Exhibit 4.1
FRONTLINE CAPITAL GROUP
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND OTHER SPECIAL RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCK
9.25% Series B Convertible Cumulative Preferred Stock
FrontLine Capital Group, a company organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), certifies
that, pursuant to the authority contained in its First Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") and its
By-Laws (the "By-Laws"), and in accordance with Section 151 of the General
Corporation Law of the State of Delaware, the board of directors of the
Company (the "Board of Directors") at a meeting duly called and held on
November 6, 2000, duly approved the issuance of a series of Preferred Stock
and appointed a committee of the Board of Directors with respect to the
specific terms of such series, and such committee duly approved and adopted
the following resolution at a meeting duly held on December 12, 2000, which
resolution remains in full force and effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by the Certificate of Incorporation and By-Laws, the Board of
Directors does hereby create, authorize and provide for the issue of a series
of Preferred Stock having the following designation, voting powers,
preferences and relative, participating, optional and other special rights:
Capitalized terms used herein are defined in Section 14.
1. Number and Designation. The Company shall have a series of
Preferred Stock, which shall be designated as its 9.25% Series B Convertible
Cumulative Preferred Stock (the "Series B Stock"), par value $0.01 per share,
with 25,000 shares initially authorized. Unless otherwise specified,
references herein to any "Section" refer to the Section number specified in
this Certificate of Designation.
2. Issuance. The Company may issue up to, and including, 25,000
shares of Series B Stock in accordance with the Purchase Agreement.
3. Registered Form; Liquidation Preference; Registrar. Certificates
for shares of Series B Stock shall be issuable only in registered form, with a
liquidation preference equal to the Issuance Price per share of Series B Stock
(the "Liquidation Preference"). The Company shall serve as initial registrar
and transfer agent (the "Registrar") for the Series B Stock.
4. Registration; Transfer. Shares of the Series B Stock have not been
registered under the Securities Act of 1933, as amended (together with the
rules and regulations promulgated thereunder, the "Securities Act"), and may
not be resold, pledged or otherwise transferred prior to the date when they
may be resold pursuant to Rule 144 under the Securities Act other than (i) to
the Company, (ii) pursuant to an exemption from registration under the
Securities Act or (iii) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States. Until such time as it is no longer
required pursuant to the Securities Act, certificates evidencing the Series B
Stock shall contain a legend (the "Restricted Shares Legend") evidencing the
foregoing restrictions in substantially the form set forth on the form of
Series B Stock attached hereto as Exhibit A.
5. Paying Agent and Conversion Agent. (a) The Company shall maintain
(i) an office or agency where shares of Series B Stock may be presented for
payment (the "Paying Agent") and (ii) an office or agency where shares of
Series B Stock may be presented for conversion (the "Conversion Agent"). The
Company may appoint the Registrar, the Paying Agent and the Conversion Agent
and may appoint one or more additional paying agents and one or more
additional conversion agents in such other locations as it shall determine.
The term "Paying Agent" includes any additional paying agent, and the term
"Conversion Agent" includes any additional conversion agent. The Company may
change any Paying Agent or Conversion Agent without prior notice to any
Holder. The Company shall notify the Registrar of the name and address of any
Paying Agent or Conversion Agent appointed by the Company. If the Company
fails to appoint or maintain another entity as Paying Agent or Conversion
Agent, the Registrar shall act as such. Notwithstanding the foregoing, the
Company or any of its Affiliates may act as Paying Agent, Registrar,
co-registrar or Conversion Agent and the Company shall be the initial Paying
Agent and the initial Conversion Agent.
(b) Neither the Company nor the Registrar shall be required (i) to
issue, countersign or register the transfer of or exchange any share of Series
B Stock during a period beginning at the opening of 15 Business Days before
any Redemption Date and ending at the close of business on such Redemption
Date or (ii) to register the transfer of or exchange any share of Series B
Stock so selected for redemption in whole or in part, except the unredeemed
portion of any share of Series B Stock being redeemed in part.
(c) If shares of Series B Stock are issued upon the transfer,
exchange or replacement of shares of Series B Stock bearing the Restricted
Shares Legend, or if a request is made to remove such Restricted Shares Legend
on shares of Series B Stock, the shares of Series B Stock so issued shall bear
the Restricted Shares Legend, or the Restricted Shares Legend shall not be
removed, as the case may be, unless the Holders of such shares shall request
that the Restricted Shares Legend be removed, and counsel for such Holders,
reasonably acceptable to the Company, reasonably determines that the transfer
of such shares is no longer restricted by the Securities Act.
(d) If any payment due on the shares of Series B Stock is in cash, it
shall be payable by United States dollar check drawn on, or wire transfer
(provided that appropriate wire instructions have been received by the
Registrar at least two Business Days prior to the applicable date of payment)
to a United States dollar account maintained by the Holder with, a bank
located in The City of New York.
6. Dividend Rights. (a) The Company shall pay, and the Holders of the
shares of Series B Stock shall be entitled to receive, when, as, and if
authorized by the Board of Directors (or any authorized committee thereof) out
of funds legally available for payment thereof, cumulative dividends from the
Issue Date (unless the Series B Stock is redeemed in full prior to December
13, 2001) at a rate of 9.25% per annum on the amount of the then aggregate
Liquidation Preference of the shares of Series B Stock then Outstanding
("Coupon Dividends").
(b) Coupon Dividends will be computed on the basis of a 360 day year
of twelve 30 day months and will be payable (to the extent not accumulated in
accordance with the terms hereof, as set forth below) in cash. Coupon
Dividends will be accrued quarterly in arrears from and including the
preceding Dividend Payment Date or December 13, 2000, as the case may be, and
will be paid on December 13, 2001, if, and to the extent, the shares of Series
B Stock are Outstanding on such date, and quarterly thereafter in arrears on
the applicable Dividend Payment Date for so long as the shares of Series B
Stock are Outstanding. Coupon Dividends on shares of the Series B Stock will
accrue and accumulate whether or not the Company has earnings or profits,
whether or not there are funds legally available for the payment of such
dividends and whether or not dividends are declared. Coupon Dividends will
accumulate to the extent they are not paid on the Dividend Payment Date for
the period to which they relate. Arrearages of unpaid Coupon Dividends
("Accumulated Dividends") will cumulate and compound quarterly at the rate of
11.25% per annum and such cumulated and compounded dividends shall thereafter
constitute Accumulated Dividends; provided, that prior to December 13, 2001,
Accumulated Dividends shall cumulate and compound quarterly at the rate of
9.25% per annum.
7. Payment of Dividend; Mechanics of Payment; Dividend Rights
Preserved. (a) Coupon Dividends on any share of Series B Stock that are
payable, and are punctually paid or duly provided for, on any Dividend Payment
Date shall be paid in arrears to the Person in whose name such share of Series
B Stock (or one or more predecessor shares of Series B Stock) is registered at
the close of business on the February 25, May 25, August 25 or November 25
preceding such Dividend Payment Date (whether or not a Business Day) (each,
together with any record date established for the payment of Accumulated
Dividends, a "Dividend Record Date").
(b) Unless full cumulative dividends on all Outstanding shares of
Series B Stock for all past dividend periods shall have been declared and paid
in accordance with the terms hereof, or declared and a sufficient sum for the
payment thereof set apart, then:
(i) no dividend (other than (A) with respect to Junior Shares or
Parity Shares, a dividend payable solely in any Junior Shares or Parity
Shares, respectively, or (B) with respect to Parity Shares, a partial
dividend paid pro rata on such Parity Shares and the shares of Series B
Stock) shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any Junior Shares or Parity Shares,
respectively, other than the Spin Off;
(ii) no other distribution shall be declared or made upon, or any
sum set apart for the payment of any distribution, upon, any Junior
Shares or Parity Shares, other than a distribution consisting solely of
Junior Shares or Parity Shares, respectively;
(iii) no Junior Shares or Parity Shares or any warrants, rights,
calls or options (other than any cashless exercises of options or option
buybacks) exercisable for or convertible into any Parity Share or Junior
Share shall be purchased, redeemed or otherwise acquired or retired for
value (other than in exchange for other Junior Shares or Parity Shares,
respectively) by the Company or any of its subsidiaries; and
(iv) no monies shall be paid into or set apart or made available for
a sinking or other like fund for the purchase, redemption or other
acquisition of any Junior Shares or Parity Shares or any warrants,
rights, calls or options exercisable for or convertible into any Parity
Shares or Junior Shares by the Company or any of its subsidiaries (other
than any cashless exercises of options or option buybacks).
(c) The Company will notify the Registrar and make a public
announcement no later than the close of business on the tenth Business Day
prior to the Dividend Record Date for each dividend on shares of Series B
Preferred Stock as to whether it will pay such dividend or allow such dividend
to accrue and cumulate.
(d) Any Accumulated Dividends on any share of Series B Stock may be
paid, subject to Section 6, by the Company in any lawful manner (which shall
include the establishment of a Dividend Record Date not more than 45 days
prior to the payment thereof) not inconsistent with the requirements of any
securities exchange on which the shares of Series B Stock may be listed, and
upon such notice (which shall precede the Dividend Record Date by at least ten
Business Days) as may be required by such exchange, if any, if, after notice
given by the Company to the Registrar of the proposed payment pursuant to this
clause (d), such manner of payment shall be deemed practicable by the
Registrar.
