-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DfkOWdnj/q2vbZLoyFPvDKS+ABNb+Mmejr1te+fNuwDkUhNkIHV854xjI+WcFTzv 87RZdQODBQS0hd5UqwacUw== 0000903112-98-001143.txt : 19980807 0000903112-98-001143.hdr.sgml : 19980807 ACCESSION NUMBER: 0000903112-98-001143 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19980728 ITEM INFORMATION: FILED AS OF DATE: 19980806 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL TRUST CENTRAL INDEX KEY: 0000016387 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 946181186 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08063 FILM NUMBER: 98678614 BUSINESS ADDRESS: STREET 1: 605 THIRD AVENUE 26TH FLOOR STREET 2: STE 200 CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126550220 MAIL ADDRESS: STREET 1: 605 THIRD AVENUE 26TH FLOOR STREET 2: #200 CITY: NEW YORK STATE: NY ZIP: 10016 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA REAL ESTATE INVESTMENT TRUST DATE OF NAME CHANGE: 19920703 8-K 1 FORM 8-K As filed with the Securities and Exchange Commission on August 6, 1998 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) July 28, 1998 CAPITAL TRUST ------------- (Exact name of registrant as specified in its charter) California 1-8063 94-6181186 - -------------------------------------------------------------------------------- (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation) 605 Third Avenue, 26th Floor New York, New York 10016 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 655-0220 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 743259.4 ITEM 5. Other Events On July 28, 1998, the Registrant privately placed to the three Investors (as defined below) (the "Private Placement")150,000 8.25% Step Up Convertible Trust Preferred Securities (liquidation amount $1,000 per security) representing undivided beneficial interests in the assets of the CT Trust I (as defined below) with an aggregate liquidation amount of $150,000,000 (the "Preferred Securities"). The Preferred Securities were issued by the Registrant's newly formed consolidated subsidiary, CT Convertible Trust I, a Delaware statutory business trust ("CT Trust I"), concurrently with the related issuance and sale to CT Trust I of the Company's 8.25% Step Up Convertible Junior Subordinated Debentures in the aggregate principal amount of $154,650,000 (the "Convertible Debentures"). The Registrant received $145,500,000 of proceeds pursuant to the foregoing transactions, reflecting an original issue discount of 3% from the liquidation amount of the Preferred Securities. The Registrant sponsored the formation of CT Trust I, pursuant to the Declaration of Trust, dated as of July 28, 1998 (the "Declaration"), by the Trustees (as defined therein), the Registrant, as sponsor, and the holders, from time to time, of undivided beneficial interests in CT Trust I to be issued pursuant to such Declaration. A Certificate of Trust for CT Trust I was filed in the State of Delaware on July 28, 1998. The Preferred Securities were offered and sold pursuant to the Preferred Securities Purchase Agreement, dated as of July 27, 1998 (the "Purchase Agreement"), among the Registrant, CT Trust I, as issuer, and Vornado Realty L.P., a Delaware limited partnership ("VRLP"), EOP Operating Limited Partnership, an Delaware limited partnership ("EOPLP"), Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust, a New York trust ("Hourly GM Trust"), and Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust, a New York trust ("Salaried GM Trust," and together with the Hourly GM Trust, the "GM Trust"; each of VRLP, EOPLP and the GM Trust being referred to herein as an "Investor" and collectively as the "Investors"), as purchasers. Pursuant to the Declaration, the proceeds obtained from the Private Placement, together with the proceeds obtained from the issuance and sale by the CT Trust I to the Registrant pursuant to a Subscription Agreement, dated as of July 28, 1998, by the Registrant of 4,650 8.25% Step Up Convertible Trust Common Securities (liquidation amount $1,000 per security), representing undivided beneficial interests in the assets of CT Trust I with an aggregate liquidation amount of $4,650,000 (the "Common Securities" and together with the Preferred Securities, the "Securities"), were used to purchase from the Registrant $154,650,000 aggregate principal amount of Convertible Debentures. The Securities were issued pursuant to the Declaration. The Preferred Securities are guaranteed by the Registrant, with respect to distributions and amounts payable upon liquidation or redemption and otherwise, pursuant to the Preferred Securities Guarantee Agreement, dated as of July 28, 1998, by the Registrant and Wilmington Trust Company, as preferred guarantee trustee (the "Preferred Securities Guarantee"). The Common Securities are guaranteed by the Registrant, with respect to distributions and amounts payable upon liquidation or redemption and otherwise, pursuant to the Common Securities Guarantee Agreement, dated as of July 28, 1998, by the Registrant (the "Common Securities Guarantee"). Distributions payable on each Security are fixed at a rate per annum of 8.25% of the stated liquidation amount of $1,000 per Security from and including July 28, 1998 to and including September 30, 2004, such rate per annum (i) automatically increasing by an additional 0.75% per annum (any such increase will be cumulative with any such prior increase(s)) on October 1, 2004, and again on each 743259.4 subsequent October 1 and (ii) automatically increasing by a prescribed amount in the event the Registrant pays a cash dividend or distribution on its Common Shares (as defined below). Distributions on the Securities are cumulative and are required to be paid quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on September 30, 1998. The Convertible Debentures were issued under an Indenture, dated as of July 28, 1998, between the Registrant and Wilmington Trust Company, as trustee (the "Indenture"). The Convertible Debentures will mature on September 30, 2018 (the "Maturity Date"). Each Convertible Debenture will bear interest at the rate of 8.25% per annum (i) from and including July 28,1998 to and including September 30, 2004, such rate of interest per annum automatically increasing by an additional 0.75% per annum (any such increase shall be cumulative with any such prior increase(s)) on October 1, 2004 and again on each subsequent October 1 and (ii) automatically increasing by an amount equal to the amount of any such similar increase to the distribution rate on the Securities in the event the Registrant pays a cash dividend or a distribution on its Common Shares, until the principal thereof becomes due and payable. Interest on the Convertible Debentures is cumulative and is required to be paid quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on September 30, 1998. As discussed above, the distribution rates and distribution payment dates for the Preferred Securities correspond to the interest rates and interest payment dates Convertible Debentures, which are the sole assets of CT Trust I. As a result, if principal and interest are not paid on the Convertible Debentures, no amounts will be paid on the Preferred Securities. Under the Indenture, so long as no event of default with respect to the Convertible Debentures has occurred and is continuing, the Registrant, upon the making of a prescribed certification, has the right to defer payments of interest on the Convertible Debentures at any time, and from time to time, for a period not exceeding 20 consecutive quarterly periods ("Extension Period"), which if exercised would defer quarterly distributions on the Preferred Securities during any such Extension Period. During any Extension Period, interest on the Convertible Debentures and distributions on the Preferred Securities would continue to accumulate with interest thereon, compounded quarterly, at the applicable interest rate or distribution rate to the extent permitted by applicable law. The Indenture provides, subject to certain exceptions, that upon (i) an event of default under the Indenture, (ii) a default by CT Trust I with respect to payment or other obligations under the Preferred Securities Guarantee or Common Securities Guarantee, or (iii) the election by CT Trust I to defer payments of interest on Convertible Debentures in accordance with the Indenture, the Registrant will be prohibited from (x) paying dividends or making other distributions on, or redeeming, purchasing or making liquidation payments with respect to, its capital stock and (y) paying interest, principal or premium on, or repaying, repurchasing, or redeeming any of the Registrant's debt securities ranking pari passu with or junior to the Convertible Debentures or making any guarantee payments with respect to any guarantee by the Registrant of the debt securities or any of the Registrant's subsidiaries if such guarantee ranks pari passu with or junior in interest to the Convertible Debentures. Under the Indenture, the Registrant may redeem the Convertible Debentures in whole or in part (pro rata among the holders) on or after September 30, 2003 at a price equal to 100% of the principal amount of the Convertible Debentures plus accrued and unpaid interest to the redemption date. Proceeds from any redemption must be used to redeem the Preferred Securities and any Common Securities. Upon the repayment of the Convertible Debentures in whole or in part, whether at maturity, upon redemption or otherwise, the proceeds from such repayment or payment will be simultaneously applied to redeem the Securities having an aggregate liquidation amount equal to the aggregate principal amount 743259.4 2 of the Convertible Debentures so repaid or redeemed at a redemption price per Security equal to the redemption price of the Convertible Debentures, together with accrued and unpaid distributions thereon to, but excluding, the date of the redemption. Pursuant to the Declaration, at any time through the close of business on the last business day prior to the Maturity Date (or, in the case of Securities called for redemption, prior to the close of business on the business date prior to the redemption date), the Securities will be convertible into class A common shares of beneficial interest, $1.00 par value, of the Registrant (the "Common Shares"), pursuant to the direction of the holder of the Securities to the conversion agent to exchange such Securities for a portion of the Convertible Debentures theretofore held by CT Trust I on the basis of one Security per $1,000 principal amount of Convertible Debentures, and immediately convert such amount of Convertible Debentures into Common Shares at an initial rate of 85.47 Common Shares per $1,000 principal amount of Convertible Debentures (which is equivalent to a conversion price of $11.70 per Common Share), subject to certain adjustments. In connection with the Private Placement, the Registrant, VRLP, EOPLP, and General Motors Investment Management Corporation, a Delaware corporation, as agent for and for the benefit of the Pension Plans (as defined therein) entered into a certain Co-Investment Agreement, dated as of July 28, 1998, pursuant to which the Registrant, subject to certain terms and conditions, is obligated to extend to the other parties to such agreement the opportunity to co-invest in any loan or other investment for which the Registrant in its sole and absolute discretion seeks to obtain co-investors. In connection with the Private Placement, on July 28, 1998, the Registrant and the Investors also executed the Registration Rights Agreement pursuant to which the Investors are entitled to certain registration rights with respect to the Common Shares which are issuable upon conversion of the Securities and/or the Convertible Debentures. Neither the Securities nor the Convertible Debentures have been registered under the Securities Act of 1933, as amended (the "Act"), and may not be offered or sold in the United States without registration under, or an applicable exemption from the registration requirements of the Act and applicable state securities laws. On July 29, 1998, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.2 and the full text of which is incorporated by reference herein, announcing the consummation of the Transactions. ITEM 7. Financial Statements, Supplemental Financial Information and Exhibits. (c) Exhibits. 4.1 Certificate of Trust of CT Convertible Trust I 4.2 Preferred Securities Purchase Agreement dated as of July 27, 1998 among Capital Trust, CT Convertible Trust I, Vornado Realty L.P., EOP Limited Partnership, Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust, and Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust. 743259.4 3 4.3 Declaration of Trust of CT Convertible Trust I ("CT Trust I") dated as of July 28, 1998 by the Trustees (as defined therein), Capital Trust, as sponsor, and the holders, from time to time, of undivided beneficial interests in CT Trust I to be issued pursuant to such Declaration. 4.4 Indenture dated as of July 28, 1998 between Capital Trust and Wilmington Trust Company, as trustee. 4.5 Preferred Securities Guarantee Agreement dated as of July 28, 1998 by Capital Trust and Wilmington Trust Company, as trustee. 4.6 Common Securities Guarantee Agreement dated as of July 28, 1998 by Capital Trust. 10.1 Co-Investment Agreement dated as of July 28, 1998 among Capital Trust, Vornado Realty L.P., EOP Operating Limited Partnership, and General Motors Investment Management Corporation, as agent for and for the benefit of the Pension Plans (as defined therein). 10.2 Registration Rights Agreement dated as of July 28, 1998 among Capital Trust, Vornado Realty L.P., EOP Limited Partnership, Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust, and Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust. 99.1 Press Release, dated July 29, 1998. 743259.4 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CAPITAL TRUST (Registrant) Date: August 6, 1998 By: /s/ Edward L. Shugrue III -------------------------- Name: Edward L. Shugrue III Title: Chief Financial Officer 743259.4 5 EX-4.1 2 CERTIFICATE OF TRUST EXHIBIT 4.1 CERTIFICATE OF TRUST OF CT CONVERTIBLE TRUST I THIS Certificate of Trust of CT CONVERTIBLE TRUST I (the "Trust") is being duly executed and filed on behalf of the Trust by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. ss. 3801 et seq.) (the "Act"). 1. Name. The name of the business trust formed by this Certificate of Trust is CT CONVERTIBLE TRUST I. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware are Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attn: Corporate Trust Administration. 3. Effective Date. This Certificate of Trust shall be effective upon filing. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Trust in accordance with Section 3811(a)(1) of the Act. WILMINGTON TRUST COMPANY, as trustee By:/s/ Emmett R. Harmon ----------------------------------- Name: Emmett R. Harmon Title: Vice President JOHN R. KLOPP, as trustee By:/s/ John R. Klopp ----------------------------------- Name: John R. Klopp Title: Trustee SHELI Z. ROSENBERG, as trustee By:/s/ Sheli Z. Rosenberg ---------------------------------- Name: Sheli Z. Rosenberg Title: Trustee 744250.1 EX-4.2 3 PURCHASE AGREEMENT EXHIBIT 4.2 PREFERRED SECURITIES PURCHASE AGREEMENT among CAPITAL TRUST, CT CONVERTIBLE TRUST I and INVESTORS NAMED THEREIN July 27, 1998 730804.14 TABLE OF CONTENTS Page SECTION 1. PURCHASE AND SALE OF SECURITIES............................2 SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS.............2 2.1 Company Organization.......................................2 2.2 Company SEC Reports and Filings............................2 2.3 Company Financial Statements; Material Adverse Changes.....3 2.4 Company Capitalization.....................................4 2.5 Company Subsidiaries.......................................4 2.6 Trust Organization; Authorization, etc.....................4 2.7 Consents and Approvals.....................................5 2.8 Absence of Defaults, Conflicts, etc........................6 2.9 Compliance with Law........................................6 2.10 Pending Actions............................................6 2.11 Private Offering; Integration..............................6 2.12 Brokerage..................................................7 2.13 Subordination..............................................7 2.14 Liabilities................................................7 2.15 Real Property..............................................7 2.16 Environmental Laws.........................................7 2.17 Material Facts.............................................8 2.18 Investment Company Act.....................................8 2.19 Tax Matters................................................8 2.20 Reservation and Valid Issuance of Shares...................8 2.21 Preferred Securities Guarantee.............................8 SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS............9 3.1 Certain Representations and Warranties.....................9 3.2 Additional Representations and Warranties..................9 SECTION 4. COVENANTS OF THE COMPANY..................................10 4.1 Tax Matters...............................................10 4.2 Additional Matters........................................10 SECTION 5. OFFERORS' CLOSING CONDITIONS..............................10 5.1 Compliance with Agreement.................................10 5.2 Each Investor to Close....................................10 SECTION 6. INVESTORS' CLOSING CONDITIONS.............................10 6.1 No Material Adverse Effect................................11 6.2 Representations and Warranties............................11 6.3 Compliance with Agreement.................................11 6.4 Officer's and Regular Trustee's Certificate...............11 6.5 Approval of Proceedings...................................11 6.6 Injunction................................................11 6.7 Additional Agreements.....................................12 6.8 Each Investor to Close....................................12 6.9 Opinions..................................................12 730804.14 -i- Page SECTION 7. INDEMNIFICATION...........................................14 7.1 Indemnification Generally.................................14 7.2 Indemnification Procedures for Third Party Claims.........14 SECTION 8. INTERPRETATION OF THIS AGREEMENT..........................15 8.1 Terms Defined.............................................15 8.2 Governing Law.............................................17 8.3 Paragraph and Section Headings............................17 SECTION 9. MISCELLANEOUS.............................................17 9.1 Expenses..................................................17 9.2 Notices...................................................17 9.3 Survival..................................................19 9.4 Entire Agreement; Amendment and Waiver....................19 9.5 Counterparts..............................................19 9.6 Successors and Assigns....................................19 SCHEDULES Schedule 2.3(b) Company Financial Statements; Material Adverse Change Schedule 2.6(a) Agreements of the Trust Schedule 2.14 Liabilities EXHIBITS Exhibit A Form of Registration Rights Agreement Exhibit B Form of Co-Investment Agreement Exhibit C Opinion of Richards, Layton & Finger, P.A. 730804.14 -ii- PREFERRED SECURITIES PURCHASE AGREEMENT This PREFERRED SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as of July 27, 1998 among Capital Trust, a California business trust (the "Company"), CT Convertible Trust I, a Delaware statutory business trust (the "Trust" and together with the Company, the "Offerors"), as issuer, and Vornado Realty L.P., a Delaware limited partnership ("VRLP"), EOP Operating Limited Partnership, a Delaware limited partnership ("EOPLP"), Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust, a New York trust ("Hourly GM Trust"), and Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust, a New York trust ("Salaried GM Trust, and together with the Hourly GM Trust, the "GM Trust"; each of VRLP, EOPLP and the GM Trust being referred to herein as an "Investor" and collectively as the "Investors"), as purchasers. PRELIMINARY STATEMENT The Trust is a statutory business trust organized under the Business Trust Act (the "Delaware Act") of the State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Sections 3801 et seq.) pursuant to the Declaration of Trust, dated and effective as of July 28, 1998, by the Company and the Trustees as defined therein and the holders, from time to time, of undivided beneficial interests in the assets of the Trust (the "Declaration"). The Offerors confirm their agreement with the Investors, with respect to the offer and sale by the Trust and the purchase by the Investors of $150,000,000 in aggregate liquidation amount of 8.25% Step Up Convertible Trust Preferred Securities (Liquidation Amount $1,000 per Security) representing undivided beneficial interests in the assets of the Trust (the "Preferred Securities"). The definitions of certain capitalized terms used herein are set forth in Section 8.1. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned such terms in the Declaration. The Preferred Securities will be guaranteed by the Company, with respect to distributions and amounts payable upon liquidation or redemption and otherwise pursuant to the Preferred Securities Guarantee Agreement, dated as of July 28, 1998 of the Company (the "Preferred Securities Guarantee"). The entire proceeds from the sale of the Preferred Securities will be combined with the entire proceeds from the sale by the Trust to the Company of its common securities (the "Common Securities") and will be used by the Trust to purchase $154,650,000 in aggregate principal amount of 8.25% Step Up Convertible Junior Subordinated Debentures due September 30, 2018 (the "Subordinated Debentures") issued by the Company. The Preferred Securities and the Common Securities will be issued pursuant to the Declaration. The Subordinated Debentures will be issued pursuant to the Indenture between the Company and Wilmington Trust Company (the "Indenture") and dated as of July 28, 1998. The Preferred Securities, the Preferred Securities Guarantee and the Subordinated Debentures are collectively referred to herein as the "Preferred Instruments." The Declaration, the Indenture, the Preferred Securities Guarantee and this Agreement are hereinafter referred to collectively as the "Operative Documents." The Preferred Securities are offered and sold to the Investors without registration under the Securities Act, in reliance upon exemptions therefrom, and Investors may only resell or otherwise transfer such Preferred Securities if such Preferred Securities are hereafter registered under the Securities Act or if an exemption from the registration requirements of the Securities Act is available. The parties hereto desire that the foregoing transaction be subject to the terms and conditions set forth herein. Accordingly, the parties agree as follows: 730804.14 SECTION 1. PURCHASE AND SALE OF SECURITIES ------------------------------- (a) Subject to the terms and conditions set forth in this Agreement and in reliance upon representations and warranties contained in this Agreement, the Trust agrees to sell to the Investors, and each of the Investors agrees, severally and not jointly, to purchase from the Trust, at a purchase price of $970 per Preferred Security, the number of Preferred Securities set forth opposite its name below: Applicable Portion Investor Number of Preferred Securities Purchase Price -------- ------------------------------ ------------------ EOPLP 50,000 $48,500,000 VRLP 50,000 $48,500,000 GM Trust 50,000 $48,500,000 (b) Such sale and purchase shall be effected at the Closing Time when deliveries of the certificates, duly registered in the Investors' names evidencing the Preferred Securities being purchased by them, shall be made against delivery by the Investors to the Trust of the aggregate purchase price therefor by wire transfer(s) of immediately available funds to such account as the Trust shall designate prior to the Closing Time. (c) The closing (the "Closing") of such sale and purchase shall take place at 11:00 A.M., New York City time, on July 28, 1998, or at such other time not later than five business days after such date as the Investors and the Offerors agree to in writing (such time and date of payment and delivery being hereinafter referred to as the "Closing Time"), at the offices of Battle Fowler LLP, 75 East 55th Street, New York, New York 10022, or at such other location as the Investors and the Offerors shall select and agree to. SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS ---------------------------------------------- (a) The Offerors, jointly and severally, represent and warrant to the Investors as of the date hereof and as of the Closing Time referred to in Section (1)(c) hereof, and agree with the Investors as follows: 2.1 Company Organization -------------------- (a) The Company has been duly created and is validly existing as a business trust under the laws of the State of California, has the trust power and authority to own, lease and operate its properties and to conduct its business as described in the SEC Reports and Filings (as defined below), and is duly qualified to transact business in each jurisdiction in which such qualification is required, whether by reason of the conduct of its business or its ownership or leasing of property, except where the failure to be so qualified would not have a Material Adverse Effect (as hereinafter defined). The Company is not required to make any submissions or filings with any State in order to maintain its valid existence or good standing. 2.2 Company SEC Reports and Filings (a) The Company has caused to be delivered to each of the Investors copies of the following, without exhibits thereto (collectively, the "SEC Reports and Filings"): (i) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-8063), as filed with the Commission on February 26, 1998, and amended by the Company's Annual Report on Form 10-K/A, as filed with the Commission on April 30, 1998; 730804.14 -2- (ii) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998, as filed with the Commission on May 14, 1998; (iii) The Company's Current Reports on Form 8-K dated February 9, 1998, February 27, 1998, January 1, 1998, March 12, 1998, April 21, 1998, May 14, 1998, June 2, 1998, June 16, 1998, and June 30 1998 as filed with the Commission, respectively, on February 23, 1998, March 13, 1998, March 18, 1998, March 19, 1998, April 23, 1998, May 22, 1998, June 12, 1998, June 24, 1998, and July 13, 1998. (iv) The Company's registration statement on Form S-1 (File No. 333-37271), as filed with the Commission on October 6, 1997, as amended by Amendments No. 1 and 2 thereto, as filed with the Commission on October 13, 1997 and December 9, 1997, respectively, the related registration statement on Form S-1 with respect to the increase in the offering size, as filed with the Commission on December 10, 1997, and the final form of prospectus constituting Part I of such registration statements as filed with the Commission on December 11, 1997; and (v) The registration statement on Form S-4 of the Company's wholly-owned subsidiary, Capital Trust, Inc. (File No. 333-21777), as filed with the Commission on May 14, 1998. (b) The SEC Reports and Filings, when filed, complied in all material respects with all applicable requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder. None of the SEC Reports and Filings, at the time of filing contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in light of the circumstances in which they were made. 2.3 Company Financial Statements; Material Adverse Changes ------------------------------------------------------ (a) The audited consolidated balance sheet of the Company as at December 31, 1997 and the unaudited consolidated balance sheets of the Company as at March 31, 1998 included in the SEC Reports and Filings fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries (as defined below) at the dates thereof, and the related consolidated statements of operations, equity and cash flows for the year ended December 31, 1997 and the three months ended March 31, 1998 included in the SEC Reports and Filings fairly present in all material respects the results of operations and other information therein of the Company and its Subsidiaries for the respective periods indicated (except that the interim reports are subject to adjustments customary in nature and amount which might be required as a result of year end audit and except as otherwise stated therein) (collectively, the "Financial Statements"). All such Financial Statements, including the schedules and notes thereto, were prepared in accordance with generally accepted accounting principles ("GAAP") applied consistently throughout the periods involved, except that the interim reports are subject to customary adjustments which might be required as a result of year end audit and except as otherwise stated therein. (b) Except as set forth on Schedule 2.3(b), since December 31, 1997, (A) there has been no material adverse change, and no development involving a prospective material adverse change, in or affecting the management, assets, business, business prospects, earnings or condition (financial or otherwise) of the Trust (a "Trust Material Adverse Effect") or the Company and its Subsidiaries considered as one enterprise (a "Company Material Adverse Effect," together with a Trust Material Adverse Effect, a "Material Adverse Effect"), whether or not arising in the ordinary course of business, (B) there have been no transactions entered into by the Trust or the Company or any Subsidiary which are material with respect to the Trust or the Company and its Subsidiaries considered as one enterprise, other than those in the ordinary course of business, and (C) there has not been any material change in the total assets, except assets acquired in the ordinary course of business, or long term debt of the Company. Neither the Trust nor the Company nor any of its Subsidiaries has sustained since December 31, 1997 any material loss or interference with its business from fire, explosion, flood 730804.14 -3- or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree. 2.4 Company Capitalization ---------------------- (a) The authorized, issued and outstanding shares of beneficial interest in the Company are set forth in the most recent Financial Statements, since the date of which there has been no change in the consolidated capitalization of the Company and its Subsidiaries (other than changes in outstanding Common Shares resulting from share option plan transactions and changes in shareholders equity resulting from changes in retained earnings). All the outstanding shares of beneficial interest in the Company have been duly and validly authorized and issued and are fully paid and non-assessable. (b) There are no Common Shares issuable upon exercise or conversion of any security outstanding of the Company nor any rights, options or warrants outstanding or other agreements to acquire Common Shares nor is the Company contractually obligated to purchase, redeem or otherwise acquire any of its outstanding Common Shares except for Common Shares issuable upon (i) conversion of the 9.5% class A preferred shares of beneficial interest, $1.00 par value, in the Company, and (ii) exercise of options and share units issued under the Company's employee and trustee share plans. 2.5 Company Subsidiaries. -------------------- Each of the Persons of which a majority of the outstanding voting equity securities or interests are owned, directly or indirectly, by the Company (each a "Subsidiary" and collectively "Subsidiaries") has been duly incorporated or organized and is validly existing as a corporation or partnership in good standing under the laws of the jurisdiction of its incorporation or organization, has the corporate or partnership power and authority to own, lease and operate its properties and to conduct its business as presently conducted, and is duly qualified as a foreign corporation or partnership to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing will not have a Company Material Adverse Effect. 2.6 Trust Organization; Authorization, etc. -------------------------------------- (a) The Trust has been duly created and is validly existing and in good standing as a business trust under the Delaware Act with the trust power and authority to own its properties and to conduct its business and to enter into and perform its obligations under this Agreement, the Preferred Securities, the Common Securities, and the Declaration. The Trust is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is necessary, except to the extent that the failure to so qualify or be in good standing would not have a Material Adverse Effect; and except as set forth on Schedule 2.6(a), the Trust is not a party to or otherwise bound by any agreement. The Trust is and will under current law be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation; and as of the Closing Time, the Trust is and will be treated as a subsidiary of the Company pursuant to GAAP. (b) This Agreement has been duly authorized, executed and delivered by the Company and the Trust and is a valid and legally binding obligation of the Company and the Offerors, enforceable against the Offerors in accordance with its terms except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting creditors' rights generally or by general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity) (the "Bankruptcy Exceptions"). 730804.14 -4- (c) The Declaration and the Indenture have been duly authorized by the Company and, to the Company's knowledge, have been duly authorized by the other parties thereto, and, at the Closing Time, will have been duly executed and delivered by the Company and, to the Company's knowledge by the other parties thereto, and each will be a valid and legally binding obligation of the Company, and to the Company's knowledge, of the other parties thereto, enforceable against the parties thereto in accordance with its terms, except to the extent that enforcement thereof may be limited by Bankruptcy Exceptions. (d) The Registration Rights Agreement and the Co-Investment Agreement have been duly authorized by the Company and, at the Closing Time, will have been duly executed and delivered by the Company and assuming the due authorization, execution and delivery by the Investors, the Registration Rights Agreement and the Co-Investment Agreement will, at the Closing Time, be valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (i) Bankruptcy Exceptions or (ii) the effect of applicable public policy on the enforceability of provisions relating to indemnification and contribution. (e) The Preferred Securities have been duly authorized by the Declaration and, when issued and delivered by the Trust to the Investors pursuant to this Agreement against payment therefor as provided herein, will be validly issued and fully paid and non-assessable undivided beneficial interests in the assets of the Trust. The issuance of the Preferred Securities is not subject to preemptive or other similar rights; and (subject to the terms of the Declaration) holders of Preferred Securities will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit incorporated under the laws of the State of Delaware. (f) The Common Securities have been duly authorized by the Declaration and, when issued and delivered by the Trust to the Company against payment therefor, will be validly issued and will represent undivided common beneficial interests in the assets of the Trust. The issuance of the Common Securities is not subject to preemptive or other similar rights; and, at the Closing Time, all of the issued and outstanding Common Securities of the Trust will be directly or indirectly owned by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equitable right. (g) The Preferred Securities Guarantee has been duly authorized by the Company and, at the Closing Time, the Preferred Securities Guarantee will have been duly executed and delivered by the Company and will constitute a valid and legally binding obligation of the Company, enforceable in accordance with its terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. (h) The Subordinated Debentures have been duly authorized by the Company and, at the Closing Time, the Subordinated Debentures will have been duly executed, authenticated, issued and delivered and will constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture, enforceable in accordance with its terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. 2.7 Consents and Approvals ---------------------- No order, license, consent, authorization or approval of, or exemption by, or the giving of notice to, or the registration with any Governmental Authority, and no filing, recording, publication or registration in any public office or any other place, was or is now required in connection with the issuance and sale of the Preferred Instruments hereunder, except for (A) such as may be required under the Securities Act, the Exchange Act or state securities laws and (B) the filing of the Certificate of Trust with the Secretary of State (which filing will be duly made). 730804.14 -5- 2.8 Absence of Defaults, Conflicts, etc. ----------------------------------- The execution and delivery of the Operative Agreements, the Registration Rights Agreement and the Co-Investment Agreement, the issuance, sale and delivery of the Preferred Instruments and the consummation of the transactions contemplated herein and therein do not and will not conflict with, or result in a breach or violation of any of the terms, conditions or provisions of, or constitute a default under, or permit the acceleration of rights under or termination of, any of the Key Agreements and Instruments of the Company, any Subsidiary or the Trust or result in the creation or imposition of any lien, charge, encumbrance upon any property or assets of the Company, any Subsidiary or the Trust, and will not result in any violation of the Organizational Documents of the Company, any Subsidiary or the Trust, or any existing Requirements of Law applicable to the Company, any Subsidiary or the Trust. 2.9 Compliance with Law ------------------- (a) The Company is not in violation of any Requirements of Law to which it is subject, which violation could reasonably be expected to result in a Company Material Adverse Effect. (b) The Company has all licenses, permits, franchises or other governmental authorizations necessary to the ownership of its property or to the conduct of its business, which if violated or not obtained could reasonably be expected to result in a Company Material Adverse Effect. The Company has not finally been denied any application for any such licenses, permits, franchises or other governmental authorizations necessary to its business. 2.10 Pending Actions --------------- There is no action, suit, investigation or proceeding pending or, to the Company's knowledge, threatened or contemplated against the Company or any of its properties or assets by or before any Governmental Authority, which questions the validity of the Operative Agreements, the issuance or validity of the Preferred Securities or any action taken or to be taken pursuant hereto or thereto, or which could reasonably be expected individually or in the aggregate to result in any Material Adverse Effect. 2.11 Private Offering; Integration ----------------------------- (a) None of the Offerors, their affiliates (as such term is defined in Rule 501(b) under the Securities Act for any person or entity) ("Affiliates"), or any person acting on their or any of their Affiliates' behalf has engaged, or will engage, in connection with the offering of the Preferred Securities, in any communication or other form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. Based upon the representations of the Investors set forth in Section 3, the offer, issuance and sale of the Preferred Securities in the manner contemplated by this Agreement are exempt from the registration and prospectus delivery requirements of the Securities Act, and have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. (b) The Offerors have not, directly or indirectly, solicited any offer to buy or offered to sell, and will not, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Preferred Securities in a manner that would require the Preferred Securities to be registered under the Securities Act. 730804.14 -6- 2.12 Brokerage --------- There are no claims for brokerage commissions or finder's fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement made by or on behalf of the Company or the Trust with any other person. 2.13 Subordination ------------- Subordinated Debentures are subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Subordinated Debentures) of the Company. 2.14 Liabilities ----------- Except as set forth in Schedule 2.14, the Company and its Subsidiaries have no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent or otherwise) except for liabilities or obligations reflected or reserved against in the preliminary non-public unaudited consolidated balance sheet of the Company as at June 30, 1998 provided to each of the Investors and current liabilities incurred in the ordinary and usual course of business consistent with the past practices of the Company and its Subsidiaries since June 30, 1998 and that could not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect. The Trust has no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent or otherwise). 2.15 Real Property ------------- Except as otherwise disclosed in the SEC Reports and Filings, and except as could not reasonably be expected to result in a Material Adverse Effect (i) neither the Company nor any of its Subsidiaries owns any real property; (ii) all of the leases under which the Company or any of its Subsidiaries holds or uses real property or assets as a lessee are in full force and effect, and neither the Company nor any of its Subsidiaries is in default in respect of any of the terms or provisions of any of such leases and no claim has been asserted by anyone adverse to any such party's rights as lessee under any of such leases, or affecting or questioning any such party's rights to the continued possession or use of the leased property or assets under any such leases; and (iii) neither the Company nor any of its Subsidiaries has knowledge of any pending or threatened condemnation, zoning change or other proceeding or action that will in any manner affect the size or use of, improvements or construction on or access to the leased properties of the Company or any of its Subsidiaries. 2.16 Environmental Laws ------------------ Except as otherwise disclosed in the SEC Reports and Filings, or as is not reasonably likely to result in a Material Adverse Effect: (a) Each of the Company and its Subsidiaries is in compliance with all applicable laws relating to pollution or the discharge of materials into the environment, including common law relating to damage to property or injury to persons ("Environmental Laws"). Each of the Company and its Subsidiaries currently holds all governmental authorizations required under Environmental Laws in order to conduct their businesses as described in the SEC Reports and Filings, and none of the above has any basis to believe that any such governmental authorization may be modified, suspended or revoked, or cannot be renewed in the ordinary course of business; (b) There are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, threatened release, or disposal of any material (including radiation and noise), that could form the basis of any claim (whether by a governmental authority or other person or entity) under Environmental Laws for cleanup costs, damages, penalties, fines, or otherwise, against any of 730804.14 -7- the Company or its subsidiaries, or against any person or entity whose liability for such claim may have been retained by any of the Company or its subsidiaries, whether by contract or law; and (c) The Company and its Subsidiaries have made available to the Investors and their counsel all studies, reports, assessments, audits and other information in their possession or control relating to any pollution or release, and, to the Company's knowledge, threatened release or disposal of materials regulated under Environmental Laws on, at, under, from or transported from any of their currently or formerly owned, leased or operated properties, including, without limitation, all information relating to underground storage tanks and asbestos containing materials. 2.17 Material Facts -------------- This Agreement, the schedules furnished contemporaneously herewith, and the other agreements, documents, certificates or written statements furnished or to be furnished to the Investors, including the SEC Reports and Filings, through the Closing Time by or on behalf of the Company in connection with the transactions contemplated hereby, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein, in light of the circumstances in which they were made, not misleading. 2.18 Investment Company Act ---------------------- None of the Offerors is, and after giving effect to the offering and sale of the Preferred Securities and the Subordinated Debentures, none of the Offerors will be, an "investment company" or a "company controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). 2.19 Tax Matters ----------- (a) The Company is taxed under subchapter C of the Code as a corporation for United States federal income tax purposes. (b) The Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. (c) The Subordinated Debentures will be classified for United States federal income tax purposes as indebtedness of the Company. 2.20 Reservation and Valid Issuance of Shares ---------------------------------------- The Common Shares issuable upon conversion of the Subordinated Debentures and the Preferred Securities have been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Indenture and the Declaration, will be duly and validly issued, fully paid and non-assessable and free of restrictions on transfer other than restrictions on transfer under the Indenture and under applicable federal and state securities laws. Holders of Common Shares shall not be personally liable as such for any liabilities, debts or obligations of, or claims against, the Company, whether arising before or after such holder became the owner or holder of the Common Shares. 2.21 Preferred Securities Guarantee ------------------------------ The Preferred Securities Guarantee, when taken together with the Company's obligations under the Subordinated Debentures, the Declaration and the Indenture, including its obligations to pay costs, expenses, debts and other obligations of the Trust, provides a full and unconditional guarantee on a subordinated basis by 730804.14 -8- the Company of amounts due on the Preferred Securities and the Subordinated Debentures. The obligations of the Company under the Preferred Securities Guarantee and the Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of the Company. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS ----------------------------------------------- 3.1 Certain Representations and Warranties -------------------------------------- Each Investor, severally and not jointly, represents and warrants to the Offerors as follows: (a) It is acquiring the Preferred Securities for its own account for investment and not with a view towards the resale, transfer or distribution thereof, nor with any present intention of distributing the Preferred Securities, but subject, nevertheless, to any requirement of law that the disposition of the Investor's property shall at all times be within the Investor's control, and without prejudice to the Investor's right at all times to sell or otherwise dispose of all or any part of such securities under a registration under the Securities Act or under an exemption from said registration available under the Securities Act. (b) It has full power and legal right to execute and deliver this Agreement and to perform its obligations hereunder. (c) It has taken all action necessary for the authorization, execution, delivery, and performance of this Agreement and its obligations hereunder, and, upon execution and delivery by the Company, this Agreement shall constitute the valid and binding obligations of such Investor, enforceable against such Investor in accordance with its terms, except as such enforcement may be limited by Bankruptcy Exceptions. (d) There are no claims for brokerage commissions or finder's fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement made by or on behalf of such Investor. (e) It has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Trust and Company as contemplated by this Agreement, and is able to bear the economic risk of such investment for an indefinite period of time. It has been furnished access to such information and documents as it has requested and has been afforded an opportunity to ask questions of and receive answers from representatives of the Company and the Trust concerning the terms and conditions of this Agreement and the purchase of the Preferred Securities contemplated hereby and the business and financial condition of the Company and the Trust. (f) It is an "accredited investor" as such term is defined in Rule 501 under the Securities Act. (g) It acknowledges that the Preferred Securities have not been registered under the Securities Act and may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. It has not offered or sold, and will not offer or sell, the Preferred Securities within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. 3.2 Additional Representations and Warranties ----------------------------------------- (a) VRLP represents and warrants to the Offerors that it is a limited partnership, duly organized, validly existing and in good standing under the laws of the State of Delaware. 730804.14 -9- (b) EOPLP represents and warrants to the Offerors that it is a limited partnership, duly organized, validly existing and in good standing under the laws of the State of Delaware. (c) GM Trust represents and warrants to the Offerors that each of its constituents is a trust, duly formed and validly existing under the laws of the State of New York. SECTION 4. COVENANTS OF THE COMPANY ------------------------ 4.1 Tax Matters ----------- (a) The Company shall continue to file tax returns under subchapter C of the Internal Revenue Code as a corporation for federal income tax purposes as long as any of (i) the Investors, (ii) any Affiliate of Vornado Realty Trust or VRLP, (iii) any Affiliate of Equity Office Properties Trust or EOPLP. or (iv) any Affiliate of the GM Trust are holders of Preferred Securities, Subordinated Debentures or Common Shares. (b) The Company and the Trust shall treat the Subordinated Debentures as indebtedness for United States federal income tax purposes. 4.2 Additional Matters. ------------------ (a) The Company shall promptly notify the Investors upon the commencement by the Company of a repurchase program of Shares, a tender offer for its outstanding Shares or other redemption or repurchase of its outstanding Shares. (b) The Company shall increase the number of trustees comprising the board of trustees of the Company to ten and fill all vacancies created thereby by September 30, 1998 and shall not decrease such number for so long as (i) VRLP or any Affiliate of Vornado Realty Trust or VRLP, or (ii) GM Trust or any Affiliate of GM Trust are holders of Preferred Securities or Subordinated Debentures. SECTION 5. OFFERORS' CLOSING CONDITIONS ---------------------------- The obligation of the Offerors to sell the Preferred Securities at the Closing Time, as provided in Section 1 hereof shall be subject to: 5.1 Compliance with Agreement ------------------------- The Investors shall have performed and complied with in all material respects all of their obligations and conditions contained in this Agreement which are required to be performed or complied with by the Investors prior to or at the Closing Time. 5.2 Each Investor to Close All of the Investors shall have purchased and paid for the Preferred Securities at the Closing Time pursuant to Section 1 hereof. SECTION 6. INVESTORS' CLOSING CONDITIONS ----------------------------- The obligation of the Investors to purchase and pay for the Preferred Securities at the Closing Time, as provided in Section 1 hereof, shall be subject, in their discretion, to the performance by the Offerors of 730804.14 -10- all of their agreements theretofore to be performed hereunder and to the satisfaction, prior thereto or concurrently therewith, of the following further conditions: 6.1 No Material Adverse Effect -------------------------- At the Closing Time, there shall not have occurred, since December 31, 1997, any development or event which has resulted in or could be expected to result in a Material Adverse Effect. On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange, the American Stock Exchange or on Nasdaq; (ii) a suspension or material limitation in trading in the Company's securities on the New York Stock Exchange; (iii) a general moratorium on commercial banking activities declared by federal or New York State authorities; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war. 6.2 Representations and Warranties ------------------------------ The representations and warranties of the Offerors contained in this Agreement shall be true and correct at and as of the Closing Time as though such representations and warranties were made at such time (unless any such representation and warranty is made as of a specific date and then it shall be true and correct as of such date). 6.3 Compliance with Agreement ------------------------- The Offerors shall have performed and complied in all material respects with all of their obligations and conditions contained in this Agreement which are required to be performed or complied with by the Offerors prior to or at the Closing Time. 6.4 Officer's and Regular Trustee's Certificate ------------------------------------------- The Investors shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, and a certificate of Regular Trustee of the Trust, dated as of the Closing Time, to the effect that, (i) there has been no Material Adverse Effect or development or event which could be expected to result in a Material Adverse Effect, (ii) the representations and warranties of the Offerors contained in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time, and (iii) the Offerors have complied with all obligations and satisfied all conditions on their part to be performed or satisfied at or prior to the Closing Time, and as to such other matters as the Investors may reasonably request. 6.5 Approval of Proceedings ----------------------- All proceedings to be taken in connection with the transactions contemplated by the Operative Documents, the Registration Rights Agreement, the Co-Investment Agreement and the other Preferred Instruments and all documents incident thereto, shall be satisfactory in form and substance to the Investors and their counsel; and the Investors shall have received copies of all documents or other evidence which they and such counsel may request in connection with such transactions and of all records of corporate proceedings in connection therewith in form and substance satisfactory to the Investors, and their counsel. 6.6 Injunction ---------- There shall be no effective injunction, writ, preliminary restraining order or any order of any nature issued by a court of competent jurisdiction directing that the transactions provided for herein or in the other Operative Documents or any of them not be consummated as herein or therein provided. 730804.14 -11- 6.7 Additional Agreements. --------------------- The Company and each Investor or certain Affiliates thereof shall have entered into this Agreement, the Registration Rights Agreement and the Co-Investment Agreement. The Company and the trustees shall have entered into the Indenture, the Declaration and the Preferred Securities Guarantee. 6.8 Each Investor to Close ---------------------- All of the Investors shall have purchased and paid for the Preferred Securities at the Closing Time pursuant to Section 1 hereof. 6.9 Opinions -------- (a) The Investors shall have received an opinion of counsel, dated as of the Closing Time, of Greenberg Glusker Fields Claman & Machtinger LLP, in form and substance satisfactory to the Investors to the effect that: (i) The Company has been duly created and is validly existing as a business trust under the laws of the State of California with the trust power and authority to own its properties and conduct its business as described in the SEC Reports and Filings. (ii) The Indenture, this Agreement, the Registration Rights Agreement and the Co-Investment Agreement have been duly authorized by the Company and have been duly executed and delivered by the Company, and constitute valid and legally binding obligations of the Company and are enforceable against the Company in accordance with their terms, subject, as to enforcement, to (i) Bankruptcy Exceptions, and (ii) the effect of applicable public policy on the enforceability of provisions relating to indemnification and contribution in the case of the Indenture, this Agreement and the Registration Rights Agreement. (iii) The Preferred Securities Guarantee has been duly authorized by the Company, has been duly executed and delivered by the Company and, constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by Bankruptcy Exceptions. (iv) The Subordinated Debentures have been duly authorized, executed, issued and delivered by the Company, when duly authenticated by the Trustee and delivered against payment therefor, will constitute the valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. (v) The Common Shares issuable upon the conversion of the Subordinated Debentures and/or the Preferred Securities have been duly authorized and reserved for issuance in accordance with the terms of the Subordinated Debentures, the Indenture and the Declaration; such Common Shares, when issued and delivered upon such conversion in accordance with the terms of the Subordinated Debentures and the Indenture and the Declaration, will be validly issued, fully paid and non-assessable; and, as of the date hereof, the issuance of such Common Shares upon the conversion of the Subordinated Debentures and/or the Preferred Securities is not subject to any preemptive or similar rights. Holders of Common Shares shall not be personally liable as such for any liabilities, debts or obligations of, or claims against, the Company, whether arising before or after such holder became the owner or holder of the Common Shares. 730804.14 -12- In rendering such opinion, such counsel may rely as to matters involving the application of laws other than the laws of California and the federal law of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of Richards, Layton & Finger, P.A. and Battle Fowler LLP. (b) The Investors shall have received an opinion of counsel, dated as of the Closing Time, of Richards, Layton & Finger, P.A. in form set forth in Exhibit C hereto. In rendering such opinion, such counsel may rely as to matters involving the application of laws other than the laws of Delaware and federal law of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of Greenberg Glusker Fields Claman & Machtinger LLP and Battle Fowler LLP. (c) The Investors shall have received an opinion of counsel, dated as of the Closing Time, of Battle Fowler LLP, in form and substance satisfactory to the Investors, to the effect that: (i) The Company is duly qualified to transact business in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified would not have a Material Adverse Effect. The Company is not required to make any submissions or filings with any state in order to maintain its valid existence or good standing. (ii) The execution, delivery and performance of the Operative Documents, the Registration Rights Agreement and the Co-Investment Agreement and the issuance and delivery of the Preferred Instruments and the consummation of the transactions contemplated herein and therein, and the compliance by each of the Offerors with their respective obligations hereunder and thereunder, do not and will not conflict with, result in a breach or violation of, or constitute a default under the Organizational Documents of the Company or any Subsidiary or the terms of any Key Agreement and Instrument known to such counsel and to which the Company or any Subsidiary is a party or bound, or result in a violation of any Requirement of Law known to such counsel to be applicable to the Company or any Subsidiary. (iii) There is no claim, suit, action or legal, administrative, arbitration or other proceeding or governmental investigation pending, or threatened, against the Company, the Company is not a target or subject of any pending or threatened criminal investigation or proceeding, and the Company is not the subject of any order, judgment, stipulation or decree, which has not been subsequently reversed, suspended, vacated or satisfied. (iv) All legally required proceedings in connection with the authorization, issuance and validity of the Preferred Securities and the sale of the Preferred Securities in accordance with this Agreement (other than the filing of post-issuance reports, the non-filing of which would not render the Preferred Securities invalid) have been taken and all legally required orders, consents or other authorizations or approvals of any public boards or bodies in connection with the authorization, issuance and the sale of the Preferred Securities in accordance with this Agreement (other than in connection with or in compliance with the provisions of the securities laws of any jurisdictions, as to which no opinion need be expressed) have been obtained and are in full force and effect. (v) Based solely upon the factual representations and warranties made by the Offerors and the Investors in the Purchase Agreement, the offer, issue, sale and delivery of the Preferred Securities in the manner contemplated in the Purchase Agreement does not require registration under the Securities Act. 730804.14 -13- (vi) Neither the Company nor the Trust are, and after giving effect to the purchase and sale of the Subordinated Debentures and the Preferred Securities, neither of them will be, required to register as an investment company under the 1940 Act. In rendering such opinion, such counsel may rely as to matters involving the application of laws other than the laws of New York and federal law of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of Greenberg Glusker Fields Claman & Machtinger LLP and Richards, Layton & Finger, P.A. (d) The Investors shall receive an opinion of Battle Fowler LLP, special tax counsel to the Offerors, in form and substance satisfactory to the Investors to the effect that: (i) based on current law and the assumptions stated or referred to therein, the Subordinated Debentures will be classified for United States federal income tax purposes as indebtedness of the Company, and (ii) the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Such opinion may be conditioned on, among other things, the initial and continuing accuracy of the facts, financial and other information, covenants and representations set forth in certificates of officers of the Company and the Trust and other documents deemed necessary for such opinion. SECTION 7. INDEMNIFICATION --------------- 7.1 Indemnification Generally ------------------------- The Offerors on the one hand, and each Investor, on the other hand (each an "Indemnifying Party"), shall indemnify the other from and against any and all losses, damages, liabilities, claims, charges, actions, proceedings, demands, judgments, settlement costs and expenses of any nature whatsoever (including, without limitation, attorneys' fees and expenses) or deficiencies resulting from any breach of a representation, warranty or covenant by the Indemnifying Party and all claims, charges, actions or proceedings incident to or arising out of the foregoing. Except with respect to third party claims being defended in good faith or claims for indemnification with respect to which there exists a good faith dispute, the Indemnifying Party shall satisfy its obligations hereunder within thirty (30) days of receipt of a notice of claim under this Section 7.1. 7.2 Indemnification Procedures for Third Party Claims ------------------------------------------------- If a claim by a third party is made against a Person entitled to indemnification under this Section (an "Indemnified Party") and such Indemnified Party intends to seek indemnity with respect thereto from any Indemnifying Party, such Indemnified Party shall give notice in writing as promptly as reasonably practicable to each such Indemnifying Party of any action commenced against or by it in respect of which indemnity may be sought hereunder, but failure to so notify an Indemnified Party shall not relieve such Indemnifying Party from any liability that it may have otherwise than on account of this indemnity agreement so long as such failure shall not have materially prejudiced the position of the Indemnifying Party. Upon such notification, the Indemnifying Party shall assume the defense of such action brought by a third party, and after such assumption the Indemnified Party shall not be entitled to reimbursement of any expenses incurred by it in connection with such action except as described below. In any such action, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party shall have failed to promptly assume and thereafter vigorously conduct such defense, (ii) the Indemnifying Party and the Indemnified Party shall have mutually 730804.14 -14- agreed to the contrary or (iii) the named parties in any such action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing or conflicting interests between them. No Indemnifying Party, in the defense of a third party claim shall, except with the consent of the Indemnifying Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent (which shall not be unreasonably withheld or delayed by such Indemnifying Party), but if settled with such consent or if there be final judgment for the plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and against any loss, damage or liability by reason of such settlement or judgment. SECTION 8. INTERPRETATION OF THIS AGREEMENT -------------------------------- 8.1 Terms Defined ------------- As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: Affiliates: shall have the meaning set forth in Section 2.11(a). Bankruptcy Exceptions: shall have the meaning set forth in Section 2.6(b). Business Day: shall mean a day other than a Saturday, Sunday or other day on which banking institutions in New York, New York are permitted or required by any applicable law to close. Certificate of Trust: shall mean the organizational document filed on July 28, 1998 in Delaware with respect to the Trust. Code: shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. Closing: shall mean the consummation of the purchase and sale of the Preferred Securities described in Section 1(a). Closing Time: shall have the meaning set forth in Section 1(b). Co-Investment Agreement: shall mean the co-investment agreement in the form attached hereto as Exhibit B. Company: shall have the meaning set forth in the preamble hereof. Company Material Adverse Effect: shall have the meaning set forth in Section 2.3(b). Declaration: shall have the meaning set forth in the preliminary statement hereof. Delaware Act: shall have the meaning set forth in the preliminary statement hereof. Environmental Laws: shall have the meaning set forth in Section 2.16(a). EOPLP: shall have the meaning set forth in the preamble hereof. 730804.14 -15- Financial Statements: shall have the meaning set forth in Section 2.3(a). GAAP: shall have the meaning set forth in Section 2.3(a). GM Trust: shall have the meaning set forth in the preamble hereof. Governmental Authority: shall mean any nation or government, any state or other political subdivision thereof, and any department, agency, instrumentality, bureau, entity or official exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. Indemnified Party: shall have the meaning set forth in Section 7.2. Indemnifying Party: shall have the meaning set forth in Section 7.1. Indenture: shall have the meaning set forth in the preliminary statement hereof. Investors: shall have the meaning set forth in the preamble hereof. Key Agreements and Instruments: shall mean as to any Person any indenture, mortgage, deed of trust, credit agreement, note or other evidence of indebtedness, or other material agreement or instrument to which such Person is a party or by which it is bound or, to which any of its property or assets is subject. Material Adverse Effect: shall have the meaning set forth in Section 2.3(b). 1940 Act: shall have the meaning set forth in Section 2.18. Offerors: shall have the meaning set forth in the preamble hereof. Operative Documents: shall have the meaning set forth in the preliminary statement hereof. Organizational Documents: shall mean as to any Person the articles or certificate of incorporation, declaration of trust, bylaws, partnership agreement or other organizational or governing documents of such Person. Person: shall mean an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof. Preferred Instruments: shall have the meaning set forth in the preliminary statement hereof. Preferred Securities: shall have the meaning set forth in the preliminary statement hereof. Preferred Securities Guarantee: shall have the meaning set forth in the preliminary statement hereof. Registration Rights Agreement: shall mean the registration rights agreement in the form attached hereto as Exhibit A. Requirements of Law: means as to any Person, any domestic or foreign and federal, state or local law, rule, regulation, statute or ordinance or judgment, order, decree or determination of any arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its properties or to which such Person or any of its property is subject. 730804.14 -16- SEC Reports and Filings: shall have the meaning set forth in Section 2.2(a). Share: shall mean a beneficial interest in the Company. Subordinated Debentures: shall have the meaning set forth in the preliminary statement hereof. Subsidiary or Subsidiaries: shall have the meaning set forth in Section 2.5. Trust: shall have the meaning set forth in the preamble hereof. Trust Material Adverse Effect: shall have the meaning set forth in Section 2.3(b). VRLP: shall have the meaning set forth in the preamble hereof. 8.2 Governing Law ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to its principles of conflicts of law. 8.3 Paragraph and Section Headings ------------------------------ The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. SECTION 9. MISCELLANEOUS ------------- 9.1 Expenses -------- Each party to this Agreement shall bear its own respective costs and expenses incurred in connection with the preparation, execution and delivery of this Agreement and the agreements and transactions contemplated hereby. 9.2 Notices. All notices or other communications under this Agreement shall be sufficient if in writing and delivered by hand or sent by telecopy, or sent, postage prepaid by registered, certified or express mail, or by recognized overnight air courier service and shall be deemed given when so delivered by hand or telecopied, or if mailed or sent by overnight courier service, on the third (3rd) Business Day after mailing (one Business Day in the case of express mail or overnight courier service) to the parties at the following addresses: (a) if to the Investors, to: Vornado Realty L.P. c/o Vornado Realty Trust Park 80 West, Plaza II Saddle Brook, New Jersey 07663 Attention: Joseph Macnow Executive Vice President, Finance and Administration 730804.14 -17- with a copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10004 Attention: Alan J. Sinsheimer EOP Operating Limited Partnership Two North Riverside Plaza Chicago, Illinois 60606 Attention: Stanley M. Stevens Richard D. Kincaid with a copy to: Rosenberg & Liebentritt, P.C. Two North Riverside Plaza, Suite 1600 Chicago, Illinois 60606 Attention: Jonathan Wasserman Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust One Mellon Bank Center Pittsburgh, Pennsylvania 15258-0001 Attention: Bernadette Rist, Legal Department with a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Gerald S. Backman, P.C. (b) if to the Company, to: Capital Trust 605 Third Avenue 26th Floor New York, New York 10016 Attention: John R. Klopp with a copy to: Battle Fowler LLP 75 East 55th Street New York, New York 10022 Attention: Thomas E. Kruger 730804.14 -18- (c) if to the Trust, to: CT Convertible Trust I c/o Capital Trust 605 Third Avenue 26th Floor New York, New York 10016 Attention: John R. Klopp with a copy to: Battle Fowler LLP 75 East 55th Street New York, New York 10022 Attention: Thomas E. Kruger or at such other address as the addressee may have furnished in writing to the sender as provided herein. 9.3 Survival -------- All warranties, representations, and covenants made by the Investors and the Offerors herein or in any certificate or other instrument delivered by the Investors or the Offerors under this Agreement shall be considered to have been relied upon by the Offerors or the Investors, as the case may be, and shall survive all deliveries to the Investors of the Preferred Securities, or payment by the Investors for such Preferred Securities, regardless of any investigation made by the Offerors or the Investors, as the case may be, or on the Offerors' or the Investors' behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by the Offerors or the Investors, as the case may be, hereunder. 9.4 Entire Agreement; Amendment and Waiver -------------------------------------- This Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of each of the parties. This Agreement and the agreements attached as Exhibits hereto constitute the entire understandings of the parties hereto and supersede all prior agreements or understandings with respect to the subject matter hereof between such parties. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the Offerors and the Investors. 9.5 Counterparts ------------ This Agreement may be executed in one or more counterparts with the same effect as if the parties executing the counterparts had each executed one instrument as of the day and year first above written. 9.6 Successors and Assigns ---------------------- This Agreement and all of the provisions hereof, including all of the rights of the Investors hereunder, shall inure to the benefit of the parties hereto and their respective successors and assigns. [The rest of this page intentionally left blank] 730804.14 -19- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. OFFERORS: CAPITAL TRUST By: /s/ John R. Klopp --------------------------------------------- Name: John R. Klopp Title: Chief Executive Officer CT CONVERTIBLE TRUST I By: /s/ John R. Klopp --------------------------------------------- Name: John R. Klopp Title: Regular Trustee INVESTORS: EOP OPERATING LIMITED PARTNERSHIP By: Equity Office Properties Trust, its general partner By: /s/ Debra L. Ferruzzi ------------------------------------------- Name: Debra L. Ferruzzi Title: Senior Vice President VORNADO REALTY L.P. By: Vornado Realty Trust, its general partner By: /s/ Michael D. Fascitelli ---------------------------------------- Name: Michael D. Fascitelli Title: President MELLON BANK N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust By: /s/ Bernadette Rist --------------------------------------------- Name: Bernadette Rist Title: Authorized Signatory 730804.14 -20- MELLON BANK N.A., as trustee for General Motors Salaried Employes Pension Trust By: /s/ Bernadette Rist --------------------------------------------- Name: Bernadette Rist Title: Authorized Signatory 730804.14 -21- Schedule 2.3(b) --------------- Company Financial Statements; Material Adverse Changes (1) Two (2) revolving credit facilities in the aggregate principal amount of up to $300,000,000, made by (i) Morgan Stanley Mortgage Capital Inc. ("MSMCI"), pursuant to a certain Master Loan Agreement dated as of June 8, 1998, between the Company and MSMCI, and (ii) Morgan Stanley & Co. International Limited ("MSIL"), pursuant to a certain CMBS Loan Agreement dated as of June 30, 1998, between the Company and MSIL. (2) Increases of a certain credit facility ("GACC Credit Facility") made by German American Capital Corporation ("GACC") to the Company, pursuant to a certain Credit Agreement dated as of September 30, 1997, between the Company and GACC, in the original maximum principal amount of $150,000,000, pursuant to the terms and provisions of: (i) a certain Amended and Restated Credit Agreement, dated as of January 1, 1998, between the Company and GACC, whereby the maximum principal amount of the GACC Credit Facility was increased from $150,000,000 to $250,000,000; (ii) a certain First Amendment to Amended and Restated Credit Agreement, dated as of June 22, 1998, between the Company and GACC, whereby the maximum principal amount of the GACC Credit Facility was increased from $250,000,000 to $300,000,000; and (iii) a certain Second Amendment to Amended and Restated Credit Agreement, dated as of July 23, 1998, between the Company and GACC, whereby the maximum principal amount of the GACC Credit Facility was increased from $300,000,000 to $360,000,000. 730804.14 Schedule 2.6(a) --------------- Agreements of the Trust NONE 730804.14 Schedule 2.14 ------------- Liabilities Capital Trust Balance Sheet Adjustments --------------------------------------- (July 23, 1998 - $000s) Significant asset and liability adjustments to 6/30/98 preliminary unaudited Capital Trust balance sheet as of 7/23/98: Assets Sale of CSFB floating rate CMBS ($23,978) Satisfaction of Troast loan (10,738) Addition of Buffalo loan 23,000 Funding of improvements under Wanamaker loan 2,510 Cash and other assets (1) (6,100) ---------------------- Total ($15,306) ====================== Liabilities Repayment of CSFB repo ($23,244) Satisfaction of Troast borrowings (10,000) Principal re-payment on VCG notes (500) Principal re-payment under FNMA repo (582) Buffalo borrowing (Morgan Stanley) 19,000 ---------------------- Total ($15,306) ====================== (1) Includes estimates to balance the Balance Sheet. 730804.14 EXHIBIT C --------- July 28, 1998 To Each of the Persons Listed on Schedule I Hereto Re: CT Convertible Trust I ---------------------- Ladies and Gentlemen: We have acted as special Delaware counsel for CT Convertible Trust I, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. This opinion is being furnished to you pursuant to Section 6.9(b) of the Preferred Securities Purchase Agreement dated as of July 28, 1998 (the "Purchase Agreement") among Capital Trust, a California business trust (the "Company"), the Trust, Vornado Realty L.P., a Delaware limited partnership, EOP Operating Limited Partnership, a Delaware limited partnership, Mellon Bank, N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust, a New York trust, and Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust, a New York trust. Capitalized terms used and not otherwise defined herein shall have the meaning ascribed to such terms in the Declaration (as hereinafter defined). For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated July 28, 1998 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on July 28, 1998; To Each of the Persons Listed on Schedule I Hereto July 28, 1998 Page 2 (b) The Declaration of Trust of the Trust, dated as of July 28, 1998, among Capital Trust, as sponsor, the Trustee and the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to the Declaration.; (c) The Purchase Agreement; (d) The Indenture; (e) The Preferred Securities Guarantee Agreement; (f) The Common Securities Guarantee Agreement; and (g) A Certificate of Good Standing for the Trust, dated July 28, 1998, obtained from the Secretary of State. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (g) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (g) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed that (i) the Declaration and the Certificate of Trust are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, each of the parties to the documents examined by us has been duly organized or duly formed, as the case may be, and is validly existing in good standing under the laws of the jurisdiction governing its organization or formation, (iii) each natural person who is a party to the documents examined by us has the legal capacity to execute, deliver and perform such documents, (iv) except to the extent provided To Each of the Persons Listed on Schedule I Hereto July 28, 1998 Page 3 in paragraph 4 below, each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) except to the extent provided in paragraph 5 below, each of the parties to the documents examined by us has duly authorized, executed and delivered such documents, (vi) each Person to whom a Convertible Preferred Security or a Common Security is to be issued by the Trust (each, a "Holder" and collectively, the "Holders") has received an appropriate Certificate for such Security, and the Trust has received payment for the Security acquired by each such Holder, in accordance with the Declaration and the Prospectus, and (vii) the Securities are issued and sold to the Holders in accordance with the Declaration and the Purchase Agreement. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder that are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Business Trust Act, and all filings required under the laws of the State of Delaware with respect to the creation and valid existence of the Trust as a business trust have been made. 2. Under the Business Trust Act and the Declaration, the Trust has the business trust power and authority to own property and conduct its business, all as described in the Declaration. 3. The Declaration constitutes a valid and binding obligation of the Company and the Trustees and is enforceable against the Company and the Trustees, in accordance with its terms. To Each of the Persons Listed on Schedule I Hereto July 28, 1998 Page 4 4. Under the Business Trust Act and the Declaration, the Trust has the trust power and authority to (i) execute and deliver, and to perform its obligations under the Purchase Agreement and (ii) issue and perform its obligations under the Securities. 5. Under the Business Trust Act and the Declaration, the execution and delivery by the Trust of the Purchase Agreement, and the performance by the Trust of its obligations thereunder, have been duly authorized by all necessary action on the part of the Trust. The Purchase Agreement has been duly authorized, executed and delivered by the Trust. 6. The Convertible Preferred Securities have been duly authorized by the Declaration and are duly and validly issued and, subject to the qualifications set forth herein, fully paid and nonassessable undivided beneficial interests in the assets of the Trust, entitled to the benefits of the Declaration. The Holders of the Convertible Preferred Securities and Common Securities, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Holders of the Convertible Preferred Securities may be obligated to make payments as set forth in the Declaration. 7. The Common Securities have been duly authorized by the Declaration and are duly and validly issued and, subject to the qualifications set forth herein, fully paid and represent undivided beneficial interests in the assets of the Trust, entitled to the benefits of the Declaration. 8. Under the Business Trust Act and the Declaration, the issuance of the Securities is not subject to preemptive rights. 9. The purchase by the Trust of the Debentures, the distribution of the Debentures by the Trust in the circumstances contemplated by the Declaration, the execution, delivery and performance by the Trust of the Purchase Agreement and the Registration Rights Agreement, the consummation by the Trust of the transactions contemplated thereby and compliance by the Trust with its obligations thereunder will not violate, conflict with or result in a breach of (i) any of the provisions of the Certificate of Trust or the Declaration or (ii) any applicable Delaware law or administrative regulation. To Each of the Persons Listed on Schedule I Hereto July 28, 1998 Page 5 The opinion expressed in paragraph 3 above regarding the enforceability of the Declaration is subject to (i) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent transfer and other similar laws relating to or affecting the rights and remedies of creditors generally, (ii) principles of equity, including applicable law relating to fiduciary duties (regardless of whether considered and applied in a proceeding in equity or at law), and (iii) the effect of applicable public policy on the enforceability of provisions relating to indemnification or contribution. This opinion may be relied upon by you in connection with the matters set forth herein. We also consent to Greenberg Glusker Fields Claman & Machtinger LLP and Battle Fowler LLC relying as to matters of Delaware law upon this opinion in connection with opinions to be rendered by them pursuant to the Purchase Agreement. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /S/ Richards, Layton & Finger, P.A. ------------------------------- GCK/ks Schedule I Vornado Realty L.P. EOP Operating Limited Partnership Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust EX-4.3 4 DECLARATION EXHIBIT 4.3 DECLARATION OF TRUST CT CONVERTIBLE TRUST I DATED AS OF July 28, 1998 727341.10 TABLE OF CONTENTS Page
