the effectiveness of a registration statement or any blue sky qualifications at
the earliest possible moment.
5.5. In the event of any underwritten offering, (i) use best efforts to
enter into and perform its obligations under an underwriting agreement
(including indemnification and contribution obligations to underwriters), in
usual and customary form, with the managing underwriter or underwriters of such
offering, (ii) use reasonable and customary efforts to
-15-
obtain a comfort letter from the Company's accountants addressed to the
underwriters of such offering and the Selling Holders (which shall be paid for,
in the event of an underwritten offering under the Shelf Registration, by the
Selling Holders). Delivery of any such comfort letter to the Selling Holders
shall be subject to the recipient furnishing such written representations or
acknowledgments as are customarily provided by selling shareholders who receive
such comfort letters.
5.6. Promptly notify the Representative of any stop order issued or
threatened to be issued by the Commission in connection therewith and take all
reasonable actions required to prevent the entry of such stop order or to
promptly remove it if entered.
5.7. Make available for inspection by the Representative on behalf of
each Selling Holder and the representatives and counsel of the Selling Holders
(but not more than one firm of counsel to the Selling Holders), all financial
and other information as shall be reasonably requested by them, and provide the
Representative and the representatives of the Selling Holder the reasonable
opportunity to discuss the business affairs of the Company with its principal
executives and independent public accountants who have certified the audited
financial statements included in such registration statement, in each case all
as necessary to enable them to exercise their due diligence responsibility under
the Securities Act; provided, however, that information that the Company
determines to be confidential and which the Company advises such Person in
writing, is confidential shall not be disclosed unless such Person signs a
confidentiality agreement reasonably satisfactory to the Company or the Selling
Holder of Registrable Securities agrees to be responsible for such Person's
breach of confidentiality on terms reasonably satisfactory to the Company;
provided, further, that all requests for information and discussions shall be
coordinated between the Company and the Representative and made in such a manner
as to avoid duplication.
5.8. Use best efforts to cause the Registrable Securities covered by
such registration statement (i) if the Class A Shares are then listed on a
securities exchange or included for quotation in a recognized trading market, to
be so listed or included for a reasonable period of time after the offering and,
in any event, so long as any Class A Shares are otherwise listed, and (ii) to be
registered with or approved by such other United States or state governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company or the securities laws of the states in which such
Registrable Securities are to be offered and sold to enable each Selling Holder
of Registrable Securities to consummate the disposition of such Registrable
Securities.
5.9. Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included in
each such registration.
5.10. The Company shall have no obligation under this Agreement to
register or keep effective any registration statement covering any Registrable
Common Securities after the twelfth anniversary of this Agreement if the Company
shall deliver to the Common Holder of such Registrable Common Securities an
opinion to the effect that the proposed sale
-16-
or disposition of all of the Registrable Common Securities for which
registration was requested does not require registration under the Securities
Act for a sale or disposition in a single public sale, and removes any and all
legends that relate to securities laws and that restrict Transfer from the
certificates evidencing such Registrable Common Securities upon tender of
certificates by the Holder. The term Registrable Common Securities shall not
include such securities held by a Holder other than a member of the Investor
Group if the Company delivers such an opinion and removes such legend upon
tender of certificates by the Holder.
5.11. The Company shall have no obligation under this Agreement to
register or keep effective any registration statement covering any Registrable
Preferred Securities after the twelfth anniversary of this Agreement if the
Company shall deliver to the Preferred Holder thereof an opinion to the effect
that the proposed sale or disposition of all of the Registrable Preferred
Securities for which registration was requested does not require registration
under the Securities Act for a sale or disposition in a single public sale, and
removes any and all legends that relate to securities laws and that restrict
Transfer from the certificates evidencing such Registrable Preferred Securities
upon tender of certificates by the Holder. The term Registrable Preferred
Securities shall not include such securities held by a Holder other than a
member of the Investor Group if the Company delivers such an opinion and removes
such legend upon tender of certificates by the Holder.
Section 6. Holder's Obligations.
6.1. It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to the
Registrable Securities of any Selling Holder of Registrable Securities that the
Selling Holder shall:
(a) Furnish to the Company in writing such information
regarding the Selling Holder, the number of the Registrable Securities
owned by it, and the intended method of disposition of such securities
as shall be required under the Securities Act to effect the
registration of the Selling Holder's Registrable Securities and to keep
such information current.
(b) Cooperate fully with the Company in preparing any
registration statement.
(c) In the event of a Piggyback Registration in which they
participate, agree to sell their Registrable Securities included in
such Piggyback Registration to the underwriters at the same price and
on substantially the same terms and conditions as the Company, and to
execute the underwriting agreement agreed to by the Company. No Selling
Holder shall be permitted to withdraw any securities from an
underwritten offering pursuant to a Piggyback Registration after the
printing of the final "red xxxxxxx" prospectus related thereto without
the consent of the Company.
-17-
6.2. Each Holder shall notify the Company within 5 Business Days of any
sale of Registrable Securities.
Section 7. Expenses of Registration. With respect to the Shelf
Registration and the Preferred Registration Statement, the Company shall bear
and pay all expenses incurred by the Company in connection with any
registration, filing, or qualification of Registrable Securities with respect to
such registration for each Selling Holder, including all registration, filing
and National Association of Securities Dealers, Inc. fees, listing fees, all
fees and expenses of complying with securities or blue sky laws, all printing
expenses, messenger and delivery expenses, the reasonable fees and disbursements
of counsel for the Company and of the independent accountants including comfort
letters addressed to the Company (the "Registration Expenses"), but excluding
underwriting discounts and commissions relating to Registrable Securities (which
shall be paid by the Holders) and all other fees and expenses of the Holders
including counsel for the Holders. Notwithstanding the foregoing, the Company
shall not be required to bear the expenses of any underwritten offering under
the Shelf Registration Statement to the extent such expenses are greater than
they would otherwise have been if such offering had not been underwritten,
including excess printing costs, accounting and legal fees, and the other
Registration Expenses.
Section 8. Indemnification; Contribution. If any Registrable Securities
are included in a registration statement under this Agreement:
8.1. To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls any Selling Holder within the meaning of the Securities Act, and each
officer, director, trustee, partner and employee of any Selling Holder and such
controlling Person, against any and all losses, claims, damages, liabilities and
expenses (joint or several), including reasonable attorneys' fees and
disbursements and reasonable expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or investigation,
or to which any of the foregoing Persons may become subject under the Securities
Act, the Exchange Act or other federal or state laws, insofar as such losses,
claims, damages, liabilities and expenses arise out of or are based upon any of
the following statements, omissions or violations (collectively, a "Violation"):
(a) Any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any
amendments thereof or supplements thereto; or
(b) The omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading; provided, however, that the
indemnification required by this Section 8.1 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or
expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable in any
-18-
such case for any such loss, claim, damage, liability or expense to the
extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with information related to the
indemnified party furnished to the Company by the indemnified party in
writing expressly for use in connection with such registration
statement; and provided, further, that the indemnity agreement
contained in this Section 8 shall not apply to the extent that any such
loss is based on or arises out of (A) any matter covered by Section 8.2
for which the Selling Holders are required to indemnify the Company,
(B) an untrue statement or alleged untrue statement of a material fact,
or an omission or alleged omission to state a material fact, contained
in or omitted from any preliminary prospectus if the final prospectus
shall correct such untrue statement or alleged untrue statement, or
such omission or alleged omission, and a copy of the final prospectus
has not been sent or given to such Person at or prior to the
confirmation of sale to such Person if an underwriter was under an
obligation to deliver such final prospectus and failed to do so or (C)
the Selling Holders' failure to comply with applicable prospectus
delivery requirements if the Company has complied with Section 5.3.
8.2. To the extent permitted by applicable law, each Selling Holder,
severally and not jointly, shall indemnify and hold harmless the Company, and
each of the officers, employees and Trustees of the Company who shall have
signed the registration statement, and each Person, if any, who controls the
Company within the meaning of the Securities Act, against any and all losses,
claims, damages, liabilities and expenses, including reasonable attorneys' fees
and disbursements and reasonable expenses of investigation, incurred by such
party pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may otherwise become
subject under the Securities Act, the Exchange Act or other federal or state
laws, but only insofar as such losses, claims, damages, liabilities and expenses
arise out of or are based upon any Violation, in each case to the extent that
such Violation occurs in reliance upon and in conformity with information
related to such Selling Holder and furnished by such Selling Holder in writing
expressly for use in connection with such registration; provided, however, that
(x) the indemnification required by this Section 8.2 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or expense if such
settlement is effected without the consent of the Representative (which consent
shall not be unreasonably withheld) and (y) in no event shall the aggregate
amount of any indemnity obligation of any Selling Holder under this Section 8.2
together with any contribution obligation under Section 8.4 exceed the proceeds
(net of any underwriting discounts or commissions) from the applicable offering
received by such Selling Holder.
8.3. Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, suit, proceeding, investigation
or threat thereof made in writing for which such indemnified party may make a
claim under this Section 8, such indemnified party shall deliver to the
indemnifying party a written notice thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the
-19-
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential conflicts
or differing interests between such indemnified party and any other party
represented by such counsel in such proceeding; provided that the indemnifying
party shall in no event be obligated to pay the fees and expenses of more than
one counsel (who may retain one local counsel in each jurisdiction that such
counsel is not admitted to practice if reasonably required at the expense of the
indemnifying party) for all indemnified parties. The failure to deliver written
notice to the indemnifying party within a reasonable time following the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 8 to the extent of such prejudice but shall
not relieve the indemnifying party of any liability that it may have to any
indemnified party otherwise than pursuant to this Section 8. Any fees and
expenses incurred by the indemnified party (including any fees and expenses
incurred in connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within thirty
(30) days of written notice thereof to the indemnifying party (regardless of
whether it is ultimately determined that an indemnified party is not entitled to
indemnification hereunder). Except as set forth above, any such indemnified
party shall have the right to employ separate counsel in any such action, claim
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be the expenses of such indemnified party unless
(i) the indemnifying party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding or (iii) the named parties to any such action, claim
or proceeding (including any impleaded parties) include both such indemnified
party and the indemnifying party, and such indemnified party shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or in addition to those available to the indemnifying
party and that the assertion of such defenses would create a conflict of
interest such that counsel employed by the indemnifying party could not
faithfully represent the indemnified party (in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action, claim or
proceeding on behalf of such indemnified party, it being understood, however,
that the indemnifying party shall not, in connection with any one such action,
claim or proceeding or separate but substantially similar or related actions,
claims or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the reasonable
judgment of such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
action, claim or proceeding, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or counsels).
-20-
8.4. If the indemnification required by this Section 8 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to in this
Section 8:
(a) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any Violation has been
committed by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Section 8.1 and Section 8.2, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation
or proceeding.
(b) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8.4 were determined
by pro rata allocation or by any other method of allocation which does
not take into account the relative fault referred to in Section 8.4(i).
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent
misrepresentation.
(c) In no event shall the aggregate amount of any contribution
obligation from any Selling Holder under this Section 8.4 together with
any indemnification obligation under Section 8.2 exceed the proceeds
(net of any underwriting commissions or discounts) from the applicable
offering received by such Selling Holder.
8.5. If indemnification is available under this Section 8, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 8 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 8.4.
8.6. The obligations of the Company and the Selling Holders under this
Section 8 shall survive the completion of any offering of Registrable Securities
pursuant to a registration statement under this Agreement, and otherwise.
-21-
Section 9. Holdback.
9.1. In connection with an underwritten offering by the Company of any
Class A Shares (or any securities convertible into or exchangeable or
exercisable for Class A Shares) covered by a registration statement filed by
Company, each Holder, whether or not its Registrable Securities are included in
the registration statement, if so requested by the Underwriters' Representative
shall not effect any public sale or distribution of Class A Shares or Warrants
(except as part of such underwritten registration), during any such lock up
periods requested by the Underwriter's Representative, not to exceed the 10-day
period prior to, and during the 180-day period in the case of the first
registration statement declared effective after the date hereof and 90 days in
the case of any subsequent registration beginning on, the date such registration
statement is declared effective under the Securities Act by the Commission. In
order to enforce the foregoing covenant, the Company shall be entitled to impose
stop-transfer instructions with respect to the Registrable Securities of the
Holders until the end of such period.
9.2. In the event of a merger or similar transaction which is accounted
for by the Company as a pooling of interests, each Holder further agrees that it
will, if it is advised by the Company's counsel that it may be deemed an
"affiliate" of the Company, at such time enter into a customary "affiliate
agreement" restricting its ability to effect any public sale or distribution of
Class A Shares or Preferred Shares in any manner that would cause the Company to
not be able to account for the transaction as a pooling of interest if and to
the same extent that Starwood Holders are subject to identical restrictions.
9.3. The terms of this Section 9 shall not be applicable to any Holder
if the Starwood Holders are not subject to identical restrictions or when such
Holder, together with its Affiliates, no longer owns Class A Shares (including
and assuming exercise of the Warrants) with a Fair Market Value of at least 2.5%
of the Fair Market Value of the outstanding Class A Shares.
Section 10. Election of Trustees.
10.1. Subject to Section 10.2, the Company shall use its best efforts
to cause Xxxxxx Xxxxxxx or his successor designated by the members of the
Investor Group who is reasonably acceptable to the Company (the "Investor
Trustee") to be elected to the Board of Trustees, to the Audit Committee thereof
and, as long as such Investor Trustee qualifies as a Non-Employee Director under
Rule 16b-3 of the Exchange Act, the Compensation Committee thereof. Starwood
agrees to and to cause its Affiliates that own Class A or Class B Shares or any
other voting securities of the Company to vote all Class A and Class B Shares
and any other voting securities beneficially owned by it and them for the
election of Xx. Xxxxxxx or his successor.
10.2. Subject to Section 10.5, the right of the members of the Investor
Group to elect the Investor Trustee shall continue until such time as any member
of the Investor Group or any Lazard Affiliate is a Competitor, at which time the
term of any Investor Trustee shall terminate and the number of Trustees
constituting the Board of Trustees shall be reduced by
-22-
one. If requested by the Company, the Investor Trustee will execute a written
resignation as a Trustee upon the expiration of his or her term pursuant to the
preceding sentence. In the event that each of the members of the Investor Group
and any Lazard Affiliates ceases to be a Competitor, the Company and Starwood
shall promptly comply with Section 10.1.
10.3. If the Investor Trustee shall resign or be removed other than
pursuant to the first two sentences of Section 10.2 (either with or without
cause), then the members of the Investor Group shall have the right to approve
the Trustee elected to fill the vacancy created by such resignation or removal;
provided that the Company reasonably approves such nominee. Further, Starwood
agrees not to and to cause its Affiliates that own Class A or Class B Shares or
other voting securities of the Company not to vote to remove the Investor
Trustee, other than for cause.
10.4. Each member of the Investor Group hereby acknowledges that any
Confidential Information provided to the Investor Trustee is confidential and
proprietary to the Company and that any Investor Trustee will be required to
enter into a confidentiality agreement as a condition precedent to election as a
Trustee, which agreement shall be no more restrictive than the confidentiality
obligations of any other trustee. Each member of the Investor Group agrees that
any Confidential Information shall (a) be kept confidential, (b) not, except as
otherwise provided in this Section, be disclosed by a receiving party to any
person in any manner without the prior written consent of the Company and (c)
not be used by a receiving party other than for Company purposes without
prejudice to the right of the members of the Investor Group at all times to sell
or otherwise dispose of all or any part of the Preferred Shares, Warrants or
Class A Shares in compliance with applicable law. The materials and information
that the Company will make available to the Investor Trustee relating to the
Investor Trustee's duties as a member of the Company's Board of Trustees
(collectively, "Information"), including oral communications with the Company's
agents or employees contain economic, commercial, marketing, financial and
contract information that the Company deems confidential and proprietary
("Confidential Information"). So that the parties will not be obliged to attempt
an item-by-item evaluation of the Information, it is expressly understood that
all the Information is Confidential Information, whether or not it qualifies
under governing law as trade secrets or proprietary information with the sole
exception of the following:
(a) Information which is or becomes generally available to the
public other than by violation of this Agreement;
(b) Information that was available to such member of the
Investor Group or any Investor Trustee on a non-confidential basis
prior to its disclosure to the Investor Trustee by the Company, its
subsidiaries, the Advisor or their representatives or agents, provided
that the source of such information is not known by the member of the
Investor Group or any Investor Trustee to be bound by a confidentiality
agreement with the Company, its subsidiaries, the Advisor or their
representatives or agents or
-23-
otherwise prohibited from transmitting the information to the member of
the Investor Group or any Investor Trustee by a contractual, legal or
fiduciary obligation; and
(c) Information that becomes available to the member of the
Investor Group or any Investor Trustee on a non-confidential basis from
a source other than the Company, its subsidiaries, the Advisor or their
representatives or agents, provided that such source is not known by
the member of the Investor Group or any Investor Trustee to be bound by
a confidentiality agreement with the Company or its representatives or
agents or otherwise prohibited from transmitting the information to the
member of the Investor Group or any Investor Trustee by a contractual,
legal or fiduciary obligation.