(e) Subject to the foregoing provisions of this Section 7, each share
of Series B Stock delivered under this Certificate of Designation upon
registration of transfer of or in exchange for or in lieu of any other share
of Series B Stock shall carry the rights to unpaid Accumulated Dividends that
were carried by such other shares of Series B Stock.
(f) The Holder of a share of Series B Stock at the close of business
on a Dividend Record Date with respect to the payment of dividends on the
shares of Series B Stock will be entitled to receive such dividends with
respect to such share of Series B Stock on the corresponding Dividend Payment
Date, notwithstanding the conversion of such share after such Dividend Record
Date and prior to such Dividend Payment Date. Shares of Series B Stock
surrendered for conversion between a Dividend Record Date and the
corresponding Dividend Payment Date or on a Dividend Payment Date (unless such
Series B Stock has been called for redemption during such period or on such
date) must be accompanied by payment of an amount equal to the dividend so
payable, or by an assignment of such Holder's right to receive such dividend
in form reasonably acceptable to the Company.
8. Voting Rights. (a) The Holders of record of shares of Series B
Stock shall not be entitled to any voting rights except as hereinafter
provided in this Section 8 or as otherwise provided by law.
(b) From and after December 13, 2001, or if occurring earlier, after
the occurrence of a Triggering Event, the Holders of shares of Series B Stock
shall be entitled to vote on all matters that the registered holders of the
Company's Common Stock are entitled to vote upon on, with each share of Series
B Stock having a number of votes equal to the number of shares of Common Stock
into which such share could be converted as of the record date for such vote,
in accordance with Section 12 of this Certificate of Designation; provided,
however, that in the case of a Triggering Event occurring prior to December
13, 2001, the right of the Holders of Series B Stock to vote set forth in this
paragraph (b) shall continue until such time as the Triggering Event giving
rise to such right is remedied, cured or waived in writing by the Holders of a
majority of the Series B Stock then Outstanding, at which time such right to
vote shall terminate with respect to such Triggering Event (but not with
respect to other or subsequent Triggering Events or with respect to voting
rights during the period subsequent to December 13, 2001; provided, further,
that the right of the Holders to vote set forth in this paragraph (b) shall be
subject to the expiration or early termination of the waiting period under the
HSR Act.
(c) The approval of the Holders of a majority of the then Outstanding
shares of Series B Stock voting or consenting, as the case may be, as one
class (which approval or consent, in the case of subparagraph (iii) and (vii)
below, shall not be unreasonably withheld so long as the proceeds of such
incurrence or issuance, as the case may be, are used by the Company to repay
Existing Debt) will be required for the Company to:
(i) amend the Certificate of Incorporation, this Certificate of
Designation or the By-Laws so as to (A) affect adversely the rights,
preferences (including, without limitation, Liquidation Preferences,
conversion price, dividend rate, Optional Redemption provisions and
Mandatory Redemption provisions), privileges or voting rights of Holders
of the shares of Series B Stock, or (B) increase or decrease the number
of authorized shares of Series B Stock;
(ii) enter into, or permit any of its subsidiaries to enter into,
any agreement that would impose material restrictions on the Company's
ability to honor the exercise of any rights of the Holders of the Series
B Stock;
(iii) issue or sell any Senior Shares or Parity Shares or issue or
sell any class or series of equity securities which are convertible or
exchangeable into or exercisable for any Senior Shares or Parity Shares.
(iv) take any action requiring the consent of a majority in interest
of the Holders pursuant to Section 13 hereof;
(v) change, amend, modify, supplement or alter, in any way
whatsoever, the Business Plan (other than modifications that are,
individually or in the aggregate, immaterial);
(vi) make (or permit HQ Global to make) any Investment in any
Operating Entity (other than HQ Global or RealtyIQ) or enter (or permit
HQ Global to enter) into any line of business, other than those lines of
business in which the Company or HQ Global is active on the Issue Date;
provided, however, that the Company shall be entitled to make an
Investment in any Operating Entity out of the proceeds of (x) the Series
B Stock, (y) the DB Facility and (z) the sale of any or all equity
interests in Employee Matters; and
(vii) incur (or permit HQ Global to incur) any additional
Indebtedness (or refinance or extend any existing Indebtedness), incur
any material contingent obligations not constituting Indebtedness, or
permit any Operating Entity to incur any Indebtedness which is recourse
to the Company or HQ Global or any of their respective assets.
Notwithstanding, the foregoing, (x) the Company shall be entitled to
incur additional Indebtedness under the DB Facility and (y) HQ Global
shall be entitled to incur Indebtedness as permitted under the HQ Global
Credit Facility, in each case without the consent of the Holders of the
Series B Stock; provided that, in the case of clause (y) above, the
Company shall not permit HQ Global to incur any Indebtedness (as such
term is defined herein) if the incurrence of such Indebtedness would
cause the Total Leverage Ratio (as calculated pursuant to the DB Facility
(as such calculation is modified by the next succeeding proviso)) to
exceed the lesser of (I) 3.75:1.00 or (II) the maximum Total Leverage
Ratio (as calculated pursuant to the DB Facility (as such calculation is
modified by the next succeeding proviso)) permitted by the HQ Global
Credit Facility (as it may be hereafter amended from time to time);
provided, further that the aggregate amounts payable upon liquidation
(including, without limitation, accrued and unpaid dividends) of the
preferred stock of HQ Global issued pursuant to Section 13(c)(ii) shall
be included in the definition of Consolidated Indebtedness for purposes
of the calculation of Total Leverage Ratio.
(d) In exercising the voting rights set forth in Section 8(b), each
share of Series B Stock shall be entitled to vote on an as-converted basis
with the registered holders of the Company's Common Stock. In exercising the
other voting rights set forth in this Section 8, each share of Series B Stock
entitled to vote shall have one vote per share, except that when any other
series of Preferred Stock shall have the right to vote with the Series B Stock
as a single class on any matter, then the Series B Stock shall have with
respect to such matters one vote per $1,000 (or fraction thereof) of the
aggregate Liquidation Preference plus all Accumulated Dividends.
(e) Upon the occurrence of a Triggering Event, a majority in interest
of the Holders, voting as a separate class, shall be entitled to elect two
directors to serve on the Board of Directors; provided, however, that such
right, as well as such directors' tenure on the Board of Directors, shall
continue only until such time as the Triggering Event giving rise to such
right is remedied, cured or waived by the Holders of a majority of the shares
of Series B Stock then Outstanding, at which time such right and tenure shall
terminate with respect to such Triggering Event (but not with respect to any
other or any subsequent Triggering Events).
(f) From and after December 13, 2001, a majority in interest of the
Holders, voting as a separate class, shall be entitled to elect one natural
Person to serve as a non-voting observer (the "Observer") at meetings of the
Board of Directors. The Observer shall be entitled to receive all information
received by or available to, and to all privileges (including, without
limitation, notice of all meetings) afforded to, Directors of the Company,
including, without limitation, the right to be present and be heard at all
meetings of the Board of Directors and all committees thereof; provided that
the Observer shall not be entitled to vote on any matter put before the Board
of Directors or any committee thereof. The Observer shall agree not to use,
disseminate or in any way disclose any information received pursuant to this
subparagraph, except to the extent necessary to manage its investment and as
otherwise required by law.
9. Ranking. (a) The shares of Series B Stock will, with respect to
dividend rights and rights on liquidation, winding-up and dissolution, rank
(i) senior to all shares of Common Stock (whether issued in one or more
classes) and to each other class of Capital Stock or series of Preferred Stock
of the Company (other than the Series A Stock), the terms of which do not
expressly provide that it ranks on a parity with, or senior to, the shares of
Series B Stock as to dividend rights and rights on liquidation, winding-up and
dissolution of the Company (collectively referred to, together with all shares
of Common Stock (whether issued in one or more classes) of the Company, as
"Junior Shares"); (ii) on a parity with the Series A Stock and each other
class of Capital Stock or series of Preferred Stock of the Company issued by
the Company in compliance with the terms of Section 8, the terms of which
expressly provide that such class or series will rank on a parity with the
shares of Series B Stock as to dividend rights and rights on liquidation,
winding-up and dissolution of the Company (collectively referred to as "Parity
Shares"); and (iii) junior to each class of Capital Stock or series of
Preferred Stock of the Company issued by the Company in compliance with
Section 8, the terms of which expressly provide that such class or series will
rank senior to the shares of Series B Stock as to dividend rights and rights
upon liquidation, winding-up and dissolution of the Company (collectively
referred to as "Senior Shares").
(b) In the event of any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary, the Holders of the shares of Series
B Stock then Outstanding shall be entitled to receive out of assets of the
Company legally available for distribution to its stockholders after
satisfaction of its creditors, prior and in preference to any distribution of
any of the assets of the Company to the registered holders of shares of Common
Stock or Junior Shares by reason of their ownership thereof, an amount equal
to the then effective Liquidation Preference, plus all Accumulated Dividends,
if any, plus an amount equal to all unpaid dividends accrued from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or
winding-up (the "Liquidation Amount"). If upon the occurrence of such event
the assets of the Company shall be insufficient to permit the payment to such
Holders of the full preferential amount described in the immediately preceding
sentence and all liquidating payments on all Parity Shares, the entire assets
of the Company legally available for distribution shall be distributed among
the Holders of the shares of Series B Stock and the registered holders of all
Parity Shares ratably in accordance with the respective amounts that would be
payable on such shares of Series B Stock and any such Parity Securities if all
amounts payable thereon were paid in full.