ARTICLE I INTERPRETATION AND DEFINITIONS......................................................... 1 SECTION 1.1. Definitions.......................................................... 1 ARTICLE II TRUST INDENTURE ACT.................................................................... 7 SECTION 2.1. Trust Indenture Act: Application..................................... 7 SECTION 2.2. Lists of Holders of Securities....................................... 7 SECTION 2.3. Reports by the Institutional Trustee................................. 7 SECTION 2.4. Periodic Reports to Institutional Trustee............................ 8 SECTION 2.5. Evidence of Compliance with Conditions Precedent..................... 8 SECTION 2.6. Events of Default; Waiver............................................ 8 SECTION 2.7. Event of Default; Notice............................................. 9 ARTICLE III ORGANIZATION.......................................................................... 10 SECTION 3.1. Name................................................................ 10 SECTION 3.2. Office.............................................................. 10 SECTION 3.3. Purpose............................................................. 10 SECTION 3.4. Authority........................................................... 10 SECTION 3.5. Title to Property of the Trust...................................... 11 SECTION 3.6. Powers and Duties of the Regular Trustees........................... 11 SECTION 3.7. Prohibition of Actions by the Trust and the Trustees................ 13 SECTION 3.8. Powers and Duties of the Institutional Trustee...................... 14 SECTION 3.9. Certain Duties and Responsibilities of the Institutional Trustee.... 15 SECTION 3.10. Certain Rights of Institutional Trustee............................. 17 SECTION 3.11. Delaware Trustee.................................................... 19 SECTION 3.12. Execution of Documents.............................................. 19 SECTION 3.13. Not Responsible for Recitals or Issuance of Securities.............. 19 SECTION 3.14. Duration of Trust................................................... 19 SECTION 3.15. Mergers............................................................. 19 ARTICLE IV SPONSOR............................................................................... 20 SECTION 4.1. Sponsor's Purchase of Common Securities............................. 20 SECTION 4.2. Responsibilities of the Sponsor..................................... 21 ARTICLE V TRUSTEES.............................................................................. 21 SECTION 5.1. Number of Trustees.................................................. 21 SECTION 5.2. Delaware Trustee.................................................... 21 SECTION 5.3. Institutional Trustee; Eligibility.................................. 22 SECTION 5.4. Certain Qualifications of Regular Trustees and Delaware Trustee Generally........................................................... 22 SECTION 5.5. Regular Trustees.................................................... 22 SECTION 5.6. Appointment, Removal and Resignation of Trustees.................... 23 SECTION 5.7. Vacancies Among Trustees............................................ 24 SECTION 5.8. Effect of Vacancies................................................ 24 SECTION 5.9. Meetings............................................................ 24 SECTION 5.10. Delegation of Power................................................. 24 SECTION 5.11. Merger, Conversion, Consolidation or Succession to Business......... 25 ARTICLE VI DISTRIBUTIONS......................................................................... 25 SECTION 6.1. Distributions....................................................... 25 727341.10 -i- Page ARTICLE VII ISSUANCE OF SECURITIES................................................................ 25 SECTION 7.1. General Provisions Regarding Securities............................. 25 SECTION 7.2. Execution and Authentication........................................ 26 SECTION 7.3. Form and Dating..................................................... 26 SECTION 7.4. Paying Agent........................................................ 27 ARTICLE VIII TERMINATION OF TRUST.................................................................. 27 SECTION 8.1. Termination of Trust................................................ 27 ARTICLE IX TRANSFER OF INTERESTS................................................................. 28 SECTION 9.1. Transfer of Securities.............................................. 28 SECTION 9.2. Transfer of Certificates............................................ 31 SECTION 9.3. Deemed Security Holders............................................. 31 SECTION 9.4. Mutilated, Destroyed, Lost or Stolen Certificates.................. 31 ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS.................................................................... 32 SECTION 10.1. Liability........................................................... 32 SECTION 10.2. Exculpation......................................................... 32 SECTION 10.3. Fiduciary Duty...................................................... 32 SECTION 10.4. Indemnification..................................................... 33 SECTION 10.5. Outside Business.................................................... 35 ARTICLE XI ACCOUNTING............................................................................ 36 SECTION 11.1. Fiscal Year......................................................... 36 SECTION 11.2. Certain Accounting Matters.......................................... 36 SECTION 11.3. Banking............................................................. 37 SECTION 11.4. Withholding......................................................... 37 ARTICLE XII AMENDMENTS AND MEETINGS............................................................... 37 SECTION 12.1. Amendments.......................................................... 37 SECTION 12.2. Meetings of the Holders of Securities; Action by Written Consent.... 39 ARTICLE XIII REPRESENTATIONS OF SPONSOR, INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE...................................................................... 40 SECTION 13.1. Representations and Warranties of Institutional Trustee............. 40 SECTION 13.2. Representations and Warranties of Delaware Trustee.................. 41 ARTICLE XIV MISCELLANEOUS......................................................................... 42 SECTION 14.1. Notices............................................................ 42 SECTION 14.2. Governing Law....................................................... 43 SECTION 14.3. Intention of the Parties............................................ 43 SECTION 14.4. Headings............................................................ 43 SECTION 14.5. Successors and Assign............................................... 43 SECTION 14.6. Partial Enforceability.............................................. 43 SECTION 14.7. Counterparts........................................................ 44
727341.10 -ii- CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Declaration 310(a)................................................ 5.3(a) 310(c)................................................ Inapplicable 311(c)................................................ Inapplicable 312(a)................................................ 2.2(a) 312(b)................................................ 2.2(b) 313................................................... 2.3 314(a)................................................ 2.4 314(b)................................................ Inapplicable 314(c)................................................ 2.5 314(d)................................................ Inapplicable 314(f)................................................ Inapplicable 315(a)................................................ 3.9(b) 315(c)................................................ 3.9(a) 315(d)................................................ 3.9(b) 316(a)................................................ Annex I 316(c)................................................ 3.6(e) - ----------------- * This Cross-Reference table does not constitute part of the Declaration and shall not affect the interpretation of any of its terms or provisions. 727341.10 -iii- DECLARATION OF TRUST OF CT CONVERTIBLE TRUST I July 28, 1998 DECLARATION OF TRUST ("Declaration") dated and effective as of July 28, 1998, by the Trustees (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor established CT Convertible Trust I (the "Trust"), a trust under the Business Trust Act (as defined herein), pursuant to a Certificate of Trust filed with the Secretary of State of the State of Delaware on July 28, 1998, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures (as defined herein) of the Debenture Issuer (as defined herein); WHEREAS, as of the date hereof, no interests in the Trust have been issued; and WHEREAS, all of the Trustees and the Sponsor desire to adopt this Declaration; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitutes the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1. Definitions. Unless the context otherwise requires: (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits of or to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. 727341.10 "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Agent" means any Paying Agent or Conversion Agent. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in New York, New York or Wilmington, Delaware are permitted or required by any applicable law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code ss. 3801 et seq., as it may be amended from time to time, or any successor legislation. "Capital Stock" means, with respect to any Person, any and all shares, interests, units representing interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, including, with respect to partnerships and business trusts, partnership interests (whether general or limited), beneficial interests and any other interest or participation that confers upon a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership or business trust, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Certificate" means a Common Security Certificate or a Convertible Preferred Security Certificate. "Closing Date" means July 28, 1998. "Closing Price" has the meaning specified in Annex I. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Commission" means the Securities and Exchange Commission. "Common Securities Guarantee" means the guarantee agreement to be dated as of July 28, 1998 of the Sponsor in respect of the Common Securities. "Common Security" has the meaning specified in Section 7.1. "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2. "Common Shares" means the class A common shares of beneficial interest, $1.00 par value, in Capital Trust, a California business trust, and any other shares of beneficial interest as may constitute "Common Shares" under the Indenture. "Company Indemnified Person" means (a) any Regular Trustee; (b) any Affiliate of any Regular Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Regular Trustee; or (d) any officer, employee or agent of the Trust or its Affiliates. "Conversion Agent" has the meaning specified in Section 7.4. 727341.10 2 "Convertible Preferred Securities Guarantee" means the guarantee agreement to be dated as of July 28, 1998, of the Sponsor in respect of the Convertible Preferred Securities. "Convertible Preferred Security" has the meaning specified in Section 7.1. "Convertible Preferred Security Certificate" means a certificate representing a Preferred Security substantially in the form of Exhibit A-1. "Corporate Trust Office" means the office of the Institutional Trustee at which the corporate trust business of the Institutional Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 1100 North Market Street, 9th Floor, Wilmington, Delaware 19890-0001, Attention Corporate Trust Administration. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means Capital Trust, a California business trust, in its capacity as issuer of the Debentures under the Indenture. "Debenture Trustee" means Wilmington Trust Company, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the series of Debentures in the aggregate principal amount of $154,650,000 to be issued by the Debenture Issuer under the Indenture to be held by the Institutional Trustee, a specimen certificate for such series of Debentures being Exhibit B. "Delaware Trustee" has the meaning set forth in Section 5.1. "Direct Action" has the meaning set forth in Section 3.8. "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.1. "EOPLP" means EOP Operating Limited Partnership, a Delaware limited partnership. "Event of Default" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Fiduciary Indemnified Person" has the meaning set forth in Section 10.4(b). "Fiscal Year" has the meaning set forth in Section 11.1. "GM Trusts" means Mellon Bank N.A., as trustee for General Motors Corporation Hourly-Rate Employes Pension Trust, a New York trust, and Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust, a New York trust. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. 727341.10 3 "Indemnified Person" means each Company Indemnified Person and each Fiduciary Indemnified Person. "Indenture" means the Indenture dated as of July 28, 1998 between the Debenture Issuer and the Debenture Trustee. "Institutional Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.3. "Institutional Trustee Account" has the meaning set forth in Section 3.8(c). "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" has the meaning set forth in Annex I hereto. "Legal Action" has the meaning set forth in Section 3.6(g). "Liquidated Distribution" has the meaning specified in the terms of the Securities as set forth in Annex I. "List of Holders" has the meaning set forth in Section 2.2. "Majority in liquidation amount of the Securities" means, except as provided in the terms of the Convertible Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Convertible Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Annex I. "Non-U.S. Person" means a Person other than a U.S. person (as such term is defined in Regulation S). "Offeror" has the meaning set forth in Section 9.1(e). "Offered Securities" means the Convertible Preferred Securities, the Convertible Preferred Securities Guarantee, the Debentures and the Common Shares issuable upon conversion of the Debentures. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; 727341.10 4 (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Paying Agent" has the meaning specified in Section 3.8(h). "Payment Amount" has the meaning set forth in Section 6.1. "Person" means any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. "Paying Agent" has the meaning set forth in Section 3.8(h). "Payment Amount" has the meaning set forth in Section 6.1. "Regular Trustee" has the meaning set forth in Section 5.1. "Regulation S" means Regulation S under the Securities Act or any successor provision. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly-owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the Institutional Trustee, including any vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Institutional Trustee customarily performing functions similar to those performed by any of the above-designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Restricted Security" has the meaning specified in Section 9.1(d). "Rule 144A" means Rule 144A as promulgated under the Securities Act, or any successor rule. "Rule 144(k)" means Rule 144(k) as promulgated under the Securities Act, or any successor rule. "Rule 3a-5" means Rule 3a-5 under the Investment Company Act or any successor rule. "Sales Notice" has the meaning set forth in Section 9.1(e). "Securities" means the Common Securities and the Convertible Preferred Securities. 727341.10 5 "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Securities Guarantees" means the Common Securities Guarantee and the Convertible Preferred Securities Guarantee. "Securities Purchase Agreement" means the securities purchase agreement, dated as of July __, 1997, by and between the Sponsor, the Trust and the certain investors signatory thereto. "Special Event" has the meaning set forth in Annex I hereto. "Sponsor" or "Capital Trust" means Capital Trust, a California business trust, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Successor Delaware Trustee" has the meaning set forth in Section 5.6(b). "Successor Entity" has the meaning set forth in Section 3.15(b)(i). "Successor Securities" has the meaning set forth in Section 3.15(b). "Super Majority" has the meaning set forth in Section 2.6(a)(ii). "Tax Event" has the meaning set forth in Annex I hereto. "Transfer Restriction Termination Date" means the earlier of the first date on which (i) the Securities and any Common Shares issued or issuable upon the conversion or exchange thereof (other than (A) Securities acquired by the Trust or any Affiliate thereof and (B) Common Shares issued upon the conversion or exchange of any Security described in clause (A) above) may be sold pursuant to Rule 144(k) and (ii) all the Securities have been sold pursuant to an effective registration statement. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Trust Property" means (i) the Debentures, (ii) any cash on deposit in, or owing to, the Institutional Trustee Account and (iii) all proceeds and rights in respect of the foregoing to be held by the Institutional Trustee pursuant to the terms of this Declaration for the benefit of the Securityholders. "25% in liquidation amount of the Securities" means, except as provided in the terms of the Convertible Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Convertible Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 25% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or 727341.10 6 otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "VRLP" means Vornado Realty L.P., a Delaware limited partnership. ARTICLE II TRUST INDENTURE ACT SECTION 2.1. Trust Indenture Act: Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions. The Trust Indenture Act shall be applicable to this Declaration except as otherwise set forth herein, as if the Securities had been sold pursuant to an effective registration statement. (b) The Institutional Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. (c) If, and to the extent that, any provision of this Declaration limits, qualifies or conflicts with the duties imposed by ss.ss. 310 to 317, inclusive, of the Trust Indenture Act, such duties imposed under the Trust Indenture Act shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2. Lists of Holders of Securities. (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Institutional Trustee (i) within 14 days after each record date for payment of Distributions, a list in such form as the Institutional Trustee may reasonably require of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that, neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Institutional Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Institutional Trustee. The Institutional Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in the Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity), provided that, the Institutional Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Institutional Trustee shall comply with its obligations under ss.ss. 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3. Reports by the Institutional Trustee. Within 60 days after December 31 of each year, the Institutional Trustee shall provide to the Holders of the Convertible Preferred Securities such reports as are required by ss. 313 of the Trust Indenture Act, if any, in the form and in the manner provided by ss. 313 of the Trust Indenture Act. The Institutional Trustee shall also comply with the requirements of ss. 313(d) of the Trust Indenture Act. 727341.10 7 SECTION 2.4. Periodic Reports to Institutional Trustee. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Institutional Trustee such documents, reports and information as required by ss. 314 (if any) and the compliance certificate required by ss. 314 of the Trust Indenture Act in the form, in the manner and at the times required by ss. 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Institutional Trustee is for informational purposes only and the Institutional Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Sponsor's compliance with any of its covenants hereunder (as to which the Institutional Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 2.5. Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Institutional Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to ss. 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6. Events of Default; Waiver. (a) The Holders of a Majority in liquidation amount of the Convertible Preferred Securities may by vote on behalf of the Holders of all of the Convertible Preferred Securities, waive any past Event of Default in respect of the Convertible Preferred Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, the Event of Default under this Declaration shall also not be waivable; or (ii) requires the consent or vote of greater than a majority in principal amount of the holders of the Debentures (a "Super Majority") to be waived under the Indenture, the Event of Default under this Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Convertible Preferred Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The foregoing provisions of this Section 2.6(a) shall be in lieu of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Convertible Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Convertible Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Convertible Preferred Securities of an Event of Default with respect to the Convertible Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: 727341.10 8 (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under this Declaration as provided below in this Section 2.6(b), the Event of Default under this Declaration shall also not be waivable; or (ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such Event of Default under this Declaration as provided below in this Section 2.6(b), the Event of Default under this Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; provided further, that each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Convertible Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Institutional Trustee shall act solely on behalf of the Holders of the Convertible Preferred Securities and only the Holders of the Convertible Preferred Securities will have the right to direct the Institutional Trustee to act in accordance with the terms of the Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Institutional Trustee at the direction of the Holders of the Convertible Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. SECTION 2.7. Event of Default; Notice. (a) The Institutional Trustee shall, within 90 days after the occurrence of an Event of Default actually known to a Responsible Officer of the Institutional Trustee, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all such defaults with respect to the Securities unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures or in the payment of any sinking fund installment established for the Debentures, the Institutional Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Institutional Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. Any such notice given pursuant to this Section 2.7(a) shall state that an Event of Default under the Indenture also constitutes an Event of Default under this Declaration. (b) The Institutional Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 5.1(a) and 5.1(b) of the Indenture; or 727341.10 9 (ii) any default as to which the Institutional Trustee shall have received written notice or of which a Responsible Officer of the Institutional Trustee charged with the administration of the Declaration shall have actual knowledge. ARTICLE III ORGANIZATION SECTION 3.1. Name. The Trust is named "CT Convertible Trust I" as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2. Office. The address of the principal office of the Trust is c/o Capital Trust, 605 Third Avenue, 26th Floor, New York, NY 10016. On at least ten Business Days written notice to the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3. Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities and use the proceeds from such sale to acquire the Debentures, and (b) except as otherwise limited herein, to engage in only those other activities necessary, or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. SECTION 3.4. Authority. (a) Subject to the limitations provided in this Declaration and to the specific duties of the Institutional Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Institutional Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. (b) Except as expressly set forth in this Declaration and except if a meeting of the Regular Trustees is called with respect to any matter over which the Regular Trustees have power to act, any power of the Regular Trustees may be exercised by, or with the consent of, any one such Regular Trustee. (c) Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to cause the Trust to execute pursuant to Section 3.6; and 727341.10 10 (d) A Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purposes of executing any documents which the Regular Trustees have power and authority to cause the Trust to execute pursuant to Section 3.6. SECTION 3.5. Title to Property of the Trust. Except as provided in Section 3.8 with respect to the Debentures and the Institutional Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders of Securities shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6. Powers and Duties of the Regular Trustees. The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Convertible Preferred Securities and no more than one series of Common Securities, and provided further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to a simultaneous issuance of both Convertible Preferred Securities and Common Securities on the Closing Date; (b) in connection with the issue and sale of the Securities, at the direction of the Sponsor, to: (i) execute and enter into the Securities Purchase Agreement, and other related agreements providing for the sale of the Securities; and (ii) take all actions and perform such duties as may be required of the Regular Trustees to open checking, deposit or similar banking accounts as may be necessary in connection with the issuance and sale of the Securities; (c) to acquire the Debentures with the proceeds of the sale of the Convertible Preferred Securities and the Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Debentures to be held of record in the name of the Institutional Trustee for the benefit of the Holders of the Convertible Preferred Securities and the Holders of Common Securities; (d) to give the Sponsor and the Institutional Trustee prompt written notice of the occurrence of a Special Event; provided that the Regular Trustees shall consult with the Sponsor and the Institutional Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of ss. 316 (c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Convertible Preferred Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Institutional Trustee has the exclusive power to bring such Legal Action; 727341.10 11 (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors and consultants, and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations, if any, under the Trust Indenture Act; (j) to give the certificate required by ss. 314(a)(4) of the Trust Indenture Act to the Institutional Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar, transfer agent, Paying Agent and Conversion Agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election to defer payments of interest on the Debentures by extending the interest payment period under the Indenture; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Convertible Preferred Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust to be classified for United States federal income tax purposes as a grantor trust; and (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes; provided that such action does not adversely affect the interests of Holders or vary the terms of the Convertible Preferred Securities; (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust; (r) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to Section 11.2 herein; and 727341.10 12 (s) to the extent provided in this Declaration, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the Certificate of Cancellation with the Secretary of State of the State of Delaware. The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Institutional Trustee set forth in Section 3.8. Any expenses incurred by the Regular Trustees pursuant to this Section 3.6 shall be reimbursed by the Sponsor. The Trust initially appoints the Institutional Trustee as transfer agent and registrar for the Convertible Preferred Securities. SECTION 3.7. Prohibition of Actions by the Trust and the Trustees. (a) The Trust shall not, and the Trustees (including the Institutional Trustee) shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular the Trust shall not and the Trustees (including the Institutional Trustee) shall cause the Trust not to: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever except as permitted by the terms of this Declaration; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) other than as provided in this Declaration or Annex I hereto, (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is not waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause more than an insubstantial risk that (x) the Trust will be deemed an Investment Company required to be registered under the Investment Company Act or (y) the Trust will not be classified as a grantor trust for United States federal income tax purposes. 727341.10 13 SECTION 3.8. Powers and Duties of the Institutional Trustee. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Institutional Trustee in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Institutional Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Institutional Trustee in accordance with Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. (b) The Institutional Trustee shall not transfer its right, title and interest in the Debentures to the Regular Trustees or to the Delaware Trustee (if the Institutional Trustee does not also act as Delaware Trustee). (c) The Institutional Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Institutional Trustee Account") in the name of and under the exclusive control of the Institutional Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Institutional Trustee, deposit such funds into the Institutional Trustee Account and make payments to the Holders of the Convertible Preferred Securities and Holders of the Common Securities from the Institutional Trustee Account in accordance with Section 6.1. Funds in the Institutional Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Institutional Trustee Account shall be an account that is maintained with a banking institution the rating on whose long-term unsecured indebtedness is rated investment grade by a "nationally recognized statistical rating organization," as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Convertible Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; (iii) engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Trust Property in accordance with the terms of this Declaration; and (iv) to the extent provided for in this Declaration, take such ministerial actions necessary in connection with the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the Certificate of Cancellation with the Secretary of State of the State of Delaware. (d) The Institutional Trustee shall take all actions and perform such duties as may be specifically required of the Institutional Trustee pursuant to the terms of the Securities. (e) The Institutional Trustee shall take any Legal Action which arises out of, or in connection with, an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge, or the Institutional Trustee's duties and obligations under this Declaration or the Trust Indenture Act; provided however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Convertible Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Convertible 727341.10 14 Preferred Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures and provided, further, that if the Institutional Trustee fails to enforce its rights under the Debentures, any Holder of Convertible Preferred Securities may institute a legal proceeding against any person to enforce the Institutional Trustee's rights under the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of Convertible Preferred Securities to the extent of any payment made by the Debenture Issuer to such Holder of Convertible Preferred Securities in such Direct Action. Except as provided in the preceding sentences, the Holders of Convertible Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. (f) The Institutional Trustee shall continue to serve as a Trustee until either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with Section 5.6. (g) The Institutional Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default actually known to a Responsible Officer of the Institutional Trustee occurs and is continuing, the Institutional Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Securities. (h) The Institutional Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or Liquidation Distributions on behalf of the Trust with respect to all Securities and any such Paying Agent shall comply with ss. 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Institutional Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Institutional Trustee. (i) Subject to this Section 3.8, the Institutional Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6. The Institutional Trustee must exercise the powers set forth in this Section 3.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Institutional Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9. Certain Duties and Responsibilities of the Institutional Trustee. (a) The Institutional Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Institutional Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) of which a Responsible Officer of the Institutional Trustee has actual knowledge, the Institutional Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Institutional Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: 727341.10 15 (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Institutional Trustee shall be determined solely by the express provisions of this Declaration and the Institutional Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Institutional Trustee; and (B) in the absence of bad faith on the part of the Institutional Trustee, the Institutional Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Institutional Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Institutional Trustee, the Institutional Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Institutional Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Institutional Trustee, unless it shall be proved that the Institutional Trustee was negligent in ascertaining the pertinent facts; (iii) the Institutional Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under this Declaration; (iv) no provision of this Declaration shall require the Institutional Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Institutional Trustee against such risk or liability is not reasonably assured to it; (v) the Institutional Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Institutional Trustee Account shall be to deal with such property in a similar manner as the Institutional Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Institutional Trustee under this Declaration and the Trust Indenture Act; (vi) the Institutional Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Institutional Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor. Money held by the Institutional Trustee need not be segregated from other funds held by it except in relation to the Institutional Trustee Account maintained by the Institutional Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and 727341.10 16 (viii) the Institutional Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Institutional Trustee be liable for any default or misconduct of the Regular Trustees or the Sponsor. SECTION 3.10. Certain Rights of Institutional Trustee. (a) Subject to the provisions of Section 3.9: (i) the Institutional Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Institutional Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Institutional Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Institutional Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; (v) the Institutional Trustee may consult with counsel of its selection or other experts and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Institutional Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Institutional Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Institutional Trustee security and indemnity, reasonably satisfactory to the Institutional Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Institutional Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Institutional Trustee provided, that, nothing contained in this Section 3.10(a)(vi) shall be taken to (a) require the Holders of Convertible Preferred Securities to offer such indemnity in the event such Holders direct the Institutional Trustee to take any action it is empowered to take under this Declaration following an Event of Default or (b) relieve the Institutional Trustee, upon the occurrence of an 727341.10 17 Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Institutional Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Institutional Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Institutional Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys and the Institutional Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Institutional Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Institutional Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Institutional Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Institutional Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Institutional Trustee shall deem it desirable to receive written instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Institutional Trustee (i) may request written instructions from the Holders of the Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Institutional Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions; (xi) except as otherwise expressly provided by this Declaration, the Institutional Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and (xii) the Institutional Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Institutional Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Institutional Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Institutional Trustee shall be construed to be a duty. 727341.10 18 SECTION 3.11. Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees, the Institutional Trustee or the Trustees generally (except as may be required under the Business Trust Act) described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of ss. 3807 of the Business Trust Act. SECTION 3.12. Execution of Documents. Except as otherwise required by the Business Trust Act, any Regular Trustee is authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to execute pursuant to Section 3.6. SECTION 3.13. Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.14. Duration of Trust. The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall have existence for twenty-five (25) years from July 28, 1998. SECTION 3.15. Mergers. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any corporation or other body, except as described in Section 3.15(b) and (c). (b) The Trust may, with the consent of the Regular Trustees or, if there are more than two, a majority of the Regular Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Institutional Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided that (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Convertible Preferred Securities other securities having substantially the same terms as the Convertible Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Convertible Preferred Securities rank with respect to Distributions and payments upon liquidation, redemption and otherwise; (ii) the Debenture Issuer expressly acknowledges a trustee of the Successor Entity that possesses the same powers and duties as the Institutional Trustee as the Holder of the Debentures; 727341.10 19 (iii) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the Successor Entity); (iv) such Successor Entity has a purpose identical to that of the Trust; (v) such Successor Entity has assets identical to that of the Trust; (vi) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the Successor Entity); (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (C) following such merger, consolidation, amalgamation or replacement, the Trust (or such Successor Entity) will continue to be classified as a grantor trust for United States federal income tax purposes; and (vii) the Sponsor guarantees the obligations of the Successor Entity under the Successor Securities at least to the extent provided by the Securities Guarantees. (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, if such consolidation, amalgamation, merger or replacement would cause the Trust or the Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes. ARTICLE IV SPONSOR SECTION 4.1. Sponsor's Purchase of Common Securities. On the Closing Date the Sponsor will purchase all of the Common Securities issued by the Trust, in an amount at least equal to 3% of the capital of the Trust, at the same time as the Convertible Preferred Securities are sold. 727341.10 20 SECTION 4.2. Responsibilities of the Sponsor. In connection with the issue and sale of the Convertible Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Convertible Preferred Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; and (b) to negotiate the terms of the Securities Purchase Agreement providing for the purchase of the Convertible Preferred Securities. ARTICLE V TRUSTEES SECTION 5.1. Number of Trustees. The number of Trustees initially shall be four (4), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; provided, however, that the number of Trustees shall in no event be less than two (2); provided further, that (i) one Trustee, in the case of a natural person, shall be a person who is a resident of the State of Delaware or that, if not a natural person, is an entity which has its principal place of business in the State of Delaware (the "Delaware Trustee"); (ii) there shall be at least one Trustee who is an employee or officer of, or is affiliated with the Sponsor (a "Regular Trustee"); and (iii) one Trustee shall be the Institutional Trustee, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements. SECTION 5.2. Delaware Trustee. If required by the Business Trust Act, one Trustee shall be: (a) a natural person who is a resident of the State of Delaware; or (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law; provided that, if the Institutional Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Institutional Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. The Initial Delaware Trustee shall be: Wilmington Trust Company. 727341.10 21 SECTION 5.3. Institutional Trustee; Eligibility. (a) There shall at all times be one Trustee which shall act as Institutional Trustee which shall: (i) not be an Affiliate of the Sponsor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Institutional Trustee shall cease to be eligible to so act under Section 5.3(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 5.6(c). (c) If the Institutional Trustee has or shall acquire any "conflicting interest" within the meaning of ss. 310(b) of the Trust Indenture Act, the Institutional Trustee and the Holder of the Common Securities (as if it were the obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of ss. 310(b) of the Trust Indenture Act. (d) The Convertible Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in ss. 310(b) of the Trust Indenture Act. (e) The initial Institutional Trustee shall be: Wilmington Trust Company. SECTION 5.4. Certain Qualifications of Regular Trustees and Delaware Trustee Generally. Each Regular Trustee and the Delaware Trustee (unless the Institutional Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 5.5. Regular Trustees. The initial Regular Trustees shall be: John R. Klopp Sheli Z. Rosenberg (a) Except as expressly set forth in this Declaration and except if a meeting of the Regular Trustees is called with respect to any matter over which the Regular Trustees have power to act, any power of the Regular Trustees may be exercised by, or with the consent of, any one such Regular Trustee. (i) Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to cause the Trust to execute pursuant to Section 3.6. 727341.10 22 SECTION 5.6. Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.6(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Securities, by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities. (b) (i) The Trustee that acts as Institutional Trustee shall not be removed in accordance with Section 5.6(a) until a Successor Institutional Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Institutional Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) No such resignation of the Trustee that acts as the Institutional Trustee shall be effective: (A) until a Successor Institutional Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Institutional Trustee and delivered to the Trust, the Sponsor and the resigning Institutional Trustee; or (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (d) the Holders of the Common Securities shall use their best efforts to promptly appoint a Successor Delaware Trustee or Successor Institutional Trustee as the case may be if the Institutional Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.6. (e) If no Successor Institutional Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery of an instrument of resignation or removal, the Institutional Trustee or Delaware Trustee resigning or being removed, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Institutional Trustee or 727341.10 23 Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Institutional Trustee or Successor Delaware Trustee, as the case may be. (f) No Institutional Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Institutional Trustee or Successor Delaware Trustee, as the case may be. SECTION 5.7. Vacancies Among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Regular Trustees or, if there are more than two, a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION 5.8. Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.9. Meetings. If there is more than one Regular trustee, meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand-delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustee or any committee thereof shall be hand-delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. In the event there is only one Regular Trustee, any and all action of such Regular Trustee shall be evidenced by a written consent of such Regular Trustee. SECTION 5.10. Delegation of Power. A Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purposes of executing any documents contemplated in Section 3.6. The Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the 727341.10 24 extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION 5.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Institutional Trustee or the Delaware Trustee, as the case may be, may be merged or converted or with which either may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Institutional Trustee or the Delaware Trustee, as the case may be, shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Institutional Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Institutional Trustee or the Delaware Trustee, as the case may be, hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. ARTICLE VI DISTRIBUTIONS SECTION 6.1. Distributions. Holders of Securities shall receive Distributions (as defined herein) in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Convertible Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of interest (including Compound Interest (as defined in the Indenture) and Additional Sums (as defined in the Indenture)), premium and/or principal on the Debentures held by the Institutional Trustee (the amount of any such payment being a "Payment Amount"), the Institutional Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1. General Provisions Regarding Securities. (a) The Regular Trustees shall on behalf of the Trust issue one class of convertible preferred securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Convertible Preferred Securities") and one class of convertible common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Common Securities"). The Trust shall issue no securities or other interests in the assets of the Trust other than the Convertible Preferred Securities and the Common Securities. (b) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (c) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable. 727341.10 25 (d) Every Person, by virtue of having become a Holder in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of and shall be bound by this Declaration. SECTION 7.2. Execution and Authentication. (a) The Certificates shall be signed on behalf of the Trust by a Regular Trustee. In case any Regular Trustee of the Trust who shall have signed any of the Securities shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. (b) One Regular Trustee shall sign the Convertible Preferred Securities for the Trust by manual or facsimile signature. Unless otherwise determined by the Trust, such signature shall, in the case of Common Securities, be a manual signature. A Convertible Preferred Security shall not be valid until authenticated by the manual signature of an authorized signatory of the Institutional Trustee. The signature shall be conclusive evidence that the Convertible Preferred Security has been authenticated under this Declaration. Upon a written order of the Trust signed by one Regular Trustee, the Institutional Trustee shall authenticate the Convertible Preferred Securities for original issue. The Institutional Trustee may appoint an authenticating agent acceptable to the Trust to authenticate Convertible Preferred Securities. An authenticating agent may authenticate Convertible Preferred Securities whenever the Institutional Trustee may do so. Each reference in this Declaration to authentication by the Institutional Trustee includes authentication by such agent. An authenticating agent has the same rights as the Institutional Trustee to deal with the Company or an Affiliate. SECTION 7.3. Form and Dating. The Convertible Preferred Securities and the Institutional Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 and the Common Securities shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration. Certificates may be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof. The Securities may have letters, numbers, notations, other marks of identification or designation or other changes or additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice and such legends or endorsements required by law, stock exchange rule and agreements to which the Trust is subject, if any (provided that any such notation, legend or endorsement is in a form acceptable to the Trust). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Institutional Trustee in writing. Each Convertible Preferred Security Certificate shall be dated the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and, to the extent applicable, the Institutional Trustee and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby. 727341.10 26 SECTION 7.4. Paying Agent. The Trust shall maintain in the Borough of Manhattan, City of New York, State of New York, an office or agency where Convertible Preferred Securities may be presented for payment ("Paying Agent"). The Trust shall maintain an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Trust may appoint the Paying Agent and the Conversion Agent and may appoint one or more additional paying agents and one or more additional conversion agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. The Trust may change any Paying Agent or Conversion Agent without prior notice to any Holder. The Trust shall notify the Institutional Trustee in writing of the name and address of any Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Paying Agent or Conversion Agent, the Institutional Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent or Conversion Agent. The Trust shall act as Paying Agent and Conversion Agent for the Common Securities. The Trust initially appoints Wilmington Trust Company, c/o Corporate Trust Administration, 1100 North Market Street, Wilmington, Delaware 19810-0001, as Paying Agent and Conversion Agent for the Convertible Preferred Securities. ARTICLE VIII TERMINATION OF TRUST SECTION 8.1. Termination of Trust. (a) The Trust shall terminate: (i) upon the bankruptcy of the Sponsor or the Holder of the Common Securities; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor or the Holder of the Common Securities; the filing of a certificate of cancellation with respect to the Trust after having obtained the consent of at least a Majority in liquidation amount of the Securities voting together as a single class to file such certificate of cancellation; or the revocation of the Sponsor's charter or the charter of the Holder of the Common Securities and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Sponsor, the Trust or the Holder of the Common Securities; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Debentures held by the Institutional Trustee shall have been distributed to the Holders of Securities in exchange for all of the Securities; (vi) upon the written direction to the Institutional Trustee from the Sponsor at any time to terminate the Trust and, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, the distribution of Debentures to Holders in exchange for 727341.10 27 the Securities, subject to the Regular Trustees' receipt of an opinion of nationally recognized independent counsel experienced in such matters to the effect that the holders of the Convertible Preferred Securities will not recognize any income, gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and such distribution to Holders; (vii) upon the distribution of the Sponsor's Common Shares to all Holders of Convertible Preferred Securities upon conversion of all outstanding Convertible Preferred Securities; (viii) the expiration of the term of the Trust on July 28, 2023; or (ix) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 8.1(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware. (c) The provisions of Sections 3.9 and 3.10 and Article X shall survive the termination of the Trust. ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1. Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (b) Subject to this Article IX, Convertible Preferred Securities shall be transferable. (c) Subject to this Article IX, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor; provided, that, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would not be classified for United States federal income tax purposes as a grantor trust; and (ii) the Trust would be an Investment Company required to register under the Investment Company Act or the transferee would become an Investment Company required to register under the Investment Company Act. (d) Each Security that bears or is required to bear the legend set forth in this Section 9.1(d) (a "Restricted Security") shall be subject to the restrictions on transfer provided in the legend set forth in this Section 9.1(d), unless such restrictions on transfer shall be waived by the written consent of the Regular Trustees, and the Holder of each Restricted Security, by such securityholder's acceptance thereof, agrees to be bound by such restrictions on transfer. As used in this Section 9.1(d) and in Section 9.1(e), the term "transfer" encompasses any sale, pledge, transfer or other disposition of any Restricted Security. 727341.10 28 Prior to the Transfer Restriction Termination Date, any certificate evidencing a Security shall bear a legend in substantially the following form, unless otherwise agreed by the Regular Trustees (with written notice thereof to the Institutional Trustee): THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON SHARES, ISSUABLE UPON CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO CAPITAL TRUST (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, SUCH HOLDER MUST FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR CT CONVERTIBLE TRUST I ("THE TRUST") MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT EVIDENCE COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED 727341.10 29 AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Following the Transfer Restriction Termination Date, any Security or security issued in exchange or substitution therefor (other than (i) Securities acquired by Capital Trust or any Affiliate and (ii) Common Shares issued upon the conversion or exchange of any Security described in clause (i) above) may upon surrender of such Security for exchange to any Regular Trustee on behalf of the Trust in accordance with the provisions of Section 9.2, be exchanged for a new Security or Securities, of like tenor and aggregate liquidation amount, which shall not bear the restrictive legend required by this Section 9.1(d). Any Convertible Preferred Security or Common Shares issued upon the conversion or exchange of a Convertible Preferred Security that, prior to the Transfer Restriction Termination Date, is purchased or owned by the Company or any Affiliate thereof may not be resold by the Company or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction which results in such Convertible Preferred Securities or Common Shares, as the case may be, no longer being "restricted securities" (as defined under Rule 144). (e) Each Convertible Preferred Security shall be subject to the restrictions on transfer provided in this Section 9.1(e). (i) If a holder of Convertible Preferred Securities (the "Offeror") desires to sell, assign, transfer, encumber, or otherwise dispose of any of his Convertible Preferred Securities, he shall give written notice to Capital Trust of his desire to do so and of the price per security and other terms under which he proposes to dispose of his Convertible Preferred Securities (the "Sales Notice"), which Sales Notice shall constitute an offer on the part of the Offeror to sell to Capital Trust any such Convertible Preferred Securities upon the terms and conditions set forth in such notice. (ii) Unless, within ten (10) days after the giving of the Sales Notice by the Offeror pursuant to subparagraph (i) of this Section 9.1(e), Capital Trust shall give written notice to the Offeror that Capital Trust irrevocably commits to purchase the Convertible Preferred Securities subject of the Sale Notice at the price and under the terms specified in the Sales Notice given by the Offeror, Capital Trust shall be deemed to have rejected the offer of the Offeror to sell the Convertible Preferred Securities subject of the Sale Notice and the Offeror shall be free without restriction under this Section 9.1(e) to sell the Convertible Preferred Securities subject of the Sales Notice to any other Person, provided however, if the price per security is less than 90% of the price and the other terms are more favorable than those contained in the Sales Notice, the Offeror shall again offer to sell the Convertible Preferred Securities in accordance with the provisions of subparagraph (i) of this Section 9.1(e) before it may complete any such sale and provided further, that the Convertible Preferred Securities subject of the Sales Notice shall again be subject to the provisions of subparagraph (i) of this Section 9.1(e) if within ninety (90) days after the giving of the Sales Notice, the Offeror shall not have completed the disposition of such Convertible Debentures. (iii) If Capital Trust irrevocably commits to purchase the Convertible Preferred Securities as contemplated by subparagraph (ii) of this Section 9.1(e), the closing of such purchase shall take place at the principal place of business of Capital Trust at 10:00 A.M. (New York City time) on the third (3rd) day following the expiration of the ten (10) day period referred to subparagraph (ii) of this Section 9.1(e), or if such day is not a Business Day, then the next day that is a Business Day. The provisions of this Section 9.1(e) shall not apply to one or more transfers of Convertible Preferred Securities (i) by the GM Trusts to one or more trusts for the benefit of the employees of General Motors 727341.10 30 Corporation and its Affiliates, (ii) by VRLP to Vornado Operating Inc. or any Affiliate or subsidiary thereof or to any entity in which VRLP holds, directly or indirectly, an economic interest of greater than 50% or (iii) by EOPLP to any EOP sponsored "Paper Clip" enterprise or any Affiliate or subsidiary thereof or to any entity in which EOPLP holds, directly or indirectly, an economic interest of greater than 50%. SECTION 9.2. Transfer of Certificates. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge, but only upon payment in respect of any tax or other government charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration. SECTION 9.3. Deemed Security Holders. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 9.4. Mutilated, Destroyed, Lost or Stolen Certificates. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Institutional Trustee or the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless; then: in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, the Institutional Trustee or any Regular Trustee on behalf of the Trust shall execute and deliver, in exchange for, or in lieu of, any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.4, the Institutional Trustee or the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. 727341.10 31 ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1. Liability. (a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or (ii) required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise. (b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than amounts due on the Securities subject to the Preferred Guarantee) to the extent not satisfied out of the Trust's assets. (c) Pursuant to ss. 3803(a) of the Business Trust Act, the Holders of the Convertible Preferred Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 10.2. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 10.3. Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Institutional Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. 727341.10 32 (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between any Covered Persons; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4. Indemnification. (a) (i) The Debenture Issuer shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. (ii) The Debenture Issuer shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the 727341.10 33 Trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (iii) To the extent that a Company Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a), or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (iv) Any indemnification under paragraphs (i) and (ii) of this Section 10.4(a) (unless ordered by a court) shall be made by the Debenture Issuer only as authorized in the specific case upon a determination that indemnification of the Company Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) or (ii). Such determination shall be made (1) by the Regular Trustees by a majority vote of a quorum consisting of such Regular Trustees who were not parties to such action, suit or proceeding, (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Common Security Holder of the Trust. (v) Expenses (including attorneys' fees) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the Debenture Issuer in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Company Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Debenture Issuer as authorized in this Section 10.4(a). Notwithstanding the foregoing, no advance shall be made by the Debenture Issuer if a determination is reasonably and promptly made (i) by the Regular Trustees by a majority vote of a quorum of disinterested Regular Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion or (iii) by the Common Security Holder of the Trust, that, based upon the facts known to the Regular Trustees, counsel or the Common Security Holder at the time such determination is made, such Company Indemnified Person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Company Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Regular Trustees, independent legal counsel or Common Security Holder reasonably determine that such person 727341.10 34 deliberately breached his duty to the Trust or its Common or Convertible Preferred Security Holders. (vi) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Debenture Issuer or Convertible Preferred Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 10.4(a) shall be deemed to be provided by a contract between the Debenture Issuer and each Company Indemnified Person who serves in such capacity at any time while this Section 10.4(a) is in effect. Any repeal or modification of this Section 10.4(a) shall not affect any rights or obligations then existing. (vii) The Debenture Issuer or the Trust may purchase and maintain insurance on behalf of any person who is or was a Company Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Debenture Issuer would have the power to indemnify him against such liability under the provisions of this Section 10.4(a) (viii) For purposes of this Section 10.4(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 10.4(a) with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (ix) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a person. (b) The Debenture Issuer agrees to indemnify the (i) Institutional Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Institutional Trustee and the Delaware Trustee, and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Institutional Trustee and the Delaware Trustee (each of the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration or the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The provisions of this Section 10.4(b) shall survive the satisfaction and discharge of this Declaration or the resignation or removal of the Institutional Trustee or the Delaware Trustee, as the case may be. SECTION 10.5. Outside Business. Any Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar 727341.10 35 or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the Institutional Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Institutional Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1. Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the same as the fiscal year of the Sponsor. SECTION 11.2. Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books, records and supporting documents, which shall reflect in detail each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting in compliance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be audited by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Regular Trustees. (b) The Sponsor shall cause to be prepared and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Sponsor, annual financial statements of the Sponsor, including a balance sheet of the Sponsor as of the end of such Fiscal Year, and the related statements of income or loss. (c) The Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities, any annual United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall use reasonable best efforts to deliver all such statements within 90 days after the end of each Fiscal Year of the Trust. (d) The Regular Trustees shall cause to be duly prepared and timely filed with the appropriate taxing authority an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. 727341.10 36 SECTION 11.3. Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Institutional Trustee shall be made directly to the Institutional Trustee Account and no other funds of the Trust shall be deposited in the Institutional Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Institutional Trustee shall designate the signatories for the Institutional Trustee Account. SECTION 11.4. Withholding. The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over-withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. Furthermore, if withholding is imposed on payments of interest on the Debentures, to the extent such withholding is attributable to ownership by a specific Holder of Convertible Preferred Securities, the amount withheld shall be deemed a distribution in the amount of the withholding to such specific Holder. ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1. Amendments. Except as otherwise provided in this Declaration or by any applicable terms of the Securities, (a) this Declaration may only be amended by a written instrument approved and executed by the Regular Trustees (or, if there are more than two Regular Trustees, a majority of the Regular Trustees) and: (i) if the amendment affects the rights, powers, duties, obligations or immunities of the Institutional Trustee, also by the Institutional Trustee; and (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, also by the Delaware Trustee; (b) no amendment shall be made, and any such purported amendment shall be void and ineffective: (i) unless, in the case of any proposed amendment, the Institutional Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); 727341.10 37 (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Institutional Trustee, the Institutional Trustee shall have first received: (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (iii) to the extent the result of such amendment would be to: (A) cause the Trust to fail to continue to be classified for purposes of United States federal income taxation as a grantor trust; (B) reduce or otherwise adversely affect the powers of the Institutional Trustee; or (C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act; (c) at such time and after the Trust has issued any securities that remain outstanding, any amendment that would adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities; (d) Section 9.