In the event that any member of the Investor Group is requested or
becomes legally compelled (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to make any disclosure which is prohibited or otherwise constrained by
this Agreement, each member of the Investor Group agrees that it will (i)
provide the Company with prompt notice of such request(s) (unless such Person is
legally prohibited from doing so pursuant to a court order of a court of
competent jurisdiction) so that it may seek an appropriate protective order or
other appropriate remedy and/or waive Investor Group member's compliance with
the provisions of this Agreement, (ii) not oppose the Company's efforts to
decline, resist or narrow such requests and (iii) in the event a protective
order or other remedy is not obtained, reasonably cooperate with the Company, at
the Company's sole cost and expense, to minimize disclosure of Confidential
Information that such Persons are not legally compelled to disclose.
10.5 This Section 10 (other than Section 10.4) shall terminate on the
date that the members of the Investor Group no longer own in the aggregate at
least 50% of the Preferred Shares issued pursuant to the Purchase Agreement.
Section 11. Transfers.
11.1. (a) No Lazard Holder will Transfer, facilitate a Transfer or
otherwise participate in any manner in a Transfer of Warrants, Class A Shares or
Preferred Shares to a Person that such Transferring Holder knows is a
Competitor. Each Lazard Holder (a "Transferring Holder") will give the Company
written notice of any proposed Transfer of Warrants, Class A Shares or Preferred
Shares, except Transfers to other Lazard Holders prior to the consummation of
such Transfer. Such notice will include the identity of the purchaser (if known
by the Transferring Holder after compliance with the inquiry standards set forth
in this Section 11.1) of the Warrants, Class A Shares or Preferred Shares,
including all Affiliates of such purchaser, in each case as can reasonably be
determined with reasonable effort by the Transferring Holder which efforts shall
include but not be limited to, inquiry of such prospective purchaser as to the
identity of the Purchaser and its Affiliates and may include, if appropriate, a
request for representation as to such identity, in any purchase agreement
relating to such Transfer. Notwithstanding the foregoing, in the event of a
-24-
Transfer of 200,000 or fewer Class A Shares (as adjusted for stock splits,
recapitalizations and similar transactions) in a single transaction or series of
related transactions pursuant to the Shelf Registration during any 30 day
period, the Transferring Holder shall only be required to inquire as to the
identity of the purchaser of such Class A Shares and shall not be required to
include the identity of the Purchaser in the notice to the Company unless known
to such Transferring Holder after inquiry. Upon receipt of such notice,
including the identity of the purchaser (if known by the Transferring Holder
after compliance with the inquiry standards set forth in this Section 11.1) and
its Affiliates, the Company shall have 5 Business Days to notify the
Transferring Holder in writing of its reasonable objection to such Transfer
based upon the fact that the Transfer is to a Competitor that is not a member of
the Investor Group (or an entity whose Affiliate is a Competitor) of the
Company. In the event that the Company provides notice of its objection, the
Transferring Holder agrees not to Transfer such Warrants, Class A Shares or
Preferred Shares to the proposed purchaser. If the Company does not provide
notice of its objection within 5 Business Days of receipt of notice of the
Transfer by the Transferring Holder, the Transferring Holder may consummate such
Transfer; provided that if, prior to the consummation of such Transfer, the
identity of the proposed purchaser changes, or the Transferring Holder acquires
actual knowledge (without any obligation of investigation or inquiry) that the
identity of the proposed purchaser's Affiliates has changed, this Section 11.1
shall again be applicable to such Transfer.
(b) The obligations under this Section 11.1 shall not apply to any
Transfer or disposition in connection with (a) any arrangement involving a
secured or structured financing, including any pledge or other security
interest, (b) any foreclosure or other exercise of remedies or negotiated
arrangements or Transfer in connection with any structured or other financing
arrangement, (c) any Transfer, distribution or resale by parties that acquired
securities in connection with the arrangements and transactions referred in
clauses (a) and (b), (d) any sale to an underwriter in connection with a firm
commitment underwritten public offering, (e) any distribution by a member of the
Investor Group to an Existing Holder and (f) any Transfer to a member of the
Investor Group.
(c) This Section 11.1 shall terminate with respect to Class A Shares on
the date that the Lazard Holders own less than an aggregate of 200,000 Class A
Shares (as adjusted for stock splits, recapitalizations and similar
transactions).