10. Redemption. (a) The Series B Stock may be redeemed on any
Redemption Date occurring on or after the Issue Date and prior to December 13,
2001 (but not thereafter), in whole or from time to time in part, at the
election of the Company (an "Optional Redemption"), at the Redemption Price.
If (i) the Company elects to voluntarily redeem all or any portion of the
Series B Stock and (ii) HQ Global has been merged or consolidated with and
into the Company and the common stock of the surviving or consolidated company
is listed on either the Nasdaq National Market or The New York Stock Exchange,
Inc. then the Company may, with the written consent of a majority-in-interest
of the Holders, elect to pay the Redemption Price by delivering a number of
freely tradable shares of Common Stock or the common stock of any successor
corporation to the Company determined by dividing the applicable Redemption
Price by an amount equal to the Current Market Value of one share of Common
Stock or such successor common stock, as the case may be; provided, that, if
the Current Market Value of one share of Common Stock or such successor common
stock exceeds $22.50, the Current Market Value of one share of Common Stock or
such successor common stock shall be deemed to be $22.50, in each case as
equitably adjusted for any stock splits, stock dividends, reclassifications or
other similar events affecting the Common Stock. Notwithstanding the
foregoing, in the event that any Holder determines that it is not in the
Holder's interest to receive freely tradable securities in redemption of the
Series B Stock, such Holder, in the Holder's sole discretion, may elect to
receive restricted or unregistered securities in lieu of freely tradable
securities.
(b) The shares of Series B Stock shall be redeemed in whole on the
first Redemption Date occurring after the occurrence of a Mandatory Redemption
Event at the Redemption Price; provided, however, that the Company shall not
be required to redeem the Series B Stock until such time as the Existing Debt
has been repaid or otherwise satisfied in full (at which time, the Existing
Debt shall be required to be immediately repaid); provided, further, that any
Holder may, in such Holder's sole discretion, waive the requirement that such
Holder's shares of Series B Stock be redeemed upon the occurrence of a
Mandatory Redemption Event and, with respect to such shares of Series B Stock,
any Mandatory Redemption Event so waived shall be deemed not to have occurred.
If (i) on or prior to December 13, 2001, the Company is required to redeem all
or any portion of the Series B Stock pursuant to this Section 10(b), and (ii)
HQ Global has been merged or consolidated with and into the Company and the
common stock of the surviving or consolidated company is listed on either the
Nasdaq National Market or The New York Stock Exchange, Inc., then the Company
may, with the written consent of a majority-in-interest of the Holders, elect
to pay the Redemption Price by delivering a number of freely tradable shares
of Common Stock or the common stock of any successor corporation to the
Company determined by dividing the applicable Redemption Price by an amount
equal to the Current Market Value of one share of Common Stock or such
successor common stock, as the case may be; provided, that, if the Current
Market Value of one share of Common Stock or such successor common stock
exceeds $22.50, the Current Market Value of one share of Common Stock or such
successor common stock shall be deemed to be $22.50, in each case as equitably
adjusted for any stock splits, stock dividends, reclassifications or other
similar events affecting the Common Stock. If (i) after December 13, 2001, the
Company is required to redeem all or any portion of the Series B Stock
pursuant to this Section 10(b), and (ii) HQ Global has been merged or
consolidated with and into the Company and the common securities of the
surviving or consolidated company is listed on either the Nasdaq National
Market or The New York Stock Exchange, Inc., then the Holders may elect (a
"Securities Election") to receive the Redemption Price in the form of a number
of freely tradable shares of Common Stock or the common stock of any successor
corporation to the Company determined by dividing the applicable Redemption
Price by an amount equal to the Current Market Value of one share of Common
Stock or such successor common stock, as the case may be; provided, that, if
the Current Market Value of one share of Common Stock or such successor common
stock exceeds $22.50, the Current Market Value of one share of Common Stock
shall be deemed to be $22.50, in each case as equitably adjusted for any stock
splits, stock dividends, reclassifications or other similar events affecting
the Common Stock. Notwithstanding the foregoing, if the Mandatory Redemption
Event compelling such Mandatory Redemption is a Capital Event, then, if a
majority in interest of the Holders consent in writing to such Capital Event,
all Holders will be deemed to have made a Securities Election. Notwithstanding
the foregoing, in the event that any Holder determines that it is not in the
Holder's interest to receive freely tradable securities in redemption of the
Series B Stock, such Holder, in the Holder's sole discretion, may elect to
receive restricted or unregistered securities in lieu of freely tradable
securities.
(c) In the event of a redemption of fewer than all the shares of
Series B Stock pursuant to Section 10(a) or (b), the shares of Series B Stock
will be chosen for redemption by the Registrar from the Outstanding shares of
Series B Stock not previously called for redemption, pro rata or by lot or by
such other method as the Registrar shall deem fair and appropriate. If fewer
than all the shares of Series B Stock represented by any share certificate are
so to be redeemed, (i) the Company shall issue a new certificate for the
shares not redeemed and (ii) if any shares represented thereby are converted
before termination of the conversion right with respect to such shares, such
converted shares shall be deemed (so far as may be) to be the shares
represented by such share certificate that was selected for redemption. Shares
of Series B Stock that have been converted during a selection of shares of
Series B Stock to be redeemed shall be treated by the Registrar as Outstanding
for the purpose of such selection but not for the purpose of the payment of
the Redemption Price and, for the avoidance of doubt, any shares of Common
Stock issued upon the conversion prior to the Redemption Date of any shares of
Series B Stock which are called for redemption shall not be redeemed and shall
remain Outstanding.
(d) In the event the Company elects to effect an Optional Redemption
or is required to effect a Mandatory Redemption, the Company shall (i) make a
public announcement of the redemption and (ii) give a redemption notice (the
"Redemption Notice") to the Holders not fewer than 30 days nor more than 60
days before the applicable Redemption Date and, in the case of a Mandatory
Redemption, as soon as practicable after the occurrence of the relevant
Mandatory Redemption Event. Whenever a Redemption Notice is required to be
delivered to the Holders, such Notice shall provide the information set forth
below and be given by first class mail, postage prepaid to each Holder of
shares of Series B Stock to be redeemed, at such Holder's address appearing in
the Series B Stock share register. All Redemption Notices shall identify the
shares of Series B Stock to be redeemed (including CUSIP number, if any,) and
shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) if fewer than all the Outstanding shares of Series B Stock are
to be redeemed, the identification (and, in the case of partial
redemption, the certificate number, the total number of shares
represented thereby and the number of such shares being redeemed on the
Redemption Date) of the particular shares of Series B Stock to be
redeemed;
(iv) that, on the Redemption Date, the Redemption Price will become
due and payable upon each such share of Series B Stock to be redeemed and
that dividends thereon will cease to accrue on and after said date; (v)
the conversion price and the date on which the right to convert shares of
Series B Stock to be redeemed will terminate and the place or places
where such shares of Series B Stock may be surrendered for conversion;
and
(vi) the place or places where such shares of Series B Stock are to
be surrendered for payment of the Redemption Price.
The Redemption Notice shall be given by the Company or, at the
Company's request, by the Registrar in the name and at the expense of the
Company; provided that if the Company so requests, it shall provide the
Registrar adequate time, as reasonably determined by the Registrar, to deliver
such notices in a timely fashion.
(e) Prior to any Redemption Date, the Company shall deposit with the
Registrar or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust) an amount of consideration
sufficient to pay the Redemption Price of all the shares of Series B Stock
that are to be redeemed on that date. If any share of Series B Stock called
for redemption is converted, any consideration deposited with the Registrar or
with any Paying Agent or so segregated and held in trust for the redemption of
such share of Series B Stock shall be paid or delivered to the Company upon
Company Order or, if then held by the Company, shall be discharged from such
trust.
(f) Notice of redemption having been given as aforesaid, the shares
of Series B Stock so to be redeemed shall, on the Redemption Date, become due
and payable at the applicable Redemption Price, and from and after such date
(unless the Company shall default in the payment of the applicable Redemption
Price) dividends on such shares of Series B Stock shall cease to accrue and
such shares shall cease to be convertible into shares of Common Stock. Upon
surrender of any such shares of Series B Stock for redemption in accordance
with said notice, such shares of Series B Stock shall be redeemed by the
Company at the applicable Redemption Price. If any share of Series B Stock
called for redemption shall not be so paid upon surrender thereof for
redemption, the Redemption Price thereof shall, until paid, bear interest from
the Redemption Date at the dividend rate payable on the shares of Series B
Stock. At any time following the second anniversary of the applicable
Redemption Date, the Company shall be entitled to require the Registrar or
Paying Agent, as the case will be, to deliver to it any funds which had been
made available to the Registrar or Paying Agent, as the case may be, with
respect to such redemption and not disbursed to Holders (including, without
limitation, all interest and other income received by the Register or Paying
Agent, as the case may be, in respect of all funds made available to it), and
thereafter such Holders shall be entitled to look to the Company (subject to
abandoned property, escheat and other similar laws) only as general creditors
thereof with respect to any Redemption Price that may be payable.
(g) Any certificate that represents more than one share of Series B
Stock and is to be redeemed only in part shall be surrendered at any office or
agency of the Company designated for that purpose (with, if the Company or the
Registrar so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Registrar duly executed by, the
Holder thereof or his attorney duly authorized in writing), and the Company
shall execute, and the Registrar shall countersign and deliver to the Holder
of such share of Series B Stock without service charge, a new Series B Stock
certificate or certificates, representing any number of shares of Series B
Stock as requested by such Holder, in aggregate amount equal to and in
exchange for the number of shares not redeemed and represented by the Series B
Stock certificate so surrendered.
