Exhibit 10.2
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STOCKHOLDERS AGREEMENT
by and among
FRONTLINE CAPITAL GROUP (formerly known as
RECKSON SERVICE INDUSTRIES, INC.),
HQ GLOBAL HOLDINGS, INC.,
and
CARRAMERICA REALTY CORPORATION
Dated as of
June 1, 2000
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TABLE OF CONTENTS
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1. Definitions..............................................................................................1
2. Board of directors of the COMPANY........................................................................3
2.1. Number of Directors.............................................................................3
2.2. Holder Nominees.................................................................................3
2.3. Independent Directors...........................................................................4
2.4. Termination.....................................................................................5
3. Information Rights.......................................................................................5
3.1. Information Rights of All Holders...............................................................5
3.2. Information Rights of 10% Holders...............................................................5
3.3. Confidentiality.................................................................................6
3.4. Termination.....................................................................................6
4. Limitations on Corporate Actions.........................................................................6
4.1. REIT Restrictions...............................................................................6
4.2. No Acquisition of Common Stock from RSI or its Affiliates......................................11
4.3. No Contravening Agreement......................................................................11
4.4. Termination....................................................................................12
5. Participation Rights....................................................................................12
5.1. Right to Participate...........................................................................12
5.2. Notice.........................................................................................12
5.3. Abandonment of Sale or Issuance................................................................13
5.4. Terms of Sale..................................................................................13
5.5. Timing of Sale.................................................................................14
5.6. Termination of Participation Right.............................................................14
6. Tag-Along Rights........................................................................................15
6.1. Rights and Notice..............................................................................15
6.2. Abandonment of Sale............................................................................15
6.3. Timing of Sale.................................................................................16
6.4. Termination of Tag-Along Right.................................................................16
7. put rights..............................................................................................16
7.1. 2000 Put Right.................................................................................16
7.2. 2001 Put Right.................................................................................17
7.3. 2002 Put Right.................................................................................18
7.4. Procedures to Determine Fair Market Value......................................................19
7.5. Indemnification of Designated Holder...........................................................20
8. transfer restrictions...................................................................................20
8.1. RSI Right of First Offer.......................................................................20
8.2. Holder Right of First Offer....................................................................21
8.3. No Obligation to Purchase......................................................................22
8.4. Termination of the Rights of First Offer.......................................................22
8.5. IPO Lock-Up....................................................................................22
9. Lease guarantee indemnification.........................................................................23
10. PURCHASE RIGHT AGREEMENT ANTI-DILUTION PROTECTION.......................................................23
11. MISCELLANEOUS...........................................................................................24
11.1. RSI Assurance..................................................................................24
11.2. Assignment.....................................................................................24
11.3. Entire Agreement; Amendment....................................................................24
11.4. Waiver.........................................................................................24
11.5. Limitation on Benefit..........................................................................25
11.6. Binding Effect.................................................................................25
11.7. Governing Law..................................................................................25
11.8. Notices........................................................................................25
11.9. Headings.......................................................................................26
11.10. Execution in Counterparts......................................................................27
11.11. Interpretation; Absence of Presumption.........................................................27
11.12. Severability...................................................................................27
11.13. Specific Performance...........................................................................27
11.14. Consent to Jurisdiction........................................................................28
11.15. Litigation Costs...............................................................................28
EXHIBIT A
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STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of June 1,
2000, is made by and among FrontLine Capital Group (formerly known as Reckson
Service Industries, Inc.) ("RSI"), HQ Global Holdings, Inc. (the "Company")
and CarrAmerica Realty Corporation ("CarrAmerica" or the "Designated Holder").
WHEREAS, RSI, CarrAmerica and certain other parties have entered
into that certain Stock Purchase Agