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EXHIBIT 4.2
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AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
by and among
FRONTLINE CAPITAL GROUP,
HQ GLOBAL HOLDINGS, INC.
and
certain holders of Series A Preferred Stock of
HQ GLOBAL HOLDINGS, INC.
Named herein
Dated as of
August 11, 2000
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TABLE OF CONTENTS
Page
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1. DEFINITIONS........................................................ 1
2. BOARD OF DIRECTORS OF THE COMPANY.................................. 6
2.1. Number of Directors....................................... 6
2.2. Holder Nominees........................................... 6
2.3. Termination............................................... 7
2.4. Reimbursement of Directors................................ 9
2.5. Committee Membership...................................... 9
2.6 Extension of Certain Agreements........................... 9
2.7 Creation of Non-Voting Common Stock....................... 9
3. INFORMATION AND INSPECTION RIGHTS.................................. 10
3.1. Information Rights of Holders............................. 10
3.2. Confidentiality........................................... 11
4. TAX MATTERS........................................................ 11
4.1. Taxable REIT Subsidiary Election ......................... 11
4.2. Tenant Services/10% Voting Securities Test................ 12
5. PARTICIPATION RIGHTS............................................... 14
5.1. Right to Participate...................................... 14
5.2. Notice.................................................... 14
5.3. Abandonment of Sale or Issuance........................... 15
5.4. Terms of Sale............................................. 15
5.5. Timing of Sale............................................ 16
6. TAG-ALONG RIGHTS................................................... 16
6.1. Rights and Notice......................................... 16
6.2. Abandonment of Sale....................................... 17
6.3. Timing of Sale............................................ 17
6.4. Termination............................................... 17
7. TRANSFER RESTRICTIONS.............................................. 18
7.1. Right of First Offer; Right to Transfer................... 18
7.2. No Obligation to Purchase................................. 19
7.3. Termination............................................... 19
8. MISCELLANEOUS...................................................... 19
8.1. No Contravening Agreement................................. 19
8.2. Assignment................................................ 19
8.3. Entire Agreement; Amendment............................... 19
8.4. Waiver.................................................... 19
8.5. Limitation on Benefit..................................... 20
8.6. Binding Effect............................................ 20
8.7. Governing Law............................................. 20
8.8. Notices................................................... 20
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8.9. Headings.................................................. 21
8.10. Execution in Counterparts................................. 22
8.11. Interpretation; Absence of Presumption.................... 22
8.12. Severability.............................................. 22
8.13. Specific Performance...................................... 22
8.14. Consent to Jurisdiction................................... 22
8.15. Litigation Costs.......................................... 23
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STOCKHOLDERS AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this
"Agreement"), dated as of August 11, 2000, is made by and among FrontLine
Capital Group, a Delaware corporation ("FCG"), HQ Global Holdings, Inc., a
Delaware corporation (the "Company"), and the undersigned holders (the
"Holders") of Series A Convertible Cumulative Preferred Stock (the "Series A
Preferred") of the Company.
WHEREAS, FCG has acquired, among other securities, Series A
Preferred from the Company pursuant to an Exchange Agreement, dated as of May
31, 2000, and has sold the Series A Preferred, among other securities, to the
Holders pursuant to separate Purchase Agreements, dated as of May 31, 2000 (the
"Initial Transaction");
WHEREAS, FCG, the Company and the Holders have heretofore
entered into a Stockholders Agreement dated as of May 31, 2000 (the "Original
Stockholders Agreement");
WHEREAS, certain of the Holders have purchased or have been
issued, as the case may be, additional Series A Preferred and other securities
pursuant to separate Purchase Agreements, dated as of August 11, 2000, the
Written Consent and Waiver by the Holders of Series A Convertible Cumulative
Preferred Stock of the Company dated as of the date hereof (the "Written
Consent and Waiver"), and the Side Letter (as such term is defined in the
Written Consent and Waiver) (such transaction, together with the Initial
Transaction, the "Transaction");
WHEREAS, the parties believe it is in their best interests to
enter into this Agreement and provide for certain rights and restrictions with
respect to the continuing investment by each Holder in the Company and the
corporate governance of the Company;
WHEREAS, this Agreement amends and restates, in its entirety,
the Original Stockholders Agreement.
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, certain capitalized terms not
otherwise defined herein shall have the following respective meanings:
"ABP" shall mean Stichting Pensioenfonds ABP.
"AFFILIATE" shall have the meaning set forth in the
Certificate of Designations.
"AS-CONVERTED BASIS" shall mean the number determined by
dividing the Liquidation Preference per share of Series A Preferred as of the
relevant date by the Per Share Price; provided, however, that
(A) if the Company shall subsequent to the issuance of the
Series A Preferred sell shares of Common Stock pursuant to an offering which is
not a Qualified Initial Public Offering, then
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(i) if the price per share of Common Stock in such sale
is less than the Per Share Price, or
(ii) if (A) the price per share in such sale is greater
than the Per Share Price, (B) the gross proceeds to
the Company from such sale are not less than $100
million, and (C) at least 50% of the shares of
Common Stock in such sale is purchased by investors
that are not Affiliates of the Company or FCG
(provided that for purposes of this clause (C), an
investor purchasing shares of Common Stock in such
sale who is not otherwise an Affiliate of the
Company or FCG shall not be deemed to be an
Affiliate of the Company or FCG solely by reason of
having the right to nominate a member of the
Company's Board of Directors as part of the sale
consideration),
the As-Converted Basis shall be determined by dividing the
Liquidation Preference per share of the Series A Preferred by
the price per share of Common Stock so sold.
(B) subsequent to a merger of the Company which is not a
Qualified Merger but prior to any conversion pursuant to Section 7(b) of the
Certificate of Designations, the As-Converted Basis shall be determined by
dividing the Liquidation Preference per share by the dollar value of the
consideration paid in respect of each share of Common Stock as determined as of
the date of the execution of the agreement relating to such merger, provided
that, if the aggregate value of the consideration to be received upon
consummation of the merger is more than 12.5% below the value of the aggregate
consideration to be received as calculated on the date of the execution of the
merger agreement, the As-Converted Basis shall be determined by dividing the
Liquidation Preference per share by the dollar value of the aggregate
consideration to be received upon consummation of the merger;
(C) in case the Company shall issue additional shares of
Common Stock or in case the Company shall pay or make any dividend or other
distribution on any class of capital stock of the Company payable in shares of
Common Stock, the As-Converted Basis in effect at such time as the As-Converted
Basis is determined shall be increased by dividing the As-Converted Basis by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the last date before issuance, dividend
or distribution and the denominator of which shall be the sum of such number of
outstanding shares of Common Stock and the total number of shares constituting
all such issuances, dividends and distributions;
(D) in case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the As-Converted
Basis shall be proportionately increased, and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of shares
of Common Stock and such combination becomes effective prior to the date of the
determination of the As-Converted Basis, the As-Converted Basis shall be
proportionately reduced;
(E) if the Company shall sell shares of its Common Stock at a
price per share less than the then current market price per share of Common
Stock (other than shares of Common Stock issued (i) pursuant to the stock
option plan adopted by the Company in accordance with its certificate of
incorporation, as amended, (ii) upon exercise of any warrants to purchase
Common Stock of the Company, including any warrants issued to holders of the
Company's high yield, mezzanine or bridge debt in accordance with Section 5.1
hereof or (iii) upon conversion of the Series A Preferred), the number by which
the Liquidation Preference is divided to determine the As-Converted Basis shall
be adjusted to equal the price determined by multiplying such number by a
fraction, the numerator of which shall be the sum of (x) the number of shares
of Common Stock outstanding immediately prior to such
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sale and (y) the number of shares of Common Stock which the aggregate
consideration received by the Company from such sale would purchase at such
current market price and the denominator of which shall be the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such sale and
(2) the number of shares of Common Stock so sold;
(F) if the Company shall distribute Options or Convertible
Securities to the holders of all or at least 75% of the outstanding shares of
its Common Stock entitling them to subscribe for, purchase, convert into or
exchange for shares of Common Stock at a price per share less than the current
market price per share of Common Stock as of the record date for such
distribution, the number by which the Liquidation Preference is divided to
determine the As-Converted Basis shall be adjusted by multiplying such number
by a fraction, the numerator of which shall be the sum of (x) the number of
shares of Common Stock outstanding on such record date and (y) the number of
shares of Common Stock which the aggregate consideration receivable by the
Company from the exercise of such Options or from the conversion, exercise or
exchange of such Convertible Securities would purchase at such current market
price and the denominator of which shall be the sum of (1) the number of shares
of Common Stock outstanding on such date and (2) the number of shares of Common
Stock so offered for subscription, purchase, conversion, exercise or exchange.