(h) If a share of Series B Stock is redeemed subsequent to a Dividend
Record Date with respect to any Dividend Payment Date specified above and on
or prior to such Dividend Payment Date, then any accumulated but unpaid
dividends will be paid to the Person in whose name such share of Series B
Stock is registered at the close of business on such Dividend Record Date.
11. Method of Payments. The Company shall make any Coupon Dividend
payments (to the extent not accumulated in accordance with terms hereof) in
cash when, and if, declared. Dividends payable pursuant to Section 6(a)(ii)
shall be payable in the same form as the related common stock dividends.
12. Conversion. (a) After December 13, 2001, and subject to and upon
compliance with the provisions of this Certificate of Designation and to the
expiration or early termination of the waiting period under the HSR Act, at
the option of the Holder thereof, any share of Series B Stock then Outstanding
may be converted at any time, into that number of fully paid and nonassessable
shares of Common Stock (calculated as to each conversion to the nearest
1/10,000 of a share) equal to (i) the sum of (x) 127.5% of the Liquidation
Preference thereof, plus (y) all Accumulated Dividends in respect thereof, if
any, plus (z) all unpaid dividends in respect thereof accrued from the last
Dividend Payment Date to the date of conversion, divided by (ii) the
Conversion Price, determined as hereinafter provided, in effect at the time of
conversion. In case a share of Series B Stock is called for redemption, such
conversion right in respect of the share so called shall expire at the close
of business on the Business Day next preceding the Redemption Date, unless the
Company defaults in making the payment due upon redemption.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall initially be equal to
$13.3875. The Conversion Price shall be adjusted in certain instances as
provided in Section 12(d) and (e).
(b) In order to exercise the conversion privilege pursuant to Section
12(a), the Holder of any share of Series B Stock to be converted shall
surrender the certificate for such share, duly endorsed or assigned to the
Company or in blank, at any office or agency of the Company maintained for
that purpose, accompanied by written notice to the Company at such office or
agency that the Holder elects to convert such share or, if fewer than all the
shares of Series B Stock represented by a single share certificate are to be
converted, the number of shares represented thereby to be converted.
Shares of Series B Stock shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
shares for conversion in accordance with the foregoing provisions and delivery
of any payment or assignment of the dividend payable upon such shares as
contemplated by Section 7(f), in the case of shares converted by the Holder
thereof in accordance with Section 12(a), and at such time the rights of the
Holders of such shares as Holders shall cease, and the Person or Persons
entitled to receive the shares of Common Stock issuable upon conversion shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock at such time. As promptly as practicable on or after the
conversion date, the Company shall issue and shall deliver at such office or
agency a certificate or certificates for the number of full shares of Common
Stock issuable upon conversion, together with payment in lieu of any fraction
of a share, as provided in Section 12(c).
In the case of any conversion of fewer than all the shares of Series
B Stock evidenced by a certificate, upon such conversion the Company shall
execute and the Registrar shall countersign and deliver to the Holder thereof,
at the expense of the Company, a new certificate or certificates representing
the number of unconverted shares of Series B Stock.
(c) No fractional shares of Common Stock shall be issued upon the
conversion of a share of Series B Stock. If more than one share of Series B
Stock shall be surrendered for conversion at one time by the same Holder, the
number of full shares of Common Stock which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Series B Stock so surrendered. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of any share of Series
B Stock, the Company shall pay a cash adjustment in respect of such fraction
in an amount equal to the same fraction of the closing price (as defined in
Section 12(d)(v)) per share of Common Stock at the close of business on the
Business Day prior to the day of conversion.
(d) The Conversion Price shall be adjusted from time to time by the
Company as follows:
(i) If the Company shall hereafter pay a dividend or make a
distribution to registered holders of the Outstanding shares of Common
Stock in shares of Common Stock, the Conversion Price in effect at the
opening of business on the date following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the number of shares of Common
Stock Outstanding at the close of business on the Common Stock Record
Date (as defined in Section 12(d)(v)) fixed for such determination and
the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business
on the day following the Common Stock Record Date. If any dividend or
distribution of the type described in this Section 12(d)(i) is declared
but not so paid or made, the Conversion Price shall again be adjusted to
the Conversion Price which would then be in effect if such dividend or
distribution had not been declared;
(ii) If the Company shall issue, sell or distribute any shares of
Common Stock or issue, sell or distribute options, rights or warrants to
any Person entitling them to subscribe for or purchase shares of Common
Stock or issue, sell or distribute convertible or exchangeable securities
which are convertible or exchangeable for shares of Common Stock, in each
case, at a price per share less than the Current Market Value of one
share of Common Stock, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price
in effect at the opening of business on the date immediately prior to
such sale, issuance or distribution of shares, options, rights, warrants
or exchangeable or convertible securities by a fraction of which the
numerator shall be the number of shares of Common Stock Outstanding at
the close of business on such date plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares of
Common Stock to be issued, sold or distributed or subject to such
options, rights, warrants or exchangeable or convertible securities would
purchase at a price equal to the Current Market Value of one share of
Common Stock and of which the denominator shall be the number of shares
of Common Stock Outstanding at the close of business on such date plus
the total number of additional shares of Common Stock to be issued, sold
or distributed or subject to such options, rights, warrants or
exchangeable or convertible securities for subscription or purchase. Such
adjustment shall become effective immediately after the opening of
business on the day following the issuance, sale or distribution of such
shares, options, rights, warrants or exchangeable or convertible
securities. To the extent that shares of Common Stock are not delivered
pursuant to such options, rights, warrants or exchangeable or convertible
securities, upon the expiration or termination of such options, rights,
warrants or exchangeable or convertible securities the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in
effect had the adjustments made upon the issuance of such options,
rights, warrants or exchangeable or convertible securities been made on
the basis of delivery of only the number of shares of Common Stock
actually delivered. If such shares, options, rights, warrants or
exchangeable or convertible securities are not so issued, the Conversion
Price shall again be adjusted to be the Conversion Price which would then
be in effect if such date fixed for the determination of stockholders
entitled to receive such shares, options, rights, warrants or
exchangeable or convertible securities had not been fixed. In determining
whether any shares, options, rights, warrants or exchangeable or
convertible securities entitle the registered holders to subscribe for or
purchase shares of Common Stock at less than the Current Market Value of
one share of Common Stock, and in determining the aggregate offering
price of such shares of Common Stock, there shall be taken into account
any consideration received for such options, rights, warrants or
exchangeable or convertible securities, with the value of such
consideration, if other than cash, to be determined in good faith by the
Board of Directors and the amount of any exercise price or subscription
price required to be paid upon exercise of such options, rights, warrants
or exchangeable or convertible securities ;
(iii) If the Outstanding shares of Common Stock shall be subdivided
or reclassified into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately reduced, and, conversely, if the Outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common
Stock, the Conversion Price in effect at the opening of business on the
day following the day upon which such combination becomes effective shall
be proportionately increased, such reduction or increase, as the case may
be, to become effective immediately after the opening of business on the
day following the day upon which such subdivision or combination becomes
effective;
(iv) If any event occurs as to which the foregoing provisions of
this Section 12(d) are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board of
Directors, fairly and adequately protect the conversion rights of the
Holders in accordance with the essential intent and principles of such
provisions, then the Board of Directors 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 opinion of such Board of Directors, to protect such purchase rights
as aforesaid, but in no event shall any such adjustment have the effect
of increasing the Conversion Price or decreasing the number of shares of
Common Stock issuable upon the conversion of the Series B Stock.
(v) For purposes of this Section 12(d), the following terms shall
have the meaning indicated:
"closing price" with respect to any securities on any day means the
closing price on such day or, if no such sale takes place on such day,
the average of the reported high and low prices on such day, in each case
on the Nasdaq National Market or The New York Stock Exchange, Inc., as
applicable, or, if such security is not listed or admitted to trading on
such national market or exchange, on the principal national securities
exchange or quotation system in the United States on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed
or admitted to trading on any national securities exchange or quotation
system in the United States, the average of the high and low prices of
such security on the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated or a similar
generally accepted reporting service in the United States, or, if not so
available, in such manner as furnished by any member firm of The New York
Stock Exchange, Inc. selected from time to time by the Board of Directors
for that purpose, or a price determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors.
"Common Stock Record Date" shall mean with respect to any dividend,
distribution or other transaction or event in which the registered
holders of Common Stock have the right to receive any cash, securities or
other property or in which the Common Stock (or other applicable
security) is exchanged for or converted into any combination of cash,
securities or other property, the date fixed for determination of
stockholders entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(vi) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of
this Section 12(d)(vi) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 12 shall be made by the Company and shall
be made to the nearest cent. No adjustment need be made for a change in
the par value or no par value of the Common Stock.
(vii) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Registrar an Officers'
Certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
Promptly after delivery of such certificate, the Company shall prepare a
notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion
Price to each Holder of shares of Series B Stock at such Holder's last
address appearing on the register of Holders maintained for that purpose
within 20 days of the effective date of such adjustment. Failure to
deliver such notice shall not affect the legality or validity of any such
adjustment.
(viii) In any case in which this Section 12(d) provides that an
adjustment shall become effective immediately after a Common Stock Record
Date for an event, the Company may defer until the occurrence of such
event issuing to the Holder of any share of Series B Stock converted
after such Common Stock Record Date and before the occurrence of such
event the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above the
shares of Common Stock issuable upon such conversion before giving effect
to such adjustment.