11.2. (a) Except for Transfers of Warrants or Class A Shares by a
member of the Investor Group to Lazard Holders, if at any time during the term
of this Agreement any Lazard Holder shall desire to Transfer in a single
transaction or a series of related transactions over a consecutive 30 day period
any Warrants or Class A Shares constituting (assuming exercise of the Warrants)
20% or more of the Class A Shares issuable under the Warrants that were acquired
pursuant to the Purchase Agreement in the aggregate owned by him, her or it
(such Person desiring to Transfer such Warrants or Class A Shares being referred
to herein as a "Selling Shareholder"), then such Selling Shareholder shall
deliver written notice of its desire to Transfer such Warrants or Class A Shares
(a "Notice of Intention"), accompanied by a copy of a proposal relating to such
Transfer (the "Sale
-25-
Proposal"), to the Company, setting forth such Selling Shareholder's desire to
make such Transfer (which shall be for cash only), the number of Warrants or
Class A Shares proposed to be Transferred (the "Offered Shares") and the price
at which such Selling Shareholder on a good faith basis proposes to Transfer the
Offered Shares (the "First Offer Price") and other terms applicable thereto. For
purposes of calculations under this Section 11.2, all Warrants shall be
considered exercised.
(b) Upon receipt of the Notice of Intention, the Company shall then
have the right to purchase at the First Offer Price and on the other terms
specified in the Sale Proposal all or, subject to Section 11.2(d), any portion
of the Offered Shares. The rights of the Company pursuant to this Section
11.2(b) shall be exercisable by the delivery of notice to the Selling
Shareholder (the "Notice of Exercise"), within 5 Business Days from the date of
delivery of the Notice of Intention. The Notice of Exercise shall state the
total number of Offered Shares the Company is willing to purchase. The rights of
the Company pursuant to this Section 11.2(b) shall terminate if unexercised 5
Business Days after the date of delivery of the Notice of Intention.
(c) In the event that the Company exercises its rights to purchase any
or all of the Offered Shares in accordance with Section 11.2(b), then the
Selling Shareholder must Transfer the Offered Shares to the Company within 5
Business Days from the date of delivery of the Notice of Exercise received by
the Selling Shareholder.
(d) Notwithstanding the foregoing provisions of this Section 11.2,
unless the Selling Shareholder shall have consented in writing to the purchase
of less than all of the Offered Shares, the Company may not purchase any Offered
Shares hereunder unless all of the Offered Shares are to be so purchased.
(e) Any Person who has failed to give notice of the election of an
option under this Section 11.2 within the specified time period will be deemed
to have waived its rights with respect to the particular Notice of Intention
only on the day after the last day of such period.
(f) If all notices required to be given pursuant to Section 11.2 have
been duly given and the Company does not exercise its option to purchase all of
the Offered Shares at the First Offer Price and the Selling Shareholder does not
desire to sell less than all the Offered Shares or if, with the consent of the
Selling Shareholder, the Company purchases less than all of the Offered Shares
pursuant to the provisions hereof, then in either such event the Selling
Shareholder shall have the right, subject to compliance by the Selling
Shareholder with the other provisions of this Agreement, for a period of 180
calendar days from the earlier of (i) the expiration of the option period
pursuant to Section 11.2 with respect to such Sale Proposal or (ii) the date on
which such Selling Shareholder receives notice from the Company that it will not
exercise in whole or in part the options granted pursuant to Section 11.2, to
Transfer to any third party that is not, to the knowledge of the Selling
Shareholder (based on the procedures set forth in Section 11.1(a)), a Competitor
or Affiliate of a
-26-
Competitor the Offered Shares remaining unsold at a price of not less than 95%
of the First Offer Price, and on the other terms specified in the Sale Proposal.
(g) The consummation of any purchase and Transfer pursuant to Section
11.2 shall take place on such date, not later than 5 Business Days after the
expiration of the option period pursuant to Section 11.2(b) with respect to such
option, as the Selling Shareholder shall select. Upon the consummation of any
such purchase and Transfer, the Selling Shareholder shall deliver certificates
evidencing the Offered Shares sold, if any, duly endorsed, or accompanied by
written instruments of transfer in form satisfactory to the purchaser duly
executed by the Selling Shareholder free and clear of any liens, against
delivery of the First Offer Price, payable by wire transfer of immediately
available funds.
(h) Subject to Section 11.2(a), making a written offer, giving or
failing to give written notice within the stated period, accepting an offer or
making a decision or election, in each case as provided in Section 11.2, shall
create a legally binding obligation to buy or Transfer, or an obligation to
refrain from buying or Transferring, as the case may be, the Offered Shares as
provided in such Section 11.2.
(i) The obligations under this Section 11.2 shall not apply to any
Transfer or disposition in connection with (a) any arrangement involving a
secured or structured financing, including any pledge or other security
interest, (b) any foreclosure or other exercise of remedies or negotiated
arrangements or Transfer in connection with any structured or other financing
arrangement, (c) any Transfer, distribution or resale by parties that acquired
securities in connection with the arrangements and transactions referred in
clauses (a) and (b), (d) any sale to an underwriter in connection with a firm
commitment underwritten public offering, (e) any Transfer to a Lazard Holder and
(f) any distribution by a member of the Investor Group to an Existing Holder.
11.3. Notwithstanding anything to the contrary herein, no Lazard Holder
shall Transfer any Preferred Shares, Warrants or Class A Shares prior to the one
year anniversary of this Agreement except to other Lazard Holders. The
restriction on Transfer under this Section 11.3 shall not apply to any Transfer
or disposition in connection with (a) any arrangement involving a secured or
structured financing, including any pledge or other security interest, (b) any
foreclosure or other exercise of remedies or negotiated arrangements or Transfer
in connection with any structured or other financing arrangement, (c) any
Transfer, distribution or resale by parties that acquired securities in
connection with the arrangements and transactions referred in clauses (a) and
(b), (d) any sale to an underwriter in connection with a firm commitment
underwritten public offering and (e) any distribution by a member of the
Investor Group to an Existing Holder, if such Existing Holder agrees in writing
to be bound by the terms of this Section 11.3.