Options or Convertible Securities distributed by the Company to all holders of
its Common Stock entitling the holders thereof to subscribe for, purchase,
convert into or exchange for shares of Common Stock, which Options or
Convertible Securities (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued in respect of
future issuances of Common Stock, in each case in clauses (i) through (iii)
until the occurrence of a Trigger Event, shall for purposes of this clause not
be deemed distributed until the occurrence of the earliest Trigger Event. An
adjustment made pursuant to this clause shall be effective immediately after
such record date;
(G) if any Organic Change shall be effected, and in
connection with such Organic Change the Common Stock shall be converted into a
New Security, then the definition of the As-Converted Basis shall thereafter be
determined in respect of said New Securities (after giving effect to such
conversion of Common Stock into such New Security, assuming the conversion of
the Series A Preferred into Common Stock immediately prior to such Organic
Change);
(H) in the event that at any time, as a result of an
adjustment made pursuant to Section 7(j) of the Certificate of Designations,
the holder of any shares of Series A Preferred becomes entitled to receive, or
with the passage of time or the occurrence of another event would become
entitled to receive, a New Security, the number and kind of such other shares
so receivable shall thereafter, for purposes of determining the As-Converted
Basis, be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions set forth in clauses (C)
through (G) above; and
(I) if any event occurs as to which the foregoing provisions
set forth in clauses (C) through (H) above are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors of the Corporation, fairly protect the rights of the holders of the
Series A Preferred in accordance with the essential intent and principles of
such provisions, then such Board shall make such adjustments in the application
of such provisions, in accordance with such essential intent and principles, as
shall be reasonably necessary, in the good faith judgment of such Board, to
protect such rights as aforesaid, but in no event shall any such adjustment
have the effect of decreasing the As-Converted Basis, or otherwise adversely
affecting the holders of the Series A Preferred.
"BOARD" shall mean the board of directors of the Company.
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"▇▇▇▇ STOCKHOLDERS AGREEMENT" shall mean the Stockholders
Agreement, dated as of January 20, 2000, as amended as of April 29, 2000, by
and among FCG, the Company, CarrAmerica Realty Corporation and the other
holders of Common Stock named therein.
"CERTIFICATE OF DESIGNATIONS" shall mean the Amended and
Restated Certificate of Designations to the Company's Certificate of
Incorporation establishing and fixing the designation, rights and preferences
of the Series A Preferred.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended (including for this purpose the amendments made to Section
856(c)(4)(B)(iii) of the Code by Pub. L. No. 106-170, The Ticket to Work and
Work Incentives Improvement Act of 1999, 113 Stat. 1860 (the "RMA")), and any
successor thereto, including all of the rules and regulations promulgated
thereunder.
"COMMON STOCK" shall mean any common stock of the Company,
including, without limitation, the Voting Common Stock and the Nonvoting Common
Stock.
"COMPANY COMPETITOR" shall mean any Person primarily engaged
in the business of providing Flexible Workplace Centers to the public anywhere
in the world, or who owns or operates, directly or indirectly, fifty or more
Flexible Workplace Centers other than EOP and its direct or indirect
subsidiaries, but not excluding Regus.
"CONVERSION DATE" shall have the meaning set forth in the
Certificate of Designations.
"CONVERTIBLE SECURITIES" shall have the meaning set forth in
the Certificate of Designations.
"DIRECTOR" shall mean a member of the Board.
"FIRST UNION" shall mean First Union Real Estate Equity and
Mortgage Investments.
"FLEXIBLE WORKPLACE CENTER" shall mean a fully furnished,
staffed and equipped flexible workplace center consisting primarily of
executive office suites and shared office workplaces, and offering Related
Business Services.
"FORTRESS" shall mean Fortress Registered Investment Trust.
"FULLY-DILUTED BASIS" shall mean the sum of the number of
shares of common stock equal to the As-Converted Basis for all of the shares of
Series A Preferred held by the Person with respect to which ownership on a
Fully-Diluted Basis is being determined and the number of shares of common
stock that would be issued upon the exercise of warrants held by such person,
provided that, for purposes of applying this definition to the surviving entity
in a business combination under Section 4.1(b), the As-Converted Basis shall be
determined by dividing the liquidation preference per share of preferred stock
in such entity by the dollar value of the consideration paid in respect of each
share of Common Stock as determined as of the date of the execution of the
agreement relating to such business combination.
"HOLDER JOINT VENTURE ARRANGEMENT" shall mean any joint
venture, partnership, investment arrangement or similar agreement whereby said
Holder, or its applicable Affiliate, develops, owns, leases, operates,
franchises or manages Flexible Workplace Centers in the United States with
third parties; provided that (i) nothing herein shall prohibit EOP or any
Affiliate of EOP from continuing to
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provide funds for and participate in the development, ownership, leasing,
operation, franchising, management or expansion of any existing or currently
budgeted Flexible Workplace Center currently contemplated under EOP's
commitments with Regus that exist as of the date hereof and (ii) a lease shall
not be deemed to give to a joint venture agreement even if said lease provides
for the payment of percentage rent.
"IMMEDIATE FAMILY MEMBER" shall mean, with respect to any
natural Person, (i) such natural Person's spouse, parents, descendants,
nephews, nieces, brothers and sisters, and (ii) any trust established by such
Person or any of the persons listed in clause (i) above, the sole beneficiaries
of which are such Person or any of the persons listed in clause (i) above.
"INDEPENDENT HOLDER CENTER" shall mean any Flexible Workplace
Center that is 100% owned, directly or indirectly, by a Holder and that is not
branded and managed by the Company or its Affiliates; provided, however, that
if EOP or any Affiliate thereof, as the landlord, recaptures space which is
being utilized as a Flexible Workplace Center, said Flexible Workplace Center
shall not constitute an Independent Holder Center so long as EOP proceeds with
due diligence and in good faith to find a new tenant for said space.
"LIQUIDATION PREFERENCE" shall have the meaning set forth in
the Certificate of Designations.
"MANDATORY REDEMPTION DATE" shall have the meaning set forth
in the Certificate of Designations.
"NEW SECURITY" shall have the meaning set forth in the
Certificate of Designations.
"NONVOTING COMMON STOCK" shall mean the Nonvoting Common
Stock, par value $.01 per share, of the Company.
"OPCO" shall mean HQ Global Workplaces, Inc.
"OPTIONS" shall have the meaning set forth in the Certificate
of Designations.
"OPTION LIMITING PERCENTAGE" shall have the meaning set forth
in the Certificate of Designations.
"ORGANIC CHANGE" shall have the meaning set forth in the
Certificate of Designations.
"PER SHARE PRICE" shall have the meaning set forth in the
Certificate of Designations.
"PERSON" shall have the meaning set forth in the Certificate
of Designations.
"QUALIFIED INITIAL PUBLIC OFFERING" shall have the meaning
set forth in the Certificate of Designations.
"QUALIFIED MERGER" shall have the meaning set forth in the
Certificate of Designations.
"RECKSON" shall mean Reckson Operating Partnership, L.P.
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"REGUS" shall mean Regus Equity Business Centers, L.L.C., a
Delaware limited liability company.
"RELATED BUSINESS SERVICES" means services of the type that
the Company customarily provides to users of its Flexible Workplace Centers,
including administrative support, word processing, secretarial support,
teleconferencing capabilities and high speed broadband connectivity.
"SEC" shall mean the Securities and Exchange Commission.
"TRANSFER" shall mean any direct or indirect sale, gift,
assignment, exchange or other disposition (including a voluntary or involuntary
disposition under judicial order, legal process, execution, attachment or
enforcement of an encumbrance) or any other direct or indirect transfer of
beneficial interest of shares of Series A Preferred.
"TRIGGER EVENT" shall have the meaning set forth in the
Certificate of Designations.
"VOTING COMMON STOCK" shall mean the Voting Common Stock, par
value $.01 per share, of the Company.
2. BOARD OF DIRECTORS OF THE COMPANY
2.1. NUMBER OF DIRECTORS
Until a Qualified Initial Public Offering or a Qualified
Merger, the Board shall consist of not less than eleven (11) and not more than
thirteen (13) Directors and, in any event, the Board shall consist of not less
than eleven (11) members so long as EOP has a representative on the Board
pursuant to the terms of this Agreement.
2.2. HOLDER NOMINEES
(a) Nomination of Directors. With respect to the initial
Board of Directors of the Company at the time of the issuance of the Series A
Preferred and at each annual or special meeting of stockholders of the Company
at, or the taking of action by written consent of stockholders of the Company
with respect to, which any Directors are to be elected, each of EOP, Fortress
and ABP (each, a "Nominating Holder") shall have the right (but not the
obligation) to nominate for election to the Board one Director (such Directors,
"Holder Nominees"). In the event that any Nominating Holder transfers more than
90% of the shares of Series A Preferred held by such Nominating Holder on the
date hereof to its Affiliate or, with the approval of the Company not to be
unreasonably withheld, any Nominating Holder other than ABP transfers more than
90% of the shares of Series A Preferred held by such Nominating Holder on the
date hereof to any Person other than its Affiliate, then such Affiliate or
Person, as the case may be, shall have the right of such Nominating Holder
referred to in the immediately preceding sentence.
(b) Qualification of Holder Nominees. No Nominating Holder
shall name any person as a Holder Nominee if (i) such person is not reasonably
experienced in business or financial matters, (ii) such person has been
convicted of, or has pled nolo contendere to, a felony, (iii) the election of
such person would violate any applicable law, (iv) any event described in Item
401(f) of Regulation S-K promulgated under the 1933 Act has occurred with
respect to such person, or (v) such person is a
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director of, or has a financial interest in excess of $1,000,000 in, any
Company Competitor. In the event that, prior to election to the Board, a
Nominating Holder names a person as a Holder Nominee who fails to meet the
qualifications set forth in this Section 2.2(b) and either (i) such Nominating
Holder becomes aware of such failure or (ii) the Company rejects such person on
account of such failure, such Nominating Holder shall have the right to name
another person as a Holder Nominee who does meet such qualifications.
(c) Support of Holder Nominees by Holders, FCG and the
Company. The Holders and FCG (in each case, to the extent set forth in the last
sentence of this Section 2.2(c)) shall support, and the Board and any
nominating committee (or any other committee exercising a similar function)
thereof shall recommend, the nomination of each Holder Nominee to the Board.
The Board shall recommend to the stockholders of the Company the election of
each Holder Nominee, and the Company, FCG and the Holders shall exercise all
authority under applicable law to cause each Holder Nominee to be elected to
and to remain a member of the Board for the term for which the Holder Nominee
is nominated. Without limiting the generality of the foregoing, with respect to
each meeting of stockholders of the Company at which Directors are to be
elected, (i) the Company shall use its commercially reasonable efforts to
solicit from the stockholders of the Company eligible to vote in the election
of Directors proxies in favor of each Holder Nominee, and (ii) FCG and the
Holders and any of their respective Affiliates shall vote their shares of
Voting Common Stock or other voting capital stock of the Company, if any, in
favor of each Holder Nominee at any stockholders meeting (or written consent in
lieu thereof).
(d) Support of FCG Nominees by Holders. If the nominees
proposed by FCG meet the qualifications set forth in Section 2.2(b) above
(each, an "FCG Nominee"), as long as the Nominating Holders have the right to
nominate a Holder Nominee pursuant to this Section 2, Holders shall support (to
the extent set forth in the last sentence of this Section 2.2(d)), and the
Board or any nominating committee (or any other committee exercising a similar
function) thereof shall recommend, the nomination of each FCG Nominee to the
Board. FCG shall have the right to nominate all of the Directors other than (i)
the Holder Nominees (except as otherwise contemplated in Section 2.2(a)) and
(ii) the Directors entitled to nomination pursuant to the ▇▇▇▇ Stockholders
Agreement. The Board shall recommend to the stockholders of the Company the
election of each FCG Nominee and the Company shall exercise all authority under
applicable law to cause each FCG Nominee to be elected to and to remain a
member of the Board for the term for which the FCG Nominee is nominated. With
respect to each meeting of stockholders of the Company at which Directors are
to be elected, as long as the Nominating Holders have the right to nominate a
Holder Nominee pursuant to this Section 2, the Holders shall vote their shares
of Voting Common Stock or other voting capital stock of the Company, if any, in
favor of each FCG Nominee at any stockholders meeting (or written consent in
lieu thereof).
(e) Vacancies. Subject to Section 2.3 (a) and (d), in the
event that any Holder Nominee shall cease to serve as a Director, the vacancy
resulting thereby shall be filled by a Holder Nominee designated by the
Nominating Holder which nominated the vacating Director; provided, however,
that any Holder Nominee so designated shall satisfy the qualification
requirements set forth in Section 2.2(b).
2.3. TERMINATION
(a) Occurrence of Certain Events. Except as provided in
Section 2.3(b), a Nominating Holder shall cause its nominee elected to the
Board, if applicable, to resign immediately (i) upon a Qualified Initial Public
Offering, (ii) upon a Qualified Merger, (iii) upon conversion by such
Nominating Holder of 50% or more of its Series A Preferred into Common Stock,
(iv) in the event that
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such Nominating Holder transfers in one or more transactions an aggregate of
50% or more of the Series A Preferred that it holds on the date hereof,
excluding transfers to such Nominating Holder's Affiliates, (v) upon such
Nominating Holder, or an Affiliate thereof owning more than ten (or, in the
case of EOP, five) Independent Holder Centers or being a party to any Holder
Joint Venture Arrangement which owns more than ten (or, in the case of EOP,
five) Independent Holder Centers or in which a material part of the applicable
business is owning, leasing, operating, franchising or managing Independent
Holder Centers. In any such case, such Nominating Holder shall not be entitled
to fill such vacancy in the Board pursuant to Section 2.2(e). In the event that
such nominee fails to resign as required, then the holders of at least 10% of
the Voting Common Stock then entitled to vote may remove such nominee from the
Board at the next annual meeting of stockholders or at a special meeting of
stockholders of the Company, as the case may be. In the event that (i) ABP
transfers in one or more transactions an aggregate of 50% or more of the Series
A Preferred that it holds on the date hereof, excluding transfers to its
Affiliates, or (ii) 50% or more of ABP's Series A Preferred is converted into
Common Stock, then FCG and the Company will cause one Director then serving on
the Board (other than a Holder Nominee) to resign from the Board within three
(3) business days after it receives notice of such transfer or conversion and
thereafter the Board shall consist of eleven (11) members.
(b) Additional Term. Unless EOP has transferred, in one or
more transactions, an aggregate of 50% or more of the Series A Preferred that
it holds on the date hereof, excluding transfers to EOP's Affiliates, upon the
occurrence of a Qualified Initial Public Offering, Qualified Merger or the
conversion by EOP of 50% or more of its Series A Preferred into Common Stock,
EOP shall be entitled to nominate a Holder Nominee to serve one additional full
three-year term on the Board commencing on the date of such occurrence. In
addition, upon the occurrence of a Qualified Initial Public Offering or a
Qualified Merger, Fortress or, if Fortress has transferred, in one or more
transactions, an aggregate of 50% or more of the Series A Preferred that it
holds on the date hereof, excluding transfers to Fortress' Affiliates, a
plurality of the holders of outstanding shares of Series A Preferred, excluding
FCG, EOP and Fortress, shall be entitled to nominate one person to serve one
additional full three-year term on the Board commencing on the date of such
occurrence so long as the Common Stock issued upon conversion of the Series A
Preferred as a result of such Qualified Initial Public Offering or Qualified
Merger, as the case may be, exceeds 20% of the total number of shares of Common
Stock outstanding immediately after such occurrence. The provisions set forth
in Section 2.2(b), (c) and (e) shall remain in effect for any additional term
referred to in this Section 2.3(b). Thereafter, no party hereto shall have any
right to nominate any person to the Board under this Agreement.