(ix) For purposes of this Section 12(d), the number of shares of
Common Stock at any time Outstanding shall not include shares held in the
treasury of the Company. The Company shall not pay any dividend or make
any distribution on shares of Common Stock held in the treasury of the
Company.
(x) Notwithstanding anything to the contrary set forth herein, this
Section 12(d) shall not apply, and no adjustment to the Conversion Price
shall be made with respect to, (A) options to purchase not more than
1,000,000 shares of Common Stock issued to employees, consultants,
directors or officers of the Company pursuant to any stock option or
other equity incentive plan or agreement approved by a written resolution
of the Board of Directors of the Company (including any such options
outstanding on the date hereof), (B) Common Stock issued or issuable upon
the conversion of the Series B Stock, or other convertible or
exchangeable securities or options, rights or warrants for which an
adjustment has already been made pursuant to this Section 12(d), (C)
additional securities exempted from the effects of this Section 12(d) by
a vote of a majority in interest of the Series B Stock, voting as a
single class, or (D) transactions consummated in connection with the Spin
Off.
(e) In case of any consolidation of the Company with any other
Person, or any merger of the Company into another Person or of another Person
into the Company (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares
of Common Stock of the Company), recapitalization of other transaction in
which the Common Stock is exchanged for or converted into other securities or
assets, the Person formed by such consolidation or resulting from such merger,
or issuing such other securities or assets, as the case may be, shall execute
and deliver to the Holders of the Series B Stock a supplemental agreement
providing that such Holder have the right thereafter, during the period the
Series B Stock shall be convertible as specified in this Section 12(a), to
convert such Series B Stock only into the kind and amount of securities, cash
and other property receivable upon such consolidation or merger,
recapitalization or other transaction (including any Common Stock retainable)
by a holder of the number of shares of Common Stock of the Company into which
such Series B Stock might have been converted immediately prior to such
consolidation, merger, recapitalization or other transaction, assuming such
holder of Common Stock of the Company (i) is not a Person with which the
Company consolidated, into which the Company merged or which merged into the
Company or was a party to such recapitalization or other transaction, as the
case may be (a "Constituent Person"), or an Affiliate of a Constituent Person
and (ii) failed to exercise his rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, recapitalization or other transaction (provided that if
the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, recapitalization or other transaction is not the same
for cash share of Common Stock of the Company held immediately prior to such
consolidation, merger, recapitalization or other transaction by others than a
Constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-electing Share"), then for the
purpose of this Section 12(e) the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, recapitalization or
other transaction by the holders or each Non-electing Share shall be deemed to
be the kind and amount so receivable per share by plurality of the
Non-electing Shares). Such supplemental agreement shall provide for
adjustments which, for events subsequent to the effective date of such
supplemental agreement, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 12. The above provisions of this
Section 12(e) shall similarly apply to successive consolidations, mergers,
recapitalizations or other transactions. In this paragraph, "securities of the
kind receivable" upon such consolidation, merger, recapitalization or other
transaction by a holder of Common Stock means securities that, among other
things, are registered and transferable under the Securities Act of 1933, and
listed and approved for quotation in all securities markets, in each case to
the same extent as such securities so receivable by a holder of Common Stock.
(f) If the Company shall take any action requiring an adjustment to
the Conversion Price pursuant to Section 12(d) or 12(e), then the Company
shall cause to be filed with the Registrar and at each office or agency
maintained for the purpose of conversion of shares of Series B Stock, and
shall cause to be mailed to all Holders at their last addresses as they shall
appear in the shares of Series B Stock Register, at least 20 Business Days (or
10 Business Days in any case specified in clause (i) or (ii) Section 12(d))
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the Holders of shares of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined or (y)
the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that registered holders of
shares of Common Stock shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. Failure to give the notice required by this Section
12(f) or any defect therein shall not affect the legality or validity of any
dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale transfer, dissolution, liquidation or winding-up, or the vote
upon any such action.
(g) The Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of shares of Series B
Stock, the full number of shares of Common Stock then issuable upon the
conversion of all Outstanding shares of Series B Stock.
(h) The Company will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of
shares of Series B Stock pursuant hereto. The Company shall not, however, be
required to pay any tax or duty which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a
name other than that of the Holder of the Series B Stock, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Company the amount of any such tax or duty, or has established to
the satisfaction of the Company that such tax or duty has been paid.
13. Covenants. The Company covenants and agrees that so long as any
shares of Series B Stock are Outstanding, the Company shall perform all the
covenants contained in this Section 13.
(a) Consolidation, Merger, Conveyance or Transfer. The Company shall
not in a single transaction or series of related transactions, consolidate or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, any Person (including,
without limitation, HQ Global), agree to any plan of recapitalization, consent
to, approve or recommend any tender offer for any class or series of the
Company's Capital Stock or consent to, approve or recommend any Change of
Control of, or action which is expected to result in a Change of Control of,
the Company or adopt a plan of liquidation or make any payments in liquidation
or with respect to the winding up of the Company, or permit HQ Global to
effect any similar transaction or series of related transactions without the
consent of a majority in interest of the Holders; provided, however, that the
Company shall be entitled to consummate (A) the Spin Off and (B) the sale of
equity interests in RSVP and Employee Matters, to the extent, in the case of
clause (B), the proceeds of such sale are used for Accepted Purposes or to
repay Existing Debt, without the approval of the Holders of a majority of the
then Outstanding Series B Shares; provided, further, that the Company may,
subject to receipt of the required approval pursuant to Section 13(g),
consummate the Spin Off; provided, further, that, notwithstanding anything to
the contrary set forth herein, if a majority in interest of the Holders do not
consent to any transaction prohibited hereby, the Company may nonetheless
consummate such transaction if the Company substantially simultaneously
redeems all of the Outstanding Series B Stock for cash at the then-applicable
Redemption Price.
(b) Limitation on Affiliate Transactions. (i) The Company will not,
and will not permit any Subsidiary to, directly or indirectly, enter into or
conduct any transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with or for the benefit of any Affiliate of the Company (an
"Affiliate Transaction") unless: (x) the terms of such Affiliate Transaction
are no less favorable to the Company or such Subsidiary, as the case may be,
than those that could be obtained at the time of such transaction in arm's
length dealings with a Person who is not such an Affiliate; (y) in the event
such Affiliate Transaction involves an aggregate amount in excess of $500,000,
the terms of such transaction have been approved by a majority of the members
of the Board of Directors of the Company and by a majority of the
disinterested members of such Board, if any (and such majority or majorities,
as the case may be, determines that such Affiliate Transaction satisfies the
criteria in (x) above); and (z) in the event such Affiliate Transaction
involves an aggregate amount in excess of $5,000,000, the Company has received
a written opinion from an independent investment banking firm of national
standing that such Affiliate Transaction is fair to the Company or such
Subsidiary, as the case may be, from a financial point of view.
(ii) The foregoing paragraph (i) shall not apply to (x) any issuance
of securities, or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of, employment arrangements, or any
stock options and stock ownership plans for the benefit of employees, officers
and directors, consultants and advisors approved by the Board of Directors of
the Company, (y) loans or advances to employees in the ordinary course of
business of the Company or any Subsidiary in aggregate amount outstanding not
to exceed $100,000 at any time, and (z) indemnification agreements with, and
the payment of fees and indemnities to, directors, officers and employees of
the Company and the Subsidiaries, in each case in the ordinary course of
business.
(c) Limitation on Equity Issuances. The Company shall not issue or
sell any Parity Shares or Senior Shares or issue or sell any class or series
of equity securities which are convertible or exchangeable into or exercisable
for any Parity Shares or Senior Shares, or permit HQ Global to issue any
preferred shares (other than (i) the issuance of preferred shares of HQ Global
which do not contain a put option or a mandatory or voluntary redemption
feature which is settleable other than solely by the issuance of common stock
of HQ Global, or (ii) the issuance of preferred shares of HQ Global which
would not cause the Total Leverage Ratio (as calculated pursuant to the DB
Facility (as such calculation is modified by the next succeeding proviso)) to
exceed the lesser of (I) 3.75:1.00 or (II) the maximum Total Leverage Ratio
(as calculated pursuant to the DB Facility (as such calculation is modified by
the next succeeding proviso)) permitted under the HQ Global Credit Facility
(as it may be amended from time to time)) without consent of a majority in
interest of the Holders (such consent with respect to preferred shares of HQ
Global not to be unreasonably withheld); provided, however, that the aggregate
amounts payable upon liquidation (including, without limitation, accrued and
unpaid dividends) of the preferred stock of HQ Global issued pursuant to
clause (ii) above shall be included in the definition of Consolidated
Indebtedness for purposes of the calculation of Total Leverage Ratio. In the
event the proceeds of such an issuance of equity securities are used to repay
Existing Debt owed to Reckson pursuant to the Reckson Credit Facility, the
consent of the Holders shall not be unreasonably withheld. Notwithstanding the
foregoing, the Company shall not permit HQ Global to issue preferred shares
which are convertible, redeemable or otherwise exchangeable into shares of
common stock of HQ Global at a price less than the Current Market Value of
common stock of HQ Global at the time such preferred shares are issued without
consent of a majority in interest of the Holders.