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders of the Securities; (e) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; (f) the rights of the holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove, Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; and (g) notwithstanding Section 12.1(c), this Declaration may be amended from time to time by the Holders of a Majority in liquidation amount of the Common Securities and the Institutional Trustee, without the consent of the Holders of the Convertible Preferred Securities to: (i) cure any ambiguity, correct or supplement any provision in this Declaration that may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under this Declaration, which shall not be inconsistent with the other provisions of this Declaration; or (ii) to modify, eliminate or add to any provisions of this Declaration to such extent as shall be necessary to ensure that the Trust will be classified for United States federal income tax purposes as a grantor trust at all times that any Securities are outstanding or to ensure that the Trust will not be required to register as an investment company under the Investment Company Act; 727341.10 38 provided, however, such action shall not adversely affect in any material respect the interests of any Holder of Securities; (h) this Declaration may be amended by the Holders of a Majority in liquidation amount of the Common Securities and the Institutional Trustee if: (i) the Holders of a Majority in liquidation amount of the Convertible Preferred Securities consent to such amendment and (ii) the Regular Trustees have received an opinion of nationally recognized independent counsel experienced in such matters to the effect that such amendment or the exercise of any power granted to the Regular Trustees in accordance with such amendment will not affect the Trust's status as a grantor trust for United States federal income tax purposes or the Trust's exemption from status as an "investment company" under the Investment Company Act, provided, that without the consent of each Holder of Securities, this Declaration may not be amended to: (i) change the amount or timing of any distribution on the Securities or otherwise adversely affect the amount of any distribution required to be made in respect of the Securities as of a specified date; (ii) restrict the right of a Holder of Securities to institute suit for the enforcement of any such payment on or after such date; or (iii) change or add a provision that shall result in the realization of unrelated business income for the Holders of Securities. (i) Any amendments of this Declaration shall become effective when notice thereof is given to Holders of Securities. SECTION 12.2. Meetings of the Holders of Securities; Action by Written Consent. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Convertible Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 25% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Security Certificates held by the Holders of Securities exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on 727341.10 39 which the Convertible Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Convertible Preferred Securities are then listed or trading otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIII REPRESENTATIONS OF SPONSOR, INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE SECTION 13.1. Representations and Warranties of Institutional Trustee. The Trustee that acts as initial Institutional Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Institutional Trustee represents and warrants, as applicable, to the Trust and the Sponsor at the time of the Successor Institutional Trustee's acceptance of its appointment as Institutional Trustee that: 727341.10 40 (a) the Institutional Trustee is a national banking association with trust powers, duly organized, validly existing and in good standing, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (b) the execution, delivery and performance by the Institutional Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Institutional Trustee. The Declaration has been duly executed and delivered by the Institutional Trustee, and it constitutes a legal, valid and binding obligation of the Institutional Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) the execution, delivery and performance of the Declaration by the Institutional Trustee does not conflict with or constitute a breach of the charter or by-laws of the Institutional Trustee; and (d) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Institutional Trustee of the Declaration. SECTION 13.2. Representations and Warranties of Delaware Trustee. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that: (a) the Delaware Trustee is a Delaware corporation, duly organized, validly existing and in good standing, with corporate power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (b) the Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration. The Declaration under Delaware law constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) no consent, approval or authorization of, or registration with or notice to, any Delaware or federal banking authority is required for the execution, delivery or performance by the Delaware Trustee of the Declaration; and (d) the Delaware Trustee is a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. SECTION 13.3. Representations and Warranties of Sponsor. The Sponsor represents and Warrants to the Trustee that: (a) the Sponsor has been duly created and is validly existing as a business trust under the laws of the State of California, with the trust power to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; and 727341.10 41 (b) the execution, delivery and performance by the Sponsor of the Declaration has been duly authorized by all necessary trust action on the part of the Sponsor. The Declaration has been duly executed and delivered by the Sponsor, and it constitutes a legal, valid and binding obligation of the Sponsor, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). ARTICLE XIV MISCELLANEOUS SECTION 14.1. Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): CT Convertible Trust I c/o Capital Trust 605 Third Avenue, 26th Floor New York, NY 10016 Attention: Chief Financial Officer (b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as Delaware Trustee may give notice of to the Holders of the Securities): Wilmington Trust Company 1100 North Market Street 9th Floor Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration (c) if given to the Institutional Trustee, at its Corporate Trust Office's mailing address set forth below (or such other address as the Institutional Trustee may give notice of to the Holders of the Securities): Wilmington Trust Company 1100 North Market Street 9th Floor Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration 727341.10 42 (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): Capital Trust 605 Third Avenue, 26th Floor New York, NY 10016 Attention: Chief Financial Officer (e) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2. Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 14.3. Intention of the Parties. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4. Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5. Successors and Assign. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6. Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. 727341.10 43 SECTION 14.7. Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 727341.10 44 IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. /s/ John R. Klopp ---------------------------------------------------- John R. Klopp, as Regular Trustee Solely as trustee and not in his individual capacity /s/ Sheli Z. Rosenberg ---------------------------------------------------- Sheli Z. Rosenberg, as Regular Trustee Solely as trustee and not in her individual capacity WILMINGTON TRUST COMPANY, as Delaware Trustee By: /s/ Emmett R. Harmon --------------------------------- Name: Emmett R. Harmon Title: Vice President WILMINGTON TRUST COMPANY, as Institutional Trustee By: /s/ Emmett R. Harmon --------------------------------- Name: Emmett R. Harmon Title: Vice President CAPITAL TRUST, as Sponsor By: /s/ John R. Klopp --------------------------------- Name: John R. Klopp Title: Chief Executive Officer 727341.10 45 ANNEX I TERMS OF 8.25% STEP UP CONVERTIBLE TRUST PREFERRED SECURITIES 8.25% STEP UP CONVERTIBLE TRUST COMMON SECURITIES Pursuant to Section 7.1 of the Declaration of Trust, dated as of July 28, 1998 (as amended from time to time, the "Declaration"), of CT Convertible Trust I, the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Convertible Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration): 1. Designation and Number. (a) Convertible Preferred Securities. 150,000 Convertible Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of One Hundred Fifty Million Dollars ($150,000,000), and a liquidation amount with respect to the assets of $1,000 per convertible preferred security, are hereby designated for the purposes of identification only as "8.25% Step Up Convertible Trust Preferred Securities" (the "Convertible Preferred Securities"). The Convertible Preferred Security Certificates evidencing the Convertible Preferred Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such letters, numbers, notations, other means of identification or designation or other changes or additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice and such legends or endorsements required by law, state exchange rule and agreements to which the Trust is subject, if any (provided that any such notation, legend or endorsement is in a form acceptable to the Trust). (b) Common Securities. 4,650 Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of Four Million Six Hundred Fifty Thousand Dollars ($4,650,000), and a liquidation amount with respect to the assets of the Trust of $1,000 per common security, are hereby designated for the purposes of identification only as "8.25% Step Up Convertible Trust Common Securities" (the "Common Securities"). The Common Securities Certificates evidencing the Common Securities shall be in the form of Exhibit A-2 to the Declaration, with such letters, numbers, notations, other means of identification or designation or other changes or additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice and such legends or endorsements required by law, state exchange rule and agreements to which the Trust is subject, if any (provided that any such notation, legend or endorsement is in a form acceptable to the Trust). 2. Distributions. (a) Distributions payable on each Security will be fixed at a rate per annum of 8.25% of the stated liquidation amount of $1,000 per Security from and including July 28, 1998 (the "Issuance Date") to and including September 30, 2004, such rate per annum automatically increasing by an additional .75% per annum (any such increase shall be cumulative with any such prior increase(s)) on October 1, 2004 and again on each subsequent October 1 (such rate in effect at any time is hereinafter referred to as the "Coupon Rate"), and such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. I-1 727341.10 If Capital Trust pays any Common Dividend during any quarter ending on a Distribution Payment Date (as defined below), the Coupon Rate in effect for such quarter shall automatically increase by the Common Rate. For purposes of this provision, the following terms have the following meanings: (i) "Common Dividend" means any cash dividend or distribution payable on the Common Shares of Capital Trust. (ii) "Common Rate" means, for any quarter, the fraction, expressed as a percentage rate per annum, the numerator of which is the aggregate dollar amount of Common Dividend paid on one common share during such quarter and the denominator of which is $9.00 (subject to adjustment in proportion to each adjustment to the Conversion Price (as defined below) triggered by events occurring prior to such quarter). (b) Distributions on the Securities will be cumulative, will accrue from July 28, 1998 and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year (each a "Distribution Payment Date"), commencing on September 30, 1998, except as otherwise described below. So long as the Debenture Issuer shall not be in default in the payment of interest on the Debentures, and subject to the condition that the prescribed certification regarding liquidity is made at the commencement of the Extension Period and at the beginning of each subsequent quarter of such Extension Period, the Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period"), during which Extension Period no interest shall be due and payable on the Debentures, provided that no Extension Period shall last beyond the date of maturity or any redemption date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or extend beyond the maturity or any redemption date of the Debentures. Payments of accrued Distributions and, to the extent permitted by applicable law, accrued interest thereon shall be payable on the Distribution Payment Date on which the relevant Extension Period terminates and shall be payable to Holders as they appear on the books and records of the Trust at the close of business on the record date next preceding such Distribution Payment Date. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. Each Extension Period, if any, will end on an interest payment date for the Debentures; such date will also be a Distribution Payment Date for the Securities. In the event that the Debenture Issuer exercises its right to defer payment of interest, then during such Extension Period the Debenture Issuer shall not (a) declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its Capital Stock, or (b) make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Debenture Issuer that rank pari passu with or junior in interest to the Debentures or make any guarantee payments with respect to any guarantee by the Debenture Issuer of the debt securities of any subsidiary of the Debenture Issuer if such guarantee ranks pari passu with or junior in interest to the Debentures (other than (i) as a result of a reclassification of the Capital Stock of the Debenture Issuer or the exchange or conversion of one class or series of the Capital Stock of the Debenture Issuer for another class or series of the Capital Stock of the Debenture Issuer, (ii) the purchase of fractional interests in shares of the Capital Stock of the Debenture Issuer pursuant to the conversion or exchange provisions of such Capital Stock or the security being converted into or exchanged for such Capital Stock, (iii) dividends or distributions in Common Shares of the Debenture Issuer, (iv) any declaration of a dividend in connection with the implementation of a shareholders' rights plan, or the issuance of Capital Stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (v) payments under the Securities Guarantees, (vi) purchases of Common Shares of the Debenture Issuer related to the issuance of Common Shares of the Debenture Issuer or rights under any of the Debenture Issuer's benefit plans for its directors, officers or employees and (vii) obligations under any dividend reinvestment and stock purchase plans). I-2 727341.10 (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates, which shall be fifteen days prior to the relevant payment dates, which dates correspond to the record and interest payment dates on the Debentures. The relevant record dates for the Common Securities shall be the same record dates as for the Convertible Preferred Securities. Distributions payable on any Securities that are not punctually paid on any Distribution Payment Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distributions payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (d) In the event of an election by the Holder to convert its Securities through the Conversion Agent into Common Shares pursuant to the terms of the Securities as set forth in this Annex I to the Declaration, no payment, allowance or adjustment shall be made with respect to accumulated and unpaid Distributions on such Securities, or be required to be made; provided, however, that Holders of Securities at the close of business on any record date for the payment of Distributions will be entitled to receive the Distributions payable on such Securities on the corresponding payment date notwithstanding the conversion of such Securities into Common Shares following such record date; provided, further that if the date of any redemption of related Debentures falls between such record date and such corresponding payment date, the amount of such Distribution shall include accumulated and unpaid Distributions accrued to but excluding such date of redemption and such payment shall be made to the converting holder. (e) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. Liquidation Distribution Upon Dissolution. The Debenture Issuer will have the right at any time to cause the Trust to be dissolved with the result that, after satisfaction of creditors of the Trust, Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of the Convertible Preferred Securities and the Common Securities will be distributed on a pro rata basis to the Holders of the Convertible Preferred Securities and the Common Securities in liquidation of such Holders' interests in the Trust, within 90 days following notice given to the Holders of the Convertible Preferred Securities, subject to the Regular Trustees' receipt of an opinion of nationally recognized independent counsel experienced in such matters to the effect that the Holders will not recognize any income, gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and such distribution to Holders of Convertible Preferred Securities. In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a "Liquidation"), the Holders of the Securities on the date of the Liquidation will be entitled to receive out of the assets of the Trust available for distribution to Holders of Securities after satisfaction of liabilities of creditors an amount equal to the aggregate of the stated liquidation amount of $1,000 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such Liquidation, Debentures in an aggregate stated principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, such Securities, shall have been distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. I-3 727341.10 If, upon any such Liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. Redemption and Distribution. (a) The Debentures will mature on September 30, 2018, and may be redeemed, in whole or in part, at any time on or after September 30, 2003, or at any time in certain circumstances upon the occurrence of a Tax Event (as defined below). Upon the repayment of the Debentures in whole or in part, whether at maturity, upon redemption (either at the option of the Debenture Issuer or pursuant to a Tax Event as described below) or otherwise, the proceeds from such repayment or payment shall be simultaneously applied to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed at a redemption price per Security equal to the redemption price of the Debentures, together with accrued and unpaid Distributions thereon to, but excluding, the date of the redemption, payable in cash (the "Redemption Price") or the Adjusted Redemption Price specified in the Indenture, as the case may be. Holders will be given not less than 30 nor more than 60 days' notice of such redemption. (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Convertible Preferred Securities will be redeemed Pro Rata and the Convertible Preferred Securities to be redeemed will be as described in Section 4(f) below. (c) If, at any time, a Tax Event or an Investment Company Event (each, as defined below, a "Special Event") shall occur and be continuing, the Regular Trustees may with the consent of the Debenture Issuer, except in certain limited circumstances in relation to a Tax Event described in this Section 4(c), dissolve the Trust and, after satisfaction of creditors, cause Debentures held by the Institutional Trustee, having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on, and having the same record date for payment as the Securities, to be distributed to the Holders of the Securities in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Special Event (the "90 Day Period"); provided, however, that such dissolution and distribution shall be conditioned on (i) the Regular Trustees' receipt of an opinion of nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and the distribution of Debentures, (ii) in the case of a Tax Event, the Debenture Issuer or the Trust being unable to avoid, within the 90 Day Period, the Tax Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure that has no adverse effect on the Trust, the Debenture Issuer, the Sponsor or the Holders of the Securities ("Ministerial Action"), and (iii) the Debenture Issuer's prior written consent to such dissolution and distribution. Furthermore, if (i) after receipt of a Dissolution Tax Opinion (as defined hereinafter) by the Regular Trustees, the Debenture Issuer has received an opinion (a "Redemption Tax Opinion") of nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Debenture Issuer would be precluded from deducting the interest on the Debentures for United States federal income tax purposes even after the Debentures were distributed to the Holders of Securities in liquidation of such Holders' interests in the Trust as described in this Section 4(c), or (ii) the Regular Trustees shall have been informed by such tax counsel that it cannot deliver a No Recognition Opinion to the Trust, the Debenture Issuer shall have the right, upon not less than 30 nor more than 60 days' notice, to redeem the Debentures, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, for cash within 90 days following the occurrence of such Tax Event. Following such redemption, Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed shall be redeemed by the Trust at the Redemption Price on a Pro Rata basis; provided, however, that, if at the time there is available to the Debenture Issuer or the Trust the I-4 727341.10 opportunity to eliminate, within such 90 day period, the Tax Event by taking some Ministerial Action, the Trust or the Debenture Issuer will pursue such Ministerial Action in lieu of redemption. "Tax Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after July 28, 1998, as a result of (a) any amendment to, clarification of, or change (including any announced prospective change) in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, (b) any judicial decision, official administrative pronouncement, ruling, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action") or (c) any amendment to, clarification of, or change in the official position or the interpretation of such Administrative Action or judicial decision that differs from the theretofore generally accepted position, in each case, by any legislative body, court, governmental authority or regulatory body, irrespective of the manner in which such amendment, clarification, change or Administrative Action is made known, which amendment, clarification, change or Administrative Action is effective or such pronouncement or decision is announced, in each case, on or after, July 28, 1998, there is the creation by such amendment, clarification, change or Administrative Action of more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to income accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes (other than withholding taxes), duties or other governmental charges, or (iii) interest paid in cash by the Debenture Issuer to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Debenture Issuer for United States federal income tax purposes. Notwithstanding the foregoing, a Tax Event shall not include any change in tax law that requires the Debenture Issuer for United States federal income tax purposes to defer taking a deduction for any original issue discount ("OID") that accrues with respect to the Debentures until the interest payment related to such OID is paid by the Debenture Issuer in cash; provided, that such change in tax law does not create more than an insubstantial risk that the Debenture Issuer will be prevented from taking a deduction for OID accruing with respect to the Debentures at a date that is no later than the date the interest payment related to such OID is actually paid by the Debenture Issuer in cash. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority on or after July 28, 1998 (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"). After the date fixed by the Regular Trustees for any distribution of Debentures upon dissolution of the Trust: (i) the Securities will no longer be deemed to be outstanding and (ii) certificates representing Securities held in definitive form will be deemed to represent Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest (including Compound Interest (as defined in the Indenture)) equal to accrued and unpaid Distributions on such Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue. (d) The Trust may not redeem fewer than all the outstanding Securities unless all accrued and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or prior to the date of redemption. (e) Notice of any redemption of, or notice of distribution of Debentures in exchange for, the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. I-5 727341.10 For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 4(e), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, or by such other means suitable to assure delivery of such written notice, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder of Securities shall affect the validity of the redemption or exchange proceedings with respect to any other Holder of Securities. (f) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each Holder of Convertible Preferred Securities. (g) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued for a redemption if the Debentures are redeemed as set out in Article X of the Indenture (which notice will be irrevocable), then, provided that the Debenture Issuer has paid the Institutional Trustee a sufficient amount of cash in connection with the related redemption of the Debentures, the Institutional Trustee will pay the relevant Redemption Price to the Holders of such Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/Distribution Notice shall have been given in connection with a redemption and funds deposited as required, then from and after the required date of such deposit, distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price or the Adjusted Redemption Price, as the case may be, but without interest on such Redemption Price or the Adjusted Redemption Price, as the case may be. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price or the Adjusted Redemption Price, as the case may be, payable on such date will be made on the next succeeding Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price or the Adjusted Redemption Price, as the case may be, in respect of any Securities is improperly withheld or refused and not paid either by the Institutional Trustee or by the Sponsor as guarantor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accrue from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price or the Adjusted Redemption Price, as the case may be. Neither the Regular Trustees nor the Trust shall be required (i) in the event of any redemption in part, to issue, register the transfer of or exchange any Securities during a period beginning at the opening of business 15 days before any selection for redemption of Securities and ending at the close of business on the earliest date in which the relevant Redemption/Distribution Notice is deemed to have been given to all holders of Securities to be so redeemed or (ii) to register the transfer of or exchange any Securities selected for redemption, in whole or in part, except for the unredeemed portion of any Securities being redeemed in part. (h) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (i) in respect of Convertible Preferred Securities, to the Holders thereof, and (ii) in respect of the Common Securities, to the Holders thereof. (i) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Convertible Preferred Securities by tender, in the open market or otherwise. I-6 727341.10 5. Conversion Rights. The Holders of Securities shall have the right at any time through the close of business on the last Business Day prior to the Maturity Date (as defined in the Indenture) (or, in the case of Securities called for redemption, prior to the close of business on the Business Day prior to the redemption date), at their option, to cause the Conversion Agent to convert Securities, on behalf of the converting Holders, into Common Shares in the manner described herein on and subject to the following terms and conditions: (a) The Securities will be convertible at the office of the Conversion Agent into fully paid and nonassessable Common Shares pursuant to the Holder's direction to the Conversion Agent to exchange such Securities for a portion of the Debentures theretofore held by the Trust on the basis of one Security per $1,000 principal amount of Debentures, and immediately convert such amount of Debentures into fully paid and nonassessable Common Shares at an initial rate of 85.47 Common Shares per $1,000 principal amount of Debentures (which is equivalent to a conversion price of $11.70 per Common Share, subject to certain adjustments set forth in Article XII of the Indenture (as so adjusted, the "Conversion Price"). At least 1,000, or all of them, if less than 1,000, of the Securities held by the converting Holder must be converted in connection with any conversion into Common Shares pursuant to the foregoing. (b) In order to convert Securities into Common Shares, the Holder shall submit to the Conversion Agent at its office an irrevocable request to convert Securities on behalf of such Holder (the "Conversion Request"), together with such certificates. The Conversion Request shall (i) set forth the number of Securities to be converted and the name or names, if other than the Holder, in which the Common Shares should be issued and (ii) direct the Conversion Agent (a) to exchange such Securities for a portion of the Debentures held by the Trust (at the rate of exchange specified in the preceding paragraph) and (b) to immediately convert such Debentures on behalf of such Holder, into Common Shares (at the conversion rate specified in the preceding paragraph). The Conversion Agent shall notify the Trust of the Holder's election to exchange Securities for a portion of the Debentures held by the Trust and the Trust shall, upon receipt of such notice, deliver to the Conversion Agent the appropriate principal amount of Debentures for exchange in accordance with this Section. The Conversion Agent shall thereupon notify Capital Trust of the Holder's election to convert such Debentures into Common Shares. Holders of Securities at the close of business on a Distribution record date will be entitled to receive the Distribution payable on such securities on the corresponding Distribution payment date notwithstanding the conversion of such Securities following such record date but prior to such distribution payment date; provided, however, that if the date of any redemption of the related Debentures falls between such record date and the related Distribution payment date, the amount of such Distribution shall include accumulated and unpaid Distributions accrued to but excluding such date of redemption, and such payment shall be made to the converting Holder. Except as provided above, neither the Trust nor the Sponsor will make, or be required to make, any payment, allowance or adjustment upon any conversion on account of any accumulated and unpaid Distributions accrued on the Securities (including any Additional Amounts accrued thereon) surrendered for conversion, or on account of any accumulated and unpaid dividends on the Common Shares issued upon such conversion, except to the extent that such shares are held of record on the record date for any such distributions. Securities shall be deemed to have been converted immediately prior to the close of business on the day on which a Notice of Conversion relating to such Securities is received by the Trust in accordance with the foregoing provision (the "Conversion Date"). The Person or Persons entitled to receive Common Shares issuable upon conversion of the Debentures shall be treated for all purposes as the record holder or holders of such Common Shares at such time. As promptly as practicable on or after the Conversion Date, Capital Trust shall issue and deliver at the office of the Conversion Agent a certificate or certificates for the number of full Common Shares issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same, unless otherwise directed by the Holder in the notice of conversion and the Conversion Agent shall distribute such certificate or certificates to such Person or Persons. (c) Each Holder of a Security by his acceptance thereof appoints Wilmington Trust Company as "Conversion Agent" for the purpose of effecting the conversion of Securities in accordance with this Section. In effecting the conversion and transactions described in this Section, the Conversion Agent shall be acting as agent I-7 727341.10 of the Holders of Securities directing it to effect such conversion transactions. The Conversion Agent is hereby authorized (i) to exchange Securities from time to time for Debentures held by the Trust in connection with the conversion of such Securities in accordance with this Section and (ii) to convert all or a portion of the Debentures into Common Shares and thereupon to deliver such Common Shares in accordance with the provisions of this Section and to deliver to the Trust a new Debenture or Debentures for any resulting unconverted principal amount. (d) No fractional Common Shares will be issued as a result of conversion of Securities, but in lieu thereof such fractional interest will be paid in cash by Capital Trust, in an amount based on the Closing Price of the Common Shares on the date such Securities are surrendered for conversion, to the Conversion Agent, which in turn will make such payment to the Holder or Holders of Securities so converted. (e) Capital Trust shall at all times reserve and keep available out of its authorized and unissued Common Shares, solely for issuance upon the conversion of the Debentures, free from any preemptive or other similar rights, such number of Common Shares as shall from time to time be issuable upon the conversion of all the Debentures then outstanding. Notwithstanding the foregoing, Capital Trust shall be entitled to deliver upon conversion of Debentures, Common Shares reacquired and held in the treasury of Capital Trust (in lieu of the issuance of authorized and unissued Common Shares), so long as any such treasury shares are free and clear of all liens, charges, security interests or encumbrances. Any Common Shares issued upon conversion of the Debentures shall be duly authorized, validly issued and fully paid and nonassessable. The Trust shall deliver the Common Shares received upon conversion of the Debentures to the converting Holder free and clear of all liens, charges, security interests and encumbrances, except for United States withholding taxes. Each of Capital Trust and the Trust shall prepare and shall use its best efforts to obtain and keep in force such governmental or regulatory permits or other authorizations as may be required by law, and shall comply with all applicable requirements as to registration or qualification of Common Shares (and all requirements to list Common Shares issuable upon conversion of Debentures that are at the time applicable), in order to enable Capital Trust to lawfully issue Common Shares to the Trust upon conversion of the Debentures and the Trust to lawfully deliver Common Shares to each Holder upon conversion of the Securities. (f) Capital Trust will pay any and all taxes that may be payable in respect of the issue or delivery of Common Shares on conversion of Debentures and the delivery of the Common Shares by the Trust upon conversion of the Securities. Capital Trust shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of Common Shares in a name other than that in which the Securities so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Trust the amount of any such tax, or has established to the satisfaction of the Trust that such tax has been paid. (g) Nothing in the preceding Paragraph (f) shall limit the requirement of the Trust to withhold taxes pursuant to the terms of the Securities or as set forth in this Annex I to the Declaration or to the Declaration itself or otherwise require the Institutional Trustee or the Trust to pay any amounts on account of such withholdings. (h) The term "Closing Price" with respect to any security on any day means the last reported sale price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the NYSE Composite Tape, or, if such security is not listed or admitted to trading on the NYSE, on the principal national securities exchange on which such security is listed or admitted to trading, or, if such security is not listed or admitted to trading on a national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc., or, if such security is not quoted or admitted to trading on such quotation system, on the principal quotation system on which such security is listed or admitted to trading or quoted, or, if not listed or admitted to trading or quoted on any national securities exchange or quotation system, the average of the closing bid and asked prices of such security in the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or, if not so available in such manner, as I-8 727341.10 furnished by any NYSE member firm selected from time to time by the Board of Trustees (or any committee duly authorized by the Board of Trustees) of the Debenture Issuer for that purpose or, if not so available in such manner, as otherwise determined in good faith by the Board of Trustees (or any committee duly authorized by the Board of Trustees) of the Debenture Issuer. 6. Voting and Other Rights - Convertible Preferred Securities. (a) Except as provided under Sections 6(b) and 8 of this Annex I to the Declaration and as otherwise required by law and the Declaration, the Holders of the Convertible Preferred Securities will not have voting rights. (b) Subject to the requirements set forth in this paragraph, the Holders of a Majority in liquidation amount of the Convertible Preferred Securities then outstanding, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or may direct the exercise of any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies available under the Indenture with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 5.9 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, provided, however, that if an Event of Default under the Indenture has occurred and is continuing then the holders of 25% of the aggregate liquidation amount of the Convertible Preferred Securities then outstanding may direct the Institutional Trustee to declare the principal of and interest on the Debentures immediately due and payable; and provided, further, that, where a consent under the Indenture would require the consent or act of the Holders of greater than a majority of the Holders in principal amount of Debentures then outstanding (a "Super Majority") affected thereby, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Convertible Preferred Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures then outstanding. The Institutional Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Convertible Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Institutional Trustee as set forth above, the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Convertible Preferred Securities under this paragraph unless the Institutional Trustee has obtained an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust as a result of such action. If the Institutional Trustee fails to enforce its rights under the Debentures, any Holder of Convertible Preferred Securities may institute a legal proceeding against any person to enforce the Institutional Trustee's rights under the Debentures. If a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Convertible Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Convertible Preferred Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of Common Securities will be subrogated to the rights of such Holder of Convertible Preferred Securities to the extent of any payment made by the Issuer to such Holder of Convertible Preferred Securities in such Direct Action. Except as provided in the preceding sentences, the Holders of Convertible Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. Any approval or direction of Holders of Convertible Preferred Securities may be given at a separate meeting of Holders of Convertible Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Convertible Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of I-9 727341.10 Convertible Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Convertible Preferred Securities will be required for the Trust to redeem and cancel Convertible Preferred Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Convertible Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Convertible Preferred Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 7. Voting Rights - Common Securities. (a) Except as provided under Sections 7(b), 7(c) and 8 of this Annex I of the Declaration and as otherwise required by law and the Declaration, the Holders of the Common Securities will not have voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees. (c) Subject to Section 2.6 of the Declaration and only after any Event of Default with respect to the Convertible Preferred Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 5.9 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, provided that, where a consent or action under the Indenture would require the consent or act of the relevant Super Majority, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The Institutional Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Convertible Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Institutional Trustee has obtained an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Institutional Trustee fails to enforce its rights under the Declaration, any Holder of Common Securities may institute a legal proceeding directly against any Person to enforce the Institutional Trustee's rights under the Declaration, without first instituting a legal proceeding against the Institutional Trustee or any other Person. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will I-10 727341.10 include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 8. Amendments to Declaration and Indenture. (a) In addition to any requirements under Section 12.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than as described in Section 8.1 of the Declaration, then the Holders of outstanding Securities voting together as a single class, will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities then outstanding affected thereby; provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Convertible Preferred Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Securities then outstanding. (b) In the event the consent of the Institutional Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Institutional Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities then outstanding, voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of the relevant Super Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities then outstanding which the relevant Super Majority represents of the aggregate principal amount of the Debentures then outstanding; provided, further, that the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this Section 8(b) unless the Institutional Trustee has obtained an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust as a result of such action. 9. Pro Rata. A reference in these terms of the Securities to any distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Declaration has occurred and is continuing, in which case any funds available to make such payment shall be paid first in cash to each Holder of the Convertible Preferred Securities pro rata according to the aggregate liquidation amount of Convertible Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Convertible Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Convertible Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. I-11 727341.10 10. Ranking. The Convertible Preferred Securities rank pari passu and payment thereon shall be made Pro Rata with the Common Securities except that, where a Declaration Event of Default occurs and is continuing, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Convertible Preferred Securities. 11. Acceptance of Securities Guarantee and Indenture. Each Holder of Convertible Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Convertible Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. 12. No Preemptive Rights. The Holders of the Securities shall have no preemptive rights to subscribe for any additional securities. 13. Miscellaneous. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Convertible Preferred Securities Guarantee or the Common Securities Guarantee (as may be appropriate), and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business. I-12 727341.10 EXHIBIT A-1 [FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE] CERTIFICATE NUMBER: NUMBER OF CONVERTIBLE PREFERRED SECURITIES: CUSIP NO.: IF RULE 144A - US1264292087; IF ACCREDITED INVESTOR - US1264293077; IF REGULATION S -USU126651020 ISIN NO.: USU126651020 - - ONLY IF REGULATION S A1-1 727341.10 Certificate Evidencing Convertible Preferred Securities of CT CONVERTIBLE TRUST I [PRIOR TO THE TRANSFER RESTRICTION TERMINATION DATE, ANY CERTIFICATE EVIDENCING A CONVERTIBLE PREFERRED SECURITY SHALL BEAR A LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM, UNLESS OTHERWISE AGREED BY THE REGULAR TRUSTEES (WITH WRITTEN NOTICE TO THE INSTITUTIONAL TRUSTEE): THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR IF THIS SECURITY IS CONVERTIBLE INTO COMMON SHARES THE COMMON SHARES ISSUABLE UPON CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO CAPITAL TRUST (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, SUCH HOLDER MUST FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR CT CONVERTIBLE TRUST I (THE "TRUST") MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT EVIDENCE COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED A1-2 727341.10 SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.] NO LATER THAN 10 DAYS AFTER THE ISSUE DATE OF THE CONVERTIBLE PREFERRED SECURITIES, INFORMATION CONCERNING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY (AS THOSE TERMS ARE USED FOR FEDERAL INCOME TAX PURPOSES) OF THE CONVERTIBLE PREFERRED SECURITIES MAY BE OBTAINED FROM THE REGULAR TRUSTEES OF CT CONVERTIBLE TRUST I AT 605 THIRD AVENUE, 26TH FLOOR, NEW YORK, NY 10016. 8.25% Step Up Convertible Trust Preferred Securities (liquidation amount $1,000 per Convertible Trust Preferred Security) CT Convertible Trust I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that __________________ (the "Holder") is the registered owner of convertible preferred securities of the Trust, representing undivided beneficial interests in the assets of the Trust, designated as the 8.25% Step Up Convertible Trust Preferred Securities (liquidation amount $1,000 per Convertible Trust Preferred Security) (the "Convertible Preferred Securities"). The Convertible Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Convertible Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Declaration of Trust of the Trust dated as of July 28, 1998, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Convertible Preferred Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Convertible Preferred Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Convertible Preferred Securities Guarantee and the Indenture to the Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Convertible Preferred Securities as evidence of indirect beneficial ownership in the Debentures. Unless the Institutional Trustee's Certificate of Authentication hereon has been properly executed, these Convertible Preferred Securities shall not be entitled to any benefit under the Declaration or be valid or obligatory for any purpose. A1-3 727341.10 IN WITNESS WHEREOF, the Trust has executed this certificate this 28 day of July, 1998. CT Convertible Trust I By: ____________________________________ Name: Title: Trustee Solely as trustee and not in his individual capacity A1-4 727341.10 [FORM OF CERTIFICATE OF AUTHENTICATION] INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Convertible Preferred Securities referred to in the within-mentioned Declaration. Dated: July 28, 1998 Wilmington Trust Company, as Institutional Trustee or as Authentication Agent By: _______________________________ By: _______________________________ Authorized Signatory Authorized Signatory A1-5 727341.10 [FORM OF REVERSE OF SECURITY] Distributions payable on each Convertible Preferred Security will be fixed at a rate per annum of 8.25% of the stated liquidation amount of $1,000 per Preferred Security from and including July 28, 1998 (the "Issuance Date") to and including September 30, 2004, such rate per annum automatically increasing by an additional .75% per annum (any such increase shall be cumulative with any such prior increase(s)) on October 1, 2004 and again on each subsequent October 1 (such rate in effect at any time is hereinafter referred to as the "Coupon Rate"), and such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. If Capital Trust pays any Common Dividend during any quarter ending on a Distribution payment date, the Coupon Rate in effect for such quarter shall automatically increase by the Common Rate. Except as otherwise described below, Distributions on the Convertible Preferred Securities will be cumulative, will accrue from July 28, 1998 and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing on September 30, 1998, which payment dates shall correspond to the interest payment dates on the Debentures, to Holders of record at the close of business on the regular record date for such Distribution which shall be the close of business 15 days prior to such Distribution payment date unless otherwise provided in the Declaration. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period"); provided that no Extension Period shall last beyond the date of the maturity or any redemption date of the Debentures and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or extend beyond the maturity or any redemption date of the Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. The Convertible Preferred Securities shall be redeemable as provided in the Declaration. The Convertible Preferred Securities shall be convertible into Common Shares, through (i) the exchange of Convertible Preferred Securities for a portion of the Debentures and (ii) the immediate conversion of such Debentures into Debenture Issuer Common Shares, in the manner and according to the terms set forth in the Declaration. A1-6 727341.10 CONVERSION REQUEST To: Wilmington Trust Company, as Institutional Trustee of CT Convertible Trust I The undersigned owner of these Convertible Preferred Securities hereby irrevocably exercises the option to convert these Convertible Preferred Securities, or the portion below designated, into Common Shares of Capital Trust (the "Common Shares") in accordance with the terms of the Declaration of Trust (the "Declaration"), dated as of July 28, 1998, by John R. Klopp, and Sheli Z. Rosenberg, as Regular Trustees, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, Capital Trust, as Sponsor, and by the Holders, from time to time, of individual beneficial interests in the Trust to be issued pursuant to the Declaration. Pursuant to the aforementioned exercise of the option to convert these Convertible Preferred Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) to (i) exchange such Convertible Preferred Securities for a portion of the Debentures (as that term is defined in the Declaration) held by the Trust (at the rate of exchange specified in the terms of the Convertible Preferred Securities set forth as Annex I to the Declaration) and (ii) immediately convert such Debentures on behalf of the undersigned, into Common Shares (at the conversion rate specified in the terms of the Convertible Preferred Securities set forth as Annex I to the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: _______________, ____ in whole _____ in part _____ Number of Convertible Preferred Securities to be converted: ____________________ If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the Common Shares are to be issued, along with the address or addresses of such person or persons. ================================================== ================================================== -------------------------------------------------- -------------------------------------------------- Signature (for conversion only) A1-7 727341.10 Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ================================================== -------------------------------------------------- Signature Guarantee:* __________________________ - -------- * (Signature must be guaranteed by an "eligible guarantor institution," that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A1-8 727341.10 [FORM OF ASSIGNMENT FOR DEFINITIVE CONVERTIBLE PREFERRED SECURITY] For value received ---------------------- hereby sell(s), assign(s) and transfer(s) unto -------------------------------------------------------------- - ----------------------------------------- (Please insert social security or other taxpayer identification number of assignee.) the within security and hereby irrevocably constitutes and appoints ____________ attorney to transfer the said security on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the within security occurring prior to the Transfer Restriction Termination Date, the undersigned confirms that such security is being transferred: / / To Capital Trust or a subsidiary thereof; or / / Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or / / To an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Regulation S under the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; or / / Pursuant to an effective registration statement. and unless the box below is checked, the undersigned confirms that such security is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): / / The transferee is an Affiliate of the Company. Dated: ___________________________ Signature(s) -------------------------------------- -------------------------------------- -------------------------------------- Signature Guarantee* NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of this Security in every particular without alteration or enlargement or any change whatever. - -------- * (Signature must be guaranteed by an "eligible guarantor institution," that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A1-9 727341.10 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE CERTIFICATE NUMBER: NUMBER OF COMMON SECURITIES: Certificate Evidencing Common Securities of CT CONVERTIBLE TRUST I 8.25% Step Up Convertible Trust Common Securities (liquidation amount $1,000 per Common Security) THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD UNLESS SUCH OFFER AND SALE ARE REGISTERED UNDER OR ARE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT. THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS ALSO SUBJECT TO THE RESTRICTIONS SET FORTH IN THE DECLARATION REFERRED TO BELOW. NO LATER THAN 10 DAYS AFTER THE ISSUE DATE OF THE COMMON SECURITIES, INFORMATION CONCERNING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY (AS THOSE TERMS ARE USED FOR FEDERAL INCOME TAX PURPOSES) OF THE COMMON SECURITIES MAY BE OBTAINED FROM THE REGULAR TRUSTEES OF CT CONVERTIBLE TRUST I AT 605 THIRD AVENUE, 26TH FLOOR, NEW YORK, NY 10016. CT Convertible Trust I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ________________________________________ (the "Holder") is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the 8.25% Step Up Common Securities (liquidation amount $1,000 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Declaration of Trust of the Trust dated as of July 28, 1998, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. A2-1 727341.10 By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this 28th day of July, 1998. CT Convertible Trust I By: ____________________________________________ Name: Title: Trustee Solely as trustee and not in his individual capacity A2-2 727341.10 [FORM OF REVERSE OF SECURITY] Distributions payable on each Common Security will be fixed at a rate per annum, of 8.25% of the stated liquidation amount of $1,000 per Common Security, from and including July 28, 1998 (the "Issuance Date") to but excluding September 30, 2004, such rate per annum automatically increasing by an additional .75% per annum (any such increase shall be cumulative with any such prior increase(s)) on October 1, 2004 and again on each subsequent October 1 (such rate in effect at any time is hereinafter referred to as the "Coupon Rate") and such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. If Capital Trust pays any Common Dividend during any quarter ending on a Distribution payment date, the Coupon Rate in effect for such quarter shall automatically increase by the Common Rate. Except as otherwise described below, Distributions on the Common Securities will be cumulative, will accrue from July 28, 1998 and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing on September 30, 1998, which payment dates shall correspond to the interest payment dates on the Debentures, to Holders of record at the close of business on the regular record date for such Distribution which shall be the close of business 15 days prior to such Distribution payment date unless otherwise provided in the Declaration. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period"), provided that no Extension Period shall last beyond the date of maturity of the Debentures and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or extend beyond the date of maturity of the Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. The Common Securities shall be redeemable as provided in the Declaration. The Common Securities shall be convertible into Common Shares, through (i) the exchange of Common Securities for a portion of the Debentures and (ii) the immediate conversion of such Debentures into Debenture Issuer Common Shares, in the manner and according to the term set forth in the Declaration. A2-3 727341.10 CONVERSION REQUEST To: Wilmington Trust Company, as Institutional Trustee of CT Convertible Trust I The undersigned owner of these Common Securities hereby irrevocably exercises the option to convert these Common Securities, or the portion below designated, into Common Shares of Capital Trust (the "Common Shares") in accordance with the terms of the Declaration of Trust (the "Declaration"), dated as of July __, 1998, by John R. Klopp and Sheli Z. Rosenberg, as Regular Trustees, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, Capital Trust, as Sponsor, and by the Holders, from time to time, of individual beneficial interests in the Trust to be issued pursuant to the Declaration. Pursuant to the aforementioned exercise of the option to convert these Common Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) to (i) exchange such Common Securities for a portion of the Debentures (as that term is defined in the Declaration) held by the Trust (at the rate of exchange specified in the terms of the Common Securities set forth as Annex I to the Declaration) and (ii) immediately convert such Debentures on behalf of the undersigned, into Common Shares (at the conversion rate specified in the terms of the Common Securities set forth as Annex I to the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: _______________, ____ in whole _____ in part _____ Number of Common Securities to be converted: ____________________ If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the Common Shares are to be issued, along with the address or addresses of such person or persons. ================================================ ================================================ ------------------------------------------------ ------------------------------------------------ Signature (for conversion only) A2-4 727341.10 Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number. ================================================ ------------------------------------------------ Signature Guarantee *__________________________ - -------- * (Signature must be guaranteed by an "eligible guarantor institution," that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A2-5 727341.10 [FORM OF ASSIGNMENT FOR SECURITY OR COMMON SHARES ISSUABLE UPON CONVERSION THEREOF] For value received ---------------------- hereby sell(s), assign(s) and transfer(s) unto --------------------------------------------------------------- (Please insert social security or other taxpayer identification number of assignee.) the within security and hereby irrevocably constitutes and appoints ____________ attorney to transfer the said security on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the within security occurring prior to the Transfer Restriction Termination Date, the undersigned confirms that such security is being transferred: / / To Capital Trust or a subsidiary thereof; or / / Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or / / To an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Regulation S under the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; or / / Pursuant to an effective registration statement. and unless the box below is checked, the undersigned confirms that such security is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): / / The transferee is an Affiliate of the Company. Dated: ____________________________ Signature(s) -------------------------------------- -------------------------------------- -------------------------------------- Signature Guarantee* NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of this Security in every particular without alteration or enlargement or any change whatever. - -------- * (Signature must be guaranteed by an "eligible guarantor institution," that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A2-6 727341.10 EXHIBIT B SPECIMEN OF DEBENTURE B-1 727341.10 EX-4.4 5 INDENTURE Exhibit 4.4 - -------------------------------------------------------------------------------- CAPITAL TRUST and WILMINGTON TRUST COMPANY, as Trustee --------------- 8.25% STEP UP CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES --------------- INDENTURE Dated as of July 28, 1998 - -------------------------------------------------------------------------------- 727411.13 CAPITAL TRUST Reconciliation and tie between Trust Indenture Act of 1939 and Indenture dated as of July 28, 1998 Trust Indenture Act Section Indenture Section - ---------------- ----------------- 310(a)(1)................................................ 6.10 (a)(2)............................................. 6.10 (a)(3)............................................. Not Applicable (a)(4)............................................. Not Applicable (a)(5)............................................. 6.10 (b) ............................................. 6.8, 6.10 311(a)................................................... 6.11 (b) ............................................. 6.11 312(a)................................................... 4.1 and 4.2 (b) ............................................. 4.2 (c) ............................................. 4.2 313(a)(1)-(5) & (7)(8)................................... 6.6 (a)(6)............................................. Not Applicable (b)(1)............................................. Not Applicable (b)(2)............................................. 6.6 (c) ............................................. 6.6 (d) ............................................. 6.6 314(a)(1)-(3)............................................ 4.3 (a)(4)............................................. 3.4 (b) ............................................. Not Applicable (c)(1)............................................. 2.6 (c)(2)............................................. 2.6 (c)(3)............................................. Not Applicable (d) ............................................. Not Applicable (e) ............................................. 15.5 (f) ............................................. Not Applicable 315(a)................................................... 6.1 (b) ............................................. 6.5 (c) ............................................. 6.1 (d) ............................................. 6.1 (d)(1)............................................. 6.1 (d)(2)............................................. 6.1 (d)(3)............................................. 6.1 (e) ............................................. 5.10 316(a)................................................... 7.4 (a)(1)(A).......................................... 5.8 (a)(1)(B).......................................... 5.1, 5.9 (a)(2)............................................. Not Applicable (b) ............................................. 5.6 (c) ............................................. 7.1 317(a)(1)................................................ 5.2 727411.13 i Trust Indenture Act Section Indenture Section - --------------- ----------------- (a)(2) 5.2 (b) 3.3 318(a)................................................... 15.7 - --------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. 727411.13 ii TABLE OF CONTENTS Page
ARTICLE I DEFINITIONS.....................................................................................1 Section 1.1 Certain Terms Defined...........................................................................1 ARTICLE II THE CONVERTIBLE DEBENTURES......................................................................9 Section 2.1 Designation and Principal Amount................................................................9 Section 2.2 Maturity........................................................................................9 Section 2.3 Form and Payment................................................................................9 Section 2.4 Exchange and Registration of Transfer of Convertible Debentures; Restrictions on Transfers; Depositary...........................................................9 Section 2.5 Interest.......................................................................................11 Section 2.6 Authentication and Delivery of Convertible Debentures..........................................12 Section 2.7 Execution of Convertible Debentures............................................................13 Section 2.8 Certificate of Authentication..................................................................13 Section 2.9 Denomination and Date of Convertible Debentures; Payments of Interest..........................13 Section 2.10 Registration, Transfer and Exchange............................................................15 Section 2.11 Mutilated, Defaced, Destroyed, Lost and Stolen Convertible Debentures..........................15 Section 2.12 Cancellation of Convertible Debentures.........................................................16 Section 2.13 Temporary Convertible Debentures...............................................................16 ARTICLE III COVENANTS OF THE COMPANY.......................................................................17 Section 3.1 Payment of Principal and Interest..............................................................17 Section 3.2 Offices for Payment, etc.......................................................................17 Section 3.3 Paying Agents..................................................................................17 Section 3.4 Written Statement to Trustee...................................................................17 Section 3.5 Limitation on Dividends; Transactions with Affiliates..........................................18 Section 3.6 Covenants as to CT Trust.......................................................................18 Section 3.7 Existence......................................................................................18 ARTICLE IV HOLDERS OF CONVERTIBLE DEBENTURES LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE.................................................................18 Section 4.1 Company to Furnish Trustee Information as to Names and Addresses of Holders of Convertible Debentures..............................................................18 Section 4.2 Preservation and Disclosure of Holders of Convertible Debentures' Lists........................19 Section 4.3 Reports by the Company.........................................................................20 ARTICLE V REMEDIES OF THE TRUSTEE AND HOLDERS OF CONVERTIBLE DEBENTURES ON EVENT OF DEFAULT.....................................................20 Section 5.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default..........................20 Section 5.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt..................................22 Section 5.3 Application of Proceeds........................................................................23 Section 5.4 Restoration of Rights on Abandonment of Proceedings............................................24 Section 5.5 Limitations on Suits by Holders of Convertible Debentures......................................24 Section 5.6 Unconditional Right of Holders of Convertible Debentures to Institute Certain Suits..........................................................................................24 Section 5.7 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default........................24 Section 5.8 Control by Holders of Convertible Debentures...................................................24 Section 5.9 Waiver of Past Defaults........................................................................25 Section 5.10 Right of Court to Require Filing of Undertaking to Pay Costs...................................25 Section 5.11 Suits for Enforcement..........................................................................25 Section 5.12 Unconditional Right of Holders to Receive Principal and Interest and to Convert........................................................................................26 727411.13 iii Page ARTICLE VI CONCERNING THE TRUSTEE.........................................................................26 Section 6.1 Duties of the Trustee..........................................................................26 Section 6.2 Rights of Trustee..............................................................................27 Section 6.3 Individual Rights of Trustee...................................................................27 Section 6.4 Trustee's Disclaimer...........................................................................27 Section 6.5 Notice of Defaults.............................................................................27 Section 6.6 Reports by Trustee to Holders..................................................................27 Section 6.7 Compensation and Indemnity.....................................................................28 Section 6.8 Replacement of Trustee.........................................................................28 Section 6.9 Successor Trustee by Merger....................................................................29 Section 6.10 Eligibility; Disqualification..................................................................29 Section 6.11 Preferential Collection of Claims Against Company..............................................29 ARTICLE VII CONCERNING THE HOLDERS OF CONVERTIBLE DEBENTURES...............................................29 Section 7.1 Evidence of Action Taken by Holders of Convertible Debentures..................................29 Section 7.2 Proof of Execution of Instruments..............................................................29 Section 7.3 Holders to be Treated as Owners................................................................30 Section 7.4 Convertible Debentures Owned by Company Deemed Not Outstanding.................................30 Section 7.5 Right of Revocation of Action Taken............................................................30 ARTICLE VIII SUPPLEMENTAL INDENTURES........................................................................30 Section 8.1 Supplemental Indentures Without Consent of Holders of Convertible Debentures.....................................................................................30 Section 8.2 Supplemental Indentures With Consent of Holders of Convertible Debentures......................31 Section 8.3 Effect of Supplemental Indenture...............................................................32 Section 8.4 Documents to Be Given to Trustee...............................................................32 Section 8.5 Notation on Convertible Debentures in Respect of Supplemental Indentures.......................32 ARTICLE IX CONSOLIDATION, MERGER, SALE OR CONVEYANCE......................................................32 Section 9.1 Company May Consolidate, etc., on Certain Terms................................................32 Section 9.2 Successor Corporation Substituted..............................................................33 Section 9.3 Opinion of Counsel to Trustee..................................................................33 ARTICLE X REDEMPTION OF THE CONVERTIBLE DEBENTURES.......................................................33 Section 10.1 Tax Event Redemption...........................................................................33 Section 10.2 Optional Redemption by Company.................................................................34 Section 10.3 No Sinking Fund................................................................................35 Section 10.4 Election to Redeem; Notice of Redemption; Partial Redemptions..................................35 Section 10.5 Payment of Convertible Debentures Called for Redemption........................................36 Section 10.6 Exclusion of Certain Convertible Debentures from Eligibility for Selection for Redemption.................................................................................36 ARTICLE XI EXTENSION OF INTEREST PAYMENT PERIOD...........................................................37 Section 11.1 Extension of Interest Payment Period...........................................................37 Section 11.2 Notice of Extension............................................................................37 ARTICLE XII CONVERSION OF CONVERTIBLE DEBENTURES...........................................................37 Section 12.1 Conversion Rights..............................................................................37 Section 12.2 Conversion Procedures..........................................................................38 Section 12.3 Conversion Price Adjustments...................................................................39 Section 12.4 Merger, Consolidation or Sale of Assets........................................................42 Section 12.5 Notice of Adjustments of Conversion Price......................................................44 Section 12.6 Prior Notice of Certain Events.................................................................44 727411.13 iv Page Section 12.7 Certain Additional Rights......................................................................44 Section 12.8 Trustee Not Responsible for Determining Conversion Price or Adjustments........................45 Section 12.9 Reservation of Shares of Common Shares.........................................................45 Section 12.10 Payment of Certain Taxes upon Conversion.......................................................45 Section 12.11 Nonassessability...............................................................................45 ARTICLE XIII SUBORDINATION OF CONVERTIBLE DEBENTURES........................................................45 Section 13.1 Convertible Debentures Subordinate to Senior Indebtedness......................................45 Section 13.2 Payment Over of Proceeds upon Dissolution, Etc.................................................46 Section 13.3 Prior Payment to Senior Indebtedness upon Acceleration of Convertible Debentures.....................................................................................46 Section 13.4 No Payment When Senior Indebtedness in Default.................................................47 Section 13.5 Payment Permitted in Certain Situations........................................................47 Section 13.6 Subrogation to Rights of Holders of Senior Indebtedness........................................47 Section 13.7 Provisions Solely to Define Relative Rights....................................................47 Section 13.8 Trustee to Effectuate Subordination............................................................48 Section 13.9 No Waiver of Subordination Provisions..........................................................48 Section 13.10 Notice to Trustee..............................................................................48 Section 13.11 Reliance on Judicial Order or Certificate of Liquidating Agent.................................49 Section 13.12 Trustee Not Fiduciary for Holders of Senior Indebtedness.......................................49 Section 13.13 Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights.........................................................................................49 Section 13.14 Article Applicable to Paying Agents............................................................49 Section 13.15 Certain Conversions Deemed Payment.............................................................49 ARTICLE XIV EXPENSES.......................................................................................50 Section 14.1 Payment of Expenses............................................................................50 Section 14.2 Payment Upon Resignation or Removal............................................................50 ARTICLE XV MISCELLANEOUS PROVISIONS.......................................................................50 Section 15.1 Incorporators, Stockholders, Officers and Trustees of Company Exempt from Individual Liability...........................................................................50 Section 15.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Convertible Debentures.........................................................................50 Section 15.3 Right to Assign; Successors and Assigns Bound by Indenture.....................................51 Section 15.4 Notices and Demands on Company, Trustee and Holders of Convertible Debentures.....................................................................................51 Section 15.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein........................................................................................51 Section 15.6 Payments Due on Saturdays, Sundays and Holidays................................................52 Section 15.7 Conflict of Any Provision of Indenture with Trust Indenture Act................................52 Section 15.8 New York Law to Govern.........................................................................52 Section 15.9 Counterparts...................................................................................52 Section 15.10 Effect of Headings; Gender.....................................................................52