11.4. Right to Join in Sale. (a) If, after the first anniversary
hereof, SOFI IV or Starwood Mezzanine proposes, in a single transaction or
series of related transactions within a 30 day period that is a private
placement to Transfer (other than Transfers to Affiliates if
-27-
the Affiliate has agreed in writing to be bound by this Section 11.4) Class A
Shares for which it or they receives aggregate cash consideration in excess of
$25 million (a "Disposing Shareholder"), then, such Person or group shall
refrain from effecting such transaction unless, prior to the consummation
thereof, the members of the Investor Group shall have been afforded the
opportunity to include their Class A Shares in such Transfer of Class A Shares
on a pro rata basis, as hereinafter provided. As a condition to the inclusion of
any Class A Shares in a Transfer pursuant to this Section 11.4, the members of
the Investor Group shall be required at the closing of such Transfer to exercise
Warrants for Class A Shares in an amount equal to that to be included in such
Transfer; provided, however, that the members of the Investor Group shall not
perform a cashless exercise of such Warrants pursuant to any sale of Class A
Shares under this Section 11.4; provided, further, that the members of the
Investor Group are permitted to pay the exercise price of such Warrants with the
proceeds of such sale.
(b) Prior to consummation of any proposed Transfer for aggregate cash
consideration in excess of $25 million of Class A Shares described in Section
11.4(a), each Disposing Shareholder shall offer in writing to the Representative
the opportunity for the members of the Investor Group to sell in the Transfer of
such Class A Shares a number of Class A Shares equal to the product of (i) the
number of Class A Shares then owned (or are entitled to be acquired upon
exercise of the Warrants) by the members of the Investor Group and that were
received upon exercise of Warrants originally issued pursuant to the Purchase
Agreement (regardless of whether the Class A Shares proposed to be sold by the
Disposing Shareholders are Class A Shares or convertible into Class A Shares)
(the "Purchase Offer") multiplied by (ii) a fraction the numerator of which
shall be the number of Class A Shares to be included in such sale by the
Starwood Holders and the denominator of which shall be the total outstanding
Class A Shares owned by the Starwood Holders on June 17, 1998 (adjusted for
stock splits, recapitalizations and similar transactions). Such offer shall be
made by each Disposing Shareholder at the highest price per Class A Share and on
such other terms and conditions as obtained by the Disposing Shareholder or
Shareholders. The Representative shall have 5 Business Days from the date of
receipt of the Purchase Offer in which to accept the Purchase Offer.
(c) This Section 11.4 shall terminate on the seventh (7th) anniversary
of the date of this Agreement.
(d) The obligations under this Section 11.4 shall not apply to any
Transfer or disposition in connection with (a) any arrangement involving a
secured or structured financing, including any pledge or other security
interest, (b) any foreclosure or other exercise of remedies or negotiated
arrangements or Transfer in connection with any structured or other financing
arrangement, (c) any Transfer, distribution or resale by parties that acquired
securities in connection with the arrangements and transactions referred in
clauses (a) and (b), (d) any sale to an underwriter in connection with a firm
commitment underwritten public offering and (e) any distribution by a
partnership, limited liability company or other entity to its partners, members
or owners or a Person owned by them and
-28-
any subsequent distribution by such partners, members or owners to their
partners, members or owners.
Section 12. Amendment, Modification and Waivers; Further Assurances.
12.1. This Agreement may be amended with the consent of the Company and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the prior written consent to such amendment, action or omission to act of: (i)
in the case of Sections 3 through 9 (including all applicable defined terms) the
Holders of a majority of the then outstanding Registrable Securities; (ii) in
the case of Sections 2, 11, 12, 13, 14 and 15 (including all applicable defined
terms), the Representative; (iii) in the case of Section 10 (including all
applicable defined terms) and all other Sections, each member of the Investor
Group; and (iv) in the case of obligations or rights of the Starwood Holders,
without the consent of the Starwood Holders.
12.2. No waiver of any terms or conditions of this Agreement shall
operate as a waiver of any other breach of such terms and conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms explicitly provides to the
contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
12.3. Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
Section 13. Assignment; Benefit. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto, the Lazard Holders and the Holders (provided that a provision
shall only be binding on a Holder if the Holder has direct rights or obligations
relating to the Class A Shares, Warrants or Preferred Shares that were acquired
by the Investors pursuant to the Purchase Agreement that are now held by such
Holder) and each indemnified party under Section 8 hereof and their respective
heirs, permitted assigns, executors, administrators or successors. The rights
under Sections 3, 4, 5, 6, 7, 8 and 9 shall inure to the benefit of any Person
who acquires Class A Shares, Warrants or Preferred Shares pursuant to the
exercise of foreclosure remedies. The rights of the members of the Investor
Group pursuant to Section 10 shall not be assigned without the consent of the
Company.
-29-
Section 14. Miscellaneous.
14.1. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving regard to
the conflict of laws principles thereof.
14.2. Notices. All notices and requests given pursuant to this
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), confirmed facsimile or
overnight air courier guaranteeing next business day delivery to the relevant
address specified on Schedule I, as otherwise specified to the Company in
writing or to the address set forth in the stock record books of the Company.
Except as otherwise provided in this Agreement, the date of each such notice and
request shall be deemed to be, and the date on which each such notice and
request shall be deemed given shall be: at the time delivered, if personally
delivered or mailed; when receipt is acknowledged, if sent by facsimile; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next business day delivery.