(d) Limitation on Dividends. The Company shall not pay any dividends
or make any other distribution of any kind whatsoever on any class of stock
(other than (i) dividends with respect to the Series A Stock payable solely in
shares of Common Stock, (ii) dividends with respect to the Series B Stock and
(iii) dividends or distributions effected in connection with the Spin Off) or
redeem, purchase or repurchase or set aside any funds for the redemption,
purchase or repurchase of, any shares of Capital Stock or other equity
securities of the Company or any Subsidiary (other than Junior Shares) without
the consent of a majority in interest of the Holders.
(e) Limitation on Investments. The Company shall not make an
Investment in any Person other than HQ Global or Realty IQ without the
approval of a majority in interest of the Holders; provided, however, that the
Company shall be entitled to make Investments in the Operating Entities out of
the proceeds of (i) the Series B Stock, (ii) the DB Facility, and (iii) the
sale of any or all of the equity interests in Employee Matters.
(f) Limitation of Indebtedness. The Company shall not, nor will it
permit HQ Global to, incur any additional Indebtedness (or refinance or extend
any existing Indebtedness) or incur any material contingent obligations not
constituting Indebtedness, in each case without the consent of a majority in
interest of the Holders (which consent, in the case of additional Indebtedness
used to repay Existing Debt owed to Reckson pursuant to the Reckson Credit
Facility, will not be unreasonably denied). The Company will not permit any
Operating Entity to incur any Indebtedness which is recourse to the Company or
HQ Global or any of their respective assets. Notwithstanding the foregoing,
(x) the Company shall be entitled to incur additional Indebtedness under the
DB Facility and (y) HQ Global shall be entitled to incur Indebtedness as
permitted under the HQ Global Credit Facility, in each case without the
consent of the Holders of the Series B Stock; provided that, in the case of
clause (y) above, the Company shall not permit HQ Global to incur any
Indebtedness (as such term is defined herein) if the incurrence of such
Indebtedness would cause the Total Leverage Ratio (as calculated pursuant to
the DB Facility (as such calculation is modified by the next succeeding
proviso)) to exceed the lesser of (I) 3.75:1.00 or (II) the maximum Total
Leverage Ratio (as calculated pursuant to the DB Facility (as such calculation
is modified by the next succeeding proviso)) permitted under the HQ Global
Credit Facility (as it may be amended from time to time); provided, further
that the aggregate amounts payable upon liquidation (including, without
limitation, accrued and unpaid dividends) of the preferred stock of HQ Global
issued pursuant to Section 13(c)(ii) shall be included in the definition of
Consolidated Indebtedness for purposes of the calculation of theTotal Leverage
Ratio.
(g) Approval of the Spin Off. The Company shall not consummate the
Spin Off without the consent of a majority in interest of the Holders;
provided that the Holders of the Series B Stock shall approve or disapprove of
the consummation of the Spin Off within 10 days of receipt by the Holders of a
written description of the Spin-Off and the transactions contemplated
thereunder which is complete and accurate in all material respects; provided
further, that the requisite approval of the Holders shall be deemed to be
given unless the impact of the Spin Off, in the sole judgment of a majority in
interest of the Holders, shall be to materially and adversely affect the
prospects for the redemption of the Series B Stock or to materially reduce the
creditworthiness of the Company. For purposes of this subparagraph (g), no
value will be attributed to any assets of the Company other than the Capital
Stock of HQ Global.
(h) Limitations on Transfer of HQ Global Stock. The Company shall
not, directly or indirectly, sell, assign, pledge, hypothecate or otherwise
transfer any shares of the Capital Stock of HQ Global owned by the Company
(including, without limitation, by way of entering into any contract for any
future or forward sale or the sale or purchase of any derivative security
linked to the Capital Stock of HQ Global); provided, however, that the Company
shall be entitled to pledge or encumber the Capital Stock of HQ Global owned
by the Company (i) in connection with any pledge or encumbrance existing on
the Issue Date, (ii) as security for the DB Facility or (iii) as security for
the Reckson Credit Facility in order to induce the lenders thereunder to
approve the Spin Off, to the extent that the Company is otherwise entitled to
do so; provided, further, that shares of Capital Stock of HQ Global may be
sold so long as the proceeds from such sale are used to repay Existing Debt
(and permanently reduce the commitments thereunder) and, to the extent of any
remaining proceeds, redeem the Series B Stock in accordance with Section
10(b).
(i) Information Rights. The Company shall, (i) within 45 days of the
last day of each quarter, deliver to the Holders quarterly unaudited
consolidated financial statements of the Company and its subsidiaries, such
financial statements to be accompanied by an Officer's Certificate certifying
that such financial statements have been prepared in accordance with GAAP,
consistently applied throughout the periods presented and that the related
financial statement fairly present the financial position of the Company and
its subsidiaries as at and through the date of such financial statements,
subject to normal, recurring year-end adjustments, together with a commentary
comparing the financial condition and results of operations of the Company for
such month and on a year-to-date basis with the Company's budget and the
financial condition and results of operations of the Company as of such date
on the previous year and for the analogous periods of the previous year ended
on such date, (ii) within 90 days of the last day of each fiscal year, deliver
to the Holders audited consolidated financial statements of the Company and
its subsidiaries, together with an audit report of a nationally recognized
firm of independent accountants, such financial statements to be accompanied
by an Officer's Certificate certifying that such financial statements have
been prepared in accordance with GAAP, consistently applied throughout the
periods presented and that the related financial statements fairly present the
financial position of the Company and its subsidiaries as at and through the
date of such financial statements, together with a commentary comparing the
financial condition and results of operations of the Company for year with the
Company's budget and the financial condition and results of operations of the
Company as of the end of, and for, the previous fiscal year and (iii) within 5
business days after filing thereof, copies of all reports filed by the Company
or its Subsidiaries pursuant to the Exchange Act. In addition, the Holders
shall be entitled to meet with the management of the Company and its
subsidiaries at such times as they may reasonably request in order to assess
the business, financial condition and operating results of the Company and its
subsidiaries and to such additional information as they may reasonably require
in order to evaluate the Holders' investment in the Series B Stock.
(j) Management Equity Incentive Plans. The Company shall not increase
the number of shares of Common Stock subject to the Company's management
equity incentive plans.
(k) Repayment of Existing Debt. Upon the occurrence of any Mandatory
Redemption Event, the Company shall repay all Existing Debt (and permanently
reduce the commitments in respect thereof), if any, to the extent of all net
proceeds received by the Company as a result of such Mandatory Redemption
Event and all cash on hand at the Company and thereafter, as promptly as
practicable, redeem the Series B Stock in accordance with Section 10(b).
14. Definitions. For purposes of this Certificate of Designation, the
following terms shall have the meaning set forth below:
"Accepted Purposes" means (i) the continuation of operation of the
Company's operations during its corporate restructuring, including, without
limitation, funding the operations of Realty IQ, Employee Matters and On Site
Access and the (ii) repayment of Existing Debt.
"Accumulated Dividends" has the meaning set forth in Section 6(b).
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Affiliate Transaction" shall have the meaning set forth in Section
13(b).
"Board of Directors" has the meaning set forth in the Recitals.
"Business Day" means any day other than a Saturday, a Sunday, or a
day when banks in The City of New York are required or authorized to be
closed.
"Business Plan" shall mean the Business Plan of the Company in the
form delivered to the Holders on the Issue Date, as modified from time to time
pursuant to Section 8.
"By-Laws" has the meaning set forth in the Recitals.
"Capital Event" means (i) any public or private offering of Capital
Stock or debt securities, or the incurrence of any Indebtedness (other than
the incurrence of any Indebtedness under the DB Facility), (ii) any merger,
consolidation or recapitalization (other than the Spin Off) of the Company, or
(iii) any other event of any kind whatsoever (other than the collection of
accounts receivable and other commercial transactions in the ordinary course
of business), which results in the raising of additional capital by the
Company.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting and/or non-voting) of such Person's capital
stock, whether Outstanding on the Issue Date or issued after the Issue Date,
and any and all rights (other than any evidence of indebtedness), warrants or
options exchangeable for or convertible into such capital stock.
"Certificate of Incorporation" has the meaning set forth in the
Recitals.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 35%
of the total Voting Securities of the Company or (b) the Company consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into
the Company, in any such event pursuant to a transaction in which the Holders
of the Outstanding Voting Securities of the Company immediately prior to such
transaction hold less than 35% of the Outstanding Voting Securities of the
surviving or transferee company or its parent company immediately after the
transaction or immediately after such transaction any "person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total Voting Securities of the surviving
or transferee company or its parent company immediately after the transaction
as applicable or (c) during any consecutive two-year period, individuals who
at the beginning of such period constituted the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office or (d) the Company is
dissolved or liquidated.
"closing price" has the meaning set forth in Section 12(d)(v).
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Common Stock Record Date" has the meaning set forth in Section
12(d)(v).
"Company" has the meaning set forth in the Recitals.
"Company Order" means a written request or order signed in the name
of the Company by its Chairman of the Board, its President or a Vice President
and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary.
"Conversion Agent" has the meaning set forth in Section 5(a).
"Conversion Price" has the meaning set forth in Section 12(a).
"Coupon Dividends" has meaning set forth in Section 6(a).