(c) Default. In the event that (i) the Company fails to
redeem Series A Preferred at the option of the holders thereof as required by
Section 8 of the Certificate of Designations or (ii) the Company fails to
redeem all of the outstanding Series A Preferred on the Mandatory Redemption
Date, in addition to any other rights referred to in Sections 2.2(a) or 2.3(b),
a plurality of the holders of outstanding shares of Series A Preferred,
excluding FCG and those Holders owning more than ten (or, in the case of EOP,
five) Independent Holder Centers or being a party to any Holder Joint Venture
Arrangement which owns more than ten (or, in the case of EOP, five) Independent
Holder Centers or in which a material part of the applicable business is
owning, leasing, operating, franchising or managing Independent Holder Centers,
shall be entitled, from and after the date of such default, to nominate two
persons to serve on the Board until the Company's failure to redeem the Series
A Preferred referred to above is remedied. FCG and the Company agree that in
the event Holders of the Series A Preferred become entitled to nominate persons
to serve on the Board pursuant to this clause (c) FCG and the Company will
cause two Directors then serving on the Board (other than Holder Nominees) to
resign from the Board within three (3) business days of notice of such default
and to cause the remaining Directors to immediately appoint the two persons
designated by the Holders of a majority of the outstanding shares of Series A
Preferred to fill the vacancies created by such resignations. The
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provisions set forth in Section 2.2(b), (c) and (e) with respect to any such
person shall remain in effect during the period of such failure of the Company.
(d) Notwithstanding anything to the contrary contained
herein, if any Holder or an Affiliate thereof owns more than ten (or, in the
case of EOP, five) Independent Holder Centers or is a party to any Holder Joint
Venture Arrangement which owns more than ten (or, in the case of EOP, five)
Independent Holder Centers or in which a material part of the applicable
business is owning, leasing, operating, franchising or managing Independent
Holder Centers, then such Holder shall cause its nominee elected to the Board,
if applicable, to resign immediately upon such occurrence and such Holder shall
not be entitled to fill such vacancy in the Board pursuant to Section 2.2(e).
In addition, any Holder whose nominee fails to meet the qualifications set
forth in Section 2.2(b)(ii), (iv) or (v) after election to the Board, if
applicable, shall cause such nominee to resign immediately upon any occurrence
causing such failure, and such Holder shall be entitled to fill such vacancy in
the Board pursuant to Section 2.2(e). In the event that the circumstances in
either of the two preceding sentences apply and the nominee elected to the
Board fails to resign as required, then the holders of at least 10% of the
Voting Common Stock then entitled to vote may remove such nominee from the
Board at the next annual meeting of stockholders or at a special meeting of
stockholders of the Company, as the case may be.
2.4. REIMBURSEMENT OF DIRECTORS
The Company shall reimburse the Directors nominated pursuant
to Sections 2.2(a) or 2.3 hereof for reasonable out-of-pocket expenses incurred
in attending Board meetings.
2.5. COMMITTEE MEMBERSHIP
Holder Nominees serving as Directors in accordance with this
Agreement shall have the right to serve as members on all committees of the
Board.
2.6. EXTENSION OF CERTAIN AGREEMENTS
Notwithstanding any provision herein to the contrary, the
unanimous consent or approval by the Board shall be required to extend or renew
the term of any of the (1) Lease Procurement Services Agreement by and between
OPCO and ▇▇▇▇ Real Estate Services, Inc., (2) Lease Procurement Services
Agreement by and between OPCO and Reckson, (3) Project Management Services
Agreement between OPCO and CarrAmerica Development Inc., and (4) Project
Management Services Agreement between OPCO and Reckson, beyond the respective
current stated terms thereof as set forth in such agreements.
2.7. CREATION OF NON-VOTING COMMON STOCK
At the request of the Company, each Holder agrees to take all
necessary actions to establish a class of non-voting common stock of the
Company having the same rights, powers and privileges as the Voting Common
Stock, except that such non-voting common stock will not have any vote on any
matters upon which stockholders of the Company may vote except as required by
law.
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3. INFORMATION AND INSPECTION RIGHTS
3.1. INFORMATION RIGHTS OF HOLDERS
(a) Quarterly Financial Information. Until the date of an
initial public offering of the securities of the Company (the "Information
Rights Termination Date"), the Company shall deliver to each Holder as soon as
available and in any event within thirty (30) days after the close of each of
the first, second and third fiscal quarters of the Company, the unaudited
consolidated balance sheet of the Company and its subsidiaries as at the end of
such period and the related unaudited consolidated statements of income,
retained earnings and cash flows of the Company and its subsidiaries for such
period, setting forth in each case in comparative form the figures for the
corresponding periods of the previous fiscal year, all of which shall be
certified by the chief financial officer or the chief accounting officer of the
Company, in his or her opinion, to present fairly in all material respects and
in accordance with generally accepted accounting principles ("GAAP"),
consistently applied, the consolidated financial position of the Company and
its subsidiaries as at the date thereof and the results of operations for such
period (subject to normal year-end adjustments).
(b) Annual Financial Information. Until the Information
Rights Termination Date, the Company shall deliver to each Holder as soon as
available and in any event within seventy-five (75) days after the end of each
fiscal year of the Company, the audited consolidated balance sheet of the
Company and its subsidiaries as at the end of such fiscal year and the related
audited consolidated statements of income, retained earnings and cash flows of
the Company and its subsidiaries for such fiscal year, setting forth in
comparative form the figures as at the end of and for the previous fiscal year,
all of which shall be certified by (A) the chief financial officer or the chief
accounting officer of the Company, in his or her opinion, to present fairly in
all material respects and in accordance with GAAP, consistently applied, the
financial position of the Company and its subsidiaries as of the date thereof
and the result of operations for such period and (B) independent certified
public accountants of recognized national standing.
(c) Other Information. Until the Information Rights
Termination Date, the Company shall deliver to each Holder as soon as available
and in any event within forty-five (45) days prior to the commencement of each
fiscal year of the Company an annual budget of the Company for such year and
such other information as may reasonably be requested by such Holder.
(d) Inspection Rights. The Company shall permit any Holder,
which together with its Affiliates, owns the lesser of (i) Series A Preferred
having a Liquidation Preference of $15 million and (ii) Series A Preferred
having the Liquidation Preference of the Series A Preferred held by such Holder
on the date hereof, or their authorized representatives, to visit and inspect
the properties of the Company and all subsidiaries, including its corporate and
financial records, and to discuss its business and finances with officers of
the Company, during normal business hours following reasonable notice and as
often as may be reasonably requested.
(e) Termination. In the event that a Holder, or an Affiliate
thereof owns more than ten (or, in the case of EOP, five) Independent Holder
Centers or is a party to any Holder Joint Venture Arrangement which owns more
than ten (or, in the case of EOP, five) Independent Holder Centers or in which
a material part of the applicable business is owning, leasing, operating,
franchising or managing Independent Holder Centers, the Board may limit or
terminate the rights of such Holder set forth under this Section 3 if it
determines that such limitation or termination is in the best interests of the
Company in order to avoid the dissemination of information related to the
Company's past, current or projected business or financial condition or
performance that would jeopardize the Company's competitive position. In
addition,
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in the event that a Holder transfers, in one or more transactions, an aggregate
of 80% or more of the Series A Preferred owned by such Holder on the date of
this Agreement (excluding transfers by a Holder to its Affiliates), such Holder
shall have no further rights under this Section 3 (other than those rights
under clauses (a) and (b) of this Section 3.1); provided, however, that any
transferee that holds the lesser of (i) Series A Preferred having a Liquidation
Preference of $15 million and (ii) Series A Preferred having the Liquidation
Preference of the Series A Preferred held by the transferring Holder on the
date hereof shall be entitled to the rights set forth under this Section 3. In
the event such a transferee subsequently transfers, in one or more
transactions, an aggregate of 80% or more of the Series A Preferred acquired
from a Holder (excluding transfers by such a Person to its Affiliates), such
transferee shall have no further rights under this Section 3 and the subsequent
transferee shall have the same rights as the transferee referred to in the
immediately preceding sentence.
3.2. CONFIDENTIALITY
Each Holder shall keep all information provided to it or any
of its representatives pursuant to this Agreement confidential, and such Holder
shall not disclose such information to any Persons other than the trustees,
directors, officers, employees, financial advisors, legal advisors, accountants
and consultants of any Holder or its Affiliates who (i) reasonably need to have
access to the confidential information, (ii) are advised of the confidential
nature of such information, and (iii) agree to maintain the confidentiality of
such information, and such Holder agrees to indemnify the Company with respect
to any breach of the agreement to maintain the confidentiality of such
information (subject to the provisos set forth below) by any of its trustees,
directors, officers, employees, financial advisors, legal advisors, accountants
or consultants; provided, however, the foregoing obligation of each Holder
shall not (A) relate to any information that (i) is or becomes generally
available other than as a result of unauthorized disclosure by such Holder or
by Persons to whom such Holder has made such information available, or (ii) is
or becomes available to such Holder on a non-confidential basis from a third
party that is not, to such Holder's knowledge, bound by any other
confidentiality agreement with the Company or FCG, or (B) prohibit disclosure
of any information if such Holder believes in good faith that disclosure is
required by law, rule, regulation, court order or other legal or governmental
process (including SEC or GAAP reporting requirements) or if such Holder
believes in good faith that disclosure is advisable to explain a material
deviation from its expected financial results that arises from its investment
in the Company; provided further, that in the case of a disclosure described in
clause (B) above, such Holder shall use its commercially reasonable efforts to
give prior notice to the Board of any such disclosure.