727411.13 v THIS INDENTURE, dated as of July 28, 1998, between CAPITAL TRUST, a California business trust (the"Company"), and Wilmington Trust Company, (the "Trustee"), W I T N E S S E T H: WHEREAS, the Company desires and has requested the Trustee to join it in the execution and delivery of this Indenture in order to establish and provide for the issuance by the Company of Convertible Debentures designated as its 8.25% Step Up Convertible Junior Subordinated Debentures (the "Convertible Debentures"), a specimen copy of which is attached hereto as Exhibit A, on the terms set forth herein; WHEREAS, CT Convertible Trust I, a Delaware statutory business trust ("CT Trust" or the "Trust"), has offered to certain investors in a private placement $150,000,000 aggregate liquidation amount of its 8.25% Step Up Convertible Trust Preferred Securities (the "Convertible Preferred Securities"), representing undivided beneficial interests in the assets of the Trust, and proposes to invest the proceeds from such offering, together with the proceeds of the issuance and sale by the Trust to the Company of $4,650,000 aggregate liquidation amount of its Common Securities, in $154,650,000 aggregate principal amount of the Convertible Debentures; and WHEREAS, all things necessary to make this Indenture a valid agreement of the Company and the Trustee, in accordance with its terms, have been done. NOW, THEREFORE: There is hereby established the terms of the Convertible Debentures to be issued under this Indenture, which shall be as set forth herein and in the form of Convertible Debentures attached hereto as Exhibit A, and in consideration of the premises and the purchase and acceptance of the Convertible Debentures by the holders thereof, the Company mutually covenants and agrees with the Trustee, for the equal and proportionate benefit of all holders of the Convertible Debentures, as follows: ARTICLE I DEFINITIONS Section 1.1 Certain Terms Defined. The following terms (except as otherwise expressly provided or unless the context otherwise clearly requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section. All other terms used in this Indenture that are defined in the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), or the definitions of which in the Securities Act of 1933, as amended (the "Securities Act"), are referred to in the Trust Indenture Act, including terms defined therein by reference to the Securities Act (except as herein otherwise expressly provided or unless the context otherwise clearly requires), shall have the meanings assigned to such terms in the Trust Indenture Act and in the Securities Act as in force at the date of this Indenture. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" means such accounting principles as are generally accepted at the time of any computation. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole, as supplemented and amended from time to time, and not to any particular Article, Section or other subdivision. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. "Additional Sums" shall have the meaning set forth in Section 2.5(c). "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Applicable Price" means (i) in the event of a Non-Share Fundamental Change in which the holders of the Common Shares receive only cash, the amount of cash received by a holder of one Common Share and (ii) in the event of any other Fundamental Change, the average of the daily Closing Price for one Common Share during the 727411.13 10 Trading Days immediately prior to the record date for the determination of the holders of Common Shares entitled to receive cash, securities, property or other assets in connection with such Fundamental Change or, if there is no such record date, prior to the date upon which the holders of the Common Shares shall have the right to receive such cash, securities, property or other assets. "Applicants" has the meaning specified in Section 4.2(b). "Board of Trustees" means either the Board of Trustees of the Company or any duly authorized committee of that Board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Trustees and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Saturday, Sunday, or any other day on which banking institutions in New York, New York or Wilmington, Delaware are permitted or required by any applicable law to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, units representing interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, including, with respect to partnerships and business trusts, partnership interests (whether general or limited), beneficial interests and any other interest or participation that confers upon a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership or business trust, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Certificated Convertible Preferred Securities" means Convertible Preferred Securities issued in definitive registered form. "Closing Price" with respect to any security on any day means the last reported sale price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the NYSE Composite Tape, or, if such security is not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which such security is listed or admitted to trading, or, if such security is not listed or admitted to trading on a national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc., or, if such security is not quoted or admitted to trading on such quotation system, on the principal quotation system on which such security is listed or admitted to trading or quoted, or, if not listed or admitted to trading or quoted on any national securities exchange or quotation system, the average of the closing bid and asked prices of such security in the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or, if not so available in such manner, as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Trustees (or any committee duly authorized by the Board of Trustees) of the Company for that purpose or, if not so available in such manner, as otherwise determined in good faith by the Board of Trustees (or any committee duly authorized by the Board of Trustees) of the Company. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, as amended, or if at any time after the execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Common Securities" means undivided beneficial interests in the assets of the CT Trust which rank pari passu with Convertible Preferred Securities issued by the CT Trust; provided, however, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect to distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Convertible Preferred Securities. 727411.13 2 "Common Securities Guarantee" means the Common Securities Guarantee Agreement dated as of July 28, 1998 by the Guarantor. "Common Shares" includes class A common shares of beneficial interest, $1.00 par value, in the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which is not subject to redemption by the Company. "Common Share Fundamental Change" means any Fundamental Change in which more than 50% of the value (as determined in good faith by the Board of Trustees of the Company) of the consideration received by holders of Common Shares consists of common stock that, for the 10 Trading Days immediately prior to such Fundamental Change, has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on The Nasdaq National Market; provided, however, that a Fundamental Change shall not be a Common Share Fundamental Change unless either (i) the Company continues to exist after the occurrence of such Fundamental Change and the outstanding Convertible Debentures continue to exist as outstanding Convertible Debentures, or (ii) not later than the occurrence of such Fundamental Change, the outstanding Convertible Debentures are converted into or exchanged for convertible debentures of a corporation succeeding to the business of the Company, which convertible debentures have terms substantially similar to those of the Convertible Debentures. "Company" means Capital Trust, a California business trust, until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Compound Interest" shall have the meaning specified in Section 11.1. "Convertible Debenture" or "Convertible Debentures" has the meaning stated in the first recital of this Indenture and more particularly means any Convertible Debentures authenticated and delivered under this Indenture. "Convertible Preferred Securities" has the meaning specified in the recitals to this Indenture. "Conversion Agent" has the meaning assigned thereto in the Declaration. "Conversion Date" has the meaning specified in Section 12.2(a). "Conversion Price" has the meaning set forth in Section 12.1. "Corporate Trust Office" means the principal corporate trust office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at 1100 North Market Street, 9th Floor, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. "Coupon Rate" has the meaning specified in Section 2.5(a). "Declaration" means the Declaration of Trust of CT Convertible Trust I, a Delaware statutory business trust, dated as of July 28, 1998. "Debt" of a Person means, all indebtedness of such Person which is for money borrowed. "defaulted interest" has the meaning specified in Section 2.9. "Deferred Interest" has the meaning specified in Section 11.1. "Delaware Trustee" has the meaning specified in the Declaration. 727411.13 3 "Dissolution Event" means that, as a result of the occurrence and continuation of a Special Event (as described in the Declaration), the Trust is to be dissolved in accordance with the Declaration, and the Convertible Debentures held by the Institutional Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Declaration. "Dollar" means the coin or currency of the United States of America which as of the time of payment is legal tender for the payment of public and private debts. "EOPLP" means EOP Operating Limited Partnership, an Delaware limited partnership. "Event of Default" has the meaning specified in Section 5.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Expiration Date" has the meaning specified in Section 12.3(e). "Extension Period" has the meaning specified in Section 11.1. "Fundamental Change" means the occurrence of any transaction or event or series of transactions or events pursuant to which all or substantially all of the Common Shares shall be exchanged for, converted into, acquired for or shall constitute solely the right to receive cash, securities, property or other assets (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise); provided, however, in the case of any such series of transactions or events, for purposes of adjustment of the Conversion Price, such Fundamental Change shall be deemed to have occurred when substantially all of the Common Shares shall have been exchanged for, converted into or acquired for, or shall constitute solely the right to receive, such cash, securities, property or other assets, but the adjustment shall be based upon the consideration that the holders of Common Shares received in the transaction or event as a result of which more than 50% of the Common Shares shall have been exchanged for, converted into or acquired for, or shall constitute solely the right to receive, such cash, securities, property or other assets. "GM Trusts" means Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust, a New York trust, and Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust, a New York trust. "Government Obligations" means securities which are (i) direct obligations of the United States government for which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by, or acting as an agency or instrumentality of, the United States government, the payment of which obligations is unconditionally guaranteed by the United States government, and which, in either case, are full faith and credit obligations of the United States government, and which are not callable or redeemable at the option of the issuer thereof prior to their stated maturity. "Guarantor" means the Company in its capacity as guarantor under any Trust Securities Guarantees. "Holder" or "Holder of Convertible Debentures" or other similar terms mean the person in whose name such Convertible Debenture is registered in the Security Register. "incur" means to issue, incur, assume, guarantee, become liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, any Debt. "Indenture" means this instrument as originally executed and delivered or as it may from time to time be amended or supplemented as herein provided, as so amended or supplemented or both, and shall include the forms and terms of the Convertible Debentures appearing as Exhibit A to this instrument. "Institutional Trustee" has the meaning specified in the Declaration. 727411.13 4 "Interest Payment Date," when used with respect to any Convertible Debenture, means the Stated Maturity of an installment of interest on such Convertible Debenture. "Issuance Date" has the meaning set forth in Section 2.5(a). "Lien" means any mortgage or deed of trust, pledge, assignment, security interest, lien, charge, or other encumbrance or preferential arrangement (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). "Majority Holders" means Holders of not less than a majority in aggregate principal amount of the Convertible Debentures at the time outstanding immediately prior to the redemption pursuant to Section 10.1 or the Non-Share Fundamental Change for which the Conversion Price is subject to adjustment pursuant to Section 12.4 (voting as one class). "Maturity" when used with respect to any Convertible Debenture means the date on which the principal of such Convertible Debenture or an installment of principal becomes due and payable as therein or herein provided, whether at Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Maturity Date" means the date on which the Convertible Debentures mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Additional Sums, if any, and (to the extent permitted by applicable law) Compound Interest, if any. "Ministerial Action" has the meaning specified in Section 10.1(a) "90-Day Period" has the meaning specified in Section 10.1(a). "Non-Share Fundamental Change" means any Fundamental Change other than a Common Share Fundamental Change. "Non-U.S. Person" means any person that is not a "U.S. person" as such term is defined in Rule 902 under the Securities Act. "Notice of Conversion" has the meaning specified in Section 12.2(a). "Offeror" has the meaning specified in Section 2.4(c). "Officers' Certificate" means a certificate signed on behalf of the Company by the Chairman of the Board of Trustees or any vice chairman or the president or any vice president and by the chief financial officer, the treasurer, the controller, any assistant treasurer, the secretary or any assistant secretary of the Company and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 15.5. "Opinion of Counsel" means a written opinion of legal counsel, who may be an employee of or counsel to the Company, and who shall be reasonably acceptable to the Trustee. Each Opinion of Counsel shall include the statements provided for in Section 15.5, if and to the extent required hereby. "Optional Redemption Price" has the meaning specified in Section 10.2. "Outstanding" when used with reference to Convertible Debentures, subject to the provisions of Section 7.4, means, as of any particular time, all Convertible Debentures authenticated and delivered under this Indenture, except (a) Convertible Debentures theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Convertible Debentures, or portions thereof, for the payment or redemption of which moneys in the necessary amount and in the required currency shall have been deposited in trust with the 727411.13 5 Trustee or with any Paying Agent (other than the Company) or shall have been set aside, segregated and held in trust by the Company for the Holders of such Convertible Debentures (if the Company shall act as its own Paying Agent), provided that if such Convertible Debentures, or portions thereof, are to be redeemed prior to the Maturity thereof, notice of such redemption shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Convertible Debentures that have been paid pursuant to Section 2.11, converted into Common Shares pursuant to Article XII, or in exchange for or in lieu of which other Convertible Debentures have been authenticated and delivered pursuant to the Indenture (except with respect to any such Convertible Debenture as to which proof satisfactory to the Trustee and the Company is presented that such Convertible Debenture is held by a person in whose hands such Convertible Debenture is a legal, valid and binding obligation of the Company). "Paying Agent" means any Person (which may include the Company) authorized by the Company to pay the principal of or interest, if any, on any Convertible Debenture on behalf of the Company. "Persons" or "Person" means any individual, corporation, partnership, joint venture, limited liability company, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Convertible Debentures, means the place or places where the principal of and interest, if any, on the Convertible Debentures are payable as specified pursuant to Section 3.2. "Predecessor Convertible Debenture" of a Convertible Debenture means every previous Convertible Debenture evidencing all or a portion of the same debt as that evidenced by such Convertible Debenture; and, for the purposes of this definition, a Convertible Debenture authenticated and delivered under Section 2.11 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Convertible Debenture shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Convertible Debenture. "Preferred Securities Guarantee" means the Preferred Securities Guarantee Agreement dated as of July 28, 1998 between the Guarantor and Wilmington Trust Company, as Preferred Guarantee Trustee. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "principal" whenever used with reference to the Convertible Debentures or any Convertible Debenture or any portion thereof, shall be deemed to include "and premium, if any." "Purchaser Share Price" means, with respect to any Common Share Fundamental Change, the average of the daily Closing Price for one share of the common stock received by holders of Common Shares (determined as provided herein) in such Common Share Fundamental Change during the five Trading Days immediately prior to the date fixed for the determination of the holders of Common Shares entitled to receive such common stock or, if there is no such date, prior to the date upon which the holders of Common Shares shall have the right to receive such common stock, in each case, as adjusted in good faith by the Board of Directors of the Company (whose good faith determination shall be conclusive and described in a resolution of the Board of Directors submitted to the Trustee) to appropriately reflect events of a type analogous to any of the events that trigger adjustments to the Conversion Price as set forth in Section 12.3 herein. "QIB" or "Qualified Institutional Buyer" shall mean "Qualified Institutional Buyer" as such term is defined in Rule 144A under the Securities Act. "record date" has the meaning specified in Section 2.9. 727411.13 6 "Redemption Date" has the meaning specified in Section 10.1(a). "Reference Date" has the meaning specified in Section 12.3(c). "Reference Market Price" initially means $11.70 and, in the event of any adjustment to the Conversion Price other than as a result of a Fundamental Change, the Reference Market Price shall also be adjusted so that the ratio of the Reference Market Price to the Conversion Price after giving effect to any such adjustment shall also be the same as the ratio of the initial Reference Market Price to the initial Conversion Price. "Registrar" has the meaning specified in Section 2.10. "Regulation S" means Regulation S under the Securities Act. "Representative" means (a) the indenture trustee or other trustee, agent or representative for any Senior Indebtedness or (b) with respect to any Senior Indebtedness that does not have any such trustee, agent or other representative (i) in the case of such Senior Indebtedness issued pursuant to an agreement providing for voting arrangements as among the holders or owners of such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting with the consent of the required persons necessary to bind such holders or owners of such Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness, the holder or owner of such Senior Indebtedness. "Responsible Officer" when used with respect to the Trustee means any officer within the corporate trust department (or any successor department) of the Trustee including any vice president, assistant vice president, assistant secretary, senior trust officer, trust officer or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred at the Corporate Trust Office because of his or her knowledge of and familiarity with the particular subject. "Restricted Convertible Debenture" has the meaning specified in Section 2.4(a). "Rule 144" means Rule 144 under the Securities Act. "Rule 144A" means Rule 144A under the Securities Act. "Sales Notice" has the meaning specified in Section 2.4(c). "Securities Act" means the Securities Act of 1933, as amended. "Security Register" has the meaning specified in Section 2.10. "Senior Indebtedness" means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (a) indebtedness of the Company for money borrowed (but excluding trade accounts payable arising in the ordinary course of business) under any credit agreements, notes, guarantees or similar documents and (b) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of the Company for the reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the Company (contingent or otherwise) with respect to an interest rate or other swap, cap or collar agreements or other similar instruments or agreements or foreign currency hedge, exchange, purchase or similar instruments or agreements; (vi) all obligations of the types referred to in clauses (i) through (v) of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vii) all obligations of the types referred to in clauses (i) through (vi) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether outstanding on the date of this Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the Company, except for any such 727411.13 7 indebtedness that is by its terms subordinated to or pari passu with the Convertible Debentures. Such Senior Indebtedness shall continue to be Senior Indebtedness irrespective of any deferrals, renewals, extensions or refundings of, or amendments, modifications, supplements or waivers of any term of such Senior Indebtedness. "Stated Maturity" when used with respect to any Convertible Debenture or any installment of principal thereof or interest thereon, means the date on which the principal of such Convertible Debenture or such installment of principal or interest is due and payable in accordance with the terms thereof. "Subsidiary" means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of the outstanding Capital Stock (or other interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, general partners, managers, managing members, managing partners or trustees thereof or, if such persons are not elected, to vote on any matter that is submitted to the vote of all persons holding ownership interests in such entity is at the time owned or controlled, directly or indirectly, by (i) the Company, (ii) the Company and one or more Subsidiaries or (iii) one or more Subsidiaries. "Trading Day" shall mean a day on which any securities are traded on the national securities exchange or quotation system used to determine the Closing Price. "Transfer Restriction Termination Date" means the earlier of the first date on which (i) the Convertible Preferred Securities, the Convertible Debentures and any Common Shares issued or issuable upon the conversion or exchange thereof (other than (A) such securities acquired by the Company or any Affiliate thereof since the Issue Date of the Convertible Preferred Securities and (B) Common Shares issued upon the conversion or exchange of any such security described in clause (A) above) may be sold pursuant to Rule 144(k) (or any successor provision) and (ii) all of such Convertible Preferred Securities, Convertible Debentures and/or Common Shares shall have been sold pursuant to an effective registration statement. "Trust" or "CT Trust" means CT Convertible Trust I, a Delaware statutory business trust. "Trust Indenture Act" or "TIA" (except as otherwise provided in Sections 8.1 and 8.2) means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this Indenture was originally executed. "Trust Securities" means the Common Securities and the Convertible Preferred Securities of CT Trust. "Trust Securities Guarantees" means the Common Securities Guarantee and the Preferred Securities Guarantee. "Trustee" means the Person identified as "Trustee" in the first paragraph hereof until a successor Trustee shall have become such pursuant to the provisions hereof, and thereafter, "Trustee" shall mean or include each Person who is then a Trustee hereunder. "United States of America" or "United States" means the United States of America (including the states and the District of Columbia), its territories, possessions, the Commonwealth of Puerto Rico and other areas subject to its jurisdiction. "U.S. Person" means (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any state or political subdivision thereof, (iii) an estate the income of which is subject to United States federal income taxation regardless of its sources or (iv) a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States fiduciaries who have the authority to control all substantial decisions of the Trust. "vice president" when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title of "vice president." "VRLP" means Vornado Realty L.P., a Delaware limited partnership. 727411.13 8 ARTICLE II THE CONVERTIBLE DEBENTURES Section 2.1 Designation and Principal Amount. There are hereby authorized Convertible Debentures designated the "8.25% Step Up Convertible Junior Subordinated Debentures," limited in aggregate principal amount to $154,650,000 which amount shall be as set forth in any written order of the Company for the authentication and delivery of Convertible Debentures pursuant to Section 2.6 of this Indenture. Section 2.2 Maturity. The Maturity Date is September 30, 2018. Section 2.3 Form and Payment. (a) Except as provided in Section 2.6, the Convertible Debentures shall be issued in fully registered certificated form without coupons in denominations of $1,000 in principal amount and integral multiples thereof. Principal and interest on the Convertible Debentures issued in certificated form will be payable, the transfer of such Convertible Debentures will be registrable and such Convertible Debentures will be exchangeable for Convertible Debentures bearing identical terms and provisions at the office or agency of the Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the Holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of any Convertible Debentures is the Institutional Trustee, the payment of the principal of and interest (including Compound Interest and Additional Sums, if any) on such Convertible Debentures held by the Institutional Trustee will be made in immediately available funds at such place and to such account as may be designated by the Institutional Trustee. (b) The Convertible Debentures are subject to the terms set forth in this Indenture including, without limitation, Exhibit A hereto, the terms of which are hereby incorporated in their entirety by reference. (c) The Convertible Debentures and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the form of Exhibit A to this Indenture. (d) The definitive Convertible Debentures shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Convertible Debentures, as evidenced by their execution of such Convertible Debentures. Section 2.4 Exchange and Registration of Transfer of Convertible Debentures; Restrictions on Transfers; Depositary. (a) Each Convertible Debenture that bears or is required to bear the legend set forth in this Section 2.4(a) (a "Restricted Convertible Debenture") shall be subject to the restrictions on transfer provided in the legend set forth in this Section 2.4(a), unless such restrictions on transfer shall be waived by the written consent of the Company, and the Holder of each Restricted Convertible Debenture, by such Holder's acceptance thereof, agrees to be bound by such restrictions on transfer. As used in this Section 2.4(a) and in Section 2.4(b), the term "transfer" encompasses any sale, pledge, transfer or other disposition of any Restricted Convertible Debenture. Prior to the Transfer Restriction Termination Date, any certificate evidencing a Convertible Debenture shall bear a legend in substantially the following form, unless otherwise agreed by the Company (with written notice thereof to the Trustee): THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED 727411.13 9 IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR, IF THIS SECURITY IS CONVERTIBLE INTO COMMON SHARES, THE COMMON SHARES ISSUABLE UPON CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO CAPITAL TRUST (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, SUCH HOLDER MUST FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR CT CONVERTIBLE TRUST I (THE "TRUST") MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT EVIDENCE COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Following the Transfer Restriction Termination Date, any Convertible Debenture or security issued in exchange or substitution therefor (other than (i) Convertible Debentures acquired by the Company or any Affiliate thereof since the issue date of the Convertible Preferred Securities and (ii) Common Shares issued upon the conversion or exchange of any Convertible Debenture described in clause (i) above) may upon surrender of such Convertible Debenture for exchange to the Registrar in accordance with the provisions of this Section 2.4, be 727411.13 10 exchanged for a new Convertible Debenture or Convertible Debentures, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.4(a). (b) Any Convertible Debenture or Common Shares issued upon the conversion or exchange of a Convertible Debenture that, prior to the Transfer Restriction Termination Date, is purchased or owned by the Company or any Affiliate thereof may not be resold by the Company or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction which results in such Convertible Debentures or Common Shares, as the case may be, no longer being "restricted securities" (as defined under Rule 144). (c) Each Convertible Debenture shall be subject to the restrictions on transfer provided in this Section 2.4(c). (i) If a holder of a Convertible Debenture (the "Offeror") desires to sell, assign, transfer, encumber, or otherwise dispose of any of his Convertible Debentures, he shall give written notice to the Company of his desire to do so and of the price per debenture and other terms under which he proposes to dispose of his Convertible Debentures (the "Sales Notice"), which Sale Notice shall constitute an offer on the part of the Offeror to sell to the Company any such Convertible Debentures upon the terms and conditions set forth in such notice. (ii) Unless, within ten (10) days after the giving of the Sales Notice by the Offeror pursuant to subparagraph (i) of this Section 2.4(c), the Company shall give written notice to the Offeror that the Company irrevocably commits to purchase the Convertible Debentures subject of the Sale Notice at the price and under the terms specified in the Sales Notice given by the Offeror, the Company shall be deemed to have rejected the offer of the Offeror to sell the Convertible Debentures subject of the Sale Notice and the Offeror shall be free without restriction under this Section 2.4(c) to sell the Convertible Debentures subject of the Sales Notice to any other Person, provided however, if the price per debenture is less than 90% of the price and the other terms are more favorable than those contained in the Sales Notice, the Offeror shall again offer to sell the Convertible Debentures in accordance with the provisions of subparagraph (i) of this Section 2.4(c) before it may complete any such sale and provided further, that the Convertible Debentures subject of the Sales Notice shall again be subject to the provisions of subparagraph (i) of this Section 2.4(c) if within ninety (90) days after the giving of the Sale Notice, the Offeror shall not have completed the disposition of such Convertible Debentures. (iii) If the Company irrevocably commits to purchase the Convertible Debentures as contemplated by subparagraph (ii) of this Section 2.4(c), the closing of such purchase shall take place at the principal place of business of the Company at 10:00 A.M. (New York City time) on the third (3rd) day following the expiration of the ten (10) day period referred to subparagraph (ii) of this Section 2.4(c), or if such day is not a Business Day, then the next day that is a Business Day. (iv) The provisions of this Section 2.4(c) shall not apply to one or more transfers of the Convertible Debentures (i) by the GM Trusts to one or more trusts for the benefit of the employees of General Motors Corporation or its Affiliates, (ii) by VRLP to any Affiliate of Vornado Realty Trust or VRLP, or (iii) EOPLP to any Affiliate of Equity Office Properties Trust or EOPLP. Section 2.5 Interest. (a) Each Convertible Debenture will bear interest at the rate of 8.25% per annum from and including July 28,1998 (the "Issuance Date") to and including September 30, 2004, such rate of interest per annum automatically increasing by an additional .75% per annum (any such increase shall be cumulative with any such prior increase(s)) on October 1, 2004 and again on each subsequent October 1, (the rate of interest in effect at any time is hereinafter referred to as the "Coupon Rate"), until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate, compounded quarterly, payable (subject to the provisions of Article XI) quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, an "Interest Payment Date"), commencing on September 30, 1998, to the Person in whose name such Convertible 727411.13 11 Debenture or any Predecessor Convertible Debenture is registered, at the close of business on the record date for such interest installment, which shall be the close of business on the fifteenth day prior to that Interest Payment Date. For purposes of demonstration, Schedule 2.5(a) hereto lists the Coupon Rate that will be in effect during each year following the Issuance Date until the Maturity Date. If the Company pays any Common Dividend during any quarter ending on an Interest Payment Date, the Coupon Rate in effect for such quarter shall automatically increase by the Common Rate. For purposes of this Section 2.5(a), the following terms have the following meanings: (i) "Common Dividend" means any cash dividend or distribution payable on the Common Shares of the Company. (ii) "Common Rate" means, for any quarter, the fraction, expressed as a percentage rate per annum, the numerator of which is the aggregate dollar amount of Common Dividend paid on one Common Share during such quarter and the denominator of which is $9.00 (subject to adjustment in proportion to each adjustment to the Conversion Price triggered by events occurring prior to such quarter). (b) The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed, will be computed on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on the Convertible Debentures is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (c) If at any time the Trust is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company will pay as additional sums ("Additional Sums") such additional amounts as shall be required so that the net amounts received and retained by the Trust after paying any such taxes, duties, assessments or other governmental charges will not be less than the amounts the Trust would have received had no such taxes, duties, assessments or other government charges been imposed so long as the Trust is the holder of the Convertible Debentures. Section 2.6 Authentication and Delivery of Convertible Debentures. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Convertible Debentures in the aggregate principal amount of up to $154,650,000 executed by the Company to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery such Convertible Debentures to or upon the written order of the Company, signed by both (i) the chairman of its Board of Trustees, or any vice chairman of its Board of Trustees, or its president or any vice president and (ii) its chief financial officer, treasurer or any assistant treasurer or its secretary or any assistant secretary, without any further action by the Company. In authenticating such Convertible Debentures and accepting the additional responsibilities under this Indenture in relation to such Convertible Debentures, the Trustee shall be entitled to receive and (subject to Section 6.1) shall be fully protected in relying upon: (a) a copy of any resolution or resolutions of the Board of Trustees relating to the issuance of such Convertible Debentures, in each case certified by the secretary or an assistant secretary of the Company; (b) a supplemental indenture, if any; (c) an Opinion of Counsel, prepared in accordance with Section 15.5, which shall state that the Convertible Debentures have been duly authorized, and, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and binding obligations of the Company enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or other laws relating to or affecting the 727411.13 12 enforcement of creditors' rights generally and by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law. Notwithstanding the provisions of the preceding paragraph, if the Convertible Debentures are not to be originally issued at one time, it shall not be necessary to deliver the resolution of the Board of Trustees and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Convertible Debenture if such documents are delivered at or prior to the time of authentication upon original issuance of the first Convertible Debentures to be issued. After the original issuance of the first Convertible Debenture to be issued, any separate request by the Company that the Trustee authenticate Convertible Debentures for original issuance will be deemed to be a certification by the Company that it is in compliance with all conditions precedent provided for in this Indenture relating to the authentication and delivery of such Convertible Debentures. The Trustee shall have the right to decline to authenticate and deliver any Convertible Debentures under this Section if the Trustee is advised by counsel in good faith that the issuance of such Convertible Debentures would expose the Trustee to personal liability or is unlawful. Section 2.7 Execution of Convertible Debentures. The Convertible Debentures shall be signed on behalf of the Company by the chairman of its Board of Trustees, or any vice chairman of its Board of Trustees, or its president or any vice president and attested by its chief financial officer, treasurer or any assistant treasurer or its secretary or any assistant secretary, under its corporate seal. Such signatures may be the manual or facsimile signatures of such officers. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Convertible Debentures. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Convertible Debenture that has been duly authenticated and delivered by the Trustee. In case any officer of the Company who shall have signed any of the Convertible Debentures shall cease to be such officer before the Convertible Debenture so signed shall be authenticated and delivered by the Trustee or disposed of by the Company, such Convertible Debenture nevertheless may be authenticated and delivered or disposed of as though the person who signed such Convertible Debenture had not ceased to be such officer of the Company; and any Convertible Debenture may be signed on behalf of the Company by such persons as, at the actual date of the execution of such Convertible Debenture, shall be the proper officers of the Company, although at the date of the execution and delivery of this Indenture any such person was not such an officer. Section 2.8 Certificate of Authentication. Only such Convertible Debentures as shall bear thereon a certificate of authentication substantially in the form attached hereto as a part of Exhibit A and executed by the Trustee by the manual signature of one of its authorized signatories shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. The execution of such certificate by the Trustee upon any Convertible Debenture executed by the Company shall be conclusive evidence that the Convertible Debenture so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Convertible Debenture shall have been duly authenticated and delivered hereunder but never issued and sold by the Company, the Company shall deliver such Convertible Debenture to the Trustee for cancellation as provided in Section 2.12 together with a written statement (which need not comply with Section 15.5 and need not be accompanied by an Opinion of Counsel) stating that such Convertible Debenture has never been issued and sold by the Company, for all purposes of this Indenture such Convertible Debenture shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. Section 2.9 Denomination and Date of Convertible Debentures; Payments of Interest. Convertible Debentures shall be issuable in denominations of $1,000 and any integral multiple thereof. The Convertible Debentures shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers of the Company executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof. 727411.13 13 Each Convertible Debenture shall be dated the date of its authentication. The term "record date" as used with respect to any interest payment date (except for payment of defaulted interest) shall mean the close of business on the fifteenth day preceding such interest payment date, whether or not such record date is a Business Day. Any interest on any Convertible Debenture which is payable, but is not punctually paid or duly provided for, on any interest payment date, subject to the provisions of Article XI (called "defaulted interest" for purposes of this Section) shall forthwith cease to be payable to the Holder on the relevant record date by virtue of his having been such Holder; and such defaulted interest may be paid by the Company, at its election in each case, as provided in clause (1) or clause (2) below: (1) The Company may elect to make payment of any defaulted interest to the persons in whose names any such Convertible Debentures (or their respective predecessor Convertible Debentures) are registered at the close of business on a special record date for the payment of such defaulted interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Convertible Debentures and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such defaulted interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such defaulted interest in respect of Convertible Debentures which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company shall cause notice of the proposed payment of such defaulted interest and the special record date thereof to be mailed, first class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such defaulted interest and the special record date therefor having been mailed as aforesaid, such defaulted interest in respect of Convertible Debentures shall be paid to the person in whose names such Convertible Debentures (or their respective predecessor Convertible Debentures) are registered on such special record date and such defaulted interest shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any defaulted interest on the Convertible Debentures in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Convertible Debentures may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Convertible Debenture delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Convertible Debenture shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Convertible Debenture. In the case of any Convertible Debenture which is converted into Common Shares of the Company after any record date and on or prior to the next succeeding Interest Payment Date (other than any Convertible Debenture whose Maturity is prior to such Interest Payment Date), interest whose Stated Maturity is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Convertible Debenture (or one or more Predecessor Convertible Debentures) is registered at the close of business on such record date. However, if a redemption date falls between a record date and the subsequent Interest Payment Date, the amount of such payment shall include accumulated and unpaid interest accrued to, but excluding, such redemption date. Except as otherwise expressly provided in the first two sentences of this paragraph, in the case of any Convertible Debenture which is converted, interest whose Stated Maturity is after the date of conversion of such Convertible Debenture shall not be payable. 727411.13 14 Section 2.10 Registration, Transfer and Exchange. The provisions of this Section 2.10 shall be subject in their entirety to the provisions of Section 2.4. The Company will cause to be kept at each office or agency to be maintained for the purpose as provided in Section 3.2 a register or registers (herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company will provide for the registration and the registration of the transfer or exchange of the Convertible Debentures. The Trustee is hereby appointed and accepts the appointment as Registrar (the "Registrar") for purposes of registering, and registering transfers of, the Convertible Debentures. Upon surrender for registration of transfer of any Convertible Debenture at any such office or agency to be maintained for the purpose as provided in Section 3.2, the Company shall execute and the Trustee shall authenticate and make available for delivery in the name of the transferee or transferees a new Convertible Debenture or Convertible Debentures and of a like tenor and containing the same terms (other than the principal amount thereof, if more than one Convertible Debenture is executed, authenticated and delivered in respect to any Convertible Debenture so presented, in which case the aggregate principal amount of the executed, authenticated and delivered Convertible Debentures shall equal the principal amount of the Convertible Debenture presented in respect thereof) and conditions. At the option of the Holder thereof, Convertible Debentures may be exchanged for a Convertible Debenture or Convertible Debentures having authorized denominations and an equal aggregate principal amount, upon surrender of such Convertible Debentures to be exchanged at the agency of the Company that shall be maintained for such purpose in accordance with Section 3.2 and upon payment, if the Company shall so require, of the charge hereinafter provided. Whenever any Convertible Debentures are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Convertible Debentures which the Holder making the exchange is entitled to receive. All Convertible Debentures surrendered upon any exchange or transfer provided for in this Indenture shall be promptly canceled by the Trustee and the Trustee will deliver a certificate of cancellation thereof to the Company. All Convertible Debentures issued upon any transfer or exchange of Convertible Debentures shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Convertible Debentures surrendered upon such transfer or exchange. Every Convertible Debenture presented or surrendered for registration of transfer or exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to the Holder for any registration of transfer or exchange of Convertible Debentures, but the company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Convertible Debentures, other than exchanges pursuant to Sections 2.13, 8.5 or 12.5 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange any Convertible Debenture during a 15-day period prior to the day of mailing of the relevant notice of redemption or (ii) to register the transfer of or exchange any Convertible Debenture so selected for redemption in whole or in part, except, in the case of any Convertible Debenture to be redeemed in part, the portion thereof not redeemed. Section 2.11 Mutilated, Defaced, Destroyed, Lost and Stolen Convertible Debentures. In case any temporary or definitive Convertible Debenture shall become mutilated or defaced or be destroyed, lost or stolen, then, in the absence of notice to the Company or the Trustee that the Convertible Debenture has been acquired by a bona fide purchaser, the Company shall execute, and upon the written request of any officer of the Company, the Trustee shall authenticate and make available for delivery a new Convertible Debenture and of like tenor and principal amount and with the same terms and conditions, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Convertible Debenture or in lieu of and substitution for the Convertible Debenture so destroyed, lost or stolen. In every case the applicant for a substitute Convertible Debenture shall furnish to the Company and to the Trustee and to any agent of the Company or the Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and, 727411.13 15 in every case of destruction, loss or theft, evidence to their satisfaction of the destruction, loss or theft of such Convertible Debenture and of the ownership thereof and in the case of mutilation or defacement shall surrender the Convertible Debenture to the Trustee or such agent. Upon the issuance of any substitute Convertible Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or its agent) connected therewith. In case any Convertible Debenture which has matured or is about to mature or has been called for redemption in full shall become mutilated or defaced or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Convertible Debenture, pay or authorize, the payment of the same (without surrender thereof except in the case of a mutilated or defaced Convertible Debenture); provided, however, that the applicant for such payment shall furnish to the Company and to the Trustee and any agent of the Company or the Trustee such security or indemnity as any of them may require to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee and any agent of the Company or the Trustee evidence to their satisfaction of the destruction, loss or theft of such Convertible Debenture and of the ownership thereof. Every substitute Convertible Debenture issued pursuant to the provisions of this Section by virtue of the fact that any Convertible Debenture is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Convertible Debenture shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Convertible Debentures duly authenticated and delivered hereunder. All Convertible Debentures shall be held upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Convertible Debentures and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.12 Cancellation of Convertible Debentures. All Convertible Debentures surrendered for payment, redemption, conversion, registration of transfer or exchange, or for credit against any payment in respect of a sinking or analogous fund, shall, if surrendered to the Company or any agent of the Company or the Trustee, be delivered to the Trustee for cancellation or, if surrendered to the Trustee, shall be canceled by it; and no Convertible Debentures shall be issued in lieu thereof, except as expressly permitted by any of the provisions of this Indenture. The Company may at any time deliver to the Trustee for cancellation any Convertible Debentures previously authenticated hereunder which the Company has not issued and sold and all Convertible Debentures so delivered shall be promptly canceled by the Trustee. If the Company shall acquire any of the Convertible Debentures, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Convertible Debentures unless and until the same are delivered to the Trustee for cancellation. All canceled Convertible Debentures shall be disposed of as directed by a Company Order or, in the absence of such Company Order, in accordance with the Trustee's customary practices. The Trustee shall provide a certificate of destruction to the Company with respect to all Convertible Debentures disposed of by the Trustee. Section 2.13 Temporary Convertible Debentures. Pending the preparation of definitive Convertible Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Convertible Debentures (printed, lithographed, typewritten or otherwise reproduced, in each case in form reasonably acceptable to the Trustee). Temporary Convertible Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Convertible Debentures but with such omissions, insertions and variations as may be appropriate for temporary Convertible Debentures, all as may be determined by the Company with the reasonable concurrence of the Trustee. Temporary Convertible Debentures may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Convertible Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Convertible Debentures. Without unreasonable delay the Company shall execute and shall furnish definitive Convertible Debentures and thereupon temporary Convertible Debentures may be surrendered in exchange therefor without charge to the Holder at each office or agency to be maintained by the Company for that purpose pursuant to Section 3.2, and the Trustee shall authenticate and make available for delivery in exchange for such temporary Convertible Debentures an equal aggregate principal amount of definitive Convertible Debentures of authorized denominations. Until so 727411.13 16 exchanged, the temporary Convertible Debentures shall be entitled to the same benefits under this Indenture as definitive Convertible Debentures. ARTICLE III COVENANTS OF THE COMPANY Section 3.1 Payment of Principal and Interest. The Company covenants and agrees for the benefit of the Convertible Debentures that it will duly and punctually pay or cause to be paid the principal of, and interest on, each of the Convertible Debentures in accordance with the terms of such Convertible Debentures and of this Indenture. The interest on Convertible Debentures (together with any additional amounts payable pursuant to the terms of such Convertible Debentures) shall be payable only to or upon the written order of the Holders thereof and at the option of the Company may be paid by wire transfer or by mailing checks for such interest payable to or upon the written order of such Holders at their last addresses as they appear on the Security Register. Section 3.2 Offices for Payment, etc. So long as any of the Convertible Debentures remain outstanding, the Company will maintain the following: an office or agency in the Borough of Manhattan, City of New York (a) where the Convertible Debentures may be presented for payment, (b) where the Convertible Debentures may be presented for registration of transfer and for exchange as provided in this Indenture, and (c) where notices and demands may be served upon the Company in respect of the Convertible Debentures, or this Indenture. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. In case the Company shall fail to so designate or maintain any such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Corporate Trust Office. The Trustee is hereby appointed, and accepts its appointment as, Paying Agent. Section 3.3 Paying Agents. Whenever the Company shall appoint a Paying Agent other than the Trustee with respect to the Convertible Debentures, it will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section: (a) that it will hold all sums received by it as such Paying Agent for the payment of the principal of or interest on the Convertible Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Convertible Debentures) in trust for the benefit of the Holders of the Convertible Debentures or of the Trustee, and upon the occurrence of an Event of Default and upon the written request of the Trustee, pay over all such sums received by it to the Trustee; and (b) that it will give the Trustee notice of any failure by the Company (or by any other obligor on the Convertible Debentures) to make any payment of the principal of or interest on the Convertible Debentures when the same shall be due and payable. The Company will, on or prior to each due date of the principal of or interest on the Convertible Debentures, deposit in a timely manner with the Paying Agent a sum sufficient to pay such principal or interest so becoming due, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of any failure to take such action. If the Company shall act as its own Paying Agent with respect to the Convertible Debentures, it will, on or before each due date of the principal of or interest on the Convertible Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Convertible Debentures a sum sufficient to pay such principal or interest so becoming due. The Company will promptly notify the Trustee of any failure to take such action. Section 3.4 Written Statement to Trustee. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, a brief certificate (which need 727411.13 17 not comply with Section 15.5) from the principal executive, financial or accounting officer of the Company as to his or her knowledge, after due inquiry, of the Company's compliance with all conditions and covenants under this Indenture (such compliance to be determined without regard to any period of grace or requirement of notice provided under this Indenture), and if the Company shall not be in compliance, specifying all such defaults or non-compliance and the nature and status thereof. Section 3.5 Limitation on Dividends; Transactions with Affiliates. If any Convertible Debentures are outstanding and (i) there shall have occurred any Event of Default or any event that, with the giving of notice or lapse of time or both, would constitute an Event of Default, (ii) the Guarantor shall be in default with respect to its payment or other obligations under the Preferred Securities Guarantee or the Common Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on Convertible Debentures by extending the interest payment period as provided in Article XI and such period, or any extension thereof, shall be continuing, then the Company shall not (a) declare or pay any dividend on, make any distribution with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its Capital Stock or (b) make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior in interest to the Convertible Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Convertible Debentures (other than (i) as a result of a reclassification of the Capital Stock of the Company or the exchange or conversion of one class or series of the Capital Stock of the Company for another class or series of the Capital Stock of the Company, (ii) the purchase of fractional interests in shares of the Capital Stock of the Company pursuant to the conversion or exchange provisions of such Capital Stock or the security being converted into or exchanged for such Capital Stock, (iii) dividends or distributions in Common Shares of the Company, (iv) any declaration of a dividend in connection with the implementation of a shareholders' rights plan, or the issuance of Capital Stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (v) payments under the Trust Securities Guarantees, (vi) purchases of Common Shares of the Company related to the issuance of Common Shares of the Company or rights under any of the Company's benefit plans for its directors, officers or employees and (vii) obligations under any dividend reinvestment and stock purchase plans). Section 3.6 Covenants as to CT Trust. For so long as the Trust Securities remain outstanding, the Company will (a) maintain 100% direct or indirect ownership of the Common Securities of CT Trust; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Company's ownership of the Common Securities, (b) use its best efforts to cause CT Trust (i) to remain a statutory business trust, except in connection with the distribution of Convertible Debentures to the holders of Trust Securities in liquidation of CT Trust, the redemption of all of the Trust Securities of CT Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (ii) to continue to be classified as a grantor trust for United States federal income tax purposes and (c) use its best efforts to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Convertible Debentures. Section 3.7 Existence. Subject to Article IX, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Trustees shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. ARTICLE IV HOLDERS OF CONVERTIBLE DEBENTURES LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE Section 4.1 Company to Furnish Trustee Information as to Names and Addresses of Holders of Convertible Debentures. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of the Convertible Debentures: 727411.13 18 (a) semiannually and not more than 15 days after each record date for the payment of interest on such Convertible Debentures, as hereinabove specified, as of such record date, and (b) at such other times as the Trustee may reasonably request in writing, within 30 days after receipt by the Company of any such request, such list to be as of a date not more than 15 days prior to the time such information is furnished, provided that if and so long as the Trustee shall be the Registrar, such list shall not be required to be furnished. Section 4.2 Preservation and Disclosure of Holders of Convertible Debentures' Lists. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders of Convertible Debentures contained in the most recent list furnished to it as provided in Section 4.1 or maintained by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished. (b) In case three or more Holders of Convertible Debentures (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Convertible Debenture for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Convertible Debentures (in which case the applicants must all hold Convertible Debentures) or with Holders of all Convertible Debentures with respect to their rights under this Indenture or under such Convertible Debentures and such application is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five business days after the receipt of such application, at is election, either (i) afford to such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section, or (ii) inform such applicants as to the approximate number of Holders of Convertible Debentures or of all Convertible Debentures, as the case may be, whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subsection (a) of this Section, as to the approximate cost of mailing to such Holders of Convertible Debentures the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford to such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder of Convertible Debentures or all Holders of Convertible Debentures, as the case may be, whose name and address appears in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section, a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Commission together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Convertible Debentures or could be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of such order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met, and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders of Convertible Debentures with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every Holder of Convertible Debentures, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of the Company or the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Convertible Debentures in accordance with the provisions of subsection (b) of this 727411.13 19 Section, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under such subsection (b). Section 4.3 Reports by the Company. The Company covenants: (a) to file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents, and other reports (or copies of such portions and any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act, or if the Company is not required to file information, documents, or reports pursuant to either of such Sections, then to file with the Trustee and the Commission to the extent permitted, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents, and reports which may be required pursuant to Section 13 of the Exchange Act, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents, and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations; and (c) to transmit by mail to the Holders of Convertible Debentures in the manner and to the extent required by Sections 6.6 and 15.4, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents, and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section as may be required to be transmitted to such Holders by rules and regulations prescribed from time to time by the Commission. ARTICLE V REMEDIES OF THE TRUSTEE AND HOLDERS OF CONVERTIBLE DEBENTURES ON EVENT OF DEFAULT Section 5.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default. "Event of Default" with respect to the Convertible Debentures wherever used herein, means any one or more of the following events which shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any interest (including any Additional Sums and Compound Interest) upon or any additional amounts payable in respect of any Convertible Debentures when it becomes due and payable, and continuance of such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Company in accordance with the terms of this Indenture shall not constitute a default in the payment of interest for this purpose; or (b) default in the payment of the principal of, or premium, if any, on, any Convertible Debentures as and when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise; or (c) default in the performance, or breach of any covenant or warranty of the Company contained in the Convertible Debentures or in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 30 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Convertible Debentures a written notice 727411.13 20 specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (d) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of all or any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days; or (e) the commencement by the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of all or any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (f) failure by the Company to convert Convertible Debentures into Common Shares of the Company upon an appropriate election by a holder of Trust Securities or Convertible Debentures to convert such Trust Securities or Convertible Debentures, as the case may be, into such Common Shares (whether or not conversion or exchange is prohibited by the subordination provisions set forth herein); or (g) the CT Trust shall have voluntarily or involuntarily dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of Convertible Debentures to holders of Trust Securities in liquidation of their interest in the CT Trust upon the occurrence of a Special Event or upon the occurrence of events as described in Section 3 of Annex I to the Declaration, (ii) the redemption of all of the outstanding Trust Securities of the CT Trust, (iii) the conversion of all outstanding Convertible Preferred Securities into Common Shares of the Company or (iv) certain mergers, consolidations or amalgamations, each as permitted by the Declaration; or (h) the Company shall have consummated a merger or consolidation in which the successor will be taxed as a partnership for federal income tax purposes, or the Company shall have transferred all or substantially all of its assets to an entity other than a Subsidiary which shall be taxed as a partnership for federal income tax purposes. If an Event of Default occurs and is continuing, then and in each and every such case, unless the principal of all Convertible Debentures shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Convertible Debentures then Outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by such Holders), may declare the entire principal of, plus accrued and unpaid interest on, all the Convertible Debentures (including Additional Sums, if any, and, to the extent permitted by applicable law, Compound Interest, if any) and any other amounts payable under this Indenture to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable. These provisions, however, are subject to the condition that if at any time after the principal and other amounts due on the Convertible Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest, if any, upon all the Convertible Debentures and the principal of any and all Convertible Debentures which shall 727411.13 21 have become due otherwise than by such acceleration (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, Compound Interest to the date of such payment) or deposit in Dollars such amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents, attorneys and counsel and all other expenses and liabilities incurred, and all advances with interest made, by the Trustee, its agents, attorneys and counsel and if any and all defaults under this Indenture, other than the nonpayment of the principal and interest of Convertible Debentures which shall have become due by such acceleration, shall have been cured or waived as provided herein, then and in every such case the Holders of a majority in aggregate principal amount of the Convertible Debentures then Outstanding, by written notice to the Company and to the Trustee for the Convertible Debentures, may waive all defaults and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. Section 5.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt. The Company covenants that (a) in case default shall be made in the payment of any installment of interest on any of the Convertible Debentures when such interest shall have become due and payable, and such default shall have continued for a period of 30 days, or (b) in case default shall be made in the payment of all or any part of the principal of any of the Convertible Debentures when the same shall have become due and payable, whether upon Maturity or upon any redemption or by declaration or otherwise, then upon demand of the Trustee for the Convertible Debentures, the Company will pay to the Trustee for the benefit of the Holders of the Convertible Debentures the whole amount that then shall have become due and payable on all Convertible Debentures for principal of or interest, as the case may be (with interest to the date of such payment upon the overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest at the same rate as the rate of interest specified in the Convertible Debentures); and in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to, and all expenses and liabilities incurred and all advances with interest made by, the Trustee and each predecessor Trustee except as a result of its negligence or bad faith. Until such demand is made by the Trustee, the Company may pay the principal of and interest on the Convertible Debentures to the persons entitled thereto, whether or not the principal of and interest on the Convertible Debentures are overdue. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee for the Convertible Debentures, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Company or other obligor upon such Convertible Debentures and collect in the manner provided by law out of the property of the Company or other obligor upon such Convertible Debentures, wherever situated, the moneys adjudged or decreed to be payable. In case there shall be pending proceedings relative to the Company or any other obligor upon the securities under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company or its property or such other obligor, or in case of any other comparable judicial proceedings relative to the Company or other obligor under the Convertible Debentures, or to the property of the Company or such other obligor, the Trustee, irrespective of whether the principal of any Convertible Debentures shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceeding or otherwise: (a) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Convertible Debentures, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to, and all expenses and liabilities incurred and all advances with interest made by, the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, except as a result of negligence or bad faith) and of the Holders of Convertible Debentures allowed in any judicial 727411.13 22 proceedings relative to the Company or other obligor upon all Convertible Debentures, or to the property of the Company or such obligor, and (b) to collect and receive any moneys or other property payable or deliver able on any such claims, and to distribute all amounts received with respect to the claims of the Holders of Convertible Debentures and of the Trustee on their behalf; and any trustee, receiver, liquidator, custodian or other similar official is hereby authorized by each of the Holders of Convertible Debentures to make payments to the Trustee for the Convertible Debentures, and, in the event that such Trustee shall consent to the making of payments directly to the Holders of Convertible Debentures, to pay to such Trustee such amounts as shall be sufficient to cover reasonable compensation to, and all expenses and liabilities incurred and all advances with interest made by, such Trustee, each predecessor Trustee and their respective agents, attorneys and counsel and all other amounts due to such Trustee or any predecessor Trustee pursuant to Section 6.7, except as a result of Trustee's negligence or bad faith. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of Convertible Debentures any plan of reorganization, arrangement, adjustment or composition affecting the Convertible Debentures or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of Convertible Debentures in any such proceeding. All rights of action and of asserting claims under this Indenture, or under any of the Convertible Debentures, may be enforced by the Trustee for the Convertible Debentures without the possession of any of the Convertible Debentures or the production thereof at any trial or other proceedings relative thereto, any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Convertible Debentures in respect of which such action was taken. In any proceedings brought by the Trustee for the Convertible Debentures (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Convertible Debentures in respect to which such action was taken, and it shall not be necessary to make any Holders of such Convertible Debentures parties to any such proceedings. Section 5.3 Application of Proceeds. Any moneys collected by the Trustee for the Convertible Debentures pursuant to this Article in respect of the Convertible Debentures shall be applied in the following order at the date or dates fixed by such Trustee and, in case of the distribution of such moneys on account of principal or interest, upon presentation of the several Convertible Debentures in respect of which moneys have been collected and stamping (or otherwise noting) thereon the payment, or issuing Convertible Debentures in reduced principal amounts in exchange for the presented Convertible Debentures if only partially paid, or upon surrender thereof if fully paid: FIRST: To the payment of costs and expenses applicable in respect of which moneys have been collected, including reasonable compensation to, and all expenses and liabilities incurred and all advances with interest made by, the Trustee and each predecessor Trustee and their respective agents and attorneys and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 6.7, except as a result of Trustee's negligence or bad faith; SECOND: To the payment of the amounts then due and unpaid for interest on the Convertible Debentures for which principal is not yet due and payable in respect of which moneys have been collected, such payments to be made ratably to the persons entitled thereto, without discrimination or preference, according to the amounts then due and payable on such Convertible Debentures for interest; THIRD: To the payment of the amounts then due and unpaid for principal of and interest on the Convertible Debentures for which principal is due and payable in respect of which moneys have been collected, such payments to be made ratably to the persons entitled thereto, without discrimination or preference, according to the amounts then due and payable on such Convertible Debentures of principal and interest, respectively; and 727411.13 23 FOURTH: To the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto. Section 5.4 Restoration of Rights on Abandonment of Proceedings. In case the Trustee for the Convertible Debentures or any Holder shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or to such Holder, then and in every such case, subject to the determination in any such proceeding, the Company, the Trustee and the Holders shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Holders of Convertible Debentures shall continue as though no such proceedings had been taken. Section 5.5 Limitations on Suits by Holders of Convertible Debentures. No Holder of any Convertible Debenture shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of any Event of Default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of not less than 25% in aggregate principal amount of the Convertible Debentures then Outstanding shall have made written request upon the Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Trustee such reasonable indemnity, as it may require, against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceeding and no direction inconsistent with such written request shall have been given to the Trustee during such 60 day period by Holders of a majority in principal amount of the Convertible Debentures then Outstanding; it being understood and intended, and being expressly covenanted by the taker and Holder of every Convertible Debenture with every other taker and Holder of a Convertible Debenture and the Trustee, that no one or more Holders of Convertible Debentures shall have any right in any manner whatever, by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other such Holder of Convertible Debentures, or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Convertible Debentures. Section 5.6 Unconditional Right of Holders of Convertible Debentures to Institute Certain Suits. Notwithstanding any provision in this Indenture and any provision of any Convertible Debenture, the right of any Holder of any Convertible Debenture to receive payment of the principal of and (subject to Section 2.9 and Article XI) interest on such Convertible Debenture at the respective rates, in the respective amount on or after the respective due dates expressed in such Convertible Debenture, and to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 5.7 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default. Except as provided in Section 2.11 and Section 5.5, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Convertible Debentures is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Holder of Convertible Debentures to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to Section 5.5, every power and remedy given by this Indenture or by law to the Trustee or to the Holders of Convertible Debentures may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or the Holders of Convertible Debentures. Section 5.8 Control by Holders of Convertible Debentures. The Holders of a majority in aggregate principal amount of the Convertible Debentures at the time Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or 727411.13 24 power conferred on the Trustee with respect to the Convertible Debentures by this Indenture; provided that such direction shall not be in conflict with any rule of law or the provisions of this Indenture; and provided further that the Trustee, being advised by counsel, shall have the right to decline to follow any such direction if the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability or if the Trustee in good faith shall so determine that the actions or forbearance specified in or pursuant to such direction would be unduly prejudicial to the interest of Holders of the Convertible Debentures not joining in the giving of said direction. Section 5.9 Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Convertible Debentures at the time Outstanding may on behalf of the Holders of all the Convertible Debentures waive any past default hereunder or its consequences, except a default: (a) in the payment of the principal of (or premium, if any) or any interest on any Convertible Debenture as and when the same shall become due by the terms of Convertible Debentures otherwise than by acceleration (unless such default has been cured and sums sufficient to pay all matured installments of interest and principal and any premium has been deposited with the Trustee (in accordance with Section 5.1)), or (b) in respect of a covenant or provision hereof which under Article VIII cannot be modified or amended without the consent of the Holder of each Outstanding Convertible Debenture affected; provided, however, that if the Convertible Debentures are held by the CT Trust or the Institutional Trustee of such Trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in aggregate liquidation amount of Trust Securities of the CT Trust shall have consented to such waiver or modification to such waiver; provided further, that if the consent of the Holder of each Outstanding Convertible Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the CT Trust shall have consented to such waiver. Upon any such waiver, such default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Section 5.10 Right of Court to Require Filing of Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Convertible Debenture, by his acceptance thereof, shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder of Convertible Debentures or group of Holders of Convertible Debentures holding in the aggregate more than 10% in principal amount of the Outstanding Convertible Debentures, or to any suit instituted by a Holder of Convertible Debentures for the enforcement of the payment of the principal of or interest on any Convertible Debenture on or after the due date expressed in such Convertible Debenture or any date fixed for redemption. Section 5.11 Suits for Enforcement. In case an Event of Default has occurred, has not been waived and is continuing, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. 727411.13 25 Section 5.12 Unconditional Right of Holders to Receive Principal and Interest and to Convert. Notwithstanding any other provision in this Indenture, the Holder of any Convertible Debenture shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest (including Compound Interest and Additional Sums, if any) on such Convertible Debenture on the respective Stated Maturities expressed in such Convertible Debenture (or, in the case of redemption, on the redemption date) and to convert such Convertible Debenture in accordance with Article XII and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder. If the Institutional Trustee is the sole Holder of the Securities, any holder of the Preferred Securities shall have the right to institute suit on behalf of the Trust for the enforcement of any such payment and right to convert. The Company may not amend the Indenture to remove the foregoing right to institute a suit directly against the Company without the prior written consent of the Holders of all of the Preferred Securities. If the right to institute a suit directly against the Company is removed following the effectiveness of a registration statement in respect of the Convertible Debentures, the Trust may become subject to the reporting obligations under the Exchange Act. The Company shall have a right of set-off to the extent of any payments made by the Company to such Holder in any such suit. ARTICLE VI CONCERNING THE TRUSTEE Section 6.1 Duties of the Trustee. (a) If an Event of Default has occurred and is continuing with respect to the Convertible Debentures, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default with respect to the Convertible Debentures: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming on their face to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform on their face to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent failure to act or its own willful misconduct, except that: (i) this paragraph (c) does not limit the effect of paragraph (b) of this Section 6.1; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.8. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 6.1. 727411.13 26 (e) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. Section 6.2 Rights of Trustee. Subject to Section 6.1 and the provisions of the Trust Indenture Act: (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) Subject to the provisions of Section 6.1(c), the Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (d) The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel. (e) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (f) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 6.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Convertible Debentures and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co- Registrar may do the same with like rights. However, the Trustee must comply with Sections 6.10 and 6.11. Section 6.4 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Convertible Debentures, it shall not be accountable for the Company's use of the proceeds from the Convertible Debentures and it shall not be responsible for any statement in the registration statement for the Common Shares of the Company into which the Convertible Debentures are convertible under the Securities Act or in the Indenture or the Convertible Debentures (other than its certificate of authentication). Section 6.5 Notice of Defaults. If a default occurs and is continuing with respect to any Convertible Debentures and if it is known to the Trustee through oral or written notice to a Responsible Officer, the Trustee shall give to each Holder of Convertible Debentures notice of the default within 90 days after such default occurs. Except in the case of a default described in Section 5.1(a) or (b), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interest of Holders of Convertible Debentures. Section 6.6 Reports by Trustee to Holders. Within 60 days after each December 31 beginning with the December 31 following the date of this Indenture, the Trustee shall mail to each Holder of Convertible Debentures and each other person specified in TIA Section 313(c) a brief report dated as of such December 31 that 727411.13 27 complies with TIA Section 313(a) to the extent required thereby. The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Holders of Convertible Debentures shall be filed with the Commission and each securities exchange on which the Convertible Debentures are listed. The Company agrees promptly to notify the Trustee whenever the Convertible Debentures become listed on any securities exchange and of any delisting thereof. Section 6.7 Compensation and Indemnity. The Company agrees: (a) to pay to the Trustee from time to time in Dollars such compensation as shall be agreed to in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances with interest thereon incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, advances with interest thereon and disbursements of its agents and counsel), except to the extent any such expense, disbursement or advance may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee in Dollars for, and to hold it harmless against, any loss, liability or expense arising out of or in connection with the acceptance or administration of this trust or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder (including the reasonable compensation and the expenses, advances with interest thereon and disbursements of its agents and counsel), except to the extent that any such loss, liability or expense may be attributable to its negligence or bad faith. As security for the performance of the obligations of the Company in this Section 6.7, the Trustee shall have a lien prior to the Convertible Debentures on all money or property held or collected by the Trustee, except that held in trust to pay the principal of or interest, if any, on particular Convertible Debentures. "Trustee" for purposes of this Section 6.7 includes any predecessor Trustee, provided that the negligence or bad faith of any Trustee shall not be attributable to any other Trustee. The Company's payment obligations pursuant to this Section 6.7 shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a default specified in Sections 5.1(d) and 5.1(e), such expenses are intended to constitute expenses of administration under bankruptcy law. Section 6.8 Replacement of Trustee. The Trustee may resign at any time with respect to Convertible Debentures by so notifying the Company; provided, however, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 6.8. The Holders of a majority in aggregate principal amount of the Outstanding Convertible Debentures may remove the Trustee at the time outstanding by so notifying the Trustee and the Company. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 6.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. 727411.13 28 If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, with respect to the Convertible Debentures, the Company shall promptly appoint, by resolution of its Board of Trustees, a successor Trustee with respect to the Convertible Debentures. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture with respect to the Convertible Debentures. The successor Trustee shall mail a notice of its succession to Holders of Convertible Debentures so affected. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 6.7. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate principal amount of the Convertible Debentures at the time Outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 6.10, any Holder of Convertible Debentures may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Section 6.9 Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 6.10 Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a)(1) and Section 310(a)(5). The Trustee shall have combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b). Section 6.11 Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE VII CONCERNING THE HOLDERS OF CONVERTIBLE DEBENTURES Section 7.1 Evidence of Action Taken by Holders of Convertible Debentures. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be given or taken by a specified percentage in principal amount of the Holders of Convertible Debentures may be embodied in and evidenced by one or more instruments or substantially similar tenor signed by such specified percentage of Holders of Convertible Debentures in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Article. (b) The ownership of such Convertible Debentures shall be provided by the Security Register. Section 7.2 Proof of Execution of Instruments. Subject to Sections 6.1 and 6.2, the execution of any instrument by a Holder of Convertible Debentures or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. 727411.13 29 Section 7.3 Holders to be Treated as Owners. The Company, the Trustee and any agent of the Company or the Trustee may deem and treat the person in whose name any Convertible Debenture shall be registered upon the Security Register as the absolute owner of such Convertible Debenture (whether or not such Convertible Debenture shall be overdue and notwithstanding any notification of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and (subject to Section 2.9) interest on such Convertible Debenture and for all other purposes; and neither the Company nor the Trustee nor any agent of the Company or the Trustee shall be affected by any notice to the contrary. Section 7.4 Convertible Debentures Owned by Company Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Outstanding Convertible Debentures have concurred in any direction, consent or waiver under this Indenture, Convertible Debentures which are owned by the Company or any other obligor on the Convertible Debentures with respect to which such determination is being made or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Convertible Debentures with respect to which such determination is being made shall be disregarded and deemed not to be Outstanding for the purpose of any such determination (it being understood that VRLP and any Affiliate of Vornado Realty Trust or VRLP and EOPLP and any Affiliate of Equity Office Properties Trust or EOPLP shall not be deemed to be under common control with the Company), except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver only Convertible Debentures which the Trustee knows are so owned shall be so disregarded. Convertible Debentures so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Convertible Debentures and that the pledgee is not the Company or any other obligor upon the Convertible Debentures or any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Convertible Debentures. Section 7.5 Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Convertible Debentures, as the case may be, specified in this Indenture in connection with such action, any Holder of a Convertible Debenture the serial number of which is shown by the evidence to be included among the serial numbers of the Convertible Debentures the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article, revoke such action so far as concerns such Convertible Debenture. Except as aforesaid any such action taken by the Holder of any Convertible Debentures shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Convertible Debenture and of any Convertible Debentures issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Convertible Debenture. Any action taken by the Holders of the percentage in aggregate principal amount of the Convertible Debentures, as the case may be, specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the Holders of all the Convertible Debentures affected by such action. ARTICLE VIII SUPPLEMENTAL INDENTURES Section 8.1 Supplemental Indentures Without Consent of Holders of Convertible Debentures. The Company, when authorized by a resolution of its Board of Trustees and the Trustee for the Convertible Debentures may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof), in form satisfactory to such Trustee, for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Convertible Debentures any property or assets; 727411.13 30 (b) to evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Company pursuant to Article IX; (c) to add to the covenants of the Company such further covenants, restrictions, conditions or provisions for the protection of the Holders of Convertible Debentures; (d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Board of Trustees may deem necessary or desirable and which shall not materially and adversely affect the interests of the Holders of the Convertible Debentures; or (e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Convertible Debentures. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section may be executed without the consent of the Holders of any of the Convertible Debentures at the time Outstanding, notwithstanding any of the provisions of Section 8.2. Section 8.2 Supplemental Indentures With Consent of Holders of Convertible Debentures. With the consent (evidenced as provided in Article VII) of the Holders of not less than a majority in aggregate principal amount of the Convertible Debentures at the time Outstanding (voting as one class), the Company, when authorized by a resolution of its Board of Trustees, and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of execution thereof) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Convertible Debentures; provided, however, that no such supplemental indenture shall (a) except to the extent permitted by Article XI, extend the Stated Maturity of any Convertible Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof, or make the principal thereof or interest thereon payable in any coin or currency other than that provided in the Convertible Debentures or in accordance with the terms thereof, or impair or affect the right of any Holder of Convertible Debentures to institute suit for payment thereof, or adversely affect the right to convert Convertible Debentures, or modify the subordination provisions of this Indenture in any manner adverse to the Holders of Convertible Debentures without the consent of the Holders of each Convertible Debenture so affected, or (b) reduce the aforesaid percentage of Convertible Debentures, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of each Convertible Debenture so affected; provided further, that no such supplemental indenture shall result in the realization of unrelated business income for the Holders of the Convertible Debentures without the consent of each Holder of Convertible Debentures. Upon the request of the Company, accompanied by a copy of a resolution of the Board of Trustees certified by the secretary or assistant secretary of the Company authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Holders of Convertible Debentures as aforesaid and other documents, if any, required by Section 7.1, the Trustee shall join with the Company in the execution of such supplemental indenture or otherwise, in which case such Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. 727411.13 31 It shall not be necessary for the consent of the Holders of Convertible Debentures under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Company shall give notice thereof to the Holders of then Outstanding Convertible Debentures, by mailing a notice thereof by first-class mail to such Holders at their addresses as they shall appear on the Security Register, and in each case such notice shall set forth in general terms the substance of such supplemental indenture. Any failure of the Company to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 8.3 Effect of Supplemental Indenture. Every supplemental indenture executed pursuant to this Article VIII shall conform to the requirements of the Trust Indenture Act. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders of Convertible Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be a part of the terms and conditions of this Indenture for any and all purposes. Section 8.4 Documents to Be Given to Trustee. The Trustee, subject to the provisions of Section 6.1 and 6.2, shall receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article VIII complies with the applicable provisions of this Indenture. Section 8.5 Notation on Convertible Debentures in Respect of Supplemental Indentures. Convertible Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article VIII may bear, upon the direction of the Company, a notation in form satisfactory to the Trustee for the Convertible Debentures as to any matter provided for by such supplemental indenture. If the Company or the Trustee shall so determine, new Convertible Debentures so modified as to conform, in the opinion of the Trustee and the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Convertible Debentures then Outstanding. ARTICLE IX CONSOLIDATION, MERGER, SALE OR CONVEYANCE Section 9.1 Company May Consolidate, etc., on Certain Terms. The Company may sell, transfer, lease or otherwise convey all or substantially all of its assets on a consolidated basis to any Person, or consolidate or merge with or into, any other Person, provided that in any such case, (a) either (i) the Company shall be the continuing corporation, or (ii) if the Company is not the continuing corporation, the successor corporation or Person which acquires by sale, transfer, lease or other conveyance all or substantially all of the assets of the Company, shall be a corporation organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia and shall expressly assume the due and punctual payment of the principal of, premium, if any, and interest (including Additional Sums and Compound Interest) on all of the Convertible Debentures according to their tenor, and the due and punctual performance and observance of all of the covenants, agreements and conditions of this Indenture to be performed or observed by the Company by supplemental indenture satisfactory to the Trustee, executed and delivered to the Trustee by such corporation or entity, by amendment thereto, (b) immediately after such merger or consolidation, or such sale, transfer, lease or other conveyance, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing, and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that the requirements of this Section have been complied with. 727411.13 32 Section 9.2 Successor Corporation Substituted. In case of any such consolidation, merger, sale, transfer, or conveyance (but not in the case of any such lease), and following such an assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein, and the Company shall be discharged from all obligations and covenants under this Indenture and the Convertible Debentures and may be liquidated and dissolved. Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Convertible Debentures issuable hereunder which theretofore shall not have been signed by the Company and be delivered to the Trustee; and, upon the order of such successor corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall make available for delivery any Convertible Debentures which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Convertible Debentures, which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Convertible Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Convertible Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Convertible Debentures had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, transfer, lease or conveyance such changes in phraseology and form (but not in substance) may be made in the Convertible Debentures thereafter to be issued as may be appropriate. Section 9.3 Opinion of Counsel to Trustee. The Trustee, subject to the provisions of Section 6.1 and 6.2, may receive an Opinion of Counsel, prepared in accordance with Section 15.5, as conclusive evidence that any such consolidation, merger, sale, lease or conveyance, and any such assumption, and any such liquidation or dissolution, complies with the applicable provisions of this Indenture. ARTICLE X REDEMPTION OF THE CONVERTIBLE DEBENTURES Section 10.1 Tax Event Redemption. (a) If a Tax Event (as defined in the Declaration) has occurred and is continuing and: (i) the Company has received a Redemption Tax Opinion (as defined in the Declaration); or (ii) after receiving a Dissolution Tax Opinion (as defined in the Declaration), the Regular Trustees shall have been informed by tax counsel rendering the Dissolution Tax Opinion that a No-Recognition Opinion (as defined in the Declaration) cannot be delivered to the Trust, then, notwithstanding Section 10.2(a) but subject to Section 10.2(b), the Company shall have the right upon not less than 30 days nor more than 60 days notice to the Holders of the Convertible Debentures to redeem the Convertible Debentures, in whole or in part, for cash within 90 days following the occurrence of such Tax Event (the "90-Day Period") at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption (the "Redemption Price"), provided that if at the time there is available to the Company or the Trust the opportunity to eliminate, within the 90-Day Period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trust or the Holders of the Trust Securities issued by the Trust, the Company shall pursue such Ministerial Action in lieu of redemption. If a redemption pursuant to the provisions of this Section 10.1 occurs on or before September 30, 2003, the Company shall provide notice of the redemption 90 days prior to redemption (the "Early Tax Redemption Date") and pay to the Holders of the Convertible Debentures on such date the Adjusted Redemption Price as determined pursuant to the provisions of paragraph (b) of this Section 10.1, provided that if the Adjusted Redemption Price is determined to be less than the Redemption Price, the Company shall instead pay the Redemption Price to the Holders of Convertible Debentures. The Redemption Price or the Adjusted Redemption Price, as the case may be, shall be paid prior to 12:00 noon, New York time, on the date of such redemption or 727411.13 33 such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price or the Adjusted Redemption Price prior to the redemption date. (b) For purposes of this Section 10.1, the Adjusted Redemption Price shall be calculated pursuant to the provisions of this Section 10.1(b). Within 10 days after the date of notice of redemption has been provided, the Company and the Majority Holders shall each appoint a nationally recognized "bulge bracket" independent investment banking firm experienced in the valuation of businesses and their securities (each an "Experienced Appraiser") (the two Experienced Appraisers appointed by the Company and the Majority Holders are hereinafter referred to collectively as the "Initial MWA Experienced Appraisers") to objectively determine the fair market value of the Convertible Debentures as of the Early Tax Redemption Date (the "Convertible Debenture Fair Market Value"). The Initial MWA Experienced Appraisers shall be instructed (the "MWA Instructions") to independently determine the Convertible Debenture Fair Market Value as of the Early Tax Redemption Date assuming for this purpose that the Convertible Debentures were to remain outstanding until September 30, 2003 (taking into account for this purpose the interest rate and the option embedded in the Convertible Debentures). If the Initial MWA Experienced Appraisers shall not agree on the Convertible Debenture Fair Market Value, then within 10 days after the Appraisal Period, they shall jointly appoint a third Experienced Appraiser to objectively determine the Convertible Debenture Fair Market Value and, in connection therewith, provide to such firm information as to their calculations of the Convertible Debenture Fair Market Value. The third Experienced Appraiser shall be instructed to objectively determine the Convertible Debenture Fair Market Value in accordance with the MWA Instructions and to select the Convertible Debenture Fair Market Value determined by one of the Initial MWA Experienced Appraisers that most closely approximates the Convertible Debenture Fair Market Value determined by such third Experienced Appraiser. Such appraisal and selection by such third Experienced Appraiser shall be completed within 20 days after the date of appointment of such firm and shall be final and binding on the Company and each Holder. The Convertible Debenture Fair Market Value that most closely approximates the Convertible Debenture Fair Market Value determined by such third Experienced Appraiser shall constitute the "Adjusted Redemption Price." If the Adjusted Redemption Price is determined to be less than the Redemption Price, the Company shall instead pay the Redemption Price to the Holders of the Convertible Debentures. All costs and expenses incurred in connection with the appraisals, including fees to investment banking firms, necessary to determine the Convertible Debenture Fair Market Value and the Adjusted Redemption Price shall be borne by the Company. The Company covenants and agrees that it shall enter into engagement agreements with the foregoing Experienced Appraisers containing customary terms and conditions, including customary indemnification provisions. Section 10.2 Optional Redemption by Company. (a) Subject to the provisions of Section 10.2(b) and to the provisions of this Article X generally, except as otherwise may be specified in Section 10.1 or elsewhere in this Indenture, the Company shall have the right to redeem the Convertible Debentures, in whole or in part, from time to time, on or after September 30, 2003. Any redemption pursuant to this paragraph will be made upon not less than 30 days nor more than 60 days notice to the Holders of the Convertible Debentures, at a price equal to 100% of the principal amount of the Convertible Debentures (the "Optional Redemption Price") together with accrued and unpaid interest (including Additional Sums, if any, and, to the extent permitted by applicable law, Compounded Interest, if any) to, but excluding, the redemption date. If Convertible Debentures are redeemed on any March 31, June 30, September 30, or December 31, accrued and unpaid interest shall be payable to holders of record on the relevant record date. The Company may not redeem fewer than all of the outstanding Convertible Debentures unless all accrued and unpaid interest has been paid on all Convertible Debentures for all quarterly interest payment periods terminating on or prior to the date of redemption. So long as the corresponding Trust Securities are outstanding, the proceeds from the redemption of the Convertible Debentures will be used to redeem the Trust Securities. If the Convertible Debentures are only partially redeemed pursuant to this Section 10.2, the Convertible Debentures will be redeemed pro rata. The Optional Redemption Price, together with any required interest 727411.13 34 payment, shall be paid in immediately available funds prior to 12:00 noon, New York time, on the redemption date or at such earlier time as the Company determines provided that the Company shall deposit with the Trustee an amount sufficient to pay the Optional Redemption Price, together with any required interest payment, by 10:00 a.m., New York time, on the date such amounts are to be paid. Partial redemptions must be in an amount not less than $1,000 principal amount of Convertible Debentures. If Convertible Debentures selected for partial redemption are converted in part before termination of the conversion right with respect to the portion of the Convertible Debentures so selected, the converted portion of the Convertible Debentures shall be deemed (so far as may be) to be the portion selected for redemption. Convertible Debentures (or portions thereof) which have been converted during a selection of Convertible Debentures to be redeemed shall be treated by the Trustee as Outstanding for the purpose of such selection. In any case where more than one Convertible Debenture is registered in the same name, the Trustee in its discretion may treat the aggregate principal amount so registered as if it were represented by one Convertible Debenture. If any Convertible Debenture called for redemption is converted into Common Shares of the Company, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Convertible Debenture shall (subject to any right of the Holder of such Convertible Debenture or any Predecessor Convertible Debenture to receive interest as provided in the last paragraph of Section 2.9) be paid to the Company upon the Company's request or, if then held by the Company, shall be discharged from such trust. (b) If a partial redemption of the Convertible Debentures would result in the delisting of the Convertible Preferred Securities issued by the Trust from any national securities exchange or other organization on which the Convertible Preferred Securities are then listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Convertible Debentures in whole. Section 10.3 No Sinking Fund. The Convertible Debentures are not entitled to the benefit of any sinking fund or subject to any sinking fund. Section 10.4 Election to Redeem; Notice of Redemption; Partial Redemptions. The election of the Company to redeem any Convertible Debentures shall be evidenced by, or pursuant to, a resolution of the Board of Trustees. Notice of redemption to the Holders of Convertible Debentures required to be redeemed or to be redeemed as a whole or in part at the option of the Company shall be given by giving notice of such redemption as provided in Section 15.4, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Convertible Debentures. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Neither the failure to give notice by mail, nor any defect in the notice so mailed to the Holder of any Convertible Debenture designated for redemption as a whole or in part shall affect the validity of the proceedings for such redemption. The notice of redemption to each such Holder shall specify the date fixed for redemption, the "CUSIP" number or numbers for such Convertible Debentures, the redemption price, the Place or Places of Payment, that payment will be made upon presentation and surrender of such Convertible Debentures, that interest accrued to the date fixed for redemption will be paid as specified in such notice and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue, the conversion rate or price, the date on which the right to convert the Convertible Debentures to be redeemed will terminate and the place or places where such Convertible Debentures may be surrendered for conversion. If less than all of the Convertible Debentures are to be redeemed, the notice of redemption shall specify the number of the Convertible Debentures to be redeemed. In case any Convertible Debenture is to be redeemed in part, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Convertible Debenture, a new Convertible Debenture or Convertible Debentures in principal amount equal to the unredeemed portion thereof will be issued. The notice of redemption of Convertible Debentures to be redeemed at the option of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. If such notice is to be given by the Trustee, the Company shall provide notice of such redemption to the Trustee at least 60 days prior to the date fixed for redemption (unless a shorter notice shall be satisfactory to 727411.13 35 the Trustee). If such notice is given by the Company, the Company shall provide a copy of such notice given to the Holders of such redemption to the Trustee at least 2 days prior to the date such notice is given to such Holders, but in any event at least 30 days and not more than 60 days prior to the date fixed for redemption. Not later than the redemption date specified in the notice of redemption given as provided in this Section, the Company will have on deposit with the Trustee or with one or more Paying Agents (or, if the Company is acting as its own Paying Agent, set aside, segregate and hold in trust as provided in Section 3.3) in funds available on such date an amount of money sufficient to redeem on the redemption date all the Convertible Debentures so called for redemption at the appropriate redemption price, together with accrued interest to the date fixed for redemption. If less than all of the Outstanding Convertible Debentures are to be redeemed at the election of the Company, the Company will deliver to the Trustee at least 60 days prior to the date fixed for redemption (unless a shorter notice shall be satisfactory to the Trustee) an Officers' Certificate stating the aggregate principal amount of Convertible Debentures to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Convertible Debentures shall relate, in the case of any Convertible Debenture redeemed or to be redeemed only in part, to the portion of the principal amount of such Convertible Debenture which has been or is to be redeemed. Section 10.5 Payment of Convertible Debentures Called for Redemption. If notice of redemption has been given as above provided, the Convertible Debentures or portions of Convertible Debentures specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption, and on and after said date (unless the Company shall default in the payment of such Convertible Debentures at the redemption price, together with interest accrued to said date) interest on the Convertible Debentures or portions of Convertible Debentures so called for redemption shall cease to accrue, and, except as provided in Section 6.1, such Convertible Debentures shall cease from and after the date fixed for redemption to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Convertible Debentures except the right to receive the redemption price thereof and unpaid interest to the date fixed for redemption. On presentation and surrender of such Convertible Debentures at a Place of Payment specified in said notice, said Convertible Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption; provided that, payment of interest becoming due on or prior to the date fixed for redemption shall be payable to the Holders of such Convertible Debentures registered as such on the relevant record date subject to the terms and provisions of Section 2.9 hereof. If any Convertible Debenture called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid or duly provided for, bear interest from the date fixed for redemption at the Coupon Rate. Upon presentation of any Convertible Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to or on the order of the Holder thereof, at the expense of the Company, a new Convertible Debenture or Convertible Debentures, of authorized denominations, in principal amount equal to the unredeemed portion of the Convertible Debenture so presented. Section 10.6 Exclusion of Certain Convertible Debentures from Eligibility for Selection for Redemption. Convertible Debentures shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in a written statement signed by an authorized officer of the Company and delivered to the Trustee at least 30 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by, either (a) the Company or (b) an entity specifically identified in such written statement as directly or indirectly controlling or controlled by or under direct or indirect common control with the Company (it being understood that VRLP and any Affiliate of Vornado Realty Trust or VRLP and EOPLP and any Affiliate of Equity Office Properties Trust or EOPLP shall not be deemed to be under common control with the Company). 727411.13 36 ARTICLE XI EXTENSION OF INTEREST PAYMENT PERIOD Section 11.1 Extension of Interest Payment Period. As long as an Event of Default under Section 5.1(a) of this Indenture shall not have occurred and be continuing, subject to the condition that the Company file with the Trustee and the transfer agent for the Convertible Preferred Securities and the Convertible Debentures a Certificate signed by the chief financial officer or Treasurer of the Company in the form attached hereto as Exhibit B ("Extension Certificate"), the Company shall have the right, at any time and from time to time during the term of the Convertible Debentures, to defer payments of interest by extending the interest payment period of such Convertible Debentures for a period not exceeding 20 consecutive quarters (the "Extension Period"), during which Extension Period no interest shall be due and payable; provided that an Extension Certificate shall be filed at the beginning of each quarter of such Extension Period and that no Extension Period may extend beyond the Maturity Date or any earlier redemption date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 11.1, will bear interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extension Period ("Compound Interest"). Each Extension Period, if any, will end on an Interest Payment Date. At the end of the Extension Period, the Company shall pay all interest accrued and unpaid on the Convertible Debentures, including any Additional Sums and, to the extent permitted by law, Compound Interest (together, "Deferred Interest") that shall be payable to the Holders of the Convertible Debentures in whose names the Convertible Debentures are registered in the Security Register at the close of business on the record date next preceding such Interest Payment Date. Before the termination of any Extension Period, the Company may further extend such period, provided that such period together with all previous and further extensions thereof shall not exceed 20 consecutive quarters, or extend beyond the Maturity Date or any earlier redemption date. Upon the termination of any Extension Period and upon the payment of all Deferred Interest then due, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest shall be due and payable during an Extension Period, except at the end thereof, but the Company may prepay at any time all or any portion of the interest accrued during an Extension Period. Section 11.2 Notice of Extension. (a) If the Institutional Trustee is the only registered Holder of the Convertible Debentures at the time the Company selects an Extension Period, the Company shall give written notice to the Regular Trustees, the Institutional Trustee and the Trustee of its selection of such Extension Period at least one Business Day before the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable. The Company shall cause the Trust to give notice of the Company's selection of such Extension Period to holders of the Convertible Preferred Securities. (b) If the Institutional Trustee is not the only Holder of the Convertible Debentures at the time the Company selects an Extension Period, the Company shall give the Holders of the Convertible Debentures, the Institutional Trustee and the Trustee written notice of its selection of such Extension Period at least 10 Business Days before next succeeding Interest Payment Date. (c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 11.2 shall be counted as one of the 20 consecutive quarters permitted in the maximum Extension Period permitted under Section 11.1. ARTICLE XII CONVERSION OF CONVERTIBLE DEBENTURES Section 12.1 Conversion Rights. Subject to and upon compliance with the provisions of this Article XII, the Convertible Debentures are convertible, at the option of the Holders, at any time through the close of business on the last Business Day prior to the Maturity Date (or, in the case of Convertible Debentures called for redemption, prior to the close of business on the Business Day prior to the corresponding redemption date) into 727411.13 37 fully paid and nonassessable Common Shares of the Company at an initial conversion rate of 85.47 Common Shares for each $1,000 in principal amount of Convertible Debentures (equivalent to a conversion price of $11.70 per Common Share (the "Conversion Price")), subject to adjustment and reset as described in this Article XII. Subject to the following sentence, a Holder of Convertible Debentures may convert any portion of the principal amount of the Convertible Debentures into that number of fully paid and nonassessable Common Shares obtained by dividing the principal amount of the Convertible Debentures to be converted by such Conversion Price. At least $1,000,000 of the principal amount, or the entire principal amount, if less than $1,000,000, of the Convertible Debentures held by the converting Holder must be converted in connection with any conversion into Common Shares pursuant to the foregoing. All calculations under this Article XII shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Section 12.2 Conversion Procedures. (a) In order to convert all or a portion of the Convertible Debentures, the Holder thereof shall deliver to the Conversion Agent an irrevocable notice of conversion (the "Notice of Conversion") setting forth the principal amount of Convertible Debentures to be converted, together with the name or names, if other than the Holder, in which the Common Shares should be issued upon conversion and, surrender to the Conversion Agent the Convertible Debentures to be converted, duly endorsed or assigned to the Company or in blank. In addition, a holder of Convertible Preferred Securities may exercise its right under the Declaration to convert such Convertible Preferred Securities into Common Shares by delivering to the Conversion Agent an irrevocable Notice of Conversion setting forth the information called for by the preceding sentence and directing the Conversion Agent (i) to exchange such Convertible Preferred Security for a portion of the Convertible Debentures held by the Trust (at an exchange rate of $1,000 principal amount of Convertible Debentures for each Convertible Preferred Security) and (ii) to immediately convert such Convertible Debentures, on behalf of such holder, into Common Shares of the Company pursuant to this Article XII and surrendering such Convertible Preferred Securities, duly endorsed or assigned to the Company or in blank. So long as any Convertible Preferred Securities are outstanding, the Trust shall not convert any Convertible Debentures except pursuant to a Notice of Conversion delivered to the Conversion Agent by a holder of Convertible Preferred Securities. If a Notice of Conversion is delivered on or after the record date and prior to the subsequent Interest Payment Date, the Holder will be entitled to receive the interest payable on the subsequent Interest Payment Date on the portion of Convertible Debentures to be converted notwithstanding the conversion thereof prior to such Interest Payment Date. However, if a redemption date falls between a record date and the subsequent Interest Payment Date, the Holder will be entitled to receive, on such Interest Payment Date, the interest accrued to, but excluding, the redemption date. Except as otherwise provided in the first and second sentences of this paragraph, in the case of any Convertible Debenture which is converted, interest whose Stated Maturity is after the date of conversion of such Convertible Debenture shall not be payable, and the Company shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest on the Convertible Debentures being converted, which shall be deemed to be paid in full. Each conversion shall be deemed to have been effected immediately prior to the close of business on the day on which the Notice of Conversion was received (the "Conversion Date") by the Conversion Agent from the Holder or from a holder of the Convertible Preferred Securities effecting a conversion thereof pursuant to its conversion rights under the Declaration, as the case may be. The Person or Persons entitled to receive the Common Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Shares as of the Conversion Date. As promptly as practicable on or after the Conversion Date, the Company shall issue and deliver at the office of the Conversion Agent, unless otherwise directed by the Holder in the Notice of Conversion, a certificate or certificates for the number of full Common Shares issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same. The Conversion Agent shall deliver such certificate or certificates to such Person or Persons. (b) The Company's delivery upon conversion of the fixed number of Common Shares into which the Convertible Debentures are convertible (together with the cash payment, if any, in lieu of fractional share and the interest payable pursuant to Section 12.2(a)) shall be deemed to satisfy the Company's obligation to pay the principal amount at Maturity of the portion of Convertible Debentures so converted and any unpaid interest (including Compound Interest) accrued on such Convertible Debentures at the time of such conversion. 727411.13 38 (c) No fractional Common Shares will be issued as a result of conversion, but in lieu thereof, the Company shall pay to the Conversion Agent a cash adjustment in an amount equal to the same fraction of the Closing Price of such fractional interest on the date on which the Convertible Debentures were duly surrendered to the Conversion Agent for conversion, or, if such day is not a Trading Day, on the next Trading Day, and the Conversion Agent in turn will make such payment, if any, to the Holder of the Convertible Debentures or the holder of the Convertible Preferred Securities so converted. (d) In the event of the conversion of any Convertible Debenture in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to or on the order of the Holder thereof, at the expense of the Company, a new Convertible Debenture or Convertible Debentures in the aggregate principal amount equal to the unconverted portion thereof. (e) In effecting the conversion transactions described in this Section 12.2, the Conversion Agent is acting as agent of the holders of Convertible Preferred Securities (in the exchange of Convertible Preferred Securities for Convertible Debentures) and as agent of the Holders of Convertible Debentures (in the conversion of Convertible Debentures into Common Shares), as the case may be. The Conversion Agent is hereby authorized (i) to exchange Convertible Debentures held by the Trust from time to time for Convertible Preferred Securities in connection with the conversion of such Convertible Preferred Securities in accordance with this Article XII and (ii) to convert all or a portion of the Convertible Debentures into Common Shares and thereupon to deliver such Common Shares in accordance with the provisions of this Article XII and to deliver to the Trust a new Convertible Debenture or Convertible Debentures for any resulting unconverted principal amount. Section 12.3 Conversion Price Adjustments. The Conversion Price shall be adjusted from time to time as follows: (a) In case the Company shall, while any of the Convertible Debentures are outstanding, (i) pay a dividend or make a distribution with respect to Common Shares in Common Shares, (ii) subdivide outstanding Common Shares, (iii) combine outstanding Common Shares into a smaller number of shares or (iv) issue by reclassification of its Common Shares any shares of Capital Stock of the Company (other than the reclassifications covered by Section 12.4), the conversion privilege and the Conversion Price for the Convertible Debentures shall be adjusted so that the Holder of any Convertible Debenture thereafter surrendered for conversion shall be entitled to receive the number of shares of Capital Stock of the Company which such Holder would have owned immediately following such action had such Convertible Debenture been converted immediately prior thereto. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or other distribution and shall become effective immediately after the effective date in case of a subdivision, combination or reclassification (or immediately after the record date if a record date shall have been established for such event). (b) In case the Company shall, while any of the Convertible Debentures are outstanding, issue rights or warrants to all holders of its Common Shares entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase Common Shares at a price per share less than the current market price per Common Share (as determined pursuant to subsection (g) below) on the record date mentioned below, the Conversion Price for the Convertible Debentures shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of issuance of such rights or warrants by a fraction of which the numerator shall be the number of Common Shares outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered for subscription or purchase would purchase at such current market price, and of which the denominator shall be the number of Common Shares outstanding on the date of issuance of such rights or warrants plus the number of additional Common Shares offered for subscription or purchase. Such adjustment shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. For the purposes of this subsection, the number of Common Shares at any time outstanding shall not include shares held in the treasury of the Company. In case any rights or warrants referred to in this subsection in respect of which an adjustment shall have been made shall expire unexercised within 45 days after the same shall have been distributed or issued by the Company, the Conversion Price shall be readjusted at the time of such expiration to the Conversion Price that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants. 727411.13 39 (c) Subject to the last sentence of this subsection (c), in case the Company shall, by dividend or otherwise, distribute to all holders of its Common Shares evidences of its indebtedness, shares of any class or series of Capital Stock, cash or assets or rights or warrants to subscribe for or purchase any of its securities (excluding any rights or warrants referred to in subsection (b), any dividend or distribution paid exclusively in cash and any dividend or distribution referred to in subsection (a) of this Section 12.3), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection (c) by a fraction of which the numerator shall be the current market price (determined as provided in subsection (g)) per Common Share on the date fixed for the payment of such distribution (the "Reference Date") less the fair market value (as determined in good faith by the Board of Trustees, whose determination shall be conclusive and evidenced by a resolution of the Board of Trustees), on the Reference Date, of the portion of the evidences of indebtedness, shares of Capital Stock, cash, assets, rights or warrants so distributed applicable to one Common Share and the denominator shall be such current market price per Common Share, such reduction to become effective immediately prior to the opening of business on the day following the Reference Date. In the event that no such dividend or distribution is so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not occurred. If the Board of Trustees determines the fair market value of any distribution for purposes of this subsection (c) by reference to the actual or when issued trading market for any securities comprising such distribution, it must in doing so consider the prices in such market over the same period used in computing the current market price per Common Share (determined as provided in subsection (g)). For purposes of this subsection (c), any dividend or distribution that includes Common Shares, or rights or warrants of the type described in subsection (b), shall be deemed instead to be a dividend or distribution of the evidences of indebtedness, shares of Capital Stock, cash or assets or rights or warrants other than such Common Shares, or such rights or warrants of the type described in subsection (b) (making any Conversion Price reduction required by this subsection (c)), immediately followed by a dividend or distribution of such Common Shares or such rights or warrants of the type described in subsection (b) (making any further Conversion Price adjustment required by subsection (a) or (b)), except (A) the Reference Date of such dividend or distribution as defined in this subsection (c) shall be substituted as (1) "the record date in the case of a dividend or other distribution," and (2) "the record date for the determination of stockholders entitled to receive such rights or warrants" and (3) "the date fixed for such determination" within the meaning of subsections (a) and (b) and (B) any Common Share included in such dividend or distribution shall not be deemed outstanding for purposes of computing any adjustment of the Conversion Price in subsection (b). (d) In case the Company shall pay or make a dividend or other distribution on its Common Shares exclusively in cash, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection (d) by a fraction of which the numerator shall be the current market price per share (determined as provided in subsection (g)) of the Common Shares on the date fixed for the payment of such distribution less the amount of cash so distributed applicable to one Common Share and the denominator shall be such current market price per Common Share (determined as provided in subsection (g)), such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution. In the event that no such dividend or distribution is so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such Record Date had not been fixed. (e) In case a tender or exchange offer (other than an odd-lot offer) made by the Company or any Subsidiary of the Company for all or any portion of the Company's Common Shares shall expire and such tender or exchange offer shall involve the payment by the Company or such subsidiary of consideration per Common Share having a fair market value (as determined in good faith by the Board of Trustees, whose determination shall be conclusive and evidenced by a resolution of the Board of Trustees) on the last date (the "Expiration Date") tenders or exchanges may be made pursuant to such tender or exchange offer (as it shall have been amended) that exceeds the Closing Price of the Common Shares on the Expiration Date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection (e) by a fraction (which shall not be greater than one) of which the numerator shall be (i) the number of Common Shares outstanding (including any tendered or exchanged shares) on the Expiration Date times the Closing Price of the Common Shares on the Expiration Date minus (ii) the fair market value (determined as aforesaid) of the aggregate consideration paid 727411.13 40 pursuant to such tender or exchange offer and the denominator shall be (i) the number of Common Shares outstanding (including any tendered or exchanged shares) on the Expiration Date minus the number of Common Shares purchased pursuant to such tender or exchange offer times (ii) the Closing Price of the Common Shares on the Expiration Date, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Date. (f) In case a tender or exchange offer made by a Person other than the Company or any Subsidiary of the Company for all or any portion of the Common Shares shall expire and such tender or exchange offer shall involve the payment by a Person other than the Company or any Subsidiary of the Company of consideration per Common Share having a fair market value (as determined in good faith by the Board of Trustees, whose determination shall be conclusive and evidenced by a resolution of the Board of Trustees) at the applicable Expiration Date that exceeds the Closing Price of the Common Shares on the Expiration Date in which as of the closing date of the offer the Board of Trustees of the Company is not recommending rejection of the offer, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection (f) by a fraction (which shall not be greater than one) of which the numerator shall be (i) the number of Common Shares outstanding (including any tendered or exchanged shares) on the Expiration Date times the Closing Price of the Common Shares on the Expiration Date minus (ii) the fair market value (determined as aforesaid) of the aggregate consideration paid pursuant to such tender or exchange offer and the denominator shall be (i) the number of Common Shares outstanding (including any tendered or exchanged shares) on the Expiration Date minus the number of Common Shares purchased pursuant to such tender or exchange offer times (ii) the Closing Price of the Common Shares on the Expiration Date, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Time; provided, however, that the reduction of the Conversion Price contemplated by this subsection (f) will only be made if the tender offer or exchange offer is made for an amount which increases that Person's ownership of Common Shares to more than 25% of the total Common Shares outstanding and provided, further, that the reduction of the Conversion Price contemplated by this subsection (f) will not be made if as of the close of the offer, the offering documents with respect to such offer include a commitment to cause the Company to engage in a consolidation or merger of the Company or a sale of all or substantially all of the assets of the Company. (g) For the purpose of any computation under subsection (b), (c), (d), (e) or (f), the current market price per Common Share on any date in question shall be deemed to be the average of the daily Closing Prices for the five Trading Day period ending on the earlier of the day in question and, if applicable, the last Trading Day before the "ex" date with respect to the issuance or distribution requiring such computation; provided, however, that if more than one event occurs that would require an adjustment pursuant to subsections (a) through (f), inclusive, the Board of Trustees shall in good faith make such adjustments to the Closing Prices during such five Trading Day period as it reasonably deems appropriate to effectuate the intent of the adjustments in this Section 12.3, in which case any such determination by the Board of Trustees shall be set forth in a Board Resolution and shall be conclusive. For purposes of this paragraph, the term "ex" date, (1) when used with respect to any issuance or distribution, means the first date on which the Common Shares trade regular way on the New York Stock Exchange or on such successor securities exchange as the Common Shares may be listed or in the relevant market from which the Closing Prices were obtained without the right to receive such issuance or distribution, and (2) when used with respect to any tender or exchange offer means the first date on which the Common Shares trade regular way on such securities exchange or in such market after the Expiration Time of such offer. (h) The Company may make such reductions in the Conversion Price, in addition to those required by subsections (a) through (f), as the Board of Trustees considers to be advisable to avoid or diminish any income tax to holders of Common Shares or rights to purchase Common Shares resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. The Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least twenty (20) days. Whenever the Conversion Price is reduced pursuant to the preceding sentence, the Company shall mail to Holders of record of the Convertible Debentures a notice of the reduction at least 15 days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period it will be in effect. 727411.13 41 (i) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price; provided, however, that any adjustments which by reason of this subsection (i) are not required to be made shall be carried forward and taken into account in determining whether any subsequent adjustment shall be required. (j) If any action would require adjustment of the Conversion Price pursuant to more than one of the provisions described above, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value to the Holder of Convertible Debentures. (k) Except as stated above, the Conversion Rate will not be adjusted for the issuance of Common Shares or any securities convertible into, or exchangeable for, Common Shares, or carrying the right to purchase any of the foregoing. Section 12.4 Merger, Consolidation or Sale of Assets. (a) In the event that the Company shall be a party to any transaction (including without limitation (i) any recapitalization or reclassification of the Common Shares (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Common Shares, (ii) any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding Common Shares of the Company), (iii) any sale or transfer of all or substantially all of the assets of the Company, or (iv) any compulsory share exchange) pursuant to which either Common Shares shall be converted into the right to receive other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the Holder of each Convertible Debenture then outstanding shall have the right thereafter to convert such Convertible Debenture only into: (i) in the case of any such transaction that does not constitute a Common Share Fundamental Change, the kind and amount of the securities, cash or other property that would have been receivable upon such transaction by a holder of the number of Common Shares issuable upon conversion of such Convertible Debenture immediately prior to such transaction, after giving effect to any adjustment in the Conversion Price in accordance with clause (i) of subsection (c) of this Section 12.4; and (ii) in the case of any such transaction that constitutes a Common Share Fundamental Change, common stock of the kind received by holders of Common Share as a result of such Common Share Fundamental Change in an amount determined in accordance with clause (ii) of subsection (c) of this Section 12.4. (b) The Company or, if the Company is not the surviving Person in such transaction, the surviving Person, shall amend this Indenture as appropriate to establish such right. Such amendment shall provide for adjustments which, for events subsequent to the effective date thereof, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article XII. The above provisions shall similarly apply to successive transactions of the foregoing type. (c) Notwithstanding any other provision of this Section 12.4 to the contrary, if any Fundamental Change occurs, then the Conversion Price in effect will be adjusted immediately after such Fundamental Change as follows: (i) in the case of a Non-Share Fundamental Change, the Conversion Price of the Convertible Debentures immediately following such Non-Share Fundamental Change shall be the lower of (A) the Conversion Price in effect immediately prior to such Non-Share Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to Section 12.3, and (B) the product of (1) the greater of the Applicable Price and the then applicable Reference Market Price and (2) a fraction, the numerator of which is $1,000 and the denominator of which is (x) the amount of the Optional Redemption Price set forth in Section 10.2 for $1,000 in principal amount of Convertible Debentures if the redemption date were the date of such Non-Share Fundamental Change plus (y) any then-accrued and unpaid interest on $1,000 principal amount of Convertible Debentures provided that if the Non-Share Fundamental 727411.13 42 Change occurs prior to September 30, 2003, the Optional Redemption Price for purposes of the foregoing will be recalculated pursuant to the provisions of subparagraph (iii) below to provide for a lower conversion price to account for the loss of the option value imbedded in the Convertible Debentures immediately before the Non-Share Fundamental Change; and (ii) in the case of a Common Share Fundamental Change, the Conversion Price of the Convertible Debentures immediately following such Common Share Fundamental Change shall be the Conversion Price in effect immediately prior to such Common Share Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to Section 12.3, multiplied by a fraction, the numerator of which is the Purchaser Share Price and the denominator of which is the Applicable Price; provided, however, that in the event of a Common Share Fundamental Change in which (A) 100% of the value of the consideration received by a holder of Common Shares is common stock of the successor, acquiror or other third party (and cash, if any, paid with respect to any fractional interests in such common stock resulting from such Common Share Fundamental Change) and (B) all of the Common Shares shall have been exchanged for, converted into or acquired for, common stock of the successor, acquiror or other third party (and any cash with respect to fractional interests), the Conversion Price of the Convertible Debentures immediately following such Common Share Fundamental Change shall be the Conversion Price in effect immediately prior to such Common Share Fundamental Change multiplied by a fraction, the numerator of which is one (1) and the denominator of which is the number of shares of common stock of the successor, acquiror or other third party received by a holder of one share Common Share as a result of such Common Share Fundamental Change. (iii) For purposes of Section 12.4(c)(i), the Optional Redemption Price to be used for purposes of making the adjustment of the Conversion Price set forth therein in the event a Non-Share Fundamental Change occurs prior to September 30, 2003 (the "Recalculated Optional Redemption Price") shall be determined pursuant to the terms of this Section 12.4(c)(iii), provided that if the Recalculated Optional Redemption Price is determined to be less than the Optional Redemption Price, the Optional Redemption Price shall instead be used for purposes of making the adjustment of the Conversion Price set forth in Section 12.4(c)(i). Within 10 days of such Non-Share Fundamental Change, the Company and the Majority Holders shall each appoint an Experienced Appraiser (the two Experienced Appraisers appointed by the Company and the Majority Holders are hereinafter referred to collectively as the "Initial RORP Experienced Appraisers") to objectively determine the Recalculated Optional Redemption Price. The Initial RORP Experienced Appraisers shall be instructed to independently recalculate the Optional Redemption Price so that such price accounts for the lost option value embedded in the Convertible Debenture as a result of the Non-Share Fundamental Change (the "RORP Instructions"), which recalculated price shall constitute the Recalculated Optional Redemption Price. The Initial RORP Experienced Appraisers shall complete their appraisals and provide notice of their determination to each other within 30 days after the Non-Share Fundamental Change (the "RORP Appraisal Period"). If the Initial RORP Experienced Appraisers shall not agree on the Recalculated Optional Redemption Price, then within 10 days after the RORP Appraisal Period, they shall jointly appoint a third Experienced Appraiser to objectively determine the Recalculated Optional Redemption Price and, in connection therewith, provide to such firm information as to their calculations of the Recalculated Optional Redemption Price. The third Experienced Appraiser shall be instructed to objectively determine the Recalculated Optional Redemption Price in accordance with the RORP Instructions and to select the Recalculated Optional Redemption Price determined by one of the Initial RORP Experienced Appraisers that most closely approximates the Recalculated Optional Redemption Price determined by such third Experienced Appraiser (the "Selected Recalculated Optional Redemption Price"). The appraisal of such third Experienced Appraiser shall be completed within 20 days after the date of appointment of such firm, whereupon it shall select the Selected Recalculated Optional Redemption Price. The selection of the Selected Recalculated Optional Redemption Price by the third Experienced Appraiser shall be final and binding on the Company and each Holder. All costs and expenses incurred in connection with the appraisals, including fees of investment bankers, necessary to determine the Recalculated Optional Redemption Price shall be borne by the Company. The Company covenants and agrees that it shall enter into engagement agreements with the foregoing Experienced Appraisers containing customary terms and conditions, including customary indemnification provisions. 727411.13 43 Section 12.5 Notice of Adjustments of Conversion Price. Whenever the Conversion Price is adjusted as herein provided: (a) the Company shall compute the adjusted Conversion Price and shall prepare a certificate signed by the chief financial officer or the treasurer of the Company setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee and the transfer agent for the Convertible Preferred Securities and the Convertible Debentures; and (b) a notice stating the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall as soon as practicable be mailed by the Company to all record holders of Convertible Preferred Securities and the Convertible Debentures at their last addresses as they appear upon the transfer books of the Company and the Trust. Section 12.6 Prior Notice of Certain Events. In case: (a) the Company shall (i) declare any dividend (or any other distribution) on its Common Shares, other than (A) a dividend payable in Common Shares or (B) a dividend payable in cash that would not require an adjustment pursuant to Section 12.3(c) or (d), or (ii) authorize a tender or exchange offer that would require an adjustment pursuant to Section 12.3(e); (b) the Company shall authorize the granting to all holders of Common Shares of rights or warrants to subscribe for or purchase any shares of stock of any class or series or of any other rights or warrants; (c) of any reclassification of Common Shares (other than a subdivision or combination of the outstanding Common Shares, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company shall be required, or of the sale or transfer of all or substantially all of the assets of the Company or of any compulsory share exchange whereby the Common Shares are converted into other securities, cash or other property; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall (i) if any Convertible Preferred Securities are outstanding, cause to be filed with the transfer agent for the Convertible Preferred Securities, and shall cause to be mailed to the holders of record of the Convertible Preferred Securities, at their last addresses as they shall appear upon the stock transfer books of the Trust or (ii) shall cause to be mailed to all Holders at their last addresses as they shall appear in the Security Register, at least 15 days prior to the applicable record or effective date hereinafter specified, a notice stating (A) the date on which a record (if any) is to be taken for the purpose of such dividend, distribution, rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Shares of record to be entitled to such dividend, distribution, rights or warrants are to be determined or (B) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Shares of record shall be entitled to exchange their shares of Common Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). If at any time the Trustee shall not be the Conversion Agent, a copy of such notice shall also forthwith be filed by the Company with the Trustee. Section 12.7 Certain Additional Rights. In case the Company shall, by dividend or otherwise, declare or make a distribution on the Common Shares referred to in Section 12.3(c) or 12.3(d), the Holder of the Convertible Debentures, upon the conversion thereof subsequent to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution and prior to the effectiveness of the Conversion Price adjustment in respect of such distribution, shall also be entitled to receive for each Common Share into which the Convertible Debentures are converted, the portion of the Common Shares, rights, warrants, evidences 727411.13 44 of indebtedness, shares of Capital Stock, cash and assets so distributed applicable to one Common Share; provided, however, that, at the election of the Company (whose election shall be evidenced by a resolution of the Board of Trustees) with respect to all Holders so converting, the Company may, in lieu of distributing to such Holder any portion of such distribution not consisting of cash or securities of the Company, pay such Holder an amount in cash equal to the fair market value thereof (as determined in good faith by the Board of Trustees, whose determination shall be conclusive and evidenced by a resolution of the Board of Trustees). If any conversion of Convertible Debentures described in the immediately preceding sentence occurs prior to the payment date for a distribution to holders of Common Shares which the Holder of Convertible Debentures so converted is entitled to receive in accordance with the immediately preceding sentence, the Company may elect (such election to be evidenced by a resolution of the Board of Trustees) to distribute to such Holder a due bill for the Common Shares, rights, warrants, evidences of indebtedness, shares of Capital Stock, cash or assets to which such Holder is so entitled, provided, that such due bill (a) meets any applicable requirements of the principal national securities exchange or other market on which the Common Shares are then traded and (b) requires payment or delivery of such Common Shares, rights, warrants, evidences of indebtedness, shares of Capital Stock, cash or assets no later than the date of payment or delivery thereof to holders of Common Share receiving such distribution. Section 12.8 Trustee Not Responsible for Determining Conversion Price or Adjustments. Neither the Trustee nor any Conversion Agent shall at any time be under any duty or responsibility to any Holder of any Convertible Debenture to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed. Neither the Trustee nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind or amount) of any Common Shares or of any securities or property, which may at any time be issued or delivered upon the conversion of any Convertible Debenture; and neither the Trustee nor any Conversion Agent makes any representation with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any Common Shares or stock certificates or other securities or property upon the surrender of any Convertible Debenture for the purpose of conversion. All Convertible Debentures delivered for conversion shall be delivered to the Trustee to be canceled by or at the discretion of the Trustee, which shall dispose of the same as provided in Section 2.12 of this Indenture. Section 12.9 Reservation of Shares of Common Shares. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Shares or treasury shares, for the purpose of effecting the conversion of Convertible Debentures, the full number of Common Shares of the Company then issuable upon the conversion of all outstanding Convertible Debentures. Section 12.10 Payment of Certain Taxes upon Conversion. The Company will pay any and all taxes that may be payable in respect of the issue or delivery of its Common Shares on conversion of Convertible Debentures pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of its Common Shares in a name other than that of the Holder of the Convertible Debenture or Convertible Debentures to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax, or has established, to the satisfaction of the Company, that such tax has been paid. Section 12.11 Nonassessability. The Company covenants that all Common Shares which may be issued upon conversion of Convertible Debentures will upon issue in accordance with the terms hereof be duly and validly issued and fully paid and nonassessable. ARTICLE XIII SUBORDINATION OF CONVERTIBLE DEBENTURES Section 13.1 Convertible Debentures Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Convertible Debenture, by the Holder's acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Convertible Debentures and the payment of the principal of (and premium, if any) and interest on each and 727411.13 45 all of the Convertible Debentures are hereby expressly made subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article shall prevent the occurrence of any default or Event of Default hereunder. Section 13.2 Payment Over of Proceeds upon Dissolution, Etc. In the event of (i) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to the Company, its creditors or its property, (ii) any proceeding for the liquidation, dissolution or other winding up of the Company voluntarily or involuntarily, whether or not involving insolvency or bankruptcy proceedings, (iii) any assignment by the Company for the benefit of creditors or (iv) any other marshalling of assets of the Company, all amounts due upon all Senior Indebtedness of the Company (including any interest thereon accruing after the commencement of such proceedings) shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company on account of the principal (and premium, if any) or interest on the Convertible Debentures; and any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Convertible Debentures or the Trustee would be entitled to receive from the Company, except for the provisions of this Article, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, or by the Holders of the Convertible Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness (including any interest thereon accruing after the commencement of such proceedings) in full, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of the Convertible Debentures or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness of the Company is paid in full, or provision is made for such payment, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, and their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company, as the case may be, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. For purposes of this Article only, the words "cash, property or securities" shall not be deemed to include shares of Capital Stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which are subordinated in right of payment to all Senior Indebtedness which may at the time be outstanding to substantially the same extent as, or to a greater extent than, the Convertible Debentures are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article IX of this Indenture shall not be deemed a dissolution, winding up, liquidation, reorganization, readjustment, composition, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article IX of this Indenture. Section 13.3 Prior Payment to Senior Indebtedness upon Acceleration of Convertible Debentures. In the event that any Convertible Debentures are declared due and payable before their Stated Maturity, then and in such event the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness or provision shall be made for such payment in cash, before 727411.13 46 the Holders of the Convertible Debentures are entitled to receive any payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Convertible Debentures) by the Company on account of the principal of (or premium, if any) or interest on the Convertible Debentures or on account of the purchase or other acquisition of Convertible Debentures. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Convertible Debenture prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which Section 13.2 would be applicable. Section 13.4 No Payment When Senior Indebtedness in Default. In the event and during the continuation of any default by the Company in the payment of principal, premium, if any, interest or any other payment due on any Senior Indebtedness of the Company, as the case may be, beyond any applicable grace period with respect thereto, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default, then, in any such case, no payment shall be made by the Company with respect to the principal (including redemption payments, if any) of, premium, if any, or interest on the Convertible Debentures until such default is cured or waived or ceases to exist or any such acceleration or demand for payment has been rescinded. Section 13.5 Payment Permitted in Certain Situations. Nothing contained in this Article or elsewhere in this Indenture or in the Convertible Debentures shall prevent (a) the Company, at any time except during the pendency of any dissolution, winding-up, liquidation or reorganization of the Company, whether voluntary or involuntary or any bankruptcy, insolvency, receivership or other proceedings of the Company referred to in Section 13.2 or under the conditions described in Section 13.3 or 13.4, from making payments at any time of principal of or premium, if any, or interest on the Convertible Debentures, or (b) the application by the Trustee of any money deposited with it hereunder to the payment of or on account of the principal of, or premium, if any, or interest on the Convertible Debentures or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article. Section 13.6 Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, the Holders of Convertible Debentures shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article (equally and ratably with the holders of indebtedness of the Company which by its express terms is subordinated to indebtedness of the Company to substantially the same extent as the Convertible Debentures are subordinated to the Senior Indebtedness and is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Convertible Debentures shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of Convertible Debentures or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to or for the benefit of the holders of Senior Indebtedness by Holders of Convertible Debentures or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of Convertible Debentures, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. Section 13.7 Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of Convertible Debentures on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Convertible Debentures is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of Convertible Debentures, the obligation of the Company, which is absolute and unconditional (and which, subject to the rights under this Article of the 727411.13 47 holders of Senior Indebtedness, is intended to rank equally with all other general obligations of the Company), to pay to the Holders of Convertible Debentures the principal of (and premium, if any) and interest on the Convertible Debentures as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of Convertible Debentures and creditors of the Company, as the case may be, other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Convertible Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. Section 13.8 Trustee to Effectuate Subordination. Each Holder of a Convertible Debenture by such Holder's acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. Section 13.9 No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Convertible Debentures, without incurring responsibility to the Holders of Convertible Debentures and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of Convertible Debentures to the holders of Senior Indebtedness do any one or more of the following (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company and any other Person. Section 13.10 Notice to Trustee. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Convertible Debentures pursuant to the provisions of this Article. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Convertible Debentures pursuant to the provisions of this Article, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 6.2 of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall have not received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Convertible Debentures, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. Subject to the provisions of Section 6.2 of this Indenture, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to 727411.13 48 participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 13.11 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 6.2 of this Indenture, and the Holders of Convertible Debentures shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Convertible Debentures, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. Section 13.12 Trustee Not Fiduciary for Holders of Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. Except with respect to Section 13.4, the Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders or creditors if it shall in good faith pay over or distribute to Holders of Convertible Debentures or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. Section 13.13 Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article XIII shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.7 of this Indenture. Section 13.14 Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Section 13.13 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 13.15 Certain Conversions Deemed Payment. For purposes of this Article only, (a) the issuance and delivery of junior securities (or cash paid in lieu of fractional shares) upon conversion of Convertible Debentures in accordance with Article XII shall not be deemed to constitute a payment or distribution on account of the principal of or premium or interest on Convertible Debentures or on account of the purchase or other acquisition of Convertible Debentures, and (b) the payment, issuance or delivery of cash, property or securities (other than junior securities and cash paid in lieu of fractional shares) upon conversion of a Convertible Debenture shall be deemed to constitute payment on account of the principal of such Convertible Debenture. For the purposes of this Section, the term "junior securities" means (i) shares of any Capital Stock of any class of the Company and (ii) securities of the Company which are subordinated in right of payment to all Senior Indebtedness which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Convertible Debentures are so subordinated as provided in this Article. Nothing contained in this Article or elsewhere in this Indenture or in the Convertible Debentures is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of Convertible Debentures, the right, which is absolute and unconditional, of the Holder of any Convertible Debenture to convert such Convertible Debenture in accordance with Article XII. 727411.13 49 ARTICLE XIV EXPENSES Section 14.1 Payment of Expenses. In connection with the offering, sale and issuance of the Convertible Debentures to the Institutional Trustee and in connection with the sale of the Trust Securities by the Trust, the Company, in its capacity as borrower with respect to the Convertible Debentures, shall: (a) pay all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the fees and expenses of the Institutional Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); (b) pay all costs and expenses related to the enforcement by the Institutional Trustee of the rights of the holders of the Trust Securities; (c) be primarily liable for any indemnification obligations arising with respect to the Declaration; and (d) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. Section 14.2 Payment Upon Resignation or Removal. Upon termination of this Indenture or the removal or resignation of the Trustee pursuant to Section 6.8 of this Indenture, the Company shall pay to the Trustee all amounts accrued to the date of such termination, removal or resignation. Upon termination of the Declaration or the removal or resignation of the Delaware Trustee or the Institutional Trustee, as the case may be, pursuant to Section 5.6 of the Declaration, the Company shall pay to the Delaware Trustee or the Institutional Trustee, and their respective counsel, as the case may be, all amounts accrued to the date of such termination, removal or resignation. ARTICLE XV MISCELLANEOUS PROVISIONS Section 15.1 Incorporators, Stockholders, Officers and Trustees of Company Exempt from Individual Liability. No recourse under or upon any obligations, covenant or agreement contained in this Indenture, in any Convertible Debenture, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such or against any past, present or future shareholder, officer or director, trustee, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Convertible Debentures by the Holders thereof and as part of the consideration of the issue of the Convertible Debentures. Section 15.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Convertible Debentures. Nothing in this Indenture or in the Convertible Debentures, expressed or implied, shall give or be construed to give to any Person, firm or corporation, other than the parties hereto, any Paying Agent and their successors hereunder, the holders of Senior Indebtedness, the holders of Convertible Preferred Securities (to the extent provided herein) and the Holders of the Convertible Debentures any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their successors and of the Holders of the Convertible Debentures. 727411.13 50 Section 15.3 Right to Assign; Successors and Assigns Bound by Indenture. The Company shall have the right at all times to assign any of its respective rights or obligations under this Indenture to a direct or indirect wholly-owned Subsidiary of the Company, other than an entity which will be taxed as a partnership for federal income tax purposes; provided that, in the event of any such assignment, the Company shall remain liable for all of its obligations under this Indenture. Subject to the foregoing, this Indenture will be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The rights and obligations of the parties under this Indenture may not otherwise be assigned by such parties. All the covenants, stipulations, promises and agreements in this Indenture by the parties hereto shall bind their respective successors and assigns, whether so expressed or not. Section 15.4 Notices and Demands on Company, Trustee and Holders of Convertible Debentures. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Convertible Debentures to or on the Company may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Company is filed by the Company with the Trustee) to Capital Trust, 605 Third Avenue, 26th Floor, New York, New York, 10016, Attention: Chief Financial Officer. Any notice, direction, request or demand by the Company or any Holder of Convertible Debentures to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made at the Corporate Trust Office. Where this Indenture provides for notice to Holders of Convertible Debentures of any event such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed by first-class mail, postage prepaid to such Holders as their names and addresses appear in the Convertible Debenture register within the time prescribed. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, shall affect the sufficiency of such notice, and any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Company and Holders of Convertible Debentures when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be reasonably acceptable to the Trustee shall be deemed to be a sufficient giving of such notice. Section 15.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Company to the Trustee to take action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition and the definitions herein relating thereto, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. Any certificate, statement or opinion of any officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the 727411.13 51 certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters or information with respect to which is in the possession of the Company, upon the certificate, statement or opinion of or representations by an officer or officers of the Company, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Company or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Company, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with and directed to the Trustee shall contain a statement that such firm is independent. Section 15.6 Payments Due on Saturdays, Sundays and Holidays. Except as otherwise provided in Section 2.5, if the date of Maturity of interest on or principal of the Convertible Debentures or the date fixed for redemption or repayment of any such Convertible Debenture shall not be a Business Day, then payment of interest or principal need not be made on such date, but may be made on the next succeeding Business Day; provided that if such next succeeding Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date of Maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. Section 15.7 Conflict of Any Provision of Indenture with Trust Indenture Act. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture which is required by the Trust Indenture Act, such required provision shall control. Section 15.8 New York Law to Govern. THIS INDENTURE AND THE CONVERTIBLE DEBENTURES SHALL BE DEEMED TO BE CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SAID STATE. Section 15.9 Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. Section 15.10 Effect of Headings; Gender. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. The use of the masculine, feminine or neuter gender herein shall not limit in any way the applicability of any term or provision hereof. 727411.13 52 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereto affixed and attested, all as of the day and year first above written. CAPITAL TRUST By: /s/ John R. Klopp ---------------------------------- Name: John R. Klopp Title: Chief Executive Officer WILMINGTON TRUST COMPANY, as Trustee By: /s/ Emmett R. Harmon ---------------------------------- Name: Emmett R. Harmon Title: Vice President 727411.13 53 SCHEDULE 2.5(a) The following table lists the Coupon Rate in effect for the Convertible Debentures for the periods specified from the Issuance Date through the Maturity Date. Period Coupon Rate ------ ----------- July 28, 1998 through September 30, 2004 8.25% October 1, 2004 through September 30, 2005 9.00% October 1, 2005 through September 30, 2006 9.75% October 1, 2006 through September 30, 2007 10.50% October 1, 2007 through September 30, 2008 11.25% October 1, 2008 through September 30, 2009 12.00% October 1, 2009 through September 30, 2010 12.75% October 1, 2010 through September 30, 2011 13.50% October 1, 2011 through September 30, 2012 14.25% October 1, 2012 through September 30, 2013 15.00% October 1, 2013 through September 30, 2014 15.75% October 1, 2014 through September 30, 2015 16.50% October 1, 2015 through September 30, 2016 17.25% October 1, 2016 through September 30, 2017 18.00% October 1, 2017 through Maturity Date 18.75% 727411.13 EXHIBIT A [(FORM OF FACE OF CONVERTIBLE DEBENTURE)] No. __________ CUSIP NO. __________ CAPITAL TRUST 8.25% STEP UP CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE PRIOR TO THE TRANSFER RESTRICTION TERMINATION DATE, ANY CERTIFICATE EVIDENCING A CONVERTIBLE DEBENTURE SHALL BEAR A LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM, UNLESS OTHERWISE AGREED BY THE COMPANY (WITH WRITTEN NOTICE THEREOF TO THE TRUSTEE): THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR, IF THIS SECURITY IS CONVERTIBLE INTO COMMON SHARES, THE COMMON SHARES ISSUABLE UPON CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO CT CAPITAL TRUST (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, SUCH HOLDER MUST FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR CT CONVERTIBLE TRUST I (THE "TRUST") MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT EVIDENCE COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE A-1 727411.13 HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE FOR THE CONVERTIBLE PREFERRED SECURITIES OR THE CONVERTIBLE DEBENTURES, AS THE CASE MAY BE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. NO LATER THAN 10 DAYS AFTER THE ISSUE DATE OF THE CONVERTIBLE DEBENTURES, INFORMATION CONCERNING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY OF THE CONVERTIBLE DEBENTURES MAY BE OBTAINED FROM THE CHIEF FINANCIAL OFFICER OF CAPITAL TRUST AT 605 THIRD AVENUE, 26TH FLOOR, NEW YORK, NY 10016. Capital Trust, a California business trust (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to, Wilmington Trust Company, as Institutional Trustee (the "Institutional Trustee") for CT Convertible Trust I or registered assigns, the principal sum of One Hundred Fifty Four Million Six Hundred Fifty Thousand Dollars ($154,650,000) on September 30, 2018 and to pay interest on said principal sum from July 28, 1998 (the "Issuance Date"), or from the most recent interest payment date to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30, and December 31 (each such date, an "Interest Payment Date") of each year commencing September 30, 1998, at the rate of 8.25% per annum from and including the Issuance Date to and including September 30, 2004, such rate of interest per annum automatically increasing by an additional .75% per annum (any such increase shall be cumulative with any such prior increase(s)) on October 1, 2004 and again on each subsequent October 1, until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed, will be computed on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on this Convertible Debenture is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture (referred to on the reverse hereof) be paid to the person in whose name this Convertible Debenture (or one or more Predecessor Convertible Debentures, as defined in said Indenture) is registered on the record date for such interest installment, which shall be the close of business on the fifteenth day prior to such Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered Holders on such record date and may be paid to the Person in whose name this Convertible Debenture (or one or more Predecessor Convertible Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered Holders of the Convertible Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Convertible Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Convertible Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of this Convertible Debenture is the Institutional Trustee, the A-2 727411.13 payment of the principal of (and premium, if any) and interest on this Convertible Debenture will be made at such place and to such account as may be designated by the Institutional Trustee. If the Company pays any Common Dividend during any quarter ending on an interest payment date, the Coupon Rate in effect for such quarter shall automatically increase by the Common Rate. For purposes of this provision, the following terms have the following meanings: (i) "Common Dividend" means any cash dividend or distribution payable on the Common Shares of the Company. (ii) "Common Rate" means, for any quarter, the fraction, expressed as a percentage rate per annum, the numerator of which is the aggregate dollar amount of Common Dividend paid on one common share during such quarter and the denominator of which is $9.00, (subject to adjustment in proportion to each adjustment to the conversion price triggered by events occurring prior to such quarter). The indebtedness evidenced by this Convertible Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Convertible Debenture is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Convertible Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Convertible Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Convertible Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. Capitalized terms used but not defined herein shall have the meaning given them in the Indenture. A-3 727411.13 IN WITNESS WHEREOF, the Company has caused this instrument to be executed. CAPITAL TRUST By: ------------------------------- Name: Title: Attest: By: ------------------ Name: Title: A-4 727411.13 [FORM OF CERTIFICATE OF AUTHENTICATION] CERTIFICATE OF AUTHENTICATION This is one of the Convertible Debentures described in the within-mentioned Indenture. Dated: July 28, 1998 WILMINGTON TRUST COMPANY, as Trustee By: ________________________________ Authorized Signatory A-5 727411.13 [FORM OF REVERSE OF DEBENTURE] This Convertible Debenture is one of the 8.25% Step Up Convertible Junior Subordinated Debentures (herein referred to as the "Convertible Debentures"), all issued or to be issued under and pursuant to an Indenture dated as of July 28, 1998, duly executed and delivered between the Company and Wilmington Trust Company, as Trustee (the "Trustee") (the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Convertible Debentures. The Convertible Debentures are limited in aggregate principal amount as specified in the Indenture. Because of the occurrence and continuation of a Tax Event, in certain circumstances, this Convertible Debenture may become due and payable at the principal amount specified on the face hereof together with any interest accrued thereon (the "Redemption Price"). If a redemption occurs on or before September 30, 2003, the Company shall pay to the Holders of the Convertible Debentures an Adjusted Redemption Price specified in the Indenture. The Redemption Price or Adjusted Redemption Price, as the case may be, shall be paid prior to 12:00 noon, New York City time, on the date of such redemption or at such earlier time as the Company determines. The Company shall have the right to redeem this Convertible Debenture at the option of the Company, upon not less than 30 nor more than 60 days notice, without premium or penalty, in whole or in part at any time on or after September 30, 2003 (an "Optional Redemption") at a price equal to 100% of the principal amount of the Convertible Debentures (the "Optional Redemption Price") together with accrued and unpaid interest (including Additional Sums, if any, and, to the extent permitted by applicable law, Compound Interest, if any) to, but excluding, the redemption date. If Convertible Debentures are redeemed on any March 31, June 30, September 30, or December 31, accrued and unpaid interest shall be payable to holders of record on the relevant record date. So long as the corresponding Trust Securities are outstanding, the proceeds from the redemption of any of the Convertible Debentures will be used to redeem Trust Securities. If the Convertible Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Convertible Debentures will be redeemed pro rata. In the event of redemption of this Convertible Debenture in part only, a new Convertible Debenture or Convertible Debentures for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Convertible Debentures and the interest accrued thereon may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of a majority of the aggregate principal amount of the Convertible Debentures at the time Outstanding, evidenced as provided in the Indenture, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Convertible Debentures; provided, however, that no such supplemental indenture shall (i) extend the Stated Maturity of any Convertible Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable upon redemption thereof, or impair or affect the right of any Holder to institute suit for the payment thereof, without the consent of the Holder of each Convertible Debenture so affected, or (ii) reduce the aforesaid percentage of Convertible Debentures, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holder of each Convertible Debenture. It is also provided in the Indenture that, with respect to certain defaults or Events of Default regarding the Convertible Debentures, prior to any declaration accelerating the maturity of such Convertible Debentures, the Holders of a majority in aggregate principal amount Outstanding of the Convertible Debentures (or, in the case of certain defaults or Events of Default, all of the Convertible Debentures), may on behalf of the Holders of all the Convertible Debentures waive any such past default or Event of Default and its consequences. The preceding sentence shall not, however, apply to a default in the payment of the principal of or premium, if any, or interest on any of the Convertible Debentures. Any such consent or waiver by the Holder of this Convertible A-6 727411.13 Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Convertible Debenture and any Convertible Debenture which may be issued in exchange or substitution therefor, irrespective of whether or not any notation thereof is made upon this Convertible Debenture or such other Convertible Debenture. No reference herein to the Indenture and no provision of this Convertible Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Convertible Debenture at the time and place and at the rate and in the money herein prescribed. As long as an Event of Default under Section 5.1(a) of the Indenture shall not have occurred and be continuing, the Company shall have the right at any time during the term of the Convertible Debentures and from time to time to extend the interest payment period of such Convertible Debentures for up to 20 consecutive quarters (an "Extension Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Convertible Debentures to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extension Period, the Company may further extend such Extension Period, provided that such Extension Period together with all such further extensions thereof shall not exceed 20 consecutive quarters. At the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may commence a new Extension Period. As provided in the Indenture and subject to certain limitations therein set forth, this Convertible Debenture is transferable by the registered Holder hereof on the Security Register of the Company, upon surrender of this Convertible Debenture for registration of transfer at the office or agency of the Trustee in the City and State of New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Convertible Debentures of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Convertible Debenture, the Company, the Trustee, any paying agent and the Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Convertible Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Convertible Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, shareholder, officer or director, trustee, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. The Holder of any Convertible Debenture has the right, exercisable at any time through the close of business (New York time) on the last Business Day prior to the Maturity Date (or, in the case of a Convertible Debenture called for redemption, prior to the close of business on the Business Day prior to the corresponding redemption date), to convert the principal amount thereof (or any portion thereof that is an integral multiple of $1,000) into Common Shares at the initial conversion rate of 85.47 Common Shares for each Convertible Debenture (equivalent to a Conversion Price of $11.70 per Common Share), subject to adjustment under certain circumstances. At least $1,000,000 of the principal amount, or the entire amount principle amount, if less than $1,000,000, of the Convertible Debentures held by the converting Holder must be converted in connection with any conversion into Common Shares pursuant to the foregoing. To convert a Convertible Debenture, a Holder must (a) complete and sign a conversion notice substantially in the form attached hereto, (b) surrender the Convertible Debenture to a Conversion Agent, (c) furnish appropriate A-7 727411.13 endorsements or transfer documents if required by the Conversion Agent and (d) pay any transfer or similar tax, if required. Upon conversion, no adjustment or payment will be made for interest or dividends, but if any Holder surrenders a Convertible Debenture for conversion on or after the record date for the payment of an installment of interest and prior to the opening of business on the next Interest Payment Date, then, notwithstanding such conversion, the interest payable on such Interest Payment Date will be paid to the registered Holder of such Convertible Debenture on such record date. In such event, such Convertible Debenture, when surrendered for conversion, need not be accompanied by payment of an amount equal to the interest payable on such Interest Payment Date on the portion so converted. However, if a redemption date falls between a record date and the subsequent Interest Payment Date, the Holder will be entitled to receive, on such redemption date, the interest accrued to, but excluding, the redemption date. The number of shares issuable upon conversion of a Convertible Debenture is determined by dividing the principal amount of the Convertible Debenture converted by the Conversion Price in effect on the Conversion Date. No fractional shares will be issued upon conversion but a cash adjustment will be made for any fractional interest. The outstanding principal amount of any Convertible Debenture shall be reduced by the portion of the principal amount thereof converted into Common Shares. The Convertible Debentures are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Convertible Debentures are exchangeable for a like aggregate principal amount of Convertible Debentures of a different authorized denomination, as requested by the Holder surrendering the same. THE INDENTURE AND THE CONVERTIBLE DEBENTURES SHALL BE DEEMED TO BE CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SAID STATE. A-8 727411.13 [FORM OF ELECTION TO CONVERT] ELECTION TO CONVERT To: Capital Trust The undersigned owner of this Convertible Debenture hereby irrevocably exercises the option to convert this Convertible Debenture, or the portion below designated, into Common Shares of CAPITAL TRUST in accordance with the terms of the Indenture referred to in this Convertible Debenture, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: _______________, ____ in whole _____ Portions of Convertible Debenture to be converted ($1,000 or integral multiples-thereof):$____________ ---------------------------------------------------- Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- Signature Guarantee:1 _______________________________ - -------- 1 Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-9 727411.13 ASSIGNMENT [FORM OF ASSIGNMENT FOR CONVERTIBLE DEBENTURES] For value received__________________________ hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ (Please insert social security or other taxpayer identification number of assignee.) the within Convertible Debenture and hereby irrevocably constitutes and appoints _______ attorney to transfer the said Convertible Debenture on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the within Convertible Debenture occurring prior to the Transfer Restriction Termination Date, the undersigned confirms that such Convertible Debenture is being transferred: / / To Capital Trust or a subsidiary thereof; or / / Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or / / To an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Regulation S under the Securities Act of 1933, as amended; or / / Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; or / / Pursuant to an effective registration statement. and unless the box below is checked, the undersigned confirms that such Convertible Debenture is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): / / The transferee is an Affiliate of the Company. Dated: _____________________________ ---------------------------------------- ---------------------------------------- Signature(s) - ------------------------------------- Signature Guarantee2 NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of this Convertible Debenture in every particular without alteration or enlargement or any change whatever. - -------- 2 (Signature must be guaranteed by an "eligible guarantor institution," that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A-10 727411.13 EXHIBIT B Wilmington Trust Company 1100 North Market Street 9th Floor Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration Ladies and Gentleman: Pursuant to Section 11.1 of the Indenture, dated as of July 28, 1998 between Capital Trust, a California business trust (the"Company") and Wilmington Trust Company, (the "Trustee"), the Company has elected to defer payments of interest by extending the interest payment period of such Convertible Debentures (as defined in the Indenture) for the fiscal quarter ended [ ]. This will serve to certify that the Company's election to defer such interest payments resulted from a business judgment that the Company does not, and is not expected during the period of extension to have or generate from ordinary operations the cash resources, nor have the ability to borrow on favorable terms the necessary funds in order to fund the payment of the deferred interest after due and good faith consideration to the Company's financial condition and anticipated cash requirements. Sincerely yours, [Chief Financial Officer] [Treasurer] A-11 727411.13 EX-4.5 6 PREFERRED SECURITIES GUARANTEE Exhibit 4.5 - -------------------------------------------------------------------------------- PREFERRED SECURITIES GUARANTEE AGREEMENT CT CONVERTIBLE TRUST I Dated as of July 28, 1998 - -------------------------------------------------------------------------------- 727414.7 TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS AND INTERPRETATION....................................1 SECTION 1.1. Definitions and Interpretation..................1 ARTICLE II TRUST INDENTURE ACT...............................................3 SECTION 2.1. Trust Indenture Act; Application................3 SECTION 2.2. Lists of Holders................................3 SECTION 2.3. Reports by the Preferred Guarantee Trustee......4 SECTION 2.4. Periodic Reports to Preferred Guarantee Trustee.........................................4 SECTION 2.5. Evidence of Compliance with Conditions Precedent.......................................4 SECTION 2.6. Events of Default; Waiver.......................4 SECTION 2.7. Event of Default; Notice........................4 SECTION 2.8. Conflicting Interests...........................5 ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE..........5 SECTION 3.1. Powers and Duties of the Preferred Guarantee Trustee.........................................5 SECTION 3.2. Certain Rights of Preferred Guarantee Trustee...6 SECTION 3.3. Not Responsible for Recitals or Issuance of Preferred Securities Guarantee..................8 ARTICLE IV PREFERRED GUARANTEE TRUSTEE.......................................8 SECTION 4.1. Preferred Guarantee Trustee: Eligibility........8 SECTION 4.2. Appointment, Removal and Resignation of Preferred Guarantee Trustee.....................9 ARTICLE V GUARANTEE.........................................................9 SECTION 5.1. Guarantee.......................................9 SECTION 5.2. Waiver of Notice and Demand....................10 SECTION 5.3. Obligations Not Affected.......................10 SECTION 5.4. Rights of Holders..............................10 SECTION 5.5. Guarantee of Payment...........................11 SECTION 5.6. Subrogation....................................11 SECTION 5.7. Independent Obligations........................11 ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION........................11 SECTION 6.1. Limitation of Transactions.....................11 SECTION 6.2. Subordination..................................12 ARTICLE VII TERMINATION......................................................12 SECTION 7.1. Termination....................................12 ARTICLE VIIIINDEMNIFICATION..................................................12 SECTION 8.1. Exculpation....................................12 SECTION 8.2. Indemnification................................13 ARTICLE IX MISCELLANEOUS....................................................13 SECTION 9.1. Successors and Assigns.........................13 SECTION 9.2. Amendments.....................................13 SECTION 9.3. Notices........................................13 SECTION 9.4. Benefit........................................14 SECTION 9.5. Governing Law..................................14 727414.7 PRIOR TO THE TRANSFER RESTRICTION TERMINATION DATE (AS DEFINED IN THE DECLARATION), ANY CERTIFICATE EVIDENCING THIS PREFERRED SECURITIES GUARANTEE SHALL BEAR A LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM, UNLESS OTHERWISE AGREED BY THE REGULAR TRUSTEES (WITH WRITTEN NOTICE TO THE INSTITUTIONAL TRUSTEE) PURSUANT TO SECTION 9.1(D) OF THE DECLARATION: THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON SHARES ISSUABLE UPON CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO CAPITAL TRUST (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, SUCH HOLDER MUST FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR CT CONVERTIBLE TRUST I (THE "TRUST") MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT EVIDENCE COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY 727414.7 EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATIONS UNDER THE SECURITIES ACT. 727414.7 PREFERRED SECURITIES GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as of July 28, 1998, is executed and delivered by Capital Trust, a California business trust (the "Guarantor"), and Wilmington Trust Company, as trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of CT Convertible Trust I, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to a Declaration of Trust (the "Declaration"), dated as of July 28, 1998, among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof up to 150,000 preferred securities (the "Preferred Securities"), having a liquidation amount of $1,000 per Preferred Security, designated the 8.25% Step Up Convertible Trust Preferred Securities. WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Preferred Securities Guarantee, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. WHEREAS, as of the date hereof, the Guarantor is also executing and delivering a guarantee agreement (the "Common Securities Guarantee") in substantially identical terms to this Preferred Securities Guarantee for the benefit of the holders of the Common Securities (as defined herein), except that if an Event of Default (as defined in the Indenture), has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments under this Preferred Securities Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Preferred Securities Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions and Interpretation. In this Preferred Securities Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Preferred Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) terms defined in the Declaration as at the date of execution of this Preferred Securities Guarantee have the same meaning when used in this Preferred Securities Guarantee unless otherwise defined in this Preferred Securities Guarantee; (c) a term defined anywhere in this Preferred Securities Guarantee has the same meaning throughout; (d) all references to "the Preferred Securities Guarantee" or "this Preferred Securities Guarantee" are to this Preferred Securities Guarantee as modified, supplemented or amended from time to time; 727414.7 (e) all references in this Preferred Securities Guarantee to Articles and Sections are to Articles and Sections of this Preferred Securities Guarantee, unless otherwise specified; a term defined in the Trust Indenture Act has the same meaning when used in this Preferred Securities Guarantee, unless otherwise defined in this Preferred Securities Guarantee or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Authorized Officer" of a Person means any Person that is authorized to legally bind such Person, provided, however, that the Authorized Officer signing an Officers' Certificate given pursuant to Section 314(a)(4) of the Trust Indenture Act shall be the principal executive, financial or accounting officer of such Person. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Corporate Trust Office" means the office of the Preferred Guarantee Trustee at which the corporate trust business of the Preferred Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 1100 North Market Street, 9th Floor, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. "Covered Person" means any Holder or beneficial owner of Preferred Securities. "Event of Default" means (a) a failure by the Guarantor to perform any of its payment or other obligations under this Preferred Securities Guarantee or (b) if applicable, the failure by the Guarantor to deliver Common Shares upon an appropriate election by a Holder of Preferred Securities to convert the Preferred Securities into Common Shares. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Preferred Securities to the extent the Issuer shall have funds available therefor, (ii) the redemption price (the "Redemption Price") or Adjusted Redemption Price specified in the Indenture, as the case may be, and all accrued and unpaid Distributions to the date of redemption, to the extent the Issuer has funds available therefor, with respect to any Preferred Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the redemption of all of the Preferred Securities or the distribution of Debentures to the Holders in exchange for Preferred Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders of Preferred Securities then outstanding upon the liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an Event of Default (as defined in the Indenture) has occurred and is continuing, the rights of holders of the Common Securities to receive payments under the Common Securities Guarantee Agreement are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments. "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that, in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of the Preferred Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Preferred Guarantee Trustee. 727414.7 2 "Indenture" means the Indenture dated as of July 28, 1998, between the Guarantor (the "Debenture Issuer") and Wilmington Trust Company, as trustee. "Majority in liquidation amount of the Preferred Securities" means, except as provided in the terms of the Convertible Preferred Securities, or except as provided by the Trust Indenture Act, a vote by Holder(s), voting separately as a class, of more than 50% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Preferred Securities. "Preferred Guarantee Trustee" means Wilmington Trust Company, until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Preferred Securities Guarantee and thereafter means each such Successor Preferred Guarantee Trustee. "Responsible Officer" means, with respect to the Preferred Guarantee Trustee, any officer within the Corporate Trust Office of the Preferred Guarantee Trustee, including any vice president, any assistant vice president, secretary, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Preferred Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee Trustee possessing the qualifications to act as Preferred Guarantee Trustee under Section 4.1. "Trust Securities" means the Common Securities and the Preferred Securities. ARTICLE II TRUST INDENTURE ACT SECTION 2.1. Trust Indenture Act; Application. (a) This Preferred Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Preferred Securities Guarantee and shall, to the extent applicable, be governed by such provisions and the Trust Indenture Act shall be applicable to this Preferred Securities Guarantee except as otherwise set forth herein, as if such guarantee had been issued pursuant to an effective registration statement; and (b) if and to the extent that any provision of this Preferred Securities Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2. Lists of Holders. (a) The Guarantor shall provide the Preferred Guarantee Trustee with a list, in such form as the Preferred Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") (i) within 14 days after each record date for payment of Distributions, as of such record date, and (ii) at any other time, within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Preferred Guarantee Trustee, provided that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The 727414.7 3 Preferred Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Preferred Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3. Reports by the Preferred Guarantee Trustee. Within 60 days after December 31 of each year, the Preferred Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4. Periodic Reports to Preferred Guarantee Trustee. The Guarantor shall provide to the Preferred Guarantee Trustee such documents, reports and information (if any) as are required by Section 314 and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Preferred Guarantee Trustee is for informational purposes only and the Preferred Guarantee Trustee's receipt of such shall not constitute constructive notice of any information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Preferred Guarantee Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 2.5. Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Preferred Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6. Events of Default; Waiver. The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Preferred Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7. Event of Default; Notice. (a) The Preferred Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee, transmit by mail, first class postage prepaid, to the Holders, notices of all such Events of Default unless such defaults have been cured before the giving of such notice, provided that the Preferred Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Preferred Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders except in the case of a default in the Guarantor's obligation to make Guarantee Payments. (b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Preferred Guarantee Trustee shall have received written notice thereof, or a Responsible 727414.7 4 Officer of the Preferred Guarantee Trustee charged with the administration of this Preferred Securities Guarantee shall have obtained actual knowledge thereof. SECTION 2.8. Conflicting Interests. The Declaration shall be deemed to be specifically described in this Preferred Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE SECTION 3.1. Powers and Duties of the Preferred Guarantee Trustee. (a) This Preferred Securities Guarantee shall be held by the Preferred Guarantee Trustee for the benefit of the Holders and the Preferred Guarantee Trustee shall not transfer this Preferred Securities Guarantee to any Person except a Holder exercising his or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred Guarantee Trustee of its appointment to act as Successor Preferred Guarantee Trustee. The right, title and interest of the Preferred Guarantee Trustee shall automatically vest in any Successor Preferred Guarantee Trustee, and such vesting and succession of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Preferred Guarantee Trustee. (b) If an Event of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee has occurred and is continuing, the Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee for the benefit of the Holders. (c) The Preferred Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such of the rights and powers vested in it by this Preferred Securities Guarantee, and shall use the same degree of care and skill in its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Preferred Securities Guarantee shall be construed to relieve the Preferred Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Preferred Guarantee Trustee shall be determined solely by the express provisions of this Preferred Securities Guarantee, and the Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants or obligations shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee; and 727414.7 5 (B) in the absence of bad faith on the part of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Preferred Guarantee Trustee and conforming to the requirements of this Preferred Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Preferred Securities Guarantee; (ii) the Preferred Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Preferred Guarantee Trustee, unless it shall be proved that the Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Preferred Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee, or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee; and (iv) no provision of this Preferred Securities Guarantee shall require the Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Preferred Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Preferred Securities Guarantee or indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2. Certain Rights of Preferred Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Preferred Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Preferred Securities Guarantee shall be sufficiently evidenced by an Officers' Certificate. (iii) Whenever, in the administration of this Preferred Securities Guarantee, the Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Preferred Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. 727414.7 6 (iv) The Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or re-registration thereof). (v) The Preferred Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Preferred Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Preferred Securities Guarantee from any court of competent jurisdiction. (vi) The Preferred Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Preferred Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Guarantee Trustee such security and indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Preferred Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Preferred Guarantee Trustee; provided that nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Preferred Securities Guarantee. (vii) The Preferred Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Preferred Guarantee Trustee or its agents hereunder shall bind the Holders and the signature of the Preferred Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Preferred Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Preferred Securities Guarantee, both of which shall be conclusively evidenced by the Preferred Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Preferred Securities Guarantee the Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Preferred Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and 727414.7 7 (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (xi) The Preferred Securities Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Preferred Securities Guarantee. (b) No provision of this Preferred Securities Guarantee shall be deemed to impose any duty or obligation on the Preferred Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Preferred Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Guarantee Trustee shall be construed to be a duty. SECTION 3.3. Not Responsible for Recitals or Issuance of Preferred Securities Guarantee. The recitals contained in this Preferred Securities Guarantee shall be taken as the statements of the Guarantor, and the Preferred Guarantee Trustee does not assume any responsibility for their correctness. The Preferred Guarantee Trustee makes no representation as to the validity or sufficiency of this Preferred Securities Guarantee. ARTICLE IV PREFERRED GUARANTEE TRUSTEE SECTION 4.1. Preferred Guarantee Trustee: Eligibility. (a) There shall at all times be a Preferred Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Preferred Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Preferred Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all 727414.7 8 respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2. Appointment, Removal and Resignation of Preferred Guarantee Trustee. (a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Preferred Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor. (c) The Preferred Guarantee Trustee appointed to office shall hold office until a Successor Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The Preferred Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Preferred Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor and the resigning Preferred Guarantee Trustee. (d) If no Successor Preferred Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of resignation or removal, the Preferred Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Preferred Guarantee Trustee. (e) No Preferred Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Preferred Guarantee Trustee. (f) Upon termination of this Preferred Securities Guarantee or removal or resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued to the date of such termination, removal or resignation. ARTICLE V GUARANTEE SECTION 5.1. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. The Guarantor will honor all obligations relating to the conversion of the Preferred Securities into the Common Shares of the Guarantor as set forth in the Declaration and the Indenture. 727414.7 9 SECTION 5.2. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Preferred Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right or remedy to require a proceeding first against the Issuer or any other Person before proceeding directly against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3. Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Preferred Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price or Adjusted Redemption Price, as the case may be, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price or Adjusted Redemption Price, as the case may be, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4. Rights of Holders. (a) The Holders of a Majority in liquidation amount of the Preferred Securities then outstanding have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of this Preferred Securities Guarantee or to direct the exercise of any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee. (b) If the Preferred Guarantee Trustee fails to enforce this Preferred Securities Guarantee, any 727414.7 10 Holder of Preferred Securities may institute a legal proceeding directly against the Guarantor to enforce the Preferred Guarantee Trustee's rights under this Preferred Securities Guarantee, without first instituting a legal proceeding against the Issuer, the Preferred Guarantee Trustee or any other person or entity. The Guarantor waives any right or remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. Notwithstanding the foregoing, if the Guarantor has failed to make a guarantee payment, a Holder of Preferred Securities may directly institute a proceeding against the Guarantor for enforcement of this Preferred Securities Guarantee for such payment. SECTION 5.5. Guarantee of Payment. This Preferred Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.6. Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Preferred Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Preferred Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7. Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1. Limitation of Transactions. So long as any Preferred Securities remain outstanding, if (i) the Guarantor has exercised its option to defer interest payments on the Debentures by extending the interest payment period and such extension period, or any extension thereof, shall be continuing, (ii) the Guarantor shall be in default with respect to its payment or other obligations under this Preferred Securities Guarantee or (iii) there shall have occurred and be continuing an Event of Default under the Declaration or any event that, with the giving of notice or lapse of time or both, would constitute an Event of Default under the Declaration, then the Guarantor shall not (a) declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire, or make any liquidation payment with respect to, any of its Capital Stock or (b) make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor that rank pari passu with or junior in interest to the Debentures or make any guarantee payment with respect to any guarantee by the Guarantor of the debt securities of any subsidiary of the Guarantor if such guarantee ranks pari passu with or junior in interest to the Debentures (other than (i) as a result of a reclassification of the Capital Stock of the Guarantor or the exchange or conversion of one class or series of the Capital Stock of the Guarantor for another class or series of the Capital Stock of the Guarantor, (ii) the purchase of fractional interests in shares of the Capital Stock of the Guarantor pursuant to the conversion or exchange provisions of such Capital Stock or the security being converted into or exchanged for 727414.7 11 such Capital Stock, (iii) dividends or distributions in Common Shares of the Guarantor, (iv) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of shares under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (v) payments under the Guarantee and Common Securities Guarantee, (vi) purchases of Common Shares of the Guarantor related to the issuance of Common Shares of the Guarantor or rights under any of the Guarantor's benefit plans for its directors, officers or employees and (vii) obligations under any dividend reinvestment and stock purchase plans). SECTION 6.2. Subordination. This Preferred Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor (except any liabilities that may be pari passu expressly by their terms), (ii) pari passu with the most senior preferred or preference shares now or hereafter issued by the Guarantor and with any guaranty now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor and (iii) senior to the Guarantor's Common Shares. ARTICLE VII TERMINATION SECTION 7.1. Termination. This Preferred Securities Guarantee shall terminate as to each Holder upon (i) full payment of the Redemption Price and accrued and unpaid distributions with respect to all Preferred Securities, (ii) the distribution of the Common Shares to such Holder upon the conversion of such Holder's Preferred Securities into the Common Shares, (iii) the distribution of the Debentures to the Holders of the Preferred Securities or (iv) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. This Preferred Securities Guarantee shall terminate completely upon full payment of the amounts payable in accordance with the Declaration. Notwithstanding the foregoing, this Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sum paid under the Preferred Securities or under this Preferred Securities Guarantee. ARTICLE VIII INDEMNIFICATION SECTION 8.1. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage, liability, expense or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Preferred Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Preferred Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including 727414.7 12 information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid. SECTION 8.2. Indemnification. The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The provisions of this Section 8.2 shall survive the termination of this Preferred Securities Guarantee or the resignation or removal of the Preferred Guarantee Trustee. When the Preferred Guarantee Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(d) or Section 5.1(e) of the Indenture, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. ARTICLE IX MISCELLANEOUS SECTION 9.1. Successors and Assigns. All guarantees and agreements contained in this Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity permitted by Section 9.1 of the Indenture or any sale, transfer or lease of the Guarantor's assets to another entity permitted by Section 9.1 of the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Preferred Securities Guarantee without the prior approval of the holders of at least a Majority in liquidation amount of the Preferred Securities then outstanding. SECTION 9.2. Amendments. Except with respect to any changes that do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Preferred Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of the Preferred Securities then outstanding. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders apply to the giving of such approval. SECTION 9.3. Notices. All notices provided for in this Preferred Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee Trustee's mailing address set forth below (or such other address as the Preferred Guarantee Trustee may give notice of to the Holders of the Preferred Securities): Wilmington Trust Company 727414.7 13 1100 North Market Street, 9th Floor Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Preferred Securities): Capital Trust 605 Third Avenue, 26th Floor New York, NY 10016 Attention: Chief Financial Officer (c) If given to any Holder of Preferred Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4. Benefit. This Preferred Securities Guarantee is solely for the benefit of the Holders of the Preferred Securities and, subject to Section 3.1(a), is not separately transferable from the Preferred Securities. SECTION 9.5. Governing Law. THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. 727414.7 14 THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year first above written. CAPITAL TRUST, as Guarantor By:/s/ John R. Klopp ------------------------------- Name: John R. Klopp Title: Chief Executive Officer WILMINGTON TRUST COMPANY, as Preferred Guarantee Trustee By:/s/ Emmett R. Harmon -------------------------------- Name: Emmett R. Harmon Title: Vice President 727414.7 15 EX-4.6 7 COMMON SECURITIES GUARANTEE Exhibit 4.6 - -------------------------------------------------------------------------------- COMMON SECURITIES GUARANTEE AGREEMENT CT CONVERTIBLE TRUST I Dated as of July 28, 1998 - -------------------------------------------------------------------------------- 738639.2 TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS AND INTERPRETATION...............................1 SECTION 1.1. Definitions and Interpretation.............1 ARTICLE II GUARANTEE....................................................2 SECTION 2.1. Guarantee..................................2 SECTION 2.2. Waiver of Notice and Demand................3 SECTION 2.3. Obligations Not Affected...................3 SECTION 2.4. Rights of Holders..........................3 SECTION 2.5. Guarantee of Payment.......................4 SECTION 2.6. Subrogation................................4 SECTION 2.7. Independent Obligations....................4 ARTICLE III LIMITATION OF TRANSACTIONS; SUBORDINATION....................4 SECTION 3.1. Limitation of Transactions.................4 SECTION 3.2. Subordination..............................5 ARTICLE IV TERMINATION..................................................5 SECTION 4.1. Termination................................5 ARTICLE V MISCELLANEOUS................................................5 SECTION 5.1. Successors and Assigns.....................5 SECTION 5.2. Amendments.................................5 SECTION 5.3. Notices....................................6 SECTION 5.4. Benefit....................................6 SECTION 5.5. Governing Law..............................6 738639.2 PRIOR TO THE TRANSFER RESTRICTION TERMINATION DATE (AS DEFINED IN THE DECLARATION), ANY CERTIFICATE EVIDENCING THIS COMMON SECURITIES GUARANTEE SHALL BEAR A LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM, UNLESS OTHERWISE AGREED BY THE REGULAR TRUSTEES (WITH WRITTEN NOTICE TO THE INSTITUTIONAL TRUSTEE) PURSUANT TO SECTION 9.1(D) OF THE DECLARATION: THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON SHARES ISSUABLE UPON CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO CAPITAL TRUST (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, SUCH HOLDER MUST FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR CT CONVERTIBLE TRUST I (THE "TRUST") MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT EVIDENCE COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY 738639.2 EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATIONS UNDER THE SECURITIES ACT. 738639.2 COMMON SECURITIES GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated as of July 28, 1998, is executed and delivered by Capital Trust, a California business trust (the "Guarantor"), for the benefit of the Holders (as defined herein) from time to time of the Common Securities (as defined herein) of CT Convertible Trust I, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to a Declaration of Trust (the "Declaration"), dated as of July 28, 1998, among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof up to 4,650 common securities (the "Common Securities"), having an aggregate stated liquidation amount of $4,650,000, designated the 8.25% Step Up Convertible Trust Common Securities; WHEREAS, as incentive for the Holders to purchase the Common Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Common Securities Guarantee, to pay to the Holders of the Common Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; and WHEREAS, as of the date hereof, the Guarantor is also executing and delivering a guarantee agreement (the "Preferred Securities Guarantee") in substantially identical terms to this Common Securities Guarantee for the benefit of the holders of the Preferred Securities (as defined herein), except that if an Event of Default (as defined in the Indenture), has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated to the rights of holders of Preferred Securities to receive guarantee payments under the Preferred Securities Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder of Common Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Common Securities Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions and Interpretation. In this Common Securities Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Common Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) terms defined in the Declaration as at the date of execution of this Common Securities Guarantee have the same meaning when used in this Common Securities Guarantee unless otherwise defined in this Common Securities Guarantee; (c) a term defined anywhere in this Common Securities Guarantee has the same meaning throughout; (d) all references to "the Common Securities Guarantee" or "this Common Securities Guarantee" are to this Common Securities Guarantee as modified, supplemented or amended from time to time; 738639.2 (e) all references in this Common Securities Guarantee to Articles and Sections are to Articles and Sections of this Common Securities Guarantee, unless otherwise specified; and (f) a reference to the singular includes the plural and vice versa. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Common Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Common Securities to the extent the Issuer shall have funds available therefor, (ii) the redemption price (the "Redemption Price") or Adjusted Redemption Price, specified in the Indenture, as the case may be, and all accrued and unpaid Distributions to the date of redemption, to the extent the Issuer has funds available therefor, with respect to any Common Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the redemption of all of the Common Securities or the distribution of Debentures to the Holders in exchange for Common Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Common Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders of Common Securities then outstanding upon the liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an Event of Default (as defined in the Indenture) has occurred and is continuing, the rights of holders of the Common Securities to receive payments under the Common Securities Guarantee Agreement are subordinated to the rights of Holders of Common Securities to receive Guarantee Payments. "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Common Securities; provided, however, that, in determining whether the holders of the requisite percentage of Common Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Majority in liquidation amount of the Common Securities" means, except as provided in the terms of the Common Securities, or except as provided by the Trust Indenture Act, a vote by Holder(s), voting separately as a class, of more than 50% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Common Securities. "Preferred Securities" means the securities representing preferred undivided beneficial interests in the assets of the Issuer. ARTICLE II GUARANTEE SECTION 2.1. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. 738639.2 2 SECTION 2.2. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Common Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right or remedy to require a proceeding first against the Issuer or any other Person before proceeding directly against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 2.3. Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Common Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Common Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price or the Adjusted Redemption Price, as the case may be, Liquidation Distribution or any other sums payable under the terms of the Common Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Common Securities (other than an extension of time for payment of Distributions, Redemption Price or the Adjusted Redemption Price, as the case may be, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Common Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Common Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 2.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 2.4. Rights of Holders. Any Holder of Common Securities may institute a legal proceeding directly against the Guarantor to enforce its rights under this Common Securities Guarantee, without first instituting a legal proceeding against the Issuer or any other person or entity. The Guarantor waives any right or remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. 738639.2 3 SECTION 2.5. Guarantee of Payment. This Common Securities Guarantee creates a guarantee of payment and not of collection. SECTION 2.6. Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Common Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Common Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Common Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 2.7. Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Common Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Common Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 2.3 hereof. ARTICLE III LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 3.1. Limitation of Transactions. So long as any Common Securities remain outstanding, if (i) the Guarantor has exercised its option to defer interest payments on the Debentures by extending the interest payment period and such extension period, or any extension thereof, shall be continuing, (ii) the Guarantor shall be in default with respect to its Guarantee Payments or other obligations under this Common Securities Guarantee or (iii) there shall have occurred and be continuing an Event of Default under the Declaration or any event that, with the giving of notice or lapse of time or both, would constitute an Event of Default under the Declaration, then the Guarantor shall not (a) declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire, or make any liquidation payment with respect to, any of its Capital Stock or (b) make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor that rank pari passu with or junior in interest to the Debentures or make any guarantee payment with respect to any guarantee by the Guarantor of the debt securities of any subsidiary of the Guarantor if such guarantee ranks pari passu with or junior in interest to the Debentures (other than (i) as a result of a reclassification of the Capital Stock of the Guarantor or the exchange or conversion of one class or series of the Capital Stock of the Guarantor for another class or series of the Capital Stock of the Guarantor, (ii) the purchase of fractional interests in shares of the Capital Stock of the Guarantor pursuant to the conversion or exchange provisions of such Capital Stock or the security being converted into or exchanged for such Capital Stock, (iii) dividends or distributions in Common Shares of the Guarantor, (iv) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of shares under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (v) payments under the Common Securities Guarantee and Preferred Securities Guarantee, (vi) purchases of Common Shares of the Guarantor related to the issuance of Common Shares of the Guarantor or rights under any of the Guarantor's benefit plans for its directors, officers or employees and (vii) obligations under any dividend reinvestment and stock purchase plans). 738639.2 4 SECTION 3.2. Subordination. This Common Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor (except any liabilities that may be pari passu expressly by their terms), (ii) pari passu with the most senior preferred or preference shares now or hereafter issued by the Guarantor and with any guaranty now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor and (iii) senior to the Guarantor's Common Shares. ARTICLE IV TERMINATION SECTION 4.1. Termination. This Common Securities Guarantee shall terminate upon (i) full payment of the Redemption Price and accrued and unpaid distributions with respect to all Common Securities, (ii) the distribution of the Common Shares to such Holder upon the conversion of such Holder's Common Securities into the Common Shares, (iii) the distribution of the Debentures to the Holders of the Common Securities, or (iv) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. This Common Securities Guarantee shall terminate completely upon full payment of the amounts payable in accordance with the Declaration. Notwithstanding the foregoing, this Common Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sum paid under the Common Securities or under this Common Securities Guarantee. ARTICLE V MISCELLANEOUS SECTION 5.1. Successors and Assigns. All guarantees and agreements contained in this Common Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Common Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity permitted by Section 9.1 of the Indenture or any sale, transfer or lease of the Guarantor's assets to another entity permitted by Section 9.1 of the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Common Securities Guarantee without the prior approval of the holders of at least a Majority in liquidation amount of the Common Securities then outstanding. SECTION 5.2. Amendments. Except with respect to any changes that do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Common Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of the Common Securities then outstanding. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders apply to the giving of such approval. 738639.2 5 SECTION 5.3. Notices. All notices provided for in this Common Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) If given to the Issuer, in care of the Regular Trustees at the Issuer's mailing address set forth below (or such other address as the Issuer may give notice of to the Holders of the Common Securities): CT Convertible Trust I Capital Trust 605 Third Avenue, 26th Floor New York, NY 10016 Attention: Chief Financial Officer (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Common Securities): Capital Trust 605 Third Avenue, 26th Floor New York, NY 10016 Attention: Chief Financial Officer (c) If given to any Holder of Common Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 5.4. Benefit. This Common Securities Guarantee is solely for the benefit of the Holders of the Common Securities and is not separately transferable from the Common Securities. SECTION 5.5. Governing Law. THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. 738639.2 6 THIS COMMON SECURITIES GUARANTEE is executed as of the day and year first above written. CAPITAL TRUST, as Guarantor By: /s/ John R. Klopp --------------------------- Name: John R. Klopp Title: Chief Executive Officer 738639.2 7 EX-10.1 8 CO-INVESTMENT AGREEMENT EXHIBIT 10.1 CO-INVESTMENT AGREEMENT, dated as of July 28, 1998, among CAPITAL TRUST, a California business trust, VORNADO REALTY L.P., a Delaware limited partnership, EOP OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership, and GENERAL MOTORS INVESTMENT MANAGEMENT CORPORATION, a Delaware corporation, as agent for and for the benefit of the Pension Plans (as defined herein). Preliminary Statement Capitalized terms used in this Agreement are defined in Section 1 hereof. The Company has requested that each of the Prospective Co-Investors purchase $50,000,000 in aggregate liquidation amount of Securities pursuant to the terms of the Securities Purchase Agreement. The Prospective Co-Investors are willing to do so provided that the Company agrees with the Prospective Co-Investors as provided herein. The Company is willing to agree with the Prospective Co-Investors as provided herein. Accordingly, the parties hereto agree as follows. Agreement Section 1. Definitions. The following terms have the indicated meanings when used herein. a. "Advance Notice" shall mean one or more oral or written communications that provide notice to each of the Prospective Co- Investors of a potential Target Investment in advance of any formal offer to co-invest with a Term Sheet pursuant to Section 4 hereof. The Advance Notice shall contain as much information as practicable with regard to the nature and prospective terms and conditions of the co-investment and the Target Investment. b. "Affiliate" shall have the same meaning as given to that term in Rule 405 under the Securities Act of 1933, as amended, or any successor rule thereunder. c. "Agreement" shall mean this Co-Investment Agreement, as amended, modified, or restated from time to time. d. "Blocked Party" shall have the meaning set forth in Section 5(c) hereof. e. "Business Day" shall mean any day other than a Saturday, Sunday or any day on which banking institutions in New York, New York are permitted or required by applicable law to close. 732653.17 f. "Change in Control" shall mean, with respect to any person, (A) the acquisition after the date hereof by any person (as such term is used in section 13(d) and section 14(d)(2) of the Exchange Act, as in effect on the date hereof) or related persons constituting a group (as such term is used in Rule 13d-5 under the Exchange Act as in effect on the date hereof) of (i) the power to elect, appoint or cause the election or appointment of at least a majority of the members of the board of directors or trustees of such person, through beneficial ownership of the voting securities of the person or otherwise, or (ii) all or substantially all of the properties and assets of such person or (B) the merger or consolidation of such person with or into another person upon the consummation of which a majority of the board of directors or trustees of the successor shall not be comprised of individuals serving on the board of directors or trustees of such person immediately prior to consummation of the merger or consolidation. g. "Code" shall mean the Internal Revenue Code of 1986, as amended. h. "Co-Investment Amount" with respect to any Target Investment shall mean the aggregate dollar amount of co-investment in such Target Investment offered by the Company as set forth on the Term Sheet with respect to such Target Investment. i. "Co-Investment Right" shall have the meaning set forth in Section 4 hereof. j. "Company" shall mean Capital Trust, a California business trust. k. "Debentures" shall mean the 8.25% Step Up Convertible Junior Subordinated Debentures issued pursuant to that certain Indenture, dated as of July 28, 1998, between the Company and Wilmington Trust Company that may be distributed to holders of Securities upon liquidation of the Trust. l. "Definitive Participation Agreement" shall mean the definitive participation, joint venture or other agreement which shall be prepared by the Company governing the rights and obligations of the Company, any Participating Co-Investor and any other co- investor with respect to the participation of co-investors in any Target Investment on terms and conditions substantially the same as set forth on the Term Sheet which shall be substantially in the form attached hereto as Exhibit A. 732653.17 2 m. "Due Diligence Information" shall have the meaning set forth in Section 3 hereof. n. "Due Diligence Period" shall mean a period of eight Business Days following the later of the date of receipt by the Prospective Co-Investors of substantially all of the Due Diligence Information or the Initial Decision Date, during which due diligence of a Target Investment shall be completed. o. "Election" shall have the meaning set forth in Section 4(c) hereof. p. "EOP" shall mean Equity Office Properties Trust, a Maryland real estate investment trust. q. "EOPLP" shall mean EOP Operating Limited Partnership, an Illinois limited partnership. r. "EOPLP Entity" shall have the meaning set forth in Section 7(b). s. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. t. "GMIM" shall mean General Motors Investment Management Corporation, a Delaware corporation, as agent for and for the benefit of the Pension Plans. u. "GMIM Entity" shall have the meaning set forth in Section 7(c). v. "Indication of Interest" shall mean one or more oral or written communications that indicate the level of interest, if any, with regard to making a co-investment in a Target Investment that is the subject of Advance Notice. w. "Initial Decision Date" with respect to any Target Investment shall mean the date two Business Days after the Company shall have provided the Prospective Co-Investor with a Term Sheet; provided however, that the Initial Decision Date shall be three Business Days after receipt of a Term Sheet if the Prospective Co-Investor receives the Term Sheet after 4:30 p.m. New York City time on the date of receipt. x. "Investment Basis Amount" shall mean an amount equal to the total liquidation value of Securities purchased by a Prospective 732653.17 3 Co-Investor pursuant to the Securities Purchase Agreement, or, if Debentures have been distributed in respect thereof, the total principal amount of the Debentures, or if any of such Securities or Debentures, as the case may be, have been converted into Underlying Common Shares, an amount equal to the sum of the total liquidation value of Securities or total principal amount of Debentures, as the case may be, that have not been so converted and the total Conversion Value (as defined below) of the Underlying Common Shares. For purposes of the foregoing, the term Conversion Value shall mean the liquidation value or principal amount of Securities or Debentures, as the case may be, converted into Underlying Common Shares. y. "Participating Co-Investor" shall have the meaning set forth in paragraph c. of Section 4 hereof. z. "Pension Plans" shall mean one or more employee benefit plans sponsored by General Motors Corporation for the benefit of its employees or the employees of its Affiliates. aa. "Prospective Co-Investors" shall mean VRLP, EOPLP and GMIM. bb. "Registration Rights Agreement" shall mean the Registration Rights Agreement, dated as of the date hereof, among the Company, VRLP, EOPLP and certain of the Pension Plans. cc. "REIT Participating Co-Investor" shall mean either or both of VRLP and EOPLP as a Participating Co-Investor who shall have made an Election in accordance with Section 4. dd. "Securities" shall mean the 8.25% Step Up Convertible Trust Preferred Securities representing undivided beneficial interests in the assets of the Trust. ee. "Securities Purchase Agreement" shall mean the Preferred Securities Purchase Agreement, dated as of the date hereof, among the Company, the Trust, VRLP, EOPLP and certain of the Pension Plans. ff. "Target Investment" shall mean any loan or other investment (i.e., a commercial real estate financial asset other than a loan), the opportunity for which develops on or after the date hereof, with respect to which the Company has purchased or has made or intends to make a commitment or offer to purchase and for which 732653.17 4 the Company has determined to obtain co-investors to originate and fund or acquire all or any portion of the loan or other investment. gg. "Tax-Exempt Participating Co-Investor" shall mean any Pension Plan which shall have made an Election in accordance with Section 4. hh. "Term Sheet" with respect to any Target Investment shall mean a written summary of terms that describes such Target Investment, including the proposed terms and conditions thereof, and the proposed terms and conditions of the co-investment, including without limitation, the principal amount and nature of the loan or the aggregate amount of the investment, the maturity date, in the case of a loan, the name and a brief description of the borrower or target of the investment, the aggregate investment amount, the Co- Investment Amount, the pro-rata share, the rate of interest to be paid to the Company and to each of the Prospective Co-Investors on such loan and a description of the form of security for such loan, in the case of the loan, in reasonable detail in the usual and customary form, it being represented by the Company that the Company's term sheet presented to counter parties customarily provides for customary due diligence termination provisions. ii. "Trust" shall mean CT Convertible Trust I, a Delaware statutory business trust. jj. "Underlying Common Shares" means the class A common shares of the Company issuable upon conversion of the Securities or the Debentures. kk. "VRLP" shall mean Vornado Realty L.P., a Delaware limited partnership. ll. "VNO" shall mean Vornado Realty Trust, a Maryland real estate investment trust. mm. "VRLP Entity" shall have the meaning set forth in Section 7(a) hereof. Section 2. No Obligation. The Company shall have complete discretion in determining whether to obtain co-investors for any investment and shall be under no obligation to offer any particular investment opportunity to the Prospective Co-Investors except as set forth in this Agreement. The Prospective Co-Investors shall have no right 732653.17 5 to co-invest in any investment made by the Company unless and until the Company has determined in its sole and absolute discretion to obtain co-investors for such investment and any right to co-invest enjoyed by the Prospective Co-Investors shall be limited to the rights set forth in this Agreement. Section 3. Preliminary Indication. In advance of any formal offer to co-invest in a Target Investment with a Term Sheet pursuant to Section 4 hereof, the Company shall use best efforts to provide the Prospective Co-Investors with Advance Notice and, upon receipt of such notice, the Prospective Co-Investors shall use best efforts to provide, as soon as practicable, an Indication of Interest. Following the receipt of an Indication of Interest confirming an interest in making a co-investment in a Target Investment, the Company shall provide to the Prospective Co-Investor, as soon as practicable, copies of all due diligence reports, financial, underwriting and market information, credit files and any other information relating to the Target Investment prepared or obtained by and in the possession of the Company (collectively "Due Diligence Information") as reasonably requested by the Prospective Co-Investor. Irrespective of whether the Company receives from a Prospective Co-Investor an Indication of Interest in response to any Advance Notice provided by the Company, the Company shall make a formal offer to each Prospective Co- Investor with a Term Sheet pursuant to Section 4 hereof. Section 4. Co-Investment Right. The Prospective Co-Investors shall have the right to co-invest in loans and other investments to be entered into or made or previously entered into or made by the Company, directly or indirectly through any entity, upon the following terms and conditions (the "Co-Investment Right"). If the Company determines in its sole and absolute discretion to obtain co-investors for any Target Investment, the Company shall first offer the opportunity to co-invest in the Target Investment to the Prospective Co-Investors (which offer shall be made upon the same terms to each of the Prospective Co-Investors) as follows: a. The Company shall provide each of the Prospective Co-Investors with the Term Sheet which shall serve as an irrevocable offer by the Company to the Prospective Co-Investors to co-invest in the Target Investment on the terms and conditions set forth in such Term Sheet. b. If prior to 5:00 p.m. New York City time on the Initial Decision Date, any Prospective Co-Investor shall not have advised the Company in writing that it elects to co-invest in the Target Investment, any such Prospective Co-Investor shall be deemed to have waived its right to co-invest in such Target Investment, and, if all Prospective Co-Investors entitled to the right to co-invest hereunder shall have waived their right to co-invest in accordance with the foregoing, the Company shall thereafter be free without restriction under this Section 4 to obtain alternative co-investors as it determines in its 732653.17 6 complete discretion, provided however, if the Company determines to offer a co-investment in such Target Investment to alternative co-investors on materially more favorable terms and conditions, the Company must first offer the Prospective Co-Investors the opportunity to co-invest on such terms and conditions by means of a revised Term Sheet incorporating such terms and conditions. Such offer shall be made in accordance with, and shall be governed by, the provisions of this Section 4. c. Each Prospective Co-Investor may individually elect to co-invest in the Target Investment by providing written notice to the Company of such election (each such notice, an "Election") prior to 5:00 p.m. New York City time on the Initial Decision Date and confirming such Election in writing prior to 5:00 p.m. New York City time on the last Business Day of the Due Diligence Period (a Prospective Co-Investor who delivers an Election and confirms such Election is hereinafter referred to as a "Participating Co- Investor"). If a Prospective Co-Investor shall have failed in its sole and absolute discretion to confirm its Election in accordance with the foregoing, such Prospective Co-Investor shall be deemed to have waived its right to co-invest in such Target Investment (but not in any other Target Investment). Upon delivery to the Company of its written confirmation of the Election, unless otherwise agreed in writing by the Company, the Participating Co- Investor shall be deemed to have accepted the offer to co-invest its pro rata share of the Co-Investment Amount on the terms and conditions set forth on the Term Sheet and the parties thereafter shall proceed as follows: i. The Company shall in good faith use reasonable commercial efforts to secure for each Participating Co- Investor the opportunity to co-invest in the Target Investment on terms and conditions substantially the same as set forth in the Term Sheet. Notwithstanding the foregoing, each Participating Co-Investor shall have the sole and absolute right to terminate without penalty any Election and confirmation thereof or other agreement to co- invest in such Target Investment (each Participating Co- Investor who shall exercise such right shall no longer be considered a Participating Co-Investor with respect to such Target Investment) if (i) there are one or more changes that individually or in the aggregate constitute a material change in the terms and conditions as set forth on the Term Sheet or the REIT Suitable Investment (as defined below) or Non- 732653.17 7 UBTI Investment (as defined below) status of the Target Investment based on information contained on or omitted from the Term Sheet (a change altering an investment from a REIT Suitable Investment to an investment that is not a REIT Suitable Investment or a change altering an investment from a Non-UBTI Investment to an investment that is not a Non-UBTI Investment shall constitute a material change), or (ii) the Company shall not have consummated the Target Investment within 120 days after date of confirmation of its Election. ii. Notwithstanding the agreement of a Participating Co- Investor to co-invest in a Target Investment upon delivery and confirmation of an Election pursuant to the foregoing provisions of this Section 4, the Company shall have the exclusive right to negotiate the terms and conditions of such Target Investment with the counter-party borrower or seller of such Target Investment. The Company shall also promptly provide the Participating Co-Investor with copies of all Due Diligence Information not previously provided in accordance with Section 3 hereof. iii. To the extent commercially practicable without causing any detriment or prejudice to the Company's ability to consummate any Target Investment on substantially the same economic terms set forth in the Term Sheet with respect thereto, (a) upon request of any REIT Participating Co-Investor, the Company shall undertake to negotiate with the counter-party borrower or seller a structure for the Target Investment (i) that is in a format suitable for investment by such REIT Participating Co-Investor in terms of compliance with the asset and gross income qualification requirements for real estate investment trusts under the Code and (ii) which avoids excess inclusion income (under Section 860E of the Code) for REIT Participating Co- Investors (a Target Investment meeting the requirements of both of the immediately foregoing clauses (i) or (ii), a "REIT Suitable Investment"), and (b) upon request of any Tax- Exempt Participating Co-Investor (as herein defined), the Company shall undertake to negotiate with the counter- party borrower or seller a structure for the Target Investment that does not result in unrelated business taxable income for the Tax-Exempt Participating Co- 732653.17 8 Investor (a Target Investment meeting the requirements of the foregoing clause, a "Non-UBTI Investment"). iv. Subject to the terms and conditions of this Agreement, the Participating Co-Investor shall in good faith use reasonable commercial efforts to execute and deliver, or cause to be executed and delivered, the Definitive Participation Agreement with respect to the Target Investment and any related definitive documentation necessary to consummate the co-investment governed thereby no later than the closing of the underlying Target Investment transaction, and after execution and delivery of the foregoing definitive documentation, to take all actions as may be reasonably necessary to consummate the transactions governed thereby. d. Unless otherwise agreed in writing among the Prospective Co- Investors, the Prospective Co-Investors shall be entitled to co- invest a pro rata share of the Co-Investment Amount set forth on the Term Sheet. If any Prospective Co-Investor shall have failed to deliver and confirm an Election or otherwise elected not to co- invest and shall thereby have waived its right to co-invest in accordance with paragraphs b. or c. of this Section 4, the Company may in its sole and absolute discretion offer to the Participating Co-Investors (on a pro rata basis if there is more than one other Participating Co-Investor), the opportunity to co-invest an additional portion of the Co-Investment Amount set forth on the Term Sheet on the terms set forth in the Term Sheet, such additional amount to be determined by the Company in its sole and absolute discretion. Each Participating Co-Investor may individually elect to co-invest such additional portion of the Co- Investment Amount by providing written notice to the Company of such election prior to 5:00 p.m. on the second Business Day following the date written notification of the offer pursuant to paragraph d. of this Section 4 by the Company is delivered to such Participating Co-Investor (or, if later, 5:00 p.m. on the last Business Day of the Due Diligence Period). Upon delivery to the Company of its written election to co-invest such additional portion of the Co-Investment Amount, each such Participating Co-Investor shall be deemed to have accepted the Company's offer to co-invest such portion of the Co-Investment Amount on terms and conditions set forth on the Term Sheet and the parties thereafter shall proceed as set forth in subparagraphs i. through iv. of paragraph c. of this Section 4. 732653.17 9 Section 5. Certain Agreements, Acknowledgments and Representations. The parties acknowledge and agree as follows: a. The Company acknowledges and agrees that the Prospective Co- Investors would not have entered into the Securities Purchase Agreement without the Company having entered into this Agreement. b. Each Prospective Co-investor acknowledges and agrees, severally and not jointly, that the Company is entitled to rely on any agreement made by such Prospective Co-Investor to co-invest in a Target Investment pursuant to the provisions of paragraph c. or paragraph d. of Section 4 hereof and that, if such Prospective Co- Investor shall have breached its obligations under subparagraph iv. of paragraph c. of Section 4 hereof, any such Prospective Co-Investor shall indemnify and hold harmless the Company for any actual out-of-pocket losses incurred as a result of such breach. The Company shall indemnify and hold each of the Prospective Co-Investors harmless from and against any and all losses, arising, directly or indirectly, from any willful misconduct, gross negligence or fraud by the Company in connection with this Agreement, any Definitive Participation Agreement or any co- investment in a Target Investment under this Agreement. Each of the Prospective Co-Investors, severally and not jointly, shall indemnify and hold the Company harmless from and against any and all losses, arising, directly or indirectly, from any willful misconduct, gross negligence or fraud by such Prospective Co- Investor in connection with this Agreement, any Definitive Participation Agreement or any co-investment in a Target Investment under this Agreement. c. Notwithstanding any of the terms and provisions of this Agreement to the contrary, the Prospective Co-Investors acknowledge and agree that, if, after the Company shall have in good faith used reasonable commercial efforts to overcome an Objection (as defined herein), the counter-party borrower or seller of any particular investment for which the Company has determined to obtain co-investors objects (an "Objection") to the participation of any Prospective Co-Investor as a co-investor in such investment (a "Blocked Party"), the validity of such Objection to be determined in the sole and absolute good faith discretion of the Company, the Company shall not be obligated to offer the opportunity to co- invest in such investment to any such Blocked Party, in which case 732653.17 10 any offer made pursuant to Section 4 hereof shall be made solely to the other Prospective Co-Investors, provided that, the objecting counter-party shall not have objected to the participation of such other Prospective Co-Investor as a co-investor, in which case no offer need be made pursuant to Section 4 hereof; provided further that, if the Company is not obligated to offer an opportunity to co-invest to any Blocked Party in accordance with the foregoing, no other Prospective Co-Investor(s) (other than GMIM (assuming GMIM is not a Blocked Party)) shall be entitled to participate in a Target Investment unless the Blocked Party or Parties consent(s) in writing to the participation of such other Prospective Co- Investor(s) in such Target Investment. The Company shall provide written notice of any Objection to all Prospective Co-Investors as soon as practicable after the Company learns of such Objection. d. Each Prospective Co-Investor acknowledges and agrees, severally and not jointly, that except pursuant to the provisions of Section 4 hereof, such Prospective Co-Investor and its Affiliates shall not, without the Company's prior written consent, acquire an interest for its own account in any loan or other investment that was the subject of an Advance Notice or a Term Sheet that was initially presented to such Prospective Co-Investor pursuant to the provisions of Section 4 hereof; provided, however, the foregoing restriction shall not apply to any acquisition by an enterprise in which any such Prospective Co-Investor owns an interest but over which it does not possess or exercise any discretionary investment power; provided further the foregoing restriction shall terminate upon the earlier of (i) the declaration by the Company that it has terminated all negotiations toward consummation of the loan or investment, (ii) the Company's receipt of notice that the counter-party has terminated negotiations with the Company toward consummation of the loan or investment, or (iii) 90 days following the date the Term Sheet was provided to the Prospective Co-Investors, except in the case of clause (ii) the restrictions shall not terminate if the principal reason for the counter-party's termination of negotiations is due to the receipt of an offer with more favorable terms directly or indirectly from such Prospective Co-Investor; provided further that a Prospective Co-Investor may acquire such interest in any loan or other investment for which it or its Affiliates had independently identified and considered for investment prior to receipt of Advance Notice pursuant to Section 3 hereof or a Term Sheet concerning such loan interest or investment; and provided further that the Prospective Co-Investor will promptly notify the Company of such prior identification and consideration 732653.17 11 after the earlier of the receipt of Advance Notice pursuant to Section 3 hereof or a related Term Sheet. The Company shall promptly notify the Prospective Co-Investors of any termination of negotiations by the Company or the counter-party borrower or seller. For purposes of this paragraph (d) of Section 5, the term "Affiliate" (A) when used with respect to EOPLP, shall exclude (i) any person or entity having securities that are listed on a national securities exchange or traded in the national over-the-counter market (a "Public Company"), (ii) any subsidiary, direct or indirect, of a Public Company, (iii) any person or entity any part of whose equity or other ownership interests (or any rights to acquire the same) are owned, directly or indirectly, beneficially or of record by any person or entity in addition to Equity Group Investments, Inc. ("EGI"), or (iv) any person or entity that owns, directly or indirectly, beneficially or of record, any equity or other ownership interests in EGI or any wholly owned subsidiary, direct or indirect, of EGI and (B) when used with respect to VRLP, shall exclude (i) any Public Company, (ii) any subsidiary, direct or indirect, of a Public Company. e. Each Prospective Co-Investor and the Company acknowledges and agrees that the rights and obligations of any Participating Co- Investor, respectively, with respect to participation in any Target Investment shall be governed by the Definitive Participation Agreement with respect thereto, and only the execution and delivery of such Definitive Participation Agreement by the parties thereto shall constitute and give rise to a legally binding and enforceable agreement of the Participating Co-Investor and the Company in respect of the Target Investment. f. Each Prospective Co-Investor, severally and not jointly, acknowledges and agrees that, in connection with any Target Investment in which it shall co-invest, it shall undertake its own independent investigation and evaluation of the Target Investment and it shall not rely on any investigation or evaluation undertaken by the Company or any other Prospective Co-Investor, it being further acknowledged and agreed by each Prospective Co-Investor that neither the Company nor any other Prospective Co-Investor makes any representation or warranty with respect to the suitability or fitness of any Target Investment. Each Prospective Co-Investor, severally and not jointly, represents and warrants that it is a sophisticated investor that has such knowledge and experience in financial and business matters and that it is capable of evaluating 732653.17 12 the merits and risks of a co-investment in any prospective Target Investment. g. At any time following the receipt of an Indication of Interest or confirmation of an Election, the Company shall use commercially reasonable efforts to respond to due diligence related inquiries made by any Prospective Co-Investor who shall have provided such Indication of Interest or confirmed such Election and allow such party to participate in any property inspections or tours. h. The parties hereto acknowledge and agree that nothing contained in this Agreement shall be considered to create the relationship of principal and agent or of partners or joint venturers and that no party shall have the authority to bind any other party hereto or have any fiduciary duty to any other party under this Agreement. i. Notwithstanding any of the terms and provisions of this Agreement to the contrary, each Prospective Co-Investor shall have the right to co-invest in loans and other investments on the same economic terms and conditions (including, without limitation, the same interest rate and the same share of fees) that the Company has obtained or will obtain from the counter-party borrower or seller and the Company shall set forth such same terms and conditions in the applicable Term Sheet; provided, however, that no Prospective co-Investor shall be required, unless it otherwise agrees, to reimburse the Company for any costs or expenses that the Company has incurred or will incur in connection with the negotiation, documentation or consummation of such loan or other investment; provided, further, that this paragraph i of Section 5 shall not apply to any proposed or consummated Target Investment (i) with respect to all Prospective Co-Investors, if the Company consummated such Target Investment that is the subject of a Term Sheet more than 90 days prior to the date the Company first provides any Prospective Co-Investor with Advance Notice of such Target Investment or (ii) with respect to an Uninterested Prospective Co-Investor (as defined herein). For purposes of the foregoing, the term "Uninterested Prospective Co-Investor" means any Prospective Co-Investor who has failed to make and confirm an Election pursuant to Section 4 following the receipt of a Formal Offer. Section 6. Termination of Co-Investment Right. The Co-Investment Right of any Prospective Co-Investor (or assignee pursuant to Section 8 hereof) shall continue until terminated and shall terminate upon the earlier of: 732653.17 13 a. the date upon which such Prospective Co-Investor shall have, in one or more transactions, disposed of Securities, Debentures and Underlying Common Shares in the aggregate representing more than 50% of its Investment Basis Amount; provided that the transfer of Securities, Debentures or Underlying Common Shares to Affiliates of any such Prospective Co-Investor shall not be deemed to be a disposition; b. the date upon which such Prospective Co-Investor shall have breached its obligations under subparagraph iv. of paragraph c. of Section 4 hereof; c. the date upon which such Prospective Co-Investor shall have materially breached or defaulted upon the provisions of any Definitive Participation Agreement and such breach shall not have been cured within ten Business Days of receipt by the breaching Prospective Co-Investor of written notice of such breach; d. the date upon which a Change in Control shall have occurred with respect to such Prospective Co-Investor (other than GMIM); or e. the date upon which such Prospective Co-Investor shall have materially breached or defaulted upon the provisions of the Securities Purchase Agreement or the Registration Rights Agreement; provided, however, that any such termination shall have no effect on the rights and obligations of the Company and the terminated Prospective Co-Investor with respect to any agreement made by such terminated Prospective Co-Investor to co-invest in a Target Investment pursuant to the provisions of paragraph c. or paragraph d. of Section 4 hereof. Section 7. Investment Through, or Transfers to, Certain Entities. a. VRLP, in or after electing to co-invest in a Target Investment, shall have the absolute right to make or hold such investment either directly or through any entity in which VRLP holds, directly or indirectly, an economic interest of greater than 50% (any such entity, a "VRLP Entity"). In addition, VRLP shall have the right, in electing to co-invest in a Target Investment, to transfer its right to invest in such Target Investment to Vornado Operating Inc. or any Affiliate or subsidiary of Vornado Operating Inc. In addition, VRLP and each VRLP Entity shall have the right to transfer all or a portion of its interest in any Target Investment to VRLP or any other VRLP Entity. 732653.17 14 b. EOPLP, in or after electing to co-invest in a Target Investment, shall have the absolute right to make or hold such investment either directly or through any entity in which EOPLP holds, directly or indirectly, an economic interest of greater than 50% (each such entity, a "EOPLP Entity"). In addition, EOPLP shall have the right to, in electing to co-invest in a Target Investment, to transfer its right to invest in such Target Co-Investment to any EOP sponsored "Paper Clip" enterprise or any Affiliate or subsidiary thereof. In addition, EOPLP and each EOPLP Entity shall have the right to transfer all or a portion of its interests in any Target Investment to EOPLP or any other EOPLP Entity. c. GMIM, in or after electing to co-invest in a Target Investment, shall have the absolute right to make or hold such investment either directly or through any entity in which GMIM holds, directly or indirectly, an economic interest of greater than 50% (each such entity, a "GMIM Entity"). In addition, GMIM and each GMIM Entity shall have the right to transfer all or a portion of its interests in any Target Investment to GMIM or any other GMIM Entity. Section 8. Assignment. This Agreement, and any rights and obligations hereunder, may not be assigned in whole or in part by any party hereto without the prior written consent of all of the other parties hereto other than, in the case of the Prospective Co-Investors, to one or more Affiliates of the assigning party. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their successors in interest and permitted assigns. Section 9. Notices. All notices or other communications under this Agreement shall be sufficient if in writing and delivered by hand or sent by telecopy and shall be deemed given when so delivered by hand or telecopied to the parties at the following addresses: a. if to VRLP, to: Vornado Realty L.P. c/o Vornado Realty Trust Park 80 West, Plaza II Saddle Brook, New Jersey 07663 Attention: Wendy Silverstein Facsimile: (201) 587-0600 732653.17 15 b. If to EOPLP, to: EOP Operating Limited Partnership Two North Riverside Plaza Chicago, Illinois 60606 Attention to each of: Stanley M. Stevens Richard D. Kincaid Facsimile: (312) 559-5009 c. If to GMIM, to: General Motors Investment Management Corporation 767 Fifth Avenue New York, New York 10004 Attention: Jamie Behar Facsimile: (212) 418-3651 d. if to the Company, to: Capital Trust 605 Third Avenue, 26th Floor, New York, New York 10016, Attention: John R. Klopp Facsimile: (212) 655-0044 or at such other address as the addressee may have furnished in writing to the sender as provided herein. Section 10. Entire Agreement. This Agreement constitutes the entire understanding of the parties relating to the subject matter hereof and supersedes all prior agreements and understandings, whether oral or written, with regard thereto. No amendment or modification of the terms of this Agreement shall be binding or effective unless expressed in writing and signed by each party. Section 11. No Waiver. The waiver by any party of the breach of any of the terms and conditions of, or any right under, this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition or of any similar right. No such waiver shall be binding or effective unless expressed in writing and signed by the party giving such waiver. Section 12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements 732653.17 16 executed and to be fully performed in such State, without regard to its principles of conflicts of law. Section 13. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Section 14. Construction. The section headings contained in this Agreement are inserted for reference purposes only and shall not affect the meaning or interpretation of this agreement. Section 15. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules and Title 9 of the U.S. Code. Judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The number of arbitrators shall be three, one of whom shall be appointed by the Company, one of whom shall be appointed by the other party to the claim or controversy (or if more than one such party, jointly by such other parties) and the third of whom shall be selected by mutual agreement, if possible, within 30 days of the selection of the second arbitrator and thereafter by the American Arbitration Association and the place of arbitration shall be New York, New York. The arbitrators will have no authority to award punitive damages or any other damages not measured by the prevailing party's actual damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms of this Agreement. Either party may make an application to the arbitrators seeking injunctive relief to maintain the status quo until such time as the arbitration award is rendered or the controversy is otherwise resolved. For purposes of the foregoing, the term "status quo" shall mean with respect to a Prospective Co-Investor, the continued enjoyment of its Co- Investment Right conferred hereunder with respect to future Target Investments following the development of a controversy as to the Company's right to terminate such Co- Investment Right pursuant to the terms of Section 6. 732653.17 17 IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be signed on its behalf as of the date first above written. CAPITAL TRUST By: /S/ John R. Klopp ----------------------------------------- Name: John R. Klopp Title: Chief Executive Officer VORNADO REALTY L.P. By: Vornado Realty Trust, its general partner By: /s/ Michael D. Fascitelli ---------------------------------- Name: Michael D. Fascitelli Title: President EOP OPERATING LIMITED PARTNERSHIP By: Equity Office Properties Trust, its general partner By: /s/ Debra L. Ferruzzi ---------------------------------- Name: Debra L. Ferruzzi Title: Senior Vice President GENERAL MOTORS INVESTMENT MANAGEMENT CORPORATION By: /s/ Thomas Dobrowski ----------------------------------------- Name: Thomas Dobrowski Title: Managing Director 732653.17 16 EXHIBIT A PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT (this "Agreement") made as of the ____ day of __________ among CAPITAL TRUST, a California business trust (the "Lender"), having an office at 605 Third Avenue, New York, New York 10016, and ***[VORNADO REALTY L.P., a Delaware limited partnership ("VRLP") having an address c/o Vornado Realty Trust, Park 80 West, Plaza II, Saddle Brook, New Jersey 07663]*** ***[EOP OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership ("EOPLP") having an address at Two North Riverside Plaza, Chicago, Illinois 60606]*** [and] ***[GENERAL MOTORS INVESTMENT MANAGEMENT CORPORATION, a Delaware corporation, as agent for one or more employee benefit plans (collectively, the "GM Pension Plans") sponsored by the General Motors Corporation for the benefit of its employees or the employees of its affiliates ("GMIM"), having an address at 767 Fifth Avenue, New York, New York 10004]*** ([VRLP], [EOPLP] and [GMIM], collectively, the "Co-Investing Participants"; each a "Co-Investing Participant"). W I T N E S S E T H: WHEREAS, simultaneously with the execution and delivery of this Agreement, the Lender is making a loan in the ***[maximum]*** principal amount of $__________ (the "Loan") to ____________, a ________ ________ [type of entity] (the "Borrower"), with respect to the Premises (as defined in Exhibit A attached hereto and made a part hereof; all capitalized terms used and not otherwise defined in this Agreement having the respective meanings given to such terms in Exhibit A) and the Improvements located thereon, which Loan is evidenced by the Note and is secured by, inter alia, the Mortgage1 and the other Security Documents; ***[WHEREAS, the full $__________ of the Loan is being advanced by the Lender to the Borrower]***; and WHEREAS, the Lender desires to sell and assign to the Co-Investing Participants, and the Co-Investing Participants desire to purchase from the Lender, undivided - -------- 1 Note: This Agreement to be modified appropriately for non-mortgage loans. 736730.10 participation interests in the outstanding principal balance of the Loan on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Lender and the Co-Investing Participants mutually agree as follows: 1. Purchase of Undivided Interests. As of the date hereof, the Lender shall sell and assign to each Co-Investing Participant, and each Co-Investing Participant shall purchase and assume from the Lender, a respective undivided participation interest in the outstanding principal balance of the Loan and the Loan Documents, in the amount and percentage and otherwise in accordance with the terms and provisions set forth with respect to such Co- Investing Participant on Exhibit B attached hereto and made a part hereof, and the Lender shall, subject to the provisions of paragraph 9 of this Agreement, retain an undivided interest in the outstanding principal balance of the Loan and the Loan Documents in the amount and percentage and otherwise in accordance with the terms and provisions set forth with respect to Lender on Exhibit B. As of the date hereof, each Co-Investing Participant shall transfer to the Lender by Federal funds wire or in other immediately available New York City funds in United States dollars an amount equal to its respective undivided interest in the outstanding principal balance of the Loan as set forth on Exhibit B. 2. Obligations of the Lender. The Lender shall, in its capacity as lead lender and servicer and until each Co-Investing Participant's undivided interest in the Loan has been paid in full, (i) hold the Loan Documents and the collateral for the Loan for the benefit of itself and the Co-Investing Participants (it being understood and agreed that each party to this Agreement shall be deemed to have an interest therein in proportion to its undivided interest in the Loan), (ii) receive all payments in respect of interest, principal and other sums on account of or with respect to the Loan, (iii) promptly remit to each Co-Investing Participant its pro rata share of interest, principal and other sums received by the Lender on account of or with respect to the Loan in accordance with the provisions of this Agreement by wire or ACH transfer in immediately available funds pursuant to the respective wiring or ACH instructions delivered in connection with each Co-Investing Participant's acquisition of its interest in the Loan (as such instructions may be modified in writing from time to time by such Co-Investing Participant), and (iv) use due diligence to recover from the Borrower all expenses incurred which are reimbursable from the Borrower and promptly remit to each Co-Investing Participant its pro rata share thereof. Except as specifically provided to the contrary in Exhibit B to this Agreement and except in the case of amounts payable by the Borrower pursuant to the provisions of the Loan Documents regarding reserve requirements and capital adequacy, the Lender's and the Co-Investing Participants' respective shares of principal, interest and other sums (if any) actually received by the Lender on account of or with respect to the Loan shall be calculated on the basis of the Lender's and the Co-Investing Participants' respective undivided percentage interests in the Loan from time to time. In addition, (a) not less frequently than once per month, the Lender shall provide to each Co-Investing Participant a periodic loan status report, either prepared by the Lender or obtained by the Lender from Midland Loan 736730.10 -2- Services, Inc. or any other loan servicer which may be unanimously agreed upon in writing by the parties to this Agreement (Midland Loan Services, Inc. or such other servicer, the "Loan Servicer"), which loan status report shall include without limitation a record of any and all loan payments and other activity, and (b) upon request, the Lender shall promptly furnish any Co-Investing Participant with such information or documentation regarding the Loan as may be reasonably required by such Co-Investing Participant for tax or regulatory compliance, in connection with any internal audit requirements applicable to such Co-Investing Participant or for similar purposes, provided in each case that the information or documentation requested is within the possession of the Lender or the Loan Servicer. Except as specifically provided to the contrary in paragraph 4 of this Agreement, the Lender shall not without the prior unanimous written consent of the Co-Investing Participants (i) waive, modify or amend in any respect whatsoever the interest rate provisions set forth in the Loan Documents, (ii) increase the maximum principal amount of the Loan other than as a result of protective advances in situations which are, in the Lender's opinion in the exercise of commercially reasonable judgement, of an emergency nature, including without limitation advances for the payment of taxes or insurance premiums, provided that in any event such increases shall be subject to the limitations set forth on Exhibit B, (iii) extend the maturity date of the Loan, other than in accordance with any mandatory provisions of the Loan Documents relating thereto, (iv) make or consent to any materially adverse amendment, modification or waiver of any of the terms, covenants, provisions or conditions of the Loan Documents, (v) waive, compromise or settle any material claim against the Borrower or any guarantor or other person or entity (a "Guarantor") liable for payment of the Loan in whole or in part or for the observance and performance by the Borrower of any of the terms, covenants, provisions and conditions of the Loan Documents, or release the Borrower or any Guarantor from any material obligation or liability under the Loan Documents, (vi) waive any material default under the Loan Documents, or (vii) substitute, release, reconvey or change, in whole or in part, any collateral or security interest held under the Loan Documents other than in accordance with any mandatory provisions of the Loan Documents or agree to subordinate or otherwise adversely affect the priority of the lien held by the Lender on the Premises, the Improvements or any other security for the Loan. The Lender, in its capacity as lead lender and servicer, may, without obtaining the prior consent of the Co-Investing Participants, (i) extend for reasonable periods of time the time for the observance or performance by the Borrower or any Guarantor of the terms and conditions of the Loan Documents, provided that such extension in the reasonable judgment of the Lender will not have a materially adverse effect on the Loan, the Borrower's or any Guarantor's performance of its obligations under the Loan Documents or the collateral for the Loan, and further provided that no such extension in the case of any scheduled payment of principal and/or interest on the Loan shall be for a period in excess of ten (10) Business Days (hereinafter defined) beyond the expiration of any applicable grace period with respect thereto without the prior unanimous written consent of the Co-Investing Participants, (ii) agree or consent to any non-material amendment, modification or waiver of the terms, covenants, provisions or conditions of the Loan Documents (it being understood and agreed that the Lender shall not agree, except pursuant to the immediately preceding clause (i), to modify any economic terms of the Loan without the unanimous written consent of the Co- 736730.10 -3- Investing Participants), (iii) waive, compromise or settle any non-material claim against the Borrower or any Guarantor, or release the Borrower or any Guarantor from any non-material obligation or liability under the Loan Documents (non-material claims, for the purposes of this clause (iii), being defined as any single claim not in excess of $10,000 or any claims in the aggregate not in excess of $25,000 over the term of the Loan), (iv) waive any non-material default under the Loan Documents (it being understood and agreed that the Lender shall not agree, except pursuant to the immediately preceding clause (i), to waive any monetary default under the Loan without the unanimous written consent of the Co-Investing Participants), (v) release, reconvey or change, in whole or in part, any collateral or security interest held under the Loan Documents which is required to be released or reconveyed in accordance with the express provisions of the Loan Documents, and (vi) subject to the provisions of the preceding sentence, do or perform any act or thing which in the reasonable judgment of the Lender is necessary to enable the Lender to discharge and perform its duties under this Agreement or which in the reasonable judgment of the Lender is necessary or required to preserve and protect the liens and security interests created by the Loan Documents and the priority thereby and the collateral for the Loan and the interests of the Lender and the Co- Investing Participants therein. Notwithstanding the foregoing, in no event shall the Lender (a) take any action that would to the Lender's knowledge result in unrelated business taxable income to the Co-Investing Participants, unless otherwise agreed by the unanimous written consent of the Co-Investing Participants or (b) take or omit to take any action in violation of applicable law or the provisions of the Loan Documents or (unless otherwise agreed by unanimous consent of the Co-Investing Participants) the provisions of this Agreement. Each Co-Investing Participant shall from time to time, upon request of the Lender, but subject to the immediately following provisions of this paragraph, execute and deliver such documents and instruments as may be reasonably necessary to enable the Lender to effectively administer and service the Loan in its capacity as lead lender and servicer and in the manner contemplated by the provisions of this Agreement. Prior to taking any action in connection with the Loan in the name of any Co-Investing Participant or Co-Investing Participants in any state, the Lender shall notify such Co-Investing Participant or Co-Investing Participants in writing. Each such Co-Investing Participant shall have the right to advise the Lender, within five (5) days of receipt of such notice, that it is likely that the laws of the state in which said action is to be taken either prohibit such action if taken in the name of such Co-Investing Participant or that such Co-Investing Participant would be adversely affected under the "doing business" or tax laws of such state, or any federal or state regulatory laws, if such action is taken in its name. Upon receipt of any such notice from a Co-Investing Participant, the Lender shall, in lieu of taking the action in question in the name of such Co-Investing Participant, take action in the name of such Person or Persons, as agent of or in trust for such Co-Investing Participant, as shall be requested by such Co-Investing Participant, it being understood and agreed that all costs and expenses incurred by the Lender in complying with the foregoing provisions of this sentence at the request of a particular Co-Investing Participant shall be borne by such Co- Investing Participant and shall be reimbursed to the Lender upon demand, provided that Lender has furnished to such Co-Investing Participant evidence reasonably satisfactory to such Co-Investing Participant, substantiating such expenditures. Such Person or Persons shall 736730.10 -4- acknowledge in writing that such action is being taken by it in the name of such Co-Investing Participant in question. Each Co-Investing Participant hereby acknowledges that the Lender has made no representations or warranties with respect to the Loan, other than as expressly set forth in this Agreement, and that the Lender shall have no responsibility for (i) the collectibility of the Loan, (ii) the validity, enforceability or legal effect of any of the Loan Documents or the Title Insurance Policy, if any, described in Exhibit A attached hereto, or any survey furnished or to be furnished to the Lender in connection with the Loan, (iii) the validity, sufficiency or effectiveness of the lien created or to be created by the Loan Documents, or (iv) the financial condition of the Borrower or any Guarantor or the accuracy of any information supplied by or to be supplied in connection with the Borrower, any Guarantor, the Premises, the Improvements or otherwise with respect to the Loan or the collateral for the Loan. Each Co-Investing Participant assumes all risk of loss in connection with its respective undivided interest in the Loan to the full extent of its respective undivided percentage interest therein. The Lender assumes all risk of loss in connection with its undivided interest in the Loan to the full extent of its undivided percentage interest therein. The Lender, in its capacity as lead lender and servicer, shall retain all rights under the Loan Documents with respect to enforcement, collection and administration of the Loan and the security for the Loan, which rights of the Lender shall be subject to the provisions of paragraph 4 of this Agreement. At all times and until such time as the Loan has been paid in full, the Lender shall act as lead lender and shall service the Loan on behalf of itself and the Co-Investing Participants in accordance with the provisions of this Agreement. The Lender shall exercise the same care in handling the Loan and the security therefor as the Lender exercises with respect to loans which are held solely by the Lender for its own account (without regard to any other loan by the Lender to the Borrower which is subordinate in priority to the Loan or any obligation of the Borrower to the Lender other than in connection with the Loan), and the Lender, in its capacity as lead lender and servicer, shall have no responsibility to the Co-Investing Participants, other than to exercise such standard of care and, in any event, the Lender shall have no liability with respect to any Co-Investing Participant's undivided interest in the Loan, except for any liability arising from Lender's gross negligence, bad faith or willful misconduct. For purposes of this Agreement, the term "Business Day" shall mean any day on which the Lender and commercial banks are open for business in New York City. 3. Expenses. From and after the date hereof, the Lender and the Co-Investing Participants shall share, in accordance with their respective undivided percentage interests in the Loan, any expenses and costs reasonably sustained or incurred in connection with the Loan as set forth below in this paragraph. Each Co-Investing Participant shall promptly upon request by the Lender pay to the Lender such Co-Investing Participant's pro rata share of any reasonable out-of-pocket expenses and costs actually incurred by the Lender and documented in connection with the Loan, to the extent any such expenses or costs are not paid or covered by the Borrower, excluding any expenses and costs incurred by the Lender in connection with any dispute with any Co-Investing Participant but including without limitation any and all loan servicing fees payable to the Loan Servicer in connection with the servicing and administration of the Loan (the "Servicing Charges"), provided that the Lender shall require the Loan 736730.10 -5- Servicer to service and administer the Loan in compliance with the terms, provisions and conditions of this Agreement and all of the material terms, provisions and conditions of the Loan Servicer's agreement or agreements with Lender applicable to the Loan. The Lender shall promptly upon request by any Co-Investing Participant pay to such Co-Investing Participant its pro rata share of any reasonable out-of-pocket expenses and costs actually incurred by such Co-Investing Participant in connection with the Loan, to the extent any such expenses or costs are not paid or covered by the Borrower (excluding any expenses and costs incurred by such Co-Investing Participant in connection with any dispute with the Lender), it being agreed, however, that no Co-Investing Participant shall seek reimbursement for any such out-of-pocket expenses or costs if the same were incurred without obtaining the prior consent of the Lender. Notwithstanding anything to the contrary contained herein, each of the Lender and the Co-Investing Participants agrees for itself that it shall be responsible for the payment of the day-to-day expenses incurred by it in connection with its own administration and servicing of its respective undivided interest in the Loan. No provision of this Agreement shall be deemed to limit or modify the Lender's right to reimbursement by each Co-Investing Participant for its pro rata share of the Servicing Charges, to the extent that such Servicing Charges are incurred in accordance with the foregoing provisions of this paragraph. 4. Default by the Borrower. The Lender shall promptly, after the Lender's having knowledge thereof, inform the Co-Investing Participants in writing of any material default under the Loan Documents and of all material facts relating to such default or relating to any other aspect of the Loan which facts are likely to have a materially adverse effect on the value of the security for the Loan or on the ability of the Borrower or any Guarantor to perform its obligations under the Loan Documents and shall keep the Co-Investing Participants informed and up to date with respect to such default and such facts and any actions taken by the Lender, in its capacity as lead lender and servicer, in connection therewith, in written notices delivered on a reasonably timely basis in connection with the material developments relating thereto. Upon the occurrence of a material default under the Loan Documents, and within 10 days after written notification to the Co-Investing Participants by the Lender of such default or within such shorter period of time after notification as may be deemed advisable by the Lender, the Lender and the Co-Investing Participants shall consult to determine a mutually acceptable course of action to take with respect to such default and then to pursue such course of action without delay and with due diligence. Notwithstanding any contrary or inconsistent provision of this paragraph, no Co-Investing Participant shall be obligated or required hereunder to approve or disapprove of the actual taking of title to the Premises and the Improvements by the Lender and the Co-Investing Participants (whether at a foreclosure sale, the consummation of a deed in lieu of foreclosure transaction or otherwise) unless and until the Lender has furnished such Co-Investing Participant with a recent appraisal and an updated environmental report concerning the Premises and the Improvements. No action whatsoever shall be taken by the Lender in response to any such default unless the Lender and the Co- Investing Participants unanimously agree upon a mutually acceptable course of action to pursue. If foreclosure is the action taken, then after payment of all reasonable costs and expenses of foreclosure and collection, the Lender shall promptly remit to each Co-Investing 736730.10 -6- Participant its pro rata share of all net proceeds received by the Lender as a consequence of such foreclosure proceeding, including, without limitation, net proceeds of foreclosure sale, net income from operation of the Premises and the Improvements pending liquidation, and net proceeds of any resale of the Premises and the Improvements. If the Premises and the Improvements are acquired through foreclosure, deed in lieu of foreclosure or otherwise, the Lender and the Co-Investing Participants shall have undivided interests in the Premises and the Improvements equal to their respective undivided percentage interests in the Loan and title shall be taken in the name of the Lender (or a subsidiary thereof) and the Co-Investing Participants (or their respective nominees or affiliates, as applicable). If such title is taken, the Lender and the Co-Investing Participants respectively waive any statutory or common law right of partition or any other similar rights or remedies, and the Lender and the Co-Investing Participants agree to consult as to the best manner in which to proceed with respect to the operation, management, maintenance, development and disposition of the Premises and the Improvements. No action whatsoever shall be taken by the Lender with respect to the operation, management, maintenance, development and disposition of the Premises and the Improvements in response to any such default unless the Lender and the Co-Investing Participants unanimously agree upon a mutually acceptable course of action to pursue. The Lender shall, subject to the provisions of this paragraph, retain in its capacity as lead lender and servicer, all rights with respect to the operation, management and maintenance of the Premises and the Improvements pending the disposition thereof in accordance with the provisions of this paragraph. The Co-Investing Participants shall promptly execute and deliver to the Lender all documents and instruments which may be reasonably requested or required by the Lender to enable the Lender to operate, manage and maintain the Premises and the Improvements and to effect a disposition thereof in accordance with the provisions of this paragraph. Without limiting the generality of the foregoing provisions, the Lender and the Co- Investing Participants shall undertake promptly upon any such taking of title, and shall thereafter diligently and expeditiously and in good faith negotiate, execute and deliver a partnership, operating, joint venture or other similar agreement setting forth the respective rights and obligations of the Lender and the Co-Investing Participants with respect to the Premises and the Improvements, which rights and obligations shall be substantially equivalent to the rights set forth in this Agreement. All reasonable out-of-pocket expenses actually incurred in connection with any action taken pursuant to the provisions of this paragraph shall be shared by the Lender and the Co-Investing Participants on a pro rata basis. The Lender and the Co-Investing Participants shall share in accordance with their respective undivided percentage interests in the Loan any losses, expenses, costs or liabilities (including, without limitation, reasonable attorneys' fees) sustained or incurred by the Lender or any Co-Investing Participant as a result of any action taken or not taken by the Lender in accordance with the provisions of this paragraph. 5. Approval of Documents. Each Co-Investing Participant represents and warrants for itself that it has examined and approved (i) the Note, the Mortgage and the other Security Documents, as the case may be, and such other of the Loan Documents as such Co- Investing Participant has deemed necessary or appropriate, (ii) the state of title to the Premises 736730.10 -7- reflected in the Title Insurance Policy, if any, described in Exhibit A attached hereto to the extent such Co-Investing Participant has deemed necessary or appropriate, (iii) the title insurance arrangements with respect to the Mortgage, if any, inclusive of the identity of the co- insuring and reinsuring title insurance companies, if any, and their respective levels and amounts of liability thereunder to the extent such Co-Investing Participant has deemed necessary or appropriate and (iv) other due diligence items regarding the Loan and the Premises and the Improvements to the extent such Co-Investing Participant has deemed necessary or appropriate. 6. Files and Records. The Lender shall keep and maintain at its offices, or the offices of its loan servicer, complete and accurate files and records of all matters pertaining to the Loan, which files and records shall be available for inspection and copying by the Co-Investing Participants and their respective employees and agents during normal business hours upon reasonable prior notice to the Lender. The Lender shall promptly upon request of any Co-Investing Participant deliver to such Co-Investing Participant such information with respect to the Loan, the Borrower, the Premises, the Improvements, or any Guarantor which may reasonably be requested by such Co-Investing Participant and which is otherwise within the Lender's reasonable ability to provide. 7. Other Security. So far as each Co-Investing Participant's undivided interest in the Loan is concerned, the security for the advances made pursuant to the Loan Documents shall include only that security specifically listed or described in the Loan Documents, together with any permitted substitutions therefor, and any additional security specifically pledged to secure the advances made pursuant to the Loan Documents. No Co-Investing Participant shall have any interest in any property or guaranty taken as security for any other loans made by the Lender to the Borrower (other than any such loans in which such Co-Investing Partiticipant otherwise owns an interest) or in any other property or guaranty now or hereafter in the Lender's possession or control which may be or become security for the undivided interest in the Loan held by the Lender by reason of the general description contained in such guaranty or in any general loan and collateral agreement or collateral note held by the Lender or by reason of applicable law now or hereafter in effect or otherwise, provided, however, that if any such property, guaranty or the proceeds thereof shall be applied in reduction of the Loan, then each Co-Investing Participant shall be entitled to receive its pro rata share of such application. Neither the Lender nor any other Co-Investing Participant shall have any interest in any property or guaranty taken as security for any other loans made by a particular Co-Investing Participant to the Borrower (other than any such loans in which the Lender of such other Co-Investing Partiticipant otherwise owns an interest) or in other property or guaranty now or hereafter in such Co-Investing Participant's possession or control which may be or become security for the undivided interest in the Loan held by such Co-Investing Participant by reason of the general description contained in such guaranty or in any general loan and collateral agreement or collateral note held by such Co-Investing Participant or by reason of applicable law now or hereafter in effect or otherwise, provided, however, that if any such property, guaranty or the proceeds thereof shall be applied in reduction of any portion of the Loan, 736730.10 -8- including, without limitation, any application in reduction of such Co-Investing Participant's undivided interest in the Loan, then the Lender and each other Co-Investing Participant shall be entitled to receive its pro rata share of such application. 