14.3. Entire Agreement; Integration. This Agreement supersedes all
prior agreements between or among any of the parties hereto with respect to the
subject matter contained herein, and this agreement embodies the entire
understanding among the parties relating to such subject matter.
14.4. Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
14.5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
14.6. Severability. If any provision of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not affect the
validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
14.7. Termination. Sections 3 through 9 of this Agreement may be
terminated at any time by a written instrument signed by the Company and the
holders of a majority of the outstanding Registrable Securities; Sections 2, 11
and 15 may be terminated with the written consent of the Company and the
Representative; and Section 10 may be terminated by the written consent of the
Company and the members of the Investor Group. Unless sooner terminated in
accordance with the preceding sentence or the other provisions of this
Agreement; Sections 3, 4, 5, 6, 7, 8 and 9 of this Agreement shall terminate in
their entirety on such date as there shall be no Registrable Securities
outstanding; provided that any Warrants, Preferred Shares or Class A Shares
previously subject to this Agreement shall not
-30-
be Registrable Securities following the date such Warrants, Preferred Shares or
Class A Shares no longer meet the definition of Registrable Securities.
14.8. Submission to Jurisdiction. Each of the parties hereto and the
Holders irrevocably submits and consents to the jurisdiction of the United
States District Court for the Southern District of New York in connection with
any action or proceeding arising out of or relating to this Agreement, and
irrevocably waives any immunity from jurisdiction thereof and any claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled in any such action or proceeding.
14.9. The Trust. Each of the parties hereto acknowledges and agrees
that the name "Starwood Financial Trust" is a designation of the Company and its
Trustees (as Trustees but not personally) under the Company's Declaration of
Trust, and all persons dealing with the Company shall look solely to the
Company's assets for the enforcement of any claims against the Company, and the
Trustees, officers, agents and security holders of the Company assume no
personal liability for obligations entered into on behalf of the Company, and
their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
Section 15. Representative.
15.1. Representative. Notwithstanding any statement to the contrary
contained herein, each Lazard Holder irrevocably authorizes and appoints LFREI
or its successor appointed pursuant to this Section 15 (the "Representative") as
its true and lawful attorney and representative with full power and authority to
take any and all actions and execute any and all documents and agreements in
such Person's name, place and stead, with the same effect as if such action were
taken or such document or agreement were executed by such Person, in connection
with any matter or thing relating to any provision of this Agreement that states
that the Representative shall act or execute and LFREI hereby accepts its
appointment as the Representative and agrees to perform all of the duties of the
Representative hereunder.
15.2. The Representative cannot resign or be removed by the Lazard
Holders, except upon delivery to the Company of a written instrument signed by
the successor Representative in which the successor Representative agrees to
serve as Representative and the Lazard Holders consent thereto (such instrument
being referred to as a "Representative Replacement Instrument").
15.3. The signature of the Representative that purports to be on behalf
of one or more of the Lazard Holders shall be deemed to be the signature of such
Lazard Holders and they shall be bound by the terms of any documents and
agreements executed and delivered by the Representative pursuant to this
Agreement as though they were actual signatories thereto. The Company shall be
entitled to rely, without any investigation or inquiry by the Company, upon all
action by the Representative as having been taken upon the authority of
-31-
such Lazard Holders. Any action by the Representative taken on behalf of the
Lazard Holders shall be conclusively deemed to be the action of the Lazard
Holders, and the Company shall not have any liability or responsibility to the
Lazard Holders for any action taken in reliance thereon.
-32-
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first written above.
STARWOOD FINANCIAL TRUST
a Maryland real estate investment trust
By: /s/ Xxx Xxxxxxxx
-------------------------------------
Name: Xxx Xxxxxxxx
Title: CEO and President
LAZARD FRERES REAL ESTATE FUND II L.P.
By: Lazard Freres Real Estate
Investors L.L.C., General Partner
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
LAZARD FRERES REAL ESTATE OFFSHORE FUND
II L.P.
By: LF Real Estate Investors
Company, General Partner
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Authorized Signatory
LF MORTGAGE REIT
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
LAZARD FRERES REAL ESTATE INVESTORS
L.L.C. (Solely limited to its rights and
obligations as the Representative pursuant
to Section 15 hereof.)
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
SOFI-IV SMT HOLDINGS, L.L.C.*
By: Starwood Mezzanine Investors, L.P.
its managing member
By: Starwood Capital Group, L.P.
its general partner
By: BSS Capital Partners, L.P.
its general partner
By: Sternlicht Holdings II, Inc.
its general partner
By: /s/ Madison X. Xxxxx
-------------------------------------
Name: Madison X. Xxxxx
Title: Senior Managing Director
STARWOOD MEZZANINE INVESTORS, *
By: SOFI IV Management, L.L.C.
Its: General Partner
By: Starwood Capital Group, L.L.C.
Its: General Manager
By: /s/ Madison X. Xxxxx
-------------------------------------
Name: Madison X. Xxxxx
Title: Executive Vice President
B HOLDINGS, L.L.C.*/
a Delaware limited liability company
By: /s/ Madison X. Xxxxx
-------------------------------------
Name: Madison X. Xxxxx
Title: Senior Managing Director
--------
*/ Each of Starwood Mezzanine Investors, L.P., SOFI-IV, SMT Holdings
L.L.C. and B Holdings, L.L.C. is a party to this Agreement solely for
purposes of performing the obligations directly applicable to it and
not for the purposes of guaranteeing in any way the obligations of the
Company. No recourse under or upon any obligation, covenant, or
agreement contained in this Agreement shall be had against any partner
or member of Starwood Mezzanine Investors, L.P., SOFI-IV, SMT Holdings
L.L.C. or B Holdings, L.L.C. SOFI IV (other than with respect to the
general partner or managing member of each, for the fraud, intentional
misrepresentation, willful misconduct or gross negligence of such
general partner or managing member) or constituent member of the
general partner.