4. TAX MATTERS
4.1. TAXABLE REIT SUBSIDIARY ELECTION
(a)(i) Effective as of January 1, 2001 and for so long
thereafter as EOPT continues to make the election to be taxed as a real estate
investment trust (a "REIT") under Sections 856 through 860 of the Code, the
Company and OPCO shall (x) elect to be treated as a "taxable REIT subsidiary"
(a "TRS") pursuant to Section 856(l) of the Code of EOPT, and (y) not take any
action to cause the Company to fail to qualify as a TRS of EOPT; provided that
EOPT shall, at the request of the Company, consent to and join in the
revocation of such election if an EOP De Minimis Event shall occur any time
after the acquisition of Series A Preferred by EOP from FCG (the "Initial
Closing Date") (which revocation shall be effective for the first taxable year
immediately following the taxable year in which such EOP De Minimis Event
occurs). An "EOP De Minimis Event" shall mean any event or transaction which
causes the number of shares of Common Stock owned directly or indirectly by
EOPT, determined
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on a Fully-Diluted Basis, to be less than ten percent (10%) of the number of
shares of Common Stock owned directly or indirectly by EOPT as of the Initial
Closing Date, determined on a Fully-Diluted Basis. EOPT shall notify the
Company in writing of the occurrence of an EOP De Minimis Event no more than 10
Business Days following the occurrence of such event.
(ii) Effective as of January 1, 2001 and for so long
thereafter as First Union Real Estate Equity and Mortgage Investments ("FUR")
continues to make the election to be taxed as a REIT, the Company and OPCO
shall (x) elect to be treated as a TRS of FUR, and (y) not take any action to
cause the Company to fail to qualify as a TRS of FUR; provided that FUR shall,
at the request of the Company, consent to and join in the revocation of such
election if an FUR De Minimis Event shall occur any time after the Initial
Closing Date (which revocation shall be effective for the first taxable year
immediately following the taxable year in which such FUR De Minimis Event
occurs). An "FUR De Minimis Event" shall mean any event or transaction which
causes the number of shares of Common Stock owned directly or directly by FUR,
determined on a Fully-Diluted Basis, to be less than ten percent (10%) of the
number of shares of Common Stock owned directly or indirectly by FUR as of the
Initial Closing Date, determined on a Fully-Diluted Basis. FUR shall notify the
Company in writing of the occurrence of an FUR De Minimis Event no more than 10
Business Days following the occurrence of such event.
(b) As a condition to any merger, consolidation,
reorganization or other business combination to which the Company is a party
pursuant to which EOPT acquires any equity interest in any entity other than
the Company, such entity shall agree to (i) file an election to be treated as a
TRS of EOPT effective as of the date of consummation of such business
combination (or, if such business combination takes place before January 1,
2001, effective beginning January 1, 2001) and (ii) not take any action that
would cause such entity to fail to qualify as a TRS of EOPT for so long
thereafter as EOPT continues to make the election to be treated as a REIT;
provided that EOPT shall, at the request of such entity, consent to and join in
a revocation of such election if a Post-Merger De Minimis Event shall occur any
time after the date of consummation of the business combination (which
revocation shall be effective for the taxable year immediately following the
taxable year in which such Post-Merger De Minimis Event occurs). A "Post-Merger
De Minimis Event" shall mean any event or transaction which causes the number
of common shares of the surviving entity of the business combination owned by
EOPT, determined on a Fully-Diluted Basis, to be less than ten percent (10%) of
the number of common shares of the surviving entity that EOPT would have owned
as of the Initial Closing Date, determined on a Fully-Diluted Basis, if EOPT
had converted all of the Common Stock it owned as of the Initial Closing Date,
determined on a Fully-Diluted Basis, into common shares of the surviving entity
pursuant to the terms of the business combination. EOPT shall notify the
surviving entity in writing of the occurrence of a Post-Merger De Minimis Event
no more than 10 Business Days following the occurrence of such event.
(c) For so long as the Company is obligated to constitute a
TRS of EOPT or FUR, if EOP or FUR, as the case may be, shall so request in
writing within forty-five (45) days prior to the close of any quarter of any of
EOPT's taxable years beginning after December 31, 2000, the Company shall
provide, within ten (10) days prior to the close of such quarter, written
certification in a form reasonably acceptable to EOP or FUR, as the case may
be, that the Company constitutes a TRS of EOPT or FUR, as the case may be. All
references to the Company in this paragraph (c) shall include references to any
successor-in-interest to the Company.
4.2. TENANT SERVICES/10% VOTING SECURITIES TEST
Prior to the effective date of the Company's election to be
treated as a TRS of EOPT, the Company shall not, without the prior written
consent of EOPT, provide any tenant services with respect to any property in
which EOPT owns a direct or indirect interest other than through or pursuant to
the
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operating agreement of HQ Global Workplaces Equity Joint Venture, L.L.C. (the
"Joint Venture"), except that for any property in which a Flexible Workplace
Center was operated by a predecessor-in-interest of the Company prior to the
date of this Agreement, (an "Existing Center Property"), the provision of
services by the Company or any of its Affiliates (other than the Joint Venture)
shall be subject to the same restrictions and requirements as those provided in
Sections 4.1 through 4.4 of that certain Master Agreement to Lease, dated as of
May 31, 2000, by and between EOP and the Joint Venture (the "Master Lease"),
including all rights to notification and indemnification contained therein,
provided that (A) for this purpose references in the Master Lease to the
"Company" (i.e., the Joint Venture) shall be deemed to refer to the Company
(i.e., HQ Global Holdings, Inc.) and its Affiliates (other than the Joint
Venture), (B) for purposes of applying Section 4.1 of the Master Lease to the
Company, EOP shall be treated as having provided written consent to the
provision by the Company of any services provided by the Company or its
Affiliates at Existing Center Properties prior to the date of this Agreement,
(C) references in the Master Lease to "Company Financial Reports" shall be
treated as referring to financial reports of the Company with respect to the
Existing Center Properties, and (D) for this purpose, in order to account for
the fact that services are being provided by the Company (as defined in this
Agreement) as opposed to being provided by the "Company" as defined in the
Master Lease, any defined terms used in the Master Lease shall, solely for
purposes of applying this Section 4.2, be reasonably adjusted as necessary to
carry out the intent of this sentence. In addition, prior to the effective date
of the Company's election to be treated as a TRS of EOPT, the Company shall
not, without the prior written consent of EOPT, cause EOPT to own in excess of
ten percent (10%) of the outstanding voting securities of the Company, as
determined under Code Section 856(c)(4)(B). FCG shall use its best efforts to
amend, as promptly as reasonably practicable, the Certificate of Incorporation
of the Company to include the following provision:
If at any time prior to the date that the Corporation
constitutes a TRS (as defined below) of Equity Office
Properties Trust ("EOPT") and First Union, a transaction or
event occurs which would cause EOPT or First Union to own any
Common Pre-TRS Excess Stock (as defined below), then the
portion of the stock of the Corporation owned by EOPT or by
First Union, as the case may be, which constitutes Common
Pre-TRS Excess Stock shall automatically convert into shares
of Nonvoting Class C Stock, on a one-for-one share basis, on
the date immediately prior to such transaction or event and
shall remain Nonvoting Class C Stock until such time as EOPT
or First Union, as the case may be, delivers notice to the
Corporation that (a) such stock no longer constitutes Common
Pre-TRS Excess Stock, or (b) the Corporation constitutes a
taxable REIT subsidiary (a "TRS") (as such term is defined in
Section 856(l) of the Internal Revenue Code of 1986, as
amended (the "Code")) of EOPT, at which point such shares
shall automatically convert back into shares of Voting Common
Stock, on a one-for-one share basis. The term "Common Pre-TRS
Excess Stock" shall mean any portion of the Common Stock
owned by EOPT or First Union, as the case may be, which,
after any shares of Series A Convertible Cumulative Preferred
Stock of the Corporation ("Series A Preferred") owned by EOPT
or First Union, as the case may be, become non-voting stock
of the Corporation pursuant to Section 6(b) of the
Certificate of Designations Establishing and Fixing the
Rights and Preferences of the Series A Preferred (the
"Certificate of Designations"), exceeds 9.5% of the total
outstanding voting securities of the Corporation,
as determined under Code Section 856(c)(4)(B); provided,
however, that for periods after December 31, 2000, the term
"Common Pre-TRS Excess Stock" shall mean any portion of the
Common Stock owned by EOPT or First Union, as the case may
be, which, after any shares of Series A Preferred owned by
EOPT become non-voting stock of the Corporation pursuant to
Section 6(b) of the Certificate of Designations, exceeds 9.5%
of the total voting power of the outstanding securities of
the Corporation,
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as determined under Code Section 856(c)(4)(B)(iii)(II). For
purposes of determining whether any of the Common Stock
constitutes Common Pre-TRS Excess Stock, any warrants
exercisable for Common Stock owned by EOPT or First Union, as
the case may be, shall be treated as having been exercised.