"Current Market Value" per share of Common Stock or any other
security at any date means (i) if the security is not registered under the
Exchange Act, the value of the security, determined in good faith by the Board
of Directors and certified in a board resolution, or (ii) if the security is
registered under the Exchange Act, the average of the daily closing bid prices
(or the equivalent in an over-the-counter market) for each Business Day during
the period commencing 15 Business Days before such date and ending on the date
one day prior to such date, or if the security has been registered under the
Exchange Act for less than 15 consecutive Business Days before such date, the
average of the daily closing bid prices (or such equivalent) for all of the
Business Days before such date for which daily closing bid prices are
available; provided, however, that if the closing bid price is not
determinable for at least ten Business Days in such period, the "Current
Market Value" of the security shall be determined as if the security were not
registered under the Exchange Act.
"DB Facility" means the amended and restated revolving line of credit
agreement by and between Bankers Trust Company and the Company dated as of
September 11, 2000, as amended from time to time.
"Dividend Payment Date" means each March 13, June 13, September 13
and December 13, commencing December 13, 2001, unless the Series B Stock has
been redeemed in full prior to such date; provided, however, that if such date
shall not be a Business Day, then the related Dividend shall be paid on the
next Business Day.
"Dividend Record Date" has the meaning set forth in Section 7(a).
"Employee Matters" means Employee Matters, Inc., a corporation
organized under the laws of the State of Delaware.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Debt" means all outstanding indebtedness owed to Reckson
pursuant to the Reckson Credit Facility on the Issue Date and all indebtedness
borrowed under the DB Facility, in each case including all amounts accruing
thereon (as reduced by prepayments and commitment reductions).
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"Holder" means the Person in whose name the Series B Stock is
registered on the books and records of the Registrar maintained for such
purpose.
"HQ Global" means HQ Global Holdings, Inc., a Delaware corporation.
"HQ Global Credit Facility" means the Amended and Restated Credit
Agreement, dated as of January 16, 1997, as amended and restated as of
November 6, 1988, as amended and restated as of August 3, 1999, as amended and
restated as of May 31, 2000, among HQ Global, the various banks, ING Capital
(U.S.) LLC, as Managing Agent, Bankers Trust Company, as Syndication Agent and
Co-Arranger, Citicorp Real Estate, Inc., as Documentation Agent and
Co-Arranger, and BNP Paribas, as Administrative Agent and Arranger, as in
effect on December 13, 2000.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations.
"Indebtedness" means, with respect to any Person, (i) any
indebtedness for borrowed money or indebtedness issued in substitution or
exchange for indebtedness for borrowed money or for the deferred purchase
price of property or services (other than trade payables and accrued expenses
arising in the ordinary course of business but including all seller notes and
"earn-out" payments), (ii) any indebtedness evidenced by any credit agreement,
note, bond, debenture or other debt security, (iii) any commitment by which
such Person assures a creditor against loss (including contingent
reimbursement obligations with respect to letters of credit), (iv) any
indebtedness guaranteed in any manner by such Person (including guarantees in
the form of an agreement to repurchase or reimburse) other than lease
guarantees, (v) any obligations under capitalized leases with respect to which
such Person is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or with respect to which obligations such Person assures a creditor
against loss, (vi) any indebtedness secured by a lien on such Person's assets,
(vii) any unsatisfied obligation for "withdrawal liability" to a Multiemployer
Plan (as such term is defined under ERISA), (viii) any obligation to repay
deposits or other amounts advanced by and owing to third parties and (ix) any
obligations under any interest rate, currency or other hedging agreements.
"Investment" means, with respect to any Person, all investments by
such Person in any other Person (including Affiliates), in the form of loans
(including guarantees of, make-whole or keep-well agreements with respect to,
or similar contingent obligations with respect to, loans by other parties),
advances or capital contributions (excluding travel and similar advances to
officers, directors or employees of the Company made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Capital Stock or other securities and all other items that would be classified
as investments on a balance sheet prepared in accordance with GAAP.
"Issuance Price" of each share of Series B Stock means, $1,000, the
original purchase price of such share.
"Issue Date" means December 13, 2000.
"Junior Shares" has the meaning set forth in Section 9(a).
"Liquidation Amount" has the meaning set forth in Section 9(b).
"Liquidation Preference" has meaning set forth in Section 3.
"Mandatory Redemption Event" means (i) any Capital Event, (ii) any
sale of assets of the Company generating cash proceeds (other than the Spin
Off and the sale of the Company's equity interests in RSVP and Employee
Matters, as permitted hereunder), (iii) the receipt by the Company of cash
distributions or cash dividends from any Operating Entity, (iv) the occurrence
of a Change of Control, (v) the date after the occurrence of any Triggering
Event (other than a Triggering Event described in clause (i) of the definition
thereof) upon which Holders of not less than 25% of the Outstanding shares of
Series B Stock deliver a request for redemption, (vi) December 13, 2005 or
(vii) the failure of the waiting period under the HSR Act to expire or be
terminated prior to June 13, 2001.
"nonelecting share" has the meaning set forth in Section 12(e).
"Observer" has the meaning set forth in Section 8(f).
"Officers' Certificate" means a certificate of the Company signed in
the name of the Company by its Chairman of the Board, its President or a Vice
President and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary.
"OnSite Access" means OnSite Access, Inc., a corporation organized
under the laws of the State of Delaware.
"Operating Entity" means any Person (other than an individual) in
which the Company has an ownership interest.
"Optional Redemption" has the meaning set forth in Section 10(a).
"Outstanding" means, (i) when used with respect to shares of Series B
Stock, as of the date of determination, all shares of Series B Stock
theretofore authenticated and delivered under this Certificate of Designation,
except (a) shares of Series B Stock theretofore converted into shares of
Common Stock in accordance with Section 12 and shares of Series B Stock
theretofore canceled by the Registrar or delivered to the Registrar for
cancellation; (b) shares of Series B Stock for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Registrar or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such shares of Series B Stock; provided that,
if such shares of Series B Stock are to be redeemed, notice of such redemption
has been duly given pursuant to this Certificate of Designation or provision
therefor satisfactory to the Registrar has been made; and (c) shares of Series
B Stock (x) that are mutilated, destroyed, lost or stolen which the Company
has decided to pay or (y) in exchange for or in lieu of which other shares of
Series B Stock have been authenticated and delivered pursuant to this
Certificate of Designation; provided, however, that, in determining whether
the Holders of the shares of Series B Stock have given any request, demand,
authorization, direction, notice, consent or waiver or taken any other action
hereunder, shares of Series B Stock owned by the Company or any successor
thereof or any Affiliate of the Company or of such successor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Registrar shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent, waiver or other action,
only shares of Series B Stock which the Registrar has actual knowledge of
being so owned shall be so disregarded (it being understood that shares of
Series B Stock so owned which have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the Registrar
the pledgee's right so to act with respect to such shares of Series B Stock
and that the pledgee is not the Company or any Affiliate of the Company) or
any successor thereto and, (ii) when used with respect to shares of Common
Stock or any other securities, as of the date of determination, all shares of
Common Stock or other securities theretofore authenticated by the issuer
thereof, except (a) shares of Common Stock or such other securities
theretofore canceled by Company or other issuer thereof or delivered to the
Company or such issuer for cancellation; (b) shares of Common Stock or other
securities for whose mandatory payment or mandatory redemption money in the
necessary amount has been theretofore deposited with a paying agent or other
trustee and notice of such redemption has been given; and (c) shares of Common
Stock or other securities (x) that are mutilated, destroyed, lost or stolen
which the Company or the issuer thereof, if not the Company, has decided to
pay or (y) in exchange for or in lieu of which other shares of Common Stock or
other securities of the same type have been authenticated and delivered;
provided, however, that, in determining whether the registered holders of the
shares of Common Stock or other securities have given any request, demand,
authorization, direction, notice, consent or waiver or taken any other action
hereunder, shares of Common Stock or other securities owned by the Company or
the issuer thereof, if not the Company, or any Affiliate of the Company or the
issuer of such securities (if not the Company) or any successor thereto shall
be disregarded and deemed not to be Outstanding.
"Parity Shares" has the meaning set forth in Section 9(a).
"Paying Agent" has the meaning set forth in Section 5(a).
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
including all classes of such preferred or preference stock.
"Purchase Agreement" means the Securities Purchase Agreement dated
December 13, 2000, among the Company and Purchaser named therein.
"RealtyIQ" means RealtyIQ Corp., a corporation organized under the
laws of the State of Delaware.
"Reckson" means Reckson Operating Partnership, L.P., a limited
partnership organized under the laws of the State of Delaware.
"Reckson Credit Facility" means the amended and restated credit
agreements between Reckson and the Company each dated as of August 4, 1999.
"Redemption Date" means (i) in the case of an Optional Redemption,
the next succeeding monthly anniversary of the Issue Date (it being understood
that such anniversary shall fall on the thirteenth (13th) day of the month)
after the Company has elected to effect such Optional Redemption and (ii) in
the case of a Mandatory Redemption, (A) if the Mandatory Redemption Event
occurs on or before March 13, 2001, March 13, 2001, (B) if the Mandatory
Redemption Event occurs after March 13, 2001 but on or before June 13, 2001,
June 13, 2001 and (C) if the Mandatory Redemption Event occurs after June 13,
2001, the next succeeding monthly anniversary of the Issue Date (it being
understood that such anniversary shall fall on the thirteenth (13th) day of
the month) after such Mandatory Redemption Event.
"Redemption Notice" has the meaning set forth in Section 10(d).