SCHEDULE I
Addresses for Notice
If to the Investors to:
LF Mortgage REIT
00 Xxxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
Lazard Freres Real Estate Fund II L.P.
00 Xxxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
Lazard Freres Real Estate Offshore Fund II L.P.
00 Xxxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
with a copy in each case to:
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxx X. Lodge
Phone: (000) 000-0000
Fax No: (000) 000-0000
If to the Representative to:
Lazard Freres Real Estate Investors L.L.C.
00 Xxxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxx X. Lodge
Phone: (000) 000-0000
Fax No: (000) 000-0000
If to the Company to:
1114 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Phone: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Xxxxx, Xxxxx & Xxxxx
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax No.: (000) 000-0000
and
Xxxx X. Xxxxx
Katten, Muchin & Zavis
000 Xxxx Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000
If to Starwood to:
c/o Starwood Group, L.P.
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Madison X. Xxxxx, Esq.
Phone: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxx & Associates
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Xxxxx Xxxxxxx
Phone: (000) 000-0000
Fax No.: (000) 000-0000
SCHEDULE II
Excluded Debt
Any Debt relating to:
MD3 Cayman L.P.
DC Retail
interest rate protection agreements relating to Debt incurred on the Closing
Date relating to
0000 Xxxxxxxx
including, in each case, any refinancing of such Debt up to an amount equal to
the outstanding balance on the Closing Date, plus any accrued and unpaid
interest or fees thereon, plus the costs of the refinancing.
Exhibit A
FORM OF INVESTOR REPRESENTATION LETTER
FOR SUBSEQUENT PURCHASES
Starwood Financial Trust
1114 Avenue of the Americas
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
In connection with the proposed acquisition of ___ Series A Preferred
Shares of beneficial interest, $.01 par value per share ("Series A Preferred"),
of Starwood Financial Trust, a Maryland real estate investment trust (the
"Company"), and/or ___ Class A Shares of beneficial interest, $1.00 par value
per share, of the Company ("Class A Shares"), and/or ___ warrants to purchase up
to ___ Class A Shares ("Warrants" and, together with the Series A Preferred and
Class A Shares, the "Shares"), the undersigned hereby certifies, represents and
covenants as to [ ] (the "Investor"), after due inquiry, as follows:
1. The Investor has received a copy of the Declaration of Trust, as
amended, including the Articles Supplementary with respect to the Series A
Preferred, and understands the restrictions on transfers and ownership of the
Company's shares of beneficial interest set forth therein.
2. The Investor represents and covenants that no individual or
organization described in Section 542(a)(2) of the Internal Revenue Code of
1986, as amended (the "Code"), as modified by Section 856(h) of the Code, that
is a direct or indirect partner, member or shareholder of the Investor, as the
case may be, Beneficially Owns (as defined herein) or, in the future will
Beneficially Own because of Investor's Beneficial Ownership in the Company,
Shares in excess of the Ownership Limit (as defined in both the Declaration of
Trust, as amended, and the Articles Supplementary with respect to the Series A
Preferred). A summary of the ownership of the Investor by those persons that
Beneficially Own a greater than 5% interest in the Investor as of the date
hereof has been attached hereto as Exhibit A-1. The summary of the ownership of
the Investor described in the immediate preceding sentence shall indicate the
classification of the person or entity (e.g., individual X) but shall not
necessarily need to indicate the name of such person. For purposes of this
representation, Beneficially Owns shall mean ownership by a person or entity who
would be treated as an owner of the Investor either directly or constructively
through the application of Section 544 of the Code, as modified by Section
856(h) of the Code.
3. As of the date hereof, except as set forth at the end of this letter
the Investor (and any direct or indirect partner, member or shareholder of the
Investor) does not own, actually or constructively (as determined in accordance
with Code Section 544), any beneficial interest in the Company, including any
Shares (other than the Shares that are subject to this representation).
4. The Investor understands that any transferee of the Investor who
acquires or attempts to acquire the Company's Series A Preferred Shares or Class
A Shares in an amount in excess of the Ownership Limits (as defined in the
Declaration of Trust, as amended, including the Articles Supplementary with
respect to the Series A Preferred) will be subject to the Excess Share
provisions of Articles XI of the Declaration of Trust and Articles IX of the
Articles Supplementary unless a waiver of those provisions is provided by the
Company.
The Investor covenants that it will immediately notify the Company of
the date on which the foregoing representations and warranties are no longer
true and correct in all respects (the "Termination Date"). The Investor
understands that any breach of a representation or covenant contained in this
letter will automatically cause the waiver granted by the Company with respect
to the Shares to immediately cease to be effective to the extent necessary to
cause such representation or covenant to be true and correct and, to the extent
necessary to cause such representation or covenant to be true and correct, all
(or a portion of) the Shares owned by the Investor shall be subject to Article
XI of the Declaration of Trust and Article IX of the Articles Supplementary.
Very Truly Yours,
INVESTOR
By:_______________________________
Name:
Title:
Other Shares Owned:
Exhibit A-1
SUMMARY OF GREATER THAN FIVE PERCENT
BENEFICIAL OWNERS OF THE INVESTOR
