Exhibit 10.17
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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
May 31, 2000
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TABLE OF CONTENTS
Page
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..................................................................... 9
3.1. Information Rights of Holders................................................................ 9
3.2. Confidentiality............................................................................. 10
4. TAXABLE REIT SUBSIDIARY ELECTION..................................................................... 11
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................................................................................ 15
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.................................................................................. 17
7.1. Right of First Offer; Right to Transfer....................................................... 17
7.2. No Obligation to Purchase..................................................................... 18
7.3. Termination................................................................................... 18
8. MISCELLANEOUS.......................................................................................... 18
8.1. No Contravening Agreement..................................................................... 18
8.2. Assignment.................................................................................... 19
8.3. Entire Agreement; Amendment................................................................... 19
8.4. Waiver........................................................................................ 19
8.5. Limitation on Benefit......................................................................... 19
8.6. Binding Effect................................................................................ 19
8.7. Governing Law................................................................................. 20
8.8. Notices....................................................................................... 20
8.9. Headings...................................................................................... 21
8.10. Execution in Counterparts..................................................................... 21
8.11. Interpretation; Absence of Presumption........................................................ 21
8.12. Severability.................................................................................. 22
8.13. Specific Performance.......................................................................... 22
8.14. Consent to Jurisdiction....................................................................... 22
8.15. Litigation Costs.............................................................................. 22
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of May 31,
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
"Transaction"); and
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.
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
(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% but not more than 17.5% 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 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.
"Xxxx 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 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 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.
"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 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 Xxxx
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 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 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
Nothwithstanding 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
Xxxx 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.
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, 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 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
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 __, 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, 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"), its business 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 Xxxx 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 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 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 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.
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 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
62.5% 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 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.
00000 Xxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn.: General Counsel
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy (which shall not constitute notice) to:
Xxxxx & Xxxx LLP
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn.: Xxxxxx X. Xxxxxxxx, Xx.
J. Xxxxxx Xxxxxxx
Facsimile No.: 212/839-5599
(ii) If to FCG:
FrontLine Capital Group
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxx X. Xxxxxxx, General Counsel
Facsimile No.: 212/931-8001
with a copy (which shall not constitute notice) to:
Xxxxx & Xxxx, LLP
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn.: Xxxxxx X. Xxxxxxxx, Xx.
J. Xxxxxx Xxxxxxx
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.
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. 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]
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: /s/ Xxxx X. Louis
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President, General Counsel
and Secretary
FRONTLINE CAPITAL GROUP
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President
HOLDERS
EOP OPERATING LIMITED PARTNERSHIP
By: Equity Office Properties Trust,
its managing general partner
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President and
Chief Legal Counsel
Address for Notice
(including facsimile number):
Two X. Xxxxxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx, XX 00000
(000) 000-0000
Number of Shares of Series A Preferred
Owned of Record:
--------------------------------------
FORTRESS REGISTERED INVESTMENT TRUST
By: /s/ Xxxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxxx Xxxxxx
Title: Vice President
Address for Notice
(including facsimile number):
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
(000) 000-0000
Number of Shares of Series A Preferred
Owned of Record:
--------------------------------------
STICHTING PENSIOENFONDS ABP
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: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
Address for Notice
(including facsimile number):
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
(000) 000-0000
Number of Shares of Series A Preferred
Owned of Record:
--------------------------------------
CIBC WMC INC.
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: Managing Director
Address for Notice
(including facsimile number):
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
(000) 000-0000
Number of Shares of Series A Preferred
Owned of Record:
--------------------------------------
CIBC EMPLOYEE PRIVATE EQUITY FUND PARTNERS
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: Managing Director
Address for Notice
(including facsimile number):
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
(000) 000-0000
Number of Shares of Series A Preferred
Owned of Record:
--------------------------------------
AEW TARGETED SECURITIES FUND, L.P.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
Address for Notice
(including facsimile number):
--------------------------------------
--------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
--------------------------------------
BLACKACRE CAPITAL PARTNERS, L.P.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
Address for Notice
(including facsimile number):
--------------------------------------
--------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
--------------------------------------
AEW TARGETED SECURITIES FUND, X.X. XX
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
Address for Notice
(including facsimile number):
--------------------------------------
--------------------------------------
Number of Shares of Series A Preferred
Owned of Record:
--------------------------------------
PARIBAS NORTH AMERICA, INC.
By: /s/ Xxxxx Xxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
Address for Notice
(including facsimile number):
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Number of Shares of Series A Preferred
Owned of Record:
--------------------------------------