For purposes of this paragraph, EOPT and First Union shall be
considered to own directly any stock, warrants or other
securities the ownership of which would be attributable to
EOPT or First Union for purposes of applying the provisions of
Section 856(c)(4)(B) of the Code. All references to the
Corporation in this paragraph shall include references to any
successor-in-interest to the Corporation. If requested in
writing by EOPT or First Union, as the case may be, the
Corporation shall, in a timely manner, provide EOPT or First
Union, as the case may be, with any information reasonably
necessary for EOPT or First Union, as the case may be, to
determine whether any of the Common Stock EOPT owns
constitutes Common Pre-TRS Excess Stock. The Corporation
further agrees to notify EOPT or First Union, as the case may
be, as soon as practicable, in writing, of any event or
transaction to which it has knowledge that it believes results
in EOPT's or First Union's ownership of Common Pre-TRS Excess
Stock, as the case may be. The Corporation further agrees that
if any event or transaction results in EOPT's or First Union's
ownership of any Common Pre-TRS Excess Stock, the Corporation
shall notify EOPT or First Union, as the case may be, as soon
as practicable, in writing, in the event that it believes such
stock no longer constitutes Common Pre-TRS Excess Stock.
5. PARTICIPATION RIGHTS
5.1. RIGHT TO PARTICIPATE
From and after the date of this Agreement until and not
including a Qualified Initial Public Offering or a Qualified Merger, if the
Company proposes to issue or sell any shares of Common Stock or other equity
securities of the Company or securities convertible into or exercisable for
shares of Common Stock or other equity securities of the Company ("Company
Interests"), other than Company Interests issued pursuant to one or more stock
option plans of the Company up to the Option Limiting Percentage, Company
Interests issued as consideration for the acquisition of another company,
warrants issued to holders of the Company's high yield, mezzanine or bridge
debt, not to exceed 7.5% of the Company's fully-diluted capital, or to holders
of Series A Preferred and Common Stock issued upon the exercise of such
warrants, or Company Interests offered to the public pursuant to an
underwritten public offering, each Holder and FCG (taking into account the
right, if any, of the stockholders under the ▇▇▇▇ Stockholders Agreement to
participate in such transaction) (each a "Participant" and collectively, the
"Participants") shall have the right to purchase or subscribe for all or a
portion of its then applicable pro rata share, on an As-Converted Basis, of
such Company Interests. In addition, any Participant subscribing for its entire
pro rata share of the Company Interests then being issued and sold shall be
entitled to subscribe for its pro rata share on an As-Converted Basis
(calculated by taking into account only those Participants who have subscribed
for their entire pro rata share) of any Company Interests that are subject to
the right to participate provided by this Section 5.1 and that are not
subscribed for by other Participants.
5.2. NOTICE
If the Company proposes to issue any Company Interests in a
transaction giving rise to the participation rights provided for in Section
5.1, the Company shall send a written notice (the "Initial
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Participation Notice") to each Participant setting forth (a) the number of the
Company Interests which the Company proposes to issue, (b) the price (before
any commission or discount) at which such the Company Interests are proposed to
be issued (or, in the case of an underwritten or privately placed offering in
which the price is not known at the time the Participation Notice is given, the
method of determining such price and an estimate thereof) (an "Initial Price"),
(c) such Participant's "pro rata share" as of the date of the Initial
Participation Notice, and (d) all other relevant information as to such
proposed transaction as may be necessary for each Participant to determine
whether or not to exercise the rights granted pursuant to Section 5.1. At any
time within twenty (20) days after its receipt of the Initial Participation
Notice or within five (5) days after receipt of a Final Participation Notice,
each Participant may exercise its participation rights to purchase or subscribe
for the Company Interests, as provided for in this Section 5, by so informing
the Company in writing (an "Exercise Notice").
In the event that the price (before any commission or
discount) at which the related Company Interests are to be issued (the "Final
Price") is greater than the Initial Price, as soon as practicable after such
Final Price is determined, the Company shall send a written notice (the "Final
Participation Notice" and, together with the Initial Participation Notice, the
"Participation Notice") setting forth such Final Price to each Participant that
delivered to the Company an Exercise Notice notifying the Company of its
intention to exercise its participation rights to purchase or subscribe for
such Company Interests at the Initial Price. In the event that the Final Price
is less than 90% of the Initial Price, as soon as practicable after such Final
Price is determined, the Company shall send a Final Participation Notice
setting forth such Final Price to each Participant. Each such Final
Participation Notice shall set forth the Final Price, shall confirm and restate
the information contained in Initial Participation Notice and shall advise the
Participant that, in order to participate in such offering, an Exercise Notice
must be received by the Company from such Participant no later than five (5)
business days after the Participant's receipt of the Final Participation
Notice. If the Final Price is greater than the Initial Price or if the Final
Price is less than 90% of the Initial Price, any previously delivered Exercise
Notice shall be deemed revoked by each Participant unless such Participant
delivers to the Company a subsequent Exercise Notice within five (5) business
days after its receipt of the Final Participation Notice.
Each Exercise Notice shall be irrevocable, subject to (a) the
conditions to the closing of the transaction giving rise to the participation
right provided for in Section 5.1 and (b) the immediately preceding paragraph.
5.3. ABANDONMENT OF SALE OR ISSUANCE
The Company shall have the right, in its sole discretion, at
all times prior to consummation of any proposed issuance or sale giving rise to
the participation right granted by Section 5.1, to abandon, rescind, annul,
withdraw or otherwise terminate such issuance or sale, whereupon all
participation rights in respect of such proposed issuance or sale shall become
null and void, and the Company shall not have any liability or obligation to
any Participant by virtue of such abandonment, rescission, annulment,
withdrawal or termination.
5.4. TERMS OF SALE
The purchase or subscription by any Participant pursuant to
Section 5.1 above shall be at the same price and such other terms and
conditions, including the date of sale or issuance, as are applicable to the
purchasers or subscribers of the Company Interests whose purchases or
subscriptions give rise to the participation rights, which price and other
terms and conditions shall be substantially as
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stated in the relevant Participation Notice; provided, however, that if the
consideration to be received by the Company in connection with the issuance of
the Company Interests giving rise to participation rights hereunder is other
than cash or cash equivalents, the price at which the participation rights may
be exercised shall be the price set forth in the Participation Notice or
determined in the manner set forth in the Participation Notice (which shall in
either event be the price as set forth in the agreement pursuant to which such
Company Interests are to be issued, with the consideration to be received
therefor being valued based upon the fair market value thereof); provided
further, that if the consideration to be received by the Company in connection
with the issuance of the Company Interests giving rise to participation rights
hereunder is other than cash or cash equivalents, and the fair market value of
the consideration to be received is not determinable, the price at which the
participation rights may be exercised shall, (i) in the event that shares of
capital stock with an established trading market are being issued or sold, be
the average ten-day trailing market price of such shares as of the date of
receipt of the Participation Notice, and (ii) in the event any other interests
are being issued or sold, be determined by reference to the amount set forth
above, adjusted as may be appropriate to reflect the relationship between those
interests with an established trading market and those interests to be issued
in the relevant transaction.