"Redemption Price" means an amount per share of Series B Stock to be
redeemed equal to (i) after the Issue Date, but on or before March 13, 2001,
$1,060.00, (ii) on or after March 14, 2001, but on or before June 13, 2001,
$1,112.50, (iii) on or after June 14, 2001, but on or before July 13, 2001,
$1139.02, (iv) on or after July 14, 2001, but on or before August 13, 2001,
$1,160.40, (v) on or after August 14, 2001, but on or before September 13,
2001, $1,182.18, (vi) on or after September 14, 2001, but on or before October
13, 2001, $1,224.40, (vii) on or after October 14, 2001, but on or before
November 13, 2001, $1,249.44, (viii) on or after November 14, 2001, but on or
before December 13, 2001, $1,275.00 and (ix) after December 13, 2001,
$1,275.00, in each case (except in the event the Series B Stock is redeemed
prior to December 13, 2001) plus an amount equal to all Accumulated Dividends
and all unpaid dividends in respect of the shares of Series B Stock so
redeemed accrued since the last Dividend Payment Date. If a Mandatory
Redemption occurs as a result of the occurrence of Triggering Event, the
Redemption Price then in effect shall be increased by $50.00
"Registrar" has the meaning set forth in Section 3.
"Restricted Shares Legend" has the meaning set forth in Section 4.
"RSVP" means RSVP Holdings, LLC, a Delaware limited liability
company.
"Securities Act" has the meaning set forth in Section 4.
"Securities Election" shall have the meaning set forth in Section
10(b).
"Senior Shares" has the meaning set forth in Section 9(a).
"Series A Stock" means the Series A Cumulative Preferred Stock of the
Company.
"Series B Stock" has the meaning set forth in Section 1.
"Significant Subsidiary" has the meaning assigned to such term under
Rule 12b-2 of Regulation 12B under the Exchange Act.
"Spin Off" means the spin off or other distribution of assets (other
than the shares of HQ Global) to stockholders of the Company approved by the
Holders in accordance with Section 13(g).
"subsidiary" means, with respect to any Person (i) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such Person, by a subsidiary of such Person, or by such Person and
one or more subsidiaries of such Person, (ii) a partnership in which such
Person or a subsidiary of such Person is, at the date of determination, a
general partner of such partnership and has the power to direct the policies
and management of such partnership or (iii) any other Person (other than a
corporation) in which such Person, a subsidiary of such person or such Person
and one or more subsidiaries of such Person, directly or indirectly, at the
date of determination thereof, has (A) at least a majority ownership interest
or (B) the power to elect or direct the election of a majority of the
directors or other governing body of such Person.
"Subsidiary" means a subsidiary of the Company.
"Triggering Event" means any of the following conditions or events:
(i) The Company shall fail to declare and pay in cash any Coupon
Dividends on any Dividend Payment Date;
(ii) The Company shall violate any of the covenants contained in
Section 13 hereof to which it is subject;
(iii) A breach or default by the Company, HQ Global or any Operating
Entity under any loan agreement, mortgage, indenture or other agreement
relating to Indebtedness of $1,000,000 or more which is recourse to the
Company or HQ Global if the effect of such breach or default is to cause such
Indebtedness to be declared due and payable prior to its stated maturity and
such breach or default shall continue for a period of ten (10) Business Days
unless waived by the lenders thereof;
(iv) (A) The Company or any Significant Subsidiary shall commence any
case, proceeding or action (x) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to its
debts, or (y) seeking appointment or a receiver, trustee, custodian or other
similar official for it or for any substantial part of its assets, (B) the
Company or any Significant Subsidiary shall make a general assignment for the
benefit of its creditors, (C) there shall be commenced against the Company or
any Significant Subsidiary any case, proceeding or other action of a nature
referred to in clause (A) above which shall not have been vacated or
discharged within 60 days from the commencement thereof, or (z) a court shall
enter a decree or order for relief in any involuntary case under Title 11 of
the United States Code, as amended from time to time, or any applicable
bankruptcy or similar law now or hereafter in effect, which decree or order is
not stayed, vacated, discharged, or bonded pending appeal within 60 days from
the entry thereof;
(v) any money judgment, writ or warrant of attachment or similar
process involving (i) in the aggregate at any time an amount in excess of
$1,000,000 shall be entered or filed against the Company or any of its assets
or (ii) in the aggregate at any time an amount in excess of $5,000,000 shall
be entered or filed against HQ Global or any of its assets and in each case
shall remain undischarged, unexecuted, unbonded or unstayed for a period of
thirty (30) days; and
(vi) the Company shall fail to make any payment in redemption of the
Series B Stock in accordance with the terms specified in this Certificate of
Designation.
"Voting Securities" means, with respect to any Person, securities of
any class or classes of Capital Stock in such Person ordinarily entitling the
registered holders thereof (whether at all times or at the times that such
class of Capital Stock has voting power by reason of the happening of any
contingency) to vote in the election of members of the board of directors or
comparable governing body of such Person.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be duly executed by Scott H. Rechler, President of the Company,
and attested by Mitchell D. Rechler, Secretary of the Company, this 13th day
of December 2000.
FRONTLINE CAPITAL GROUP
By /s/ Scott H. Rechler
----------------------------
Name: Scott H. Rechler
Title: President
ATTEST:
By /s/ Mitchell D. Rechler
----------------------------
Name: Mitchell D. Rechler
Title: Secretary
<PAGE>
EXHIBIT A
FACE OF SECURITY
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. SUCH SHARES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
Number of Shares
Number: ________ Shares
--------------
9.25% Series B Convertible CUMULATIVE Preferred Stock
of
frontline capital group
FrontLine Capital Group, a company organized under the laws of
Delaware (the "Company"), hereby certifies that ______ (the "Holder") is the
registered owner of [_____________] fully paid and non-assessable shares of
9.25% Series B Convertible Cumulative Preferred Stock of the Company, par
value U.S.$0.01 (the "Series B Stock"), having a liquidation value equal the
sum of (x) to the original purchase price per share plus (y) all Accumulated
Dividends, if any, in respect thereof, plus (z) all unpaid dividends accrued
from the last Dividend Payment Date. The shares of Series B Stock are
transferable on the books and records of the Registrar, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Series B Stock represented
hereby are issued and shall in all respects be subject to the provisions of
the Certificate of Designation of the Company dated December 13, 2000, as the
same may be amended from time to time in accordance with its terms (the
"Certificate of Designation"). Capitalized terms used herein but not defined
shall have the meaning given them in the Certificate of Designation. The
Company will provide a copy of the Certificate of Designation to a Holder
without charge upon written request to the Company at its principal place of
business.
Reference is hereby made to select provisions of the Series B Stock
set forth on the reverse hereof and to the Certificate of Designation, which
select provisions and the Certificate of Designation shall for all purposes
have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the
Certificate of Designation and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Company has executed this certificate as of
the date set forth below.
FRONTLINE CAPITAL GROUP
By
---------------------------------
Name:
Title:
[Seal]
Dated:
<PAGE>
REVERSE OF SECURITY
FRONTLINE CAPITAL GROUP
9.25% Series B Convertible Cumulative Preferred Stock
Dividends on each share of Series B Stock shall be payable at a rate
per annum as provided in the Certificate of Designation. Dividends may be
paid, to the extent not cumulated in accordance with the terms of the
Certificate of Designation.
The shares of Series B Stock shall be redeemable as provided in the
Certificate of Designation. The shares of Series B Stock shall be convertible
into the Company's Common Stock in the manner and according to the terms set
forth in the Certification of Designation.
The Company shall furnish to any Holder, upon request and without
charge, a full summary statement of the powers, designations, preferences,
limitations, qualifications and relative participating, optional or other
special rights of the Series B Stock.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares
of Series B Stock evidenced hereby to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints:
agent to transfer the shares of Series B Stock evidenced hereby on the books
of the Transfer Agent and Registrar. The agent may substitute another to act
for him or her.
Date:
Signature:
(Sign exactly as your name appears-on the other side of this certificate)
Signature Guarantee: ____________________(1)
------------------------
(1) Signature must be guaranteed by an "eligible guarantor institution"
(i.e., a bank, stockbroker, savings and loan association or credit union)
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934.
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series B Stock)
The undersigned hereby irrevocably elects to convert (the
"Conversion") shares of 9.25% Series B Convertible Cumulative Preferred Stock
(the "Series B Stock"), represented by stock certificate No(s). __________
(the "Preferred Stock Certificates") into shares of common stock, par value
U.S. $.01 per share ("Common Stock"), of FrontLine Capital Group (the
"Company") according to the conditions of the Certificate of Designation
establishing the terms of the Series B Stock (the "Certificate of
Designation"), as of the date written below. If shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates. No fee will be charged to the Holder for any conversion. A copy
of each Preferred Stock Certificate is attached hereto (or evidence of loss,
theft or destruction thereof).(1)
The undersigned represents and warrants that all offers and sales by
the undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Series B Stock shall be made pursuant to registration of the
Common Stock under the Securities Act of 1933 (the "Securities Act"), or
pursuant to an exemption from registration under the Securities Act.
Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in or pursuant to the Certificate of Designation.
Date of Conversion:
Applicable Conversion Price:
Number of shares of Series B Stock to be Converted:
Number of shares of Common Stock to be Issued:
Signature:
Name:
Address:(2)
Fax No.:
--------------------
(1) The Company is not required to issue shares of Common Stock until the
original Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Company or its
Transfer Agent. The Company shall issue and deliver shares of Common
Stock to an overnight courier not later than three business days
following receipt of the original Preferred Stock Certificate(s) to be
converted.
(2) Address where shares of Common Stock and any other payments or
certificates shall be sent by the Company.