8. Amounts Received by Co-Investing Participants. Each Co-Investing Participant agrees that if at any time it shall receive from any sources whatsoever any payment on account of the Loan in excess of its pro rata share thereof, it will promptly remit to the Lender the amount of such excess, and Lender shall retain its share of such excess and shall promptly remit to the other Co-Investing Participants their respective shares in such excess, in each case pro rata in accordance with the respective undivided percentage interests of the Lender and such other Co-Investing Participants in the Loan and the Loan Documents or as otherwise provided on Exhibit B. The Lender agrees that if at any time it shall receive from any sources whatsoever any payment on account of the Loan in excess of its pro rata share thereof, it will promptly remit to the Co-Investing Participants the amount of such excess, pro rata in accordance with the Co-Investing Participants' respective undivided percentage interests in the Loan and the Loan Documents or as otherwise provided on Exhibit B. 9. Assignments and Subparticipations. (a) The Lender shall, subject to the terms of this paragraph hereinafter set forth, have the right after the date of this Agreement to (i) pledge the entire Loan and Loan Documents, subject to the express right of the Co-Investing Participants' undivided interests in the Loan, to a third party lender in connection with any financing provided to the Lender, and such third party lender shall be permitted to exercise its remedies against the Lender and shall, at such third party lender's option, succeed to the interest of the Lender and be entitled to all of the rights and benefits of the Lender under the Loan and the Loan Documents, subject, however to the provisions of subparagraph (e) below (and any and all other applicable provisions of this Agreement), (ii) subject to the provisions of subparagraph (c) below (and any and all other applicable provisions of this Agreement), sell, in whole but not in part, its undivided interest in the Loan, and (iii) subject to the provisions of subparagraph (d) below (and any and all other applicable provisions of this Agreement), sell one or more subparticipation interests in the Lender's undivided interest in the Loan to any domestic or foreign banks, insurance companies, pension funds, trusts or other institutional lenders or other persons, parties or investors (including, but not limited to, grantor trusts, owner trusts, special purpose corporations, REMICs, real estate investment trusts or other similar or comparable investment vehicles) selected by the Lender and on terms satisfactory to the Lender, provided that if the Lender elects to subparticipate its interest in the Loan, (x) the Lender and affiliates or subsidiaries of the Lender (specifically excluding EOPLP and its affiliates) shall at all times and until the Loan is paid in full retain an aggregate undivided interest in the Loan, which interest will not be subparticipated, in an amount not less than 20% of the outstanding principal balance of the Loan from time to time (the calculation of which retained amount shall be made without regard to any interest of the Lender in the Loan which has been pledged to a third party lender as provided in this Agreement), (y) the Lender shall remain the lead lender and servicer of the Loan as provided in this Agreement and (z) the Lender shall under no circumstance sell, transfer, assign, alienate or delegate to any 736730.10 -9- subparticipant any of the voting, consent or approval rights of the Lender with respect to the Loan, the Premises or the Improvements, the sale of undivided participation interests or subparticipations in the Loan, or any other matters provided for in this Agreement, and any purported assignment of such voting, consent or approval rights shall be void and not binding on the Co-Investing Participants. If the Lender elects to subparticipate its undivided interest in the Loan, no Co-Investing Participant shall in any event have any obligation to look to any person, party or entity (including, without limitation, any such bank, insurance company, pension fund, trust, other institutional lender, person, party or investor or affiliate or subsidiary of the Lender to whom the Lender has sold and assigned a participation interest in the Lender's undivided interest in the Loan from time to time) other than the Lender for the observance and performance by the Lender of its obligations under this Agreement including, without limitation, those set forth in paragraph 3 of this Agreement. (b) Each Co-Investing Participant shall, subject to the terms of this paragraph herein set forth, have the right after the date of this Agreement to (i) subject to the provisions of subparagraph (c) below, sell, in whole but not in part, its undivided interest in the Loan and (ii) subject to the provisions of subparagraph (d) below, sell one or more subparticipation interests in such Co-Investing Participant's undivided interest in the Loan to any domestic or foreign banks, insurance companies, pension funds, trusts or other institutional lenders or other persons, parties or investors (including, but not limited to, grantor trusts, owner trusts, special purpose corporations, REMICs, real estate investment trusts or other similar or comparable investment vehicles) selected by such Co-Investing Participant and on terms satisfactory to such Co-Investing Participant, provided the Lender shall have the right to approve any proposed subparticipation by such Co-Investing Participant and the form of agreement between such Co-Investing Participant and each subparticipant (which approval will not be unreasonably withheld), and provided further that if such Co-Investing Participant elects to subparticipate its interest in the Loan, (x) such Co-Investing Participant and affiliates or subsidiaries of the Co-Investing Participant shall at all times and until the Loan is paid in full retain an aggregate undivided interest in the Loan, which interest will not be subparticipated, in an amount greater than 50% of the undivided participation interest in the Loan held by such Co-Investing Participant on the date hereof (as such amount may be proportionately increased in connection with any approved future advances under the Loan) and (y) such Co-Investing Participant shall under no circumstance sell, transfer, assign, alienate or delegate to any subparticipant any of the voting, consent or approval rights of such Co-Investing Participant with respect to the Loan, the Premises or the Improvements, the sale of undivided participation interests or subparticipations in the Loan, or any other matters provided for in this Agreement, and any purported assignment of such voting, consent or approval rights shall be void and not binding on the Lender or the other Co-Investing Participants. If any Co-Investing Participant elects to subparticipate its undivided interest in the Loan, neither the Lender nor any other Co-Investing Participant shall in any event have any obligation to look to any person, party or entity (including, without limitation, any such bank, insurance company, pension fund, trust, other institutional lender, person, party or investor or affiliate or subsidiary of such Co-Investing Participant to whom such Co-Investing Participant has sold and assigned a 736730.10 -10- participation interest in such Co-Investing Participant's retained undivided interest in the Loan from time to time) other than such Co-Investing Participant for the observance and performance by such Co-Investing Participant of its obligations under this Agreement, including, without limitation, those set forth in paragraph 3 of this Agreement. (c) Any and each sale or transfer by the Lender or any Co-Investing Participant of its undivided interest in the Loan shall be subject to the terms and provisions set forth in this subparagraph (c). (i) If any party to this Agreement (an "Offeror") desires to sell or transfer its undivided interest in the Loan, such Offeror shall give written notice (the "Sale Notice") to the other parties to this Agreement (each an "Offeree"; collectively, the "Offerees") of its desire to do so and of the price and other terms under which the Offeror proposes to dispose of its undivided interest in the Loan, which Sale Notice shall constitute an offer on the part of the Offeror to sell to the Offerees the Offeror's undivided participation interest in the Loan, upon the terms and conditions set forth in such notice. Within ten (10) days after the giving of the Sale Notice by the Offeror, any one or more of the Offerees may give written notice (a "Response Notice") to the Lender, as agent and servicer, stating (x) that such Offeree or Offerees commit to purchase the Offeror's undivided interest in the Loan at the aggregate price and under the terms specified in the Sale Notice or (y) that such Offeree or Offerees elect to exercise their right of inclusion in such sale pursuant to clause (iii) below. Any Offeree that shall not have delivered a Response Notice within such 10-day period shall be deemed to have rejected the Offeror's offer to sell its undivided interest in the Loan to such Offeree, and the Offeror shall be free to sell its undivided interest in the Loan to one or more other Offerees that have delivered Response Notices electing to purchase all or a portion of such undivided interest in the Loan or to any other Person, subject to the terms, provisions and conditions set forth below in this paragraph (including, without limitation, clauses (iii), (v) and (vii) hereof). The Lender shall promptly notify the Offeror of any and all Response Notices and the respective contents thereof. If no Offeree has delivered a Response Notice to the Lender within such 10-day period, the Offeror shall be free to sell or transfer its undivided interest in the Loan to any Permitted Institutional Transferee, subject to the terms, provisions and conditions set forth below in this paragraph (including, without limitation, clauses (iii) and (v) hereof). The Offeror's undivided interest in the Loan, if it is the subject of Response Notices by more than one Offeree, shall be purchased and paid for by and divided among such Offerees in proportion to their respective percentage interests in the Loan, or as otherwise agreed among the Offerees that have committed to purchase the Offeree's undivided participation interest in the Loan as provided above in this clause (i). For purposes of this Agreement, the term "Permitted Institutional Transferee" shall mean an insurance company, bank, investment bank, savings and loan association, real estate investment trust ("REIT"), Real Estate Mortgage Investment Conduit ("REMIC"), trust company, commercial credit corporation, pension plan, pension fund 736730.10 -11- or pension fund advisory firm, mutual fund or other investment company, governmental plan or entity, "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended (other than a broker/dealer), or an institution substantially similar to any of the foregoing, or any entity wholly owned by any one or more of such institutions, in each case having not less than one billion dollars in assets and not less than $250,000,000 in equity. (ii) Notwithstanding any provision to the contrary contained in clause (i) above, if, after the Offerees have declined, or have been deemed to have declined, the offer to purchase the Offeror's undivided participation interest in the Loan in accordance with clause (i) above, the proposed sale price of the Offeror's undivided interest to a third party shall be less than 90% of the price specified in the applicable Sale Notice, then the Offeror shall again offer to sell its undivided interest in the Loan to the Offerees, in accordance with the provisions of clause (i) above, before the Offeror may complete any such sale. Furthermore, the Offeror's undivided interest in the Loan shall again be subject to the provisions of clause (i) of this paragraph if, within ninety (90) days after the giving of the applicable Sale Notice, the Offeror shall not have completed the disposition of its undivided interest in the Loan as contemplated by such Sale Notice. (iii) If and only if the Offeror is the Lender, any Co-Investing Participant not electing to purchase all or any portion of the Lender's undivided interest in the Loan pursuant to clause (i) above, may elect in the alternative, in a Response Notice delivered in accordance with the provisions of clause (i) above, to cause the Lender to offer to a third party purchaser such Co-Investing Participant's undivided interest in the Loan, together with the Lender' s undivided interest therein. It shall be a condition of the sale by the Lender of its undivided interest in the Loan to a third party that each Co-Investing Participant that so elects shall have the right to have its undivided participation interest in the Loan purchased by the purchaser of the Lender's undivided participation interest in the Loan, at the same price (adjusted proportionately in accordance with such Co-Investing Participant's percentage interest in the Loan, as compared with the Lender's) and on the same terms and conditions as specified in the Sale Notice. (iv) If any one or more Offerees irrevocably commit to purchase the Offeror's undivided participation interest in the Loan in a Response Notice or Notices as contemplated by clause (i) above, the closing of such purchase shall take place at the principal place of business of the Offeror (or its attorneys) at 10:00 A.M. (New York City time) on the twentieth (20th) day following the date on which the Offeror delivered the Sale Notice, or if such day is not a Business Day, then the next day that is a Business Day. If any Offeree that has elected to purchase all or (in the event that more than one Offeree executes and delivers a Response Notice exercising such Offeree's right to purchase) a portion of the Offeror's undivided participation interest in the Loan 736730.10 -12- in accordance with the provisions of this paragraph fails to purchase such participation interest pursuant to the provisions hereof, then such Offeree shall be in default under this Agreement, and the Offeror shall be entitled to exercise any and all rights and remedies available to it against such Offeree. (v) No party to this Agreement shall be permitted to sell or transfer less than all of its undivided interests in the Loan (except for a sale of subparticipation interests as expressly provided in this paragraph). Any attempted transfer of any party's undivided participation interest in the Loan in violation of the terms of this paragraph shall be ineffective to vest in any transferee any interest in the Loan. Anything contained in this paragraph to the contrary notwithstanding, any purchaser or other transferee of an undivided participation interest in the Loan pursuant to this paragraph which purchaser or transferee is not the Lender or a Co-Investing Partcipant shall agree in writing in advance with the parties hereto to be bound by and comply with all applicable provisions of this Agreement and to assume in writing, upon the consummation of such purchase or transfer, the obligations of the transferor under this Agreement and shall thenceforth be deemed to be a Co-Investing Participant for all purposes of this Agreement. (vi) Notwithstanding the foregoing, the provisions of clauses (i) through (v) above shall not apply to transfers or proposed transfers of undivided participation interests in the Loan (u) by EOPLP to (1) any entity (other than Capital Trust) in which EOPLP holds, directly or indirectly, an economic interest of greater than 50% (an "EOPLP Entity") or (2) any EOP-sponsored "Paper Clip" enterprise or any Affiliate or subsidiary thereof (it being understood and agreed that EOPLP and each EOPLP Entity shall have the right to transfer its undivided participation interest in the Loan to EOPLP or any other EOPLP Entity), (v) by GMIM to (1) one or more GM Pension Plans or (2) any entity in which GMIM holds, directly or indirectly, an economic interest of greater than 50% (a "GMIM Entity") (it being understood and agreed that GMIM and each GMIM Entity shall have the right to transfer its undivided participation interest in the Loan to GMIM or any other GMIM Entity), (w) by VRLP to (1) any entity in which VRLP holds, directly or indirectly, an economic interest of greater than 50% (a "VRLP Entity") or (2) Vornado Operating Inc. or any Affiliate or subsidiary of Vornado Operating Inc. (it being understood and agreed that VRLP and each VRLP Entity shall have the right to transfer its undivided participation interest in the Loan to VRLP or any other VRLP Entity) or (x) by the Lender to any Affiliate of the Lender, other than an Affiliate of Capital Trust the affairs of which are managed and controlled, directly or indirectly, by Samuel Zell or (y) by the Lender or any Co-Investing Participant to a Loan Pledgee (hereinafter defined) as contemplated by the provisions of subparagraph (e) below or (z) with respect to any undivided participation interest in the Loan acquired by a Loan Pledgee through the exercise of its remedies against the Lender or any Co-Investing Participant, by such Loan Pledgee to any other individual, corporation, partnership, business trust, trust, unincorporated association or 736730.10 -13- other entity, or a governmental entity of any country (each a "Person"). For purposes of this Agreement, the term "Affiliate" shall have the meaning given to such term in Rule 405 under the Securities Act of 1933, as amended. (vii) Notwithstanding any contrary or inconsistent provision contained in this Agreement, neither the Lender nor any of the Co-Investing Participants nor any of the respective successors or assigns of the foregoing (including without limitation any Loan Pledgee that acquires an undivided participation interest in the Loan as a result of such Loan Pledgee's realizing on its security interest therein and any transferee of any Loan Pledgee) shall transfer its respective interest in the Loan to any Person that is not a Permitted Institutional Transferee under any circumstances, except for (x) a transfer in accordance with the provisions of paragraphs 9(c)(i) through 9(c)(iv) of this Agreement to a Co-Investing Participant or to the Lender (as the case may be) pursuant to the exercise of its right of first offer to purchase such interest in the Loan as set forth hereinabove or (y) a transfer pursuant to and in accordance with the express provisions of paragraph 9(c)(vi) of this Agreement. (d) Any and each sale of a subparticipation interest in the Loan by any party hereto shall be subject to the following provisions of this subparagraph (d). (i) Any sale by the Lender of a subparticipation in its respective undivided interest in the Loan as provided in subparagraph (a) above shall be subject to the Co-Investment Right of each Co-Investing Participant. For purposes of this clause (i), the term "Co-Investment Right" shall have the meaning given to such term in the Co-Investment Agreement, modified as necessary to reflect an offering by the Lender to the Co-Investing Participants of a subparticipation interest in the Lender's undivided interest in the Loan, rather than a co-investment in the applicable Target Investment (as such term is defined in the Loan Agreement). (ii) Any sale by a Co-Investment Participant of a subparticipation in its respective undivided interest in the Loan as provided in subparagraph (b) above shall be subject to the Co-Investment Right of each of the Lender and the other Co-Investing Participants. For purposes of this clause (ii), the term "Co-Investment Right" shall have the meaning given to such term in the Co-Investment Agreement, modified as necessary to reflect an offering by a Co-Investing Participant to Lender and the other Co-Investing Participants (rather than by Lender to the Co-Investing Participants) of a subparticipation interest in such Co-Investment Participant's undivided interest in the Loan, rather than a co-investment in the applicable Target Investment. (iii) Each subparticipation agreement entered into between, on one hand, the Lender or any Co-Investing Participant (as the case may be) and, on the other hand, the purchaser or purchasers of a subparticipation in such party's undivided interest in the Loan shall incorporate the requirements of paragraph 9(d) of this Agreement 736730.10 -14- relating to the rights of subparticipants. As a condition precedent to the delivery of any such subparticipation agreement by a Co-Investing Participant or the Lender (as the case may be), the terms and provisions of such agreement shall be subject to the approval of the other parties to this Agreement, which approval shall not be withheld, conditioned or delayed provided that such other parties shall be reasonably satisfied that the terms and provisions of such subparticipation agreement do not derogate the rights of such other parties to this Agreement or otherwise contravene the material terms and provisions of this Agreement. (iv) Notwithstanding any contrary or inconsistent provision contained in this Agreement, neither the Lender nor any of the Co-Investing Participants shall under any circumstances sell or transfer a subparticipation interest in the Loan to any Person that is not a Permitted Institutional Transferee. In no event shall the provisions of this subparagraph (d) be deemed to apply to any pledge by the Lender or any Co-Investing Participant of any of interest in the Loan to a Loan Pledgee as contemplated by the provisions of subparagraph (e) below. Any attempted transfer of a subparticipation interest in the Loan in violation of the terms and provisions of this paragraph shall be ineffective to vest in any transferee any direct or indirect interest in the Loan. (e) Notwithstanding anything contained in this Agreement to the contrary: (i) Each Co-Investing Participant hereby consents to the pledge by the Lender to (x) German American Capital Corporation, a Maryland corporation, or an affiliate thereof ("GACC"), (y) Morgan Stanley Mortgage Capital Inc. or Morgan Stanley & Co. International Limited or an affiliate thereof (collectively, "Morgan Stanley") or (z) any other entity which has extended a credit facility to the Lender, as the case may be (GACC, Morgan Stanley, or any entity described in the foregoing clause (z), a "Lender Loan Pledgee"), of all right, title and interest of the Lender in and to the Loan and the Loan Documents (subject to the Co-Investing Participants' respective undivided interests therein), as security for one or more advances by the applicable Lender Loan Pledgee to the Lender under any such credit facility. (ii) The Lender and each of the Co-Investing Participants hereby consent to the pledge by any Co-Investing Participant to any entity which has extended a credit facility to such Co-Investing Participant or any of its Affiliates (any entity described in the foregoing provisions of this clause, a "Participant Loan Pledgee"; a Participant Loan Pledgee or Lender Loan Pledgee, as the case may be, shall hereinafter be referred to from time to time as a "Loan Pledgee"), of all right, title and interest of such Co-Investing Participant in and to the Loan and the Loan Documents (subject to the Lender's and the Co-Investing Participants' respective undivided interests therein), as security for one or more advances by the applicable Participant Loan Pledgee to such 736730.10 -15- Co-Investing Participant (or Affiliate of a Co-Investing Participant) under any such credit facility. (iii) The Lender and the Co-Investing Participants other than the Pledgor (as hereinafter defined), and any one or more of the foregoing, shall have the right, in the event that all of the undivided interest in the Loan of the Lender or any Co-Investing Participant (the Lender or any such Co-Investing Participant, as the case may be, the "Pledgor") is transferred or conveyed to a Loan Pledgee as a result of a default under a credit facility secured by a pledge of such interest, to purchase such undivided interest in the Loan for an aggregate purchase price equal to the amount of the Pledgor's undivided interest in the outstanding principal balance of the Loan, plus all interest and other sums due to the Pledgor with respect to such portion of the outstanding principal balance of the Loan, all as of the date of the closing of such purchase. Such right shall be exercisable by the Lender and the Co-Investing Participants (other than the Pledgor) as follows. Not later than sixty (60) days from and after the date of such transfer to the Loan Pledgee, the Lender and all of the Co-Investing Participants desiring to purchase such undivided interest in the Loan (excluding the Pledgor) shall confer and shall thereafter execute and deliver to such Loan Pledgee a notice (the "Pledgee Buyout Notice"). The execution and delivery of a Pledgee Buyout Notice shall create a binding obligation of the signatories thereto to purchase the undivided interest in the Loan of the Loan Pledgee in accordance with the provisions of this subparagraph. Such undivided interest in the Loan, if it is the subject of a Pledgee Buyout Notice executed and delivered by more than one party, shall be purchased by such parties and paid for and divided among such parties in proportion to their respective percentage interests in the Loan, or as otherwise agreed among such parties. The closing date of any such purchase from the Loan Pledgee shall be a date unanimously agreed upon by the Loan Pledgee and the Lender (if it has executed and delivered the Pledgee Buyout Notice) and all of the Co-Investing Participants that have elected to purchase from the Loan Pledgee such undivided interest in the Loan in accordance with the provisions of this subparagraph (e)(iii), but in any event no later than thirty (30) days from and after the last day of the 60-day period described above in this subparagraph. If neither the Lender nor any Co-Investing Participant delivers a Pledgee Buyout Notice within such 60-day period, then the Lender and all of the Co-Investing Participants (excluding the Pledgor) shall be deemed to have waived the right to purchase set forth herein, and the Loan Pledgee shall retain its undivided interest in the Loan and the Loan Documents, together with all of the rights and benefits and obligations that had, prior to such realization by the Loan Pledgee of its security interests therein, inured to and bound the Pledgor under and pursuant to the terms and provisions of this Agreement. 10. Withholding Taxes. In the event the Lender or the Borrower shall be required by law to deduct and withhold Taxes (as hereinafter defined) from interest, fees or other amounts payable to any Co-Investing Participant with respect to the Loan as a result of 736730.10 -16- such Co-Investing Participant constituting a Non-Exempt Person (as hereinafter defined), the Lender, in its capacity as lead lender and servicer, shall be entitled to do so with respect to such Co-Investing Participant's interest in such payment (all withheld amounts being deemed paid to such Co-Investing Participant), provided the Lender shall furnish such Co-Investing Participant a statement setting forth the amount of Taxes withheld, the applicable rate and other information which may reasonably be requested for the purposes of assisting such Co-Investing Participant to seek any allowable credits or deductions for the Taxes so withheld in each jurisdiction in which such Co-Investing Participant is subject to tax. A "Non-Exempt Person" is any Person other than a Person that is either (i) a United States Person (as such term is defined in Section 7701(a)(30) of the United States Internal Revenue Code of 1986, as amended), or (ii) has on file with the Lender for the year involved such duly executed form(s) or statement(s) which may, from time to time, be prescribed by law and which, pursuant to applicable provisions of (a) an income tax treaty between the United States and the country of residence of such Person, (b) the United States Internal Revenue Code of 1986, as amended, and as such may hereafter be amended, or (c) any applicable rules or regulations in effect under (a) or (b) above, permit the Lender to make such payments free of any obligation or liability for withholding. For the purposes of this paragraph, "Taxes" shall mean any income or other taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature, now or hereafter imposed by any jurisdiction or by any department, agency, state or other political subdivision thereof or therein. Each Co-Investing Participant for itself agrees to indemnify the Lender and the Borrower against and to hold the Lender and the Borrower harmless from any Taxes, interests, penalties and reasonable counsel fees arising from any failure of the Lender or the Borrower to withhold Taxes from payments made to such Co-Investing Participant in reliance upon any representation, certificate, statement, document or instrument made or provided by such Co-Investing Participant to the Lender or the Borrower in connection with the obligation of the Lender or the Borrower to withhold Taxes from payments made to such Co-Investing Participant, it being expressly understood and agreed that (i) the Lender and the Borrower shall be absolutely and unconditionally entitled to accept any such representation, certificate, statement, document or instrument as being true and correct in all respects and to fully rely thereon without any obligation or responsibility to investigate or to make any inquiries with respect to the accuracy, veracity, conclusory correctness, or validity of the same, and (ii) each Co-Investing Participant upon request of the Lender shall, at its sole cost and expense, defend any claim relating to the foregoing indemnification by counsel selected by such Co-Investing Participant and reasonably satisfactory to the Lender. Each Co-Investing Participant for itself represents to the Lender (and agrees that the Borrower may rely upon such representation) that it is not a Non-Exempt Person. Contemporaneously with the execution of this Agreement, and from time to time as necessary during the term of this Agreement, each Co-Investing Participant shall deliver to the Lender evidence reasonably satisfactory to the Lender substantiating that it is not a Non-Exempt Person and such other evidence as the Lender or the Borrower may reasonably request to establish that neither the Lender nor the Borrower is obligated under applicable law to withhold Taxes on sums paid to it with respect to the Loan or otherwise. 736730.10 -17- 11. Reserve Requirements and Capital Adequacy. The Lender and the Co-Investing Participants agree that no proceeds realized on a foreclosure of the Mortgage or other Security Documents or otherwise with respect to the collateral held under the Loan Documents or any portion thereof or any sums received after the Debt (as hereinafter defined) has been declared due and payable shall be applied towards the payment of additional amounts due pursuant to the provisions of the Loan Documents regarding reserve requirements or capital adequacy, unless and until all other sums constituting part of the Debt have been paid in full, and any sums available for application towards additional amounts due under such provisions after the payment in full of the balance of the Debt shall be applied to the respective additional amounts due to the parties to whom such additional amounts are due in accordance with the provisions of the Note or any other Loan Documents on a proportionate basis, calculated in accordance with the respective additional amounts which are due. Any additional amounts charged to the Borrower pursuant to the terms and provisions of the Note or any other Loan Documents which amounts are paid by the Borrower prior to the Debt being declared due and payable shall be distributed to the parties to whom such additional amounts are payable in accordance with the applicable provision of the Note or other Loan Documents. If any Co-Investing Participant shall be entitled to receive additional amounts from the Borrower in accordance with the provisions of the Note or the other Loan Documents regarding reserve requirements or capital adequacy, such Co-Investing Participant (i) shall certify to the Lender in a timely manner the additional amounts due to it and the manner of calculation of such additional amounts, which certification may be relied upon by the Lender, and (ii) shall indemnify and agree to hold the Lender harmless from and against any loss, liability, cost or expense of any nature whatsoever which the Lender or any other Co-Investing Participant may incur as the result of any demand which is made on the Borrower for the payment of such additional amounts or as a result of the payment of any such additional amounts by the Borrower. The Lender shall not have the obligation to request the Borrower to pay any additional amounts pursuant to the Note or other Loan Documents regarding reserve requirements or capital adequacy insofar as such additional amounts pertain to any person or party to whom any Co-Investing Participant has assigned or subparticipated its undivided interest in the Loan pursuant to the provisions of this Agreement, and the Borrower shall not have the obligation to pay any such additional amounts pertaining to the capital adequacy or reserve requirements applicable to such person or party, unless the Lender shall agree to the contrary in its sole and absolute discretion. The Lender reserves the right, but in no event shall have any obligation, to purchase, or to arrange for the purchase of by another foreign or domestic bank, insurance company, pension fund, trust or other institutional Lender, the undivided interest in the Loan and the Loan Documents held by any Co-Investing Participant who requests the payment of additional amounts pursuant to the Note with respect to any period of time during which the Lender is not also requesting payment for its own account of comparable amounts for a purchase price equal to the funded principal amount of such Co-Investing Participant's undivided interest in the Loan plus interest accrued and unpaid thereon and other sums due with respect thereto, which right of purchase may be enforced by the Lender in an action for specific performance and shall remain in effect for so long as such Co-Investing Participant is requesting payment of such additional amounts. The term "Debt" as 736730.10 -18- used in this paragraph shall mean all principal, interest or other sums of any nature whatsoever which may or shall become due and payable in accordance with the provisions of the Note, the Mortgage, the Security Documents and the other Loan Documents. 12. Entire Agreement. This Agreement (together with the Exhibits attached hereto) contains, and is intended as, a complete statement of all the terms of the arrangements between the parties with respect to the matters provided for, and supersedes any previous agreements and understandings between the parties with respect to those matters. 13. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the State of New York, without regard to its principles of conflicts of law. 14. Notices. All notices or other communications under this Agreement shall be sufficient if in writing and delivered by hand or sent by telecopy, or sent, postage prepaid by registered, certified or express mail, or by recognized overnight air courier service and shall be deemed given when so delivered by hand or telecopied, or if mailed or sent by overnight courier service, on the third (3rd) Business Day after mailing (one Business Day in the case of express mail or overnight courier service) to the parties at the following addresses: If to the Lender: Capital Trust 605 Third Avenue - 26th Floor New York, New York 10016 Attention: Loan Administration Peter Ginsberg, Esq. John Felletter Facsimile: (212) 655-0044 with a copy to: Battle Fowler LLP 75 East 55th Street New York, New York 10022 Attention: John A. Cahill, Esq. Facsimile: (212) 856-7801 If to VRLP to: Vornado Realty L.P. c/o Vornado Realty Trust Park 80 West, Plaza II 736730.10 -19- Saddle Brook, New Jersey 07663 Attention: Wendy Silverstein Facsimile: (201) 587-0600 with a copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10004-2498 Attention: Alan J. Sinsheimer, Esq. Facsimile: (212) 558-3588 If to EOPLP to: EOP Operating Limited Partnership Two North Riverside Plaza Chicago, Illinois 60606 Attention: Stanley M. Stevens, Esq. Richard D. Kincaid Facsimile: (312) 559-5009 with a copy to: Rosenberg & Liebentritt, P.C. Two North Riverside Plaza, Suite 1600 Chicago, Illinois 60606 Attention: Jonathan D. Wasserman, Esq. Facsimile: (312) 454-0335 If to GMIM: General Motors Investment Management Corporation 767 Fifth Avenue New York, New York 10004 Attention: Jamie Behar Facsimile: (212) 418-3651 736730.10 -20- with a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Gerald S. Backman, Esq. Facsimile: (212) 310-8007 or at such other address as the addressee may have furnished in writing to the sender as provided herein. 15. Undivided Interests Not Securities. The undivided interest in the Loan sold by the Lender to the Co-Investing Participants shall not be deemed to be securities within the meaning of the Securities Act of l933, as amended, or the Securities Exchange Act of l934, as amended. No representations with respect to the Loan, the Borrower or any Guarantor have been made by the Lender to the Co-Investing Participants except those, if any, contained herein and except those representations, if any, heretofore made by the Lender to the Co-Investing Participants in writing. 16. Parties' Intent. It is the intent and purpose of the parties hereto that this Agreement represent a sale by the Lender to the Co-Investing Participants of undivided interests in the Loan and the Loan Documents and the rights, benefits and obligations arising therefrom. This Agreement shall not be deemed to represent a pledge of any interest in the Loan by the Lender to the Co-Investing Participants, or a loan from the Co-Investing Participants (or any of them) to the Lender. 17. Captions. The titles and headings of the paragraphs of this Agreement have been inserted for convenience of reference only and are not intended to summarize or otherwise describe the subject matter of such paragraphs and shall not be given any consideration in the construction of this Agreement. 18. Counterparts. This Agreement may be executed in one or more counterparts by some or all of the parties hereto, each of which counterparts shall be an original and all of which together shall constitute a single agreement. 19. Severability. If any term, covenant or provision of this Agreement shall be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such term, covenant or provision. 20. Amendment; Waiver. This Agreement shall not be modified, amended or terminated, except by an agreement in writing signed by the parties hereto. Any party may waive compliance by another with respect to any of the provisions of this Agreement. No 736730.10 -21- waiver of any provision hereof shall be construed as a waiver of any other provision. A waiver must be in writing. 21. Successors and Assigns. This Agreement and all of the provisions hereof shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. 22. Due Execution. The Lender and each Co-Investing Participant respectively represents for itself that this Agreement has been duly executed and delivered by it and constitutes its binding and enforceable obligation in accordance with its terms. 23. Trustees. The Co-Investing Participants acknowledge and agree that the trustees of the Lender shall have no personal liability hereunder to any Co-Investing Participant and any obligation of the Lender hereunder to any Co-Investing Participant or Co-Investing Participants shall be satisfied solely from the assets of the Lender. [Signatures begin on next page] 736730.10 -22- IN WITNESS WHEREOF, the Lender and the Co-Investing Participants have caused this Agreement to be duly executed as of the day and year first above written. LENDER: CAPITAL TRUST By: ------------------------------------------ Name: Title: CO-INVESTING PARTICIPANT[S]: VORNADO REALTY L.P. By: Vornado Realty Trust, its general partner By: ------------------------------------- Name: Title: EOP OPERATING LIMITED PARTNERSHIP By: Equity Office Properties Trust, its general partner By: ------------------------------------- Name: Title: GENERAL MOTORS INVESTMENT MANAGEMENT CORPORATION By: ----------------------------------------- Name: Title: -23- ADDENDUM The parties will endeavor in good faith to negotiate a mechanism, or series of mechanisms, reasonably acceptable to the parties, such that if the parties fail to reach unanimous consent with respect to any matter on which unanimous consent by the Co-Investing Participants and the Lender is required, such disagreement will trigger: (i) a buyout right as between two differing Co-Investing Participants and (ii) a buyout right as between the Co-Investing Participant (if there is only one) or the remaining Co-Investing Partcipant (if such Co-Investing Participant has previously purchased the interest of another, dissenting Co-Investing Participant) and the Lender. -24- EXHIBIT A Co-Investment Agreement: That certain Co-Investment Agreement, dated as of July __, 1998, by and among Capital Trust, Vornado Realty L.P., EOP Operating Limited Partnership and General Motors Investment Management Corporation, as agent for the GM Pension Plans. Improvements: Loan Documents: Collectively, the Note, the Mortgage, the Security Documents and all other documents and instruments of any nature whatsoever now or hereafter executed and delivered in connection with the Loan, or otherwise relating thereto, as all of the same may be modified and amended from time to time after the date of this Agreement. Mortgage: Note: Premises: Security Documents: Title Insurance Policy: -25- EXHIBIT B Loan Reference Name or Number: ______________________________ Outstanding Principal Balance of Loan as of __/__/__1: $_____________ Maximum Amount of Increase in Principal for Protective Advances: ***[$________ per advance; $_________ in the aggregate during the term of the Loan]*** Interests of Lender and Co-Investment Participants; Other Key Features: Principal Percentage Interest Name Amount Interest Rate Fees2 - ---- --------- ---------- -------- ----- Lender $ % [VRLP] $ % [EOPLP] $ % [GMIM] $ % - -------- 1 Insert date of Agreement or, if different, date of purchase of participation interests. 2 Include other material features of participation arrangements for this particular transaction, as applicable, e.g., the obligations of the Co-Investing Participants with respect to future advances under the Loan, if contemplated, increases in the interest rate, etc. EX-10.2 9 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.2 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of July 28, 1998 among Capital Trust, a California business trust (the "Company"), Vornado Realty L.P., a Delaware limited partnership ("VRLP"), EOP Operating Limited Partnership, a Delaware limited partnership ("EOPLP"), Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust, a New York trust ("Hourly GM Trust"), and Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust, a New York trust ("Salaried GM Trust" and together with the Hourly GM Trust, the "GM Trust"). WHEREAS, CT Convertible Trust I, a Delaware statutory business trust (the "Trust"), has offered to certain investors in a private placement $150,000,000 aggregate liquidation amount of its 8.25% Step Up Convertible Trust Preferred Securities (the "Convertible Preferred Securities"), representing undivided beneficial interests in the assets of the Trust, and proposes to invest the proceeds from such offering, together with the proceeds of the issuance and sale by the Trust to the Company of $4,650,000 aggregate liquidation amount of its 8.25% Step Up Convertible Trust Common Securities (the "Common Securities"), representing an undivided interest in the assets of the Trust, in $154,650,000 aggregate principal amount of 8.25% Step Up Convertible Junior Subordinated Debentures of the Company (the "Debentures"); and WHEREAS, the Company has agreed to issue the Common Shares (as defined below) to the Holders (as defined below) upon conversion of the Securities (as defined below) and to grant to the Holders the registration rights set forth in Sections 2 and 4 hereof. NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, hereby agree as follows: Section 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Agent" means the principal placement agent on an agented placement of Registrable Securities. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which banking institutions in New York, New York are permitted or required by any applicable law to close. "Commission" shall mean the Securities and Exchange Commission. 732353.7 "Common Securities" shall have the meaning set forth in the Preamble. "Common Shares" shall mean the Class A common shares of beneficial interest, $1.00 par value, in the Company. "Company" shall have the meaning set forth in the Preamble and also shall include the Company's successors. "Continuously Effective" means, with respect to a specified registration statement, that it shall not cease to be effective and current with respect to applicable disclosure requirements and available for Transfers of Registrable Securities thereunder, and shall not be subject to any stop order or injunction, for longer than either (i) any ten (10) consecutive Business Days, or (ii) an aggregate of fifteen (15) Business Days during the period specified in the relevant provision of this Agreement. "Convertible Preferred Securities" shall have the meaning set forth in the Preamble. "Debentures" shall have the meaning set forth in the Preamble. "Demand Registration" shall have the meaning set forth in Section 2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 2(a) hereof. "EOPLP" shall have the meaning set forth in the Preamble. "Evergreen Registration" shall have the meaning set forth in Section 6 hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "GM Trust" shall have the meaning set forth in the Preamble. "Holder" or "Holders" shall mean VRLP, EOPLP and the GM Trust or transferee of any such Person's Registrable Securities acquiring rights in accordance with Section 9 hereof whenever such Person owns of record Registrable Securities, or holds a security convertible into or exercisable or exchangeable for, Registrable Securities, whether or not such purchase or conversion has actually been effected and disregarding any legal restrictions upon the exercise of such rights. If the Company receives conflicting instructions, notices or elections from two or more persons with respect to the same Registrable Securities, the Company may act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities. 732353.7 2 "Indenture" means the Indenture dated as of July 28, 1998 between the Company and Wilmington Trust Company, as trustee. "Majority Selling Holders" means those Selling Holders whose Registrable Securities included in such registration represent a majority of the Registrable Securities of all Selling Holders included therein. "NASD" shall mean the National Association of Securities Dealers, Inc. "Person" shall mean an individual, partnership, corporation, limited liability company, trust, estate, or unincorporated organization, or other entity, or a government or agency or political subdivision thereof. "Register," "Registered" and "Registration" 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 Securities" shall mean (i) the Common Shares issuable upon conversion of the Securities purchased by the Holders on the date hereof pursuant to that certain Preferred Securities Purchase Agreement, dated as of the date hereof, among the Company, the Trust, VRLP, EOPLP and the GM Trust; (ii) any Common 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 generally for, or in replacement by the Company generally of, such Common Shares; and (iii) any securities issued in exchange for such Common Shares in any merger, combination or reorganization of the Company; provided, however, that Registrable Securities shall not include any securities which have theretofore been registered and sold pursuant to the Securities Act or which have been sold to the public pursuant to Rule 144 or any similar rules promulgated by the Commission pursuant to the Securities Act, and, provided further, the Company shall have no obligation under Section 2 or 4 to register any Registrable Securities of a Holder if the Company shall deliver to the Holders requesting such registration an opinion of counsel reasonably satisfactory to such Holders and their counsel to the effect that the proposed sale or disposition of all of the Registrable 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 offers to remove any and all legends restricting transfer from the certificates evidencing such Registrable Securities. For purposes of this Agreement, a Person will be deemed to be a Holder of Registrable Securities whenever such Person has the then-existing right to acquire such Registrable Securities (by conversion, purchase or otherwise), whether or not such acquisition has actually been effected. "Rule 144" and "Rule 145" shall mean Rule 144 and Rule 145 promulgated under the Securities Act. 732353.7 3 "Securities" shall mean the Convertible Preferred Securities together with the Debentures. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Selling Holders" means, with respect to a specified registration pursuant to this Agreement, the Holders whose Registrable Securities are included in such registration. "Transfer" means and includes the act of selling, giving, transferring, creating a trust (voting or otherwise), assigning or otherwise disposing of (other than pledging, hypothecating or otherwise transferring as security or any transfer upon any merger or consolidation) (and correlative words shall have correlative meanings); provided however, that any transfer or other disposition upon foreclosure or other exercise of remedies of a secured creditor after an event of default under or with respect to a pledge, hypothecation or other transfer as security shall constitute a Transfer. "Trust" shall have the meaning set forth in the Preamble. "Underwriters' Representative" means 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(a)(i). "VRLP" shall have the meaning set forth in the Preamble. Section 2. Demand Registration. (a) Request for Demand Registration. Subject to Sections 2(b), 2(d) and 2(e) below, at any time, if one or more Holders shall make a written request to the Company (the "Demanding Holders"), the Company shall cause there to be filed with the Commission a registration statement meeting the requirements of the Securities Act (a "Demand Registration"), and each Demanding Holder shall be entitled to have included therein (subject to, as applicable, Section 10 hereof) all or such number of such Demanding Holder's Registrable Securities as the Demanding Holder shall report in writing. Any request made pursuant to this Section 2(a) shall be addressed to the attention of the secretary of the Company, and shall specify the number of Registrable Securities to be registered, the intended methods of disposition thereof and that the request is for a Demand Registration pursuant to this Section 2(a). Whenever the Company shall have received a demand pursuant to Section 2(a) to effect the Demand Registration of any Registrable Securities, the Company shall promptly 732353.7 4 give written notice of such proposed registration to all Holders of the Securities, if any. Any such Holder may, within 20 days after receipt of such notice, request in writing that all of such Holder's Registrable Securities, or any portion thereof designated by such Holder, be included in the registration and such request shall not be considered one of the Demand Registrations under Section 2(a) hereof to which such Holder is entitled. (b) Limitations on Demand Registrations. (i) The Company shall be obligated to effect no more than three Demand Registrations for each Holder. For purposes of the preceding sentence, registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated, or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 2, a right to demand a registration pursuant to Section 2(a) shall be deemed to have been satisfied upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to a registration statement, and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of not less than 270 days ("Minimum Effective Period"), provided no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated. (ii) Notwithstanding the foregoing, the Demand Registration rights granted to the Holders in Section 2(a) are subject to the following limitations: (i) each registration in respect of a Demand Registration must include Registrable Securities having an aggregate market value of at least $5,000,000, which market value shall be determined by multiplying the number of Registrable Securities to be included in the Demand Registration by the proposed per share offering price (provided that the limitation set forth in this clause (i) shall not be in effect at any time the Holders' Registrable Securities are not able to be sold under Rule 144 because of the Company's failure to comply with the information requirements thereunder, unless at such time, the Company's counsel delivers a written opinion of counsel, which shall be in a form reasonably satisfactory to such Holders' counsel, to such Holders to the effect that such Holders' Registrable Securities may be publicly offered and sold without registration under the Act); (ii) the Company shall not be required to 732353.7 5 cause a registration pursuant to Section 2(a) to be declared effective within a period of 120 days after the effective date of any registration statement of the Company effected in connection with a Demand Registration, provided the Company has not breached its obligations under Section 2(a); and (iii) the Company shall not be required to file a registration statement or to keep a registration statement effective and current with respect to applicable disclosure requirements if the negotiation or consummation of a material transaction is pending or an event has occurred, which negotiation, transaction or event would require additional disclosure by the Company in the registration statement of previously non-public material information which the Company in its good faith judgment has a bona fide business purpose for keeping confidential and the nondisclosure of which in the registration statement might cause the registration statement to fail to comply with applicable disclosure requirements; provided, however, that the Company may not delay the filing of a registration or documents necessary to keep an existing registration statement effective and current, for such reason for more than 75 days in any calender year. (iii) Whenever the Company shall effect a registration pursuant to this Section 2 in connection with an underwritten offering by one or more Selling Holders of Registrable Securities, if the Underwriters' Representative or Agent advises each such Selling Holder in writing that, in its opinion, the amount of securities requested to be included in such offering (whether by Selling Holders or others) exceeds the amount which can be sold in such offering within a price range acceptable to the Majority Selling Holders, Registrable Securities shall be included in such offering and the related registration to the extent of the amount which can be sold within such price range, and on a pro rata based on the estimated gross proceeds from the sale thereof among all the Selling Holders and all other securities being registered pursuant to the exercise of Contractual rights comparable to the rights granted in Section 4 hereof. (c) Effective Demand Registration. Following receipt of a request for a Demand Registration, the Company shall: (i) File the registration statement with the Commission as promptly as practicable, and shall use the Company's best efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due regard to the need to prepare current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (ii) Use the Company's best efforts to keep the relevant registration statement Continuously Effective for no less than the Minimum Effective Period or until such earlier date as of which all the Registrable Securities under the 732353.7 6 registration statement filed pursuant to the Demand Registration shall have been disposed of in the manner described in the registration statement. Notwithstanding the foregoing, if for any reason the effectiveness of a registration pursuant to this Section 2 is suspended or such registration statement shall not be current with respect to applicable disclosure requirements, the Minimum Effective Period shall be extended by the aggregate number of days of such suspension or period of non-compliance. (d) Restrictions on Public Sale by Holders. Notwithstanding anything herein to the contrary, the Company shall have the right from time to time to require the Holders not to effect any public sale or public distribution of any Registrable Securities under a registration statement filed pursuant to a Demand Registration during the period starting with the date 30 days prior to the Company's good faith estimate, as certified in writing by an executive officer of the Company to the Holders, of the proposed date of filing of a registration statement or a prospectus supplement under an effective primary shelf registration statement on file pursuant to Rule 415 promulgated under the Securities Act relating to an underwritten public offering of equity securities of the Company for the account of the Company, and ending on the date sixty (60) days following the effective date of such registration or the date of such prospectus supplement, provided, however, the Company may not restrict the Holders' ability to publicly sell or distribute Registrable Securities for such reason more than one time in any calendar year. Notwithstanding the foregoing, if the Company shall restrict the public sale or distribution in accordance with the foregoing, the Minimum Effective Period shall be extended by the aggregate number of days of such period of restriction. (e) Form of Registration Statement. A registration pursuant to this Section 2 shall be on such appropriate registration form of the Commission as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders, and (ii) permit the disposition of the Registrable Securities in accordance with the intended method or methods of disposition specified in the request pursuant to Section 2(a). (f) Selection of Underwriters. If any registration pursuant to Section 2(a) involves an underwritten offering (whether on a "firm," "best efforts" or "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering; provided, however, that each Person so selected shall be reasonably acceptable to the Company. Section 3. Registration Procedures. (a) Obligations of the Company. Whenever required under Section 2 to effect a Demand Registration of any Registrable Securities, the Company shall, as expeditiously as practicable: 732353.7 7 (i) Prepare and file with the Commission a registration statement with respect to such Registrable Securities (which registration statement shall be available for the Selling Holders' intended method of distribution and shall comply in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith) and use the Company's best efforts to cause such registration statement to become effective. (ii) Notify each Selling Holder when the registration statement and any post-effective amendments thereto are declared effective. (iii) Respond as promptly as practicable to any comments received by the Commission with respect to the registration statement and, subject to clause (iii) of Section 2(b)(ii), prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement or any document incorporated therein by reference or file any other required document 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 and the instructions applicable to the registration form used by the Company. 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 3(a)(vi). In the event that any Registrable Securities included in a registration statement subject to, or required by, this Agreement remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post-effective amendment to the registration statement for the purpose of removing such securities from registered status. (iv) Furnish to 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 any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (v) Use the Company's best efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the Underwriters' Representative or Agent (as applicable, or if inapplicable, any 732353.7 8 Selling Holder) and to keep such qualification effective during the period such registration statement is effective, and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business, subject itself to taxation in any such jurisdiction, or to file a general consent to service of process in any such states or jurisdictions. (vi) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents and representations and warranties by the Company to the Selling Holders and the underwriters), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering and use reasonable best efforts to obtain executed lock-up agreements from the officers and directors of the Company and from the holders of more than 5% of the Company's equity securities, if requested by the underwriters. The Company shall also cooperate with the Majority Selling Holders and the Underwriters' Representative or Agent for such offering in the marketing of the Registrable Shares, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (vii) Promptly notify each Selling Holder 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 remove it if entered. (viii) Promptly notify each Selling Holder of the happening of any transaction or event during the period a registration statement is effective which is of a type specified in clause (iii) of Section 2(b)(ii) hereof or as a result of which such registration statement or the related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made (in the case of the prospectus), not misleading. (ix) Make generally available to the Company's security holders copies of an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period 732353.7 9 beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Agreement. (x) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and Underwriter (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and Underwriter the 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, in good faith, 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 related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (xi) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company addressed to the Selling Holders, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily provided by selling shareholders who receive such comfort letters or opinions. (xii) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (xiii) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if such securities are then listed on a securities exchange or included for quotation in a recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, 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 732353.7 10 the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (xiv) Use the Company's reasonable efforts to provide a CUSIP number for the Registrable Securities prior to the effective date of the first registration statement including Registrable Securities. (xv) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. (b) Holders' Obligations. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Sections 2 and 3 hereof with respect to the Registrable Securities of any Selling Holder of Registrable Securities that such Selling Holder shall furnish to the Company such information regarding such Selling Holder, the number of the Registrable Securities owned by it, and the intended method of disposition of such Registrable Securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration. Section 4. Piggyback Registration. (a) Request for Piggyback Registration. If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2, S-3 or S-11 (as requested) (or any replacement or successor forms) other than a registration of securities for a delayed offering pursuant to Rule 415 promulgated under the Securities Act, the Company shall promptly give each Holder of Registrable Securities written notice of such registration (a "Piggyback Registration"). Upon the written request of each Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act and included in any underwriting all the Registrable Securities that each such Holder shall have requested to be registered. The Company shall have the absolute right to 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 any Holder. (b) Limitations on Piggyback Registrations. The Company shall not be required to include any Holder's Registrable Securities in any underwriting unless such Holder accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, provided that such Holder shall be entitled to the same pricing terms. If the Underwriters' Representative or Agent shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities 732353.7 11 requested to be included in such registration would materially 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 material adverse effect in such offering (i) the securities proposed to be sold by the Company for its own account; (ii) the Registrable Securities requested to be included in such registration by Holders pursuant to this Section 4; and (iii) all other securities being registered pursuant to the exercise of contractual rights comparable to the rights granted in this Section 4, pro rata based on the estimated gross proceeds from the sale thereof. Section 5. Agreements of Selling Holder. In connection with any registration pursuant to Section 2 or 4 hereof, each Selling Holder agrees, as applicable: (i) to execute the underwriting agreement, if any, agreed to by the Majority Selling Holders or the Company, as the case may be; (ii) that it will not offer or sell its Registrable Securities under the registration statement until it has received copies of the supplemented or amended Prospectus contemplated by Section 3(a)(iii) hereof and receives notice that any post-effective amendment (if required) has become effective; and (iii) that upon receipt of any notice from the Company of the happening of any transaction or event of the kind described in Section 3(a)(viii) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a registration statement until the Holder receives copies of the supplemented or amended Prospectus contemplated by Section 3(a)(iii) hereof and receives notice that any post-effective amendment (if required) has become effective, and, if so directed by the Company, the Holder will deliver to the Company (at the expense of the Company) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current immediately preceding the time of receipt of such notice. Section 6. Limitations or Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 2 or 4 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included, or (b) to make a demand registration which could result in such registration statement being declared effective within a period of 120 days of the effective date of any registration effected in connection with a Demand Registration. From and after the date of this 732353.7 12 Agreement, if the Company shall enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder to make a demand registration that the Company would be obligated to keep Continuously Effective until all securities subject of such registration have been disposed of (such registration, an "Evergreen Registration"), the Company thereupon shall be obligated to make an Evergreen Registration on behalf of and at the request of any Holder and include therein all Registrable Securities then owned by such Holder, which such registration shall be subject to and governed by the provisions of Sections 2 and 3 to the extent a Demand Registration is governed thereby . Section 7. Expenses of Registration. Expenses in connection with registrations pursuant to this Agreement shall be allocated and paid as follows with respect to each Demand Registration or Piggyback Registration; the Company shall bear and pay all expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registrations or Piggyback Registration for each Selling Holder (which right to payment by the Company may be assigned to any Person to whom Registrable Securities are Transferred as permitted by Section 9), including all registration, exchange listing, accounting, filing and NASD fees, all fees and expenses of complying with securities or Blue Sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and, with respect to Demand Registrations, the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders), provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders and any other Holders of Registrable Securities to be included in the registration shall bear such expense pro rata according to their number of shares requested to be registered), unless Holders whose Registrable Securities constitute a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute one of the Demand Registrations under Section 2(a) hereof. Section 8. Indemnification; Contribution. (a) Indemnification by the Company. If any Registrable Securities are included in a registration statement under this Agreement: (i) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who 732353.7 13 controls such Selling Holder within the meaning of the Securities Act, and each officer, director, trustee, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and 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 or supplements thereto or any document incorporated by reference therein; (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; or (C) Any violation or alleged violation by the Company of the federal securities laws any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 8(a) 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 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 written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 8(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of 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 such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters participating in the distribution of the Registrable Securities, their officers, directors, agents and employees and each Person who controls such Persons (within 732353.7 14 the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. (b) Indemnification by Holder. If any of a Selling Holder's Registrable Securities are included in a registration statement under this Agreement, to the extent permitted by applicable law, such Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers who shall have signed the registration statement, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and 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, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation is based on or arises from written information furnished by such Selling Holder to the Company expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 8(b) exceed the gross proceeds from the applicable offering received by such Selling Holder. In no event shall a Holder be jointly liable with any other Holder as a result of its indemnification obligations. (c) Conduct of Indemnification Proceedings. 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 of the commencement 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 defense thereof with counsel mutually satisfactory to the parties. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if not otherwise known by the Company and materially prejudices or results in forfeiture of substantial rights or defenses shall relieve such indemnifying party of any liability to the indemnified party under this Section 8 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 732353.7 15 indemnified party is not entitled to indemnification hereunder). 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, (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 additional 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). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) Contribution. 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: (i) 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, as well as any other relevant equitable considerations. 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, 732353.7 16 claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(a) and Section 8(b), any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 8(d)(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. (e) Full Indemnification. 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(d)(i). (f) Survival. The obligations of the Company and the Selling Holders of Registrable Securities under this Section 8 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this agreement, and otherwise. Section 9. Transfer of Registration Rights. Rights with respect to Registrable Securities may be Transferred as follows: all rights of a Holder with respect to Registrable Securities pursuant to this Agreement may be Transferred by such Holder to any Person in connection with the Transfer of Registrable Securities to such Person, in all cases, if the transferor or transferee shall have delivered to the secretary of the Company, reasonably promptly following the date of the Transfer, written notification of such Transfer setting forth the name of the transferor, name and address of the transferee, and the number of Registrable Securities which shall have been so Transferred. Section 10. Covenants of the Company. The Company hereby agrees and covenants as follows: (a) Exchange Act Filings. The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any Holder of Registrable Securities, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144. The Company shall take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the Holders to Transfer Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 or any similar rule or regulation hereafter adopted by the Commission. 732353.7 17 In connection with any sale, transfer or other disposition by a Holder of any Registrable Securities pursuant to Rule 144, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Securities to be for such number of shares and registered in such names as the Holder may reasonably request at least two business days prior to any sale of Registrable Securities. (b) Merger, Consolidations and Sale of Assets. The Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the Holders of Registrable Securities would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. Section 11. Miscellaneous. (a) Amendments and Waivers. (i) The provisions of this Agreement, including the provisions of this Section 11(a), may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and the Holders. (ii) Notice of any amendment, modification or supplement to this Agreement adopted in accordance with this Section 11 shall be provided by the Company to the Holders at least thirty (30) days prior to the effective date of such amendment, modification or supplement. (b) Notices. All notices or other communications under this Agreement shall be sufficient if in writing and delivered by hand or sent by telecopy, or sent, postage prepaid by registered, certified or express mail, or by recognized overnight air courier service and shall be deemed given when so delivered by hand or telecopied, or if mailed or sent by overnight courier service, on the third Business Day after mailing (one Business Day in the case of express mail or overnight courier service) to the parties at the following addresses: 732353.7 18 (i) if to VRLP, to: Vornado Realty L.P. c/o Vornado Realty Trust Park 80 West Plaza II Saddlebrook, New Jersey 07663 Attention: Joseph Macnow Executive Vice President, Finance and Administration with a copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10004 Attention: Alan J. Sinsheimer and: (ii) if to EOPLP, to: EOP Operating Limited Partnership Two North Riverside Plaza Chicago, Illinois 60606 To the attention of each of: Stanley M. Stevens Richard D. Kincaid with a copy to: Rosenberg & Liebentritt, P.C. Two North Riverside Plaza, Suite 1600 Chicago, Illinois 60606 Attention: Jonathan Wasserman 732353.7 19 (iii) if to the GM Trust, to: Mellon Bank N.A., as trustee for General Motors Hourly- Rate Employes Pension Trust Mellon Bank N.A., as trustee for General Motors Salaried Employes Pension Trust One Mellon Bank Center Pittsburgh, Pennsylvania 15258-0001 Attention: Bernadette Rist, Legal Department with a copy to: Weil, Gotshal & Manges, LLP 767 Fifth Avenue New York, New York 10153 Attention: Gerald S. Backman, P.C. (iv) if to the Company, to: Capital Trust 605 Third Avenue, 26th Floor, New York, New York 10016 Attention: John R. Klopp with a copy to: Battle Fowler LLP 75 East 55th Street New York, New York 10022 Attention: Thomas E. Kruger or at such other address as the addressee may have furnished in writing to the sender as provided herein. (c) Successors, Assigns and Transferees. (i) This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties. 732353.7 20 (ii) If any successor, assignee or transferee of the Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be entitled to receive the benefits hereof and shall be conclusively deemed to have agreed to be bound by all of the terms and provisions hereof. (iii) The term "successor, assignee or transferee of a Holder" shall include any Person that acquires Registrable Securities by operation of law, including upon the merger or consolidation, liquidation or dissolution of the Holder. (d) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. (g) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (h) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 732353.7 21 IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or caused this Agreement to be duly executed on its behalf, as of the date first written above. CAPITAL TRUST By: /s/ John R. Klopp ---------------------------------------- Name: John R. Klopp Title: Chief Executive Officer EOP OPERATING LIMITED PARTNERSHIP By: Equity Office Properties Trust, its general partner By: /s/ Debra L. Ferruzzi ----------------------------------- Name: Debra L. Ferruzzi Title: Senior Vice President VORNADO REALTY L.P. By: Vornado Realty Trust, its general partner By: /s/ Michael D. Fascitelli ---------------------------------- Name: Michael D. Fascitelli Title: President MELLON BANK, N.A., as trustee for General Motors Hourly-Rate Employes Pension Trust By: /s/ Bernadette Rist --------------------------------------- Name: Bernadette Rist Title: Authorized Signatory 732353.7 22 MELLON BANK, N.A., as trustee for General Motors Salaried Employes Pension Trust By: /s/ Bernadette Rist --------------------------------------- Name: Bernadette Rist Title: Authorized Signatory 732353.7 23 EX-99.1 10 PRESS RELEASE EXHIBIT 99.1 [N E W S R E L E A S E] CAPITAL TRUST Two North Riverside Plaza, Suite 600 Chicago, Illinois 60606 (312) 454-9886 (312) 454-0614 (fax) CONTACT: Cindy McHugh FOR IMMEDIATE RELEASE (312) 466-3779 JULY 29, 1998 CAPITAL TRUST COMPLETES $150 MILLION OFFERING Private Placement with Vornado Realty Trust, Equity Office Properties Trust & General Motors Investment Management Corporation NEW YORK, NY - JULY 29, 1998 - Capital Trust (NYSE: CT) today announced that it has completed the private placement of $150 million aggregate liquidation amount of 8.25% Step Up Convertible Trust Preferred Securities, $1,000 liquidation preference per share. Vornado Realty Trust (NYSE: VNO), Equity Office Properties Trust (NYSE: EOP) and General Motors Investment Management Corp. (GMIMCo), on behalf of certain General Motors Pension Trusts, each made a $50 million investment. The Company received gross proceeds of $150 million, which will initially be used to pay down borrowings under the Company's credit facilities. The trust preferred shares are convertible at any time by the holders into the Company's listed common shares at a conversion price of $11.70, reflecting a 30 percent conversion premium over Capital Trust's common share price at the close of business on Friday, July 24, 1998. The trust preferred shares have a 20-year maturity and are non-callable for five years. The annual dividend will be paid on September 30 and each calendar quarter thereafter; commencing in year seven, the dividend will step up 75 basis points per annum. In connection with the investment, the Company has granted the investors the right to participate in certain strategic lending opportunities, which the Company believes will further enhance its business. The Company also announced that Steven Roth, Vornado's Chairman and CEO, and Thomas Dobrowski, Managing Director, Real Estate and Alternative Investments, GMIMCo, have been nominated to its Board of Trustees. Following their appointment, which is expected at the next regularly scheduled Board Meeting, the Company's Board will be comprised of ten members. -more- 744236.1 "The $150 million investment by Vornado, Equity Office and GMIMCo is a strong endorsement of Capital Trust's business plan and further enhances our origination network while creating the opportunity for future business ventures - - we welcome all three parties as strategic partners," said John Klopp, Capital Trust's Vice Chairman and CEO. "The additional liquidity provided by their investment will allow us to keep pace with the abundant lending opportunities currently in our pipeline as we continue to expand our balance sheet and achieve scale." Except for historical information contained herein, the statements in this press release regarding the Company's business, strategy, portfolio management and results of operations are forward-looking statements that are dependent upon certain risks and uncertainties, including those related to the availability of desirable loan and investment opportunities, the ability to obtain and maintain targeted levels of leverage and changes in interest rates. Those and other risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K (Item 1- Business). Capital Trust is a fully integrated, self-managed specialty finance company focused on the commercial real estate industry. Headquartered in New York, the Company also provides investment banking and advisory services to owners and operators of commercial real estate through its wholly owned subsidiary, Victor Capital Group. ### 744236.1 -----END PRIVACY-ENHANCED MESSAGE-----