5.5. TIMING OF SALE
If, with respect to any Participation Notice, any Participant
fails to deliver an Exercise Notice within the requisite time period, the
Company shall have one hundred twenty (120) days after the expiration of the
time in which the Exercise Notice is required to be delivered in which to sell
or issue not more than the number of the Company Interests described in the
Participation Notice and at a price and on terms not materially less favorable
to the Company than were set forth in the Participation Notice. If, at the end
of one hundred twenty (120) days following the expiration of the time in which
the Exercise Notice is required to be delivered, the Company has not completed
the issuance or sale of the Company Interests in accordance with the terms
described in the Participation Notice (or, in the case of the price, at a price
which is at least 90% of the Initial Price set forth in the Participation
Notice, which price shall be deemed not to be materially less favorable to the
Company than the price set forth in the Participation Notice), the Company
shall again be obligated to comply with the provisions of Section 5.2 with
respect to, and provide Participants with the opportunity to participate in,
any proposed issuance or sale of the Company Interests.
6. TAG-ALONG RIGHTS
6.1. RIGHTS AND NOTICE
Subject to Sections 6.4, if FCG or any Affiliate of FCG
receives a bona fide offer to purchase from it (or otherwise proposes to sell),
whether in one transaction or in a series of related transactions, shares of
Common Stock of the Company from any person other than an Affiliate of FCG (a
"Purchase Offer"), FCG shall not accept such Purchase Offer unless the Holders
are entitled to sell a number of shares of Common Stock and Series A Preferred
(determined on an As-Converted Basis) in an amount equal to the product of (1)
a fraction the numerator of which is total number of shares of Common Stock
owned by such Holders, directly and on an As-Converted Basis, and the
denominator of which equals the sum of the total number of shares of Common
Stock owned by such Holders, directly and on an As-Converted Basis, plus the
total number of shares of Common Stock and Series A Preferred (determined on an
As-Converted Basis) owned by FCG, multiplied by (2) the number of shares of
Common Stock proposed to be included in the Purchase Offer. Sales by the
Holders pursuant to the
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Purchase Offer shall be on the same terms and conditions as the Purchase Offer
(it being understood that the terms of the sale of any Series A Preferred will
be determined on an As-Converted Basis) without reduction for minority
interest, absence of voting rights, illiquidity or otherwise. Not later than
fifteen (15) days prior to consummation of the Purchase Offer, FCG shall send a
notice (the "Tag-Along Notice") to each Holder, which notice shall include,
among other things, (a) the number of shares of Common Stock that are the
subject of the Purchase Offer, (b) the price at which the bona fide purchaser
is willing to purchase the Common Stock and the price at which the Series A
Preferred would be sold pursuant to such Purchase Offer (as determined on an
As-Converted Basis), and (c) all other relevant information as to such proposed
transaction as may be necessary for each Holder to determine whether or not to
exercise the Tag-Along Right. Upon receipt of the Tag-Along Notice, each Holder
shall have the right (the "Tag-Along Right") to sell in accordance with the
terms of the Purchase Offer up to the number of shares of Common Stock and, if
applicable, Series A Preferred (determined on an As-Converted Basis) equal to
the product of (a) the total number of shares of Common Stock and, if
applicable, Series A Preferred (determined on an As-Converted Basis) that may
be sold by all of the Holders pursuant to the Purchase Offer and (b) a
fraction, the numerator of which shall be the number of shares of Common Stock
and, if applicable, Series A Preferred (determined on an As-Converted Basis)
owned by such Holder and the denominator of which shall be the number of shares
of Common Stock and, if applicable, Series A Preferred owned (determined on an
As-Converted Basis) by all Holders electing to participate in such purchase. A
Holder may exercise the Tag-Along Right by delivering, not later than ten (10)
days after receipt of the Tag-Along Notice, a written notice to FCG (a "Holder
Tag-Along Notice") stating the number of shares of Common Stock and, if
applicable, Series A Preferred that such Holder wishes to sell pursuant to the
Purchase Offer.
6.2. ABANDONMENT OF SALE
FCG shall have the right, in its sole discretion, at all
times prior to consummation of the proposed transaction giving rise to the
Tag-Along Rights, to abandon, withdraw or otherwise terminate its participation
in the proposed transaction, and FCG shall not have any liability or obligation
to the Holders as a result of such abandonment, withdrawal or other
termination.
6.3. TIMING OF SALE
If any Holder fails to deliver a Holder Tag-Along Notice
within the requisite time period, FCG shall have one hundred twenty (120) days
after the expiration of the time in which the Holder Tag-Along Notice is
required to be delivered to consummate the proposed transaction identified in
the Holder Purchase Offer at the price and on the terms that are not more
favorable to FCG than those set forth in the Holder Tag-Along Notice (except
that the price may be increased by up to 10% from the price set forth in the
Holder Tag-Along Notice). If, at the end of such one hundred twenty (120) day
period, FCG has not consummated the proposed transaction, FCG shall again be
obligated to comply with the provisions of this Section 6.
6.4. TERMINATION
The Tag-Along Rights granted to Holders pursuant to this
Section 6 shall terminate upon the closing of a Qualified Initial Public
Offering or Qualified Merger.
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7. TRANSFER RESTRICTIONS
7.1. RIGHT OF FIRST OFFER; RIGHT TO TRANSFER
(a) Subject to Section 7.3, before any Holder shall transfer
any shares of Series A Preferred to any person other than (i) an Affiliate of
such Holder, (ii) another Holder, an Affiliate of such other Holder or (iii) in
the case of First Union, a liquidating trust, such Holder shall first deliver a
written notice (the "Holder Notice of Offer") to the Company offering to sell
the number of shares proposed to be sold by such Holder to the Company (the
"Right of First Offer"). The Holder Notice of Offer shall specify (i) the
number of shares of Series A Preferred proposed to be sold by such Holder to
the Company (the "Holder Offered Securities"), (ii) the minimum proposed cash
consideration per share that Holder desires to receive for the Holder Offered
Securities (the "Holder Offer Price"), and (iii) any other terms and conditions
of the offer. The Holder Notice of Offer shall constitute an irrevocable offer
by such Holder to sell to the Company all, but not less than all, of the Holder
Offered Securities at the Holder Offer Price, in accordance with this Section
7.
(b) Within twenty (20) days following its receipt of the
Holder Notice of Offer, the Company shall notify such Holder whether it intends
to exercise its right to purchase all (but not less than all) of the Holder
Offered Securities (the "Company Notification"). A Company Notification that
indicates that the Company intends to purchase the Holder Offered Securities
shall be deemed to be an irrevocable commitment of the Company to purchase the
Holder Offered Securities. Should the Company elect to exercise the Right of
First Offer, the Company Notification shall include a subscription for the
offered shares and the Company shall purchase the Holder Offered Securities on
the date for closing specified in the Holder Notice of Offer, which date shall
be no less than twenty (20) days after the date of the Company Notification. If
the Company does not subscribe for and purchase all of the Holder Offered
Securities pursuant to this Section 7.1(b), such Holder may thereafter sell the
Holder Offered Securities to any third party on the terms and conditions
(including, but not limited to, the number of shares of Holder Offered
Securities) as specified in the Holder Notice of Offer, provided, that such
sale is consummated within one hundred twenty (120) days of the date of the
Holder Notice of Offer; and provided further, that the fair market value of the
price paid for such shares by a third party (which price may consist of cash,
securities, other non-cash consideration or a combination thereof) is at least
90% of the Holder Offer Price. If the price to be paid for such shares by a
third party is payable in whole or in part in consideration other than cash or
securities traded on a national securities exchange or the NASDAQ Stock Market,
and the Company objects to the Holder's determination of the cash fair market
value of the non-cash portion of the consideration, then such determination
shall be made by an independent investment banking firm or other qualified
appraiser mutually agreeable to and promptly selected by the Holder and the
Company, such determination shall be final and binding on the parties. After
the expiration of such one hundred twenty (120) day period, such Holder shall
again comply with the provisions of this Section 7.1 before selling any shares
of Series A Preferred.
The Company shall, after receipt of any Holder Notice of
Offer, provide notice to each Holder that is a real estate investment trust of
its receipt of such Holder Notice of Offer, which notice shall also include the
Holder Offer Price.
(c) Subject to this Section 7, prior to a Qualified Initial
Public Offering or a Qualified Merger, any Holder shall be entitled to transfer
any or all of its shares of the Series A Preferred to any number of other
Persons, provided that (i) in connection with any transfer other than to an
Affiliate or another Holder or, in the case of First Union, a liquidating
trust, any such transfer is of Series A Preferred having a Liquidation
Preference of at least $15 million or, if less, the Liquidation Preference of
Series A Preferred held by such Holder on the date hereof, as the case may be,
unless such transfer involves a pledge of Series A Preferred to such Holder's
lender, in which case no minimum transfer amount shall apply if such lender
agrees to be bound by the terms of this Agreement upon any transfer of
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such Series A Preferred pursuant to such pledge, and (ii) no transfer may be
made, directly or indirectly, to a Company Competitor.
7.2. NO OBLIGATION TO PURCHASE
The Company shall not be obligated to purchase any Holder
Offered Securities pursuant to any Holder Notice of Offer in accordance with
the provisions of Section 7.1.
7.3. TERMINATION
The Rights of First Offer granted pursuant to this Section 7
shall terminate upon the earlier of (i) the closing of a Qualified Initial
Public Offering or a Qualified Merger and (ii) June 1, 2005.
8. MISCELLANEOUS
8.1. NO CONTRAVENING AGREEMENT
Each of FCG, each Holder and the Company covenants that, from
and after the date hereof, it will not enter into any contract, agreement or
other arrangement that would impair, limit or restrict its ability to perform
any of its obligations under this Agreement.
8.2. ASSIGNMENT
None of the parties hereto shall be permitted to assign any
of their respective rights or obligations hereunder to any third party, except
that each Holder shall be permitted to assign its rights and obligations
hereunder to any other Person in connection with a transfer of shares of Series
A Preferred by such Holder made in accordance with Section 7 hereof; provided,
that such Person agrees to be bound by this Agreement; and provided further,
that any party hereto may assign its rights and obligations hereunder in
connection with a transfer of all or substantially all of its assets or a
merger, consolidation or other similar business combination transaction. Any
agreement in violation hereof shall be void ab initio and of no force or
effect.
8.3. ENTIRE AGREEMENT; AMENDMENT
This Agreement constitutes the entire agreement among the
parties hereto with respect to the transactions contemplated herein, and it
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein. No amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by the Company, FCG and the Holders of at least
66.67% of the outstanding shares of Series A Preferred. In addition, any
amendment or modification of Section 4.1 (other than Section 4.1 (a)(ii)) or
4.2 (insofar as it relates to EOP) shall require the consent of EOP and of
Section 4.1(a)(ii) or 4.2 (insofar as it relates to First Union) shall require
the consent of First Union.
8.4. WAIVER
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any
other instruments given in connection with or pursuant to
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this Agreement shall impair any such right, power or privilege or be construed
as a waiver of any default or any acquiescence therein. No single or partial
exercise of any such right, power or privilege shall preclude the further
exercise of such right, power or privilege, or the exercise of any other right,
power or privilege. No waiver shall be valid against any party hereto unless
made in writing and signed by the party against whom enforcement of such waiver
is sought and then only to the extent expressly specified therein.
8.5. LIMITATION ON BENEFIT
It is the explicit intention of the parties hereto that no
person or entity other than the parties hereto and their respective successors,
heirs, executors, administrators, legal representatives and permitted assigns
are or shall be entitled to bring any action to enforce any provision of this
Agreement against any of the parties hereto and their respective successors,
heirs, executors, administrators, legal representatives and permitted assigns,
and the covenants, undertakings and agreements set forth in this Agreement
shall be solely for the benefit of, and shall be enforceable only by, the
parties hereto or their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
8.6. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs,
executors, administrators, legal representatives and permitted assigns.
8.7. GOVERNING LAW
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of Delaware (excluding the conflicts of
law rules thereof).
8.8. NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be
hand-delivered, sent by documented overnight delivery service or mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or, to the extent receipt is confirmed, transmitted by telegram,
telecopy, facsimile or other electronic transmission or telex, addressed as
follows:
(i) If to the Company:
HQ Global Holdings, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn.: General Counsel
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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with a copy (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: 212/839-5599
(ii) If to FCG:
FrontLine Capital Group
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, General Counsel
Facsimile No.: 212/931-8001
with a copy (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: 212/839-5599
Notice to each Holder shall be delivered to such Holder at
the address indicated on the signature page hereof.
Each party may designate by notice in writing a new address
to which any notice, demand, request, or communication may thereafter be so
given, served or sent. Each notice, demand, request, or communication which
shall be hand-delivered, sent by documented overnight delivery service, mailed,
transmitted, telecopied, faxed, e-mailed, or telexed in the manner described
above, or which shall be delivered to a telegraph company, shall be deemed
sufficiently given, served, sent, received, or delivered for all purposes at
such time as it is delivered to the addressee (with the return receipt, the
delivery receipt, or the answerback being deemed conclusive, but not exclusive,
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
8.9. HEADINGS
Article and Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions thereof. All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
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8.10. EXECUTION IN COUNTERPARTS
To facilitate execution, this Agreement may be executed in as
many counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party appear on one or
more of the counterparts. Copies of executed counterparts transmitted by
telecopy, facsimile or other electronic transmission service shall be
considered original executed counterparts for purposes of this Section 8.10;
provided, that receipt of copies of such counterparts is confirmed. All
counterparts shall collectively constitute a single agreement. It shall not be
necessary in making proof of this Agreement to produce or account for more than
a number of counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
8.11. INTERPRETATION; ABSENCE OF PRESUMPTION
(a) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one gender shall be
held to include the other gender as the context requires, (ii) the terms
"hereof," "herein," and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Article, Section and paragraph
references are to the Articles, Sections and paragraphs to this Agreement
unless otherwise specified, (iii) the word "including" and words of similar
import when used in this Agreement shall mean "including, without limitation,"
unless the context otherwise requires or unless otherwise specified, (iv) the
word "or" shall not be exclusive, and (v) provisions shall apply, when
appropriate, to successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
8.12. SEVERABILITY
Any provision hereof which is invalid or unenforceable shall
be ineffective to the extent of such invalidity or unenforceability, without
affecting in any way the remaining provisions hereof.
8.13. SPECIFIC PERFORMANCE
Each of the Company, FCG and each Holder acknowledges that,
in view of the uniqueness of arrangements contemplated by this Agreement, the
parties hereto would not have an adequate remedy at law for money damages in
the event that this Agreement were not performed in accordance with its terms,
and therefore agrees that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.
8.14. CONSENT TO JURISDICTION
Each party to this Agreement: (i) agrees to commence any
action, suit or proceeding relating hereto either in a federal court located in
the State of Delaware or the State of New York or in a Delaware or New York
state court; (ii) irrevocably submits and consents to personal jurisdiction in
any such suit; (iii) agrees that any service of process, summons, notice or
document delivered by U.S.
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registered mail to such party's respective address set forth in Section 8.8
above or, in the case of the Holders, the respective address set forth on the
signature page hereof, shall be effective service of process for any action,
suit or proceeding in Delaware with respect to any matters to which such party
has submitted to jurisdiction in this Section 8.14; (iv) irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (x) any Delaware or New York state court or (y) any federal court
located in the State of Delaware or the State of New York; and (v) irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum. EACH PARTY TO THIS AGREEMENT IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT.
8.15. LITIGATION COSTS
If any litigation with respect to the obligations of the
parties under this Agreement results in a final nonappealable order of a court
of competent jurisdiction that results in a final disposition of such
litigation, the prevailing party, as determined by the court ordering such
disposition, shall be entitled to reasonable attorneys' fees as shall be
determined by such court. Contingent or other percentage compensation
arrangements shall not be considered reasonable attorneys' fees.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the day first above written.
HQ GLOBAL HOLDINGS, INC.
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
FRONTLINE CAPITAL GROUP
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
HOLDERS
EOP OPERATING LIMITED PARTNERSHIP
By: Equity Office Properties Trust, a Maryland Real
Estate Investment Trust, its general partner
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------
FORTRESS HQ LLC
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------
28
STICHTING PENSIOENFONDS ABP
By: ABP Investments US Inc., as agent
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------
CIBC WMC INC.
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------
29
CIBC EMPLOYEE PRIVATE EQUITY FUND PARTNERS
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------
AEW TARGETED SECURITIES FUND, L.P.
By: AEW TSF, L.L.C., its General Partner
By: AEW TSF, Inc., its Managing Member
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------
30
AEW TARGETED SECURITIES FUND II, L.P.
By: AEW TSF II, L.L.C., its General Partner
By: AEW TSF, Inc., its Managing Member
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------
BLACKACRE CAPITAL PARTNERS LP
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------
PARIBAS NORTH AMERICA, INC.
By:
----------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
Address for Notice
(including facsimile number):
---------------
--------------------------------------------
--------------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
----------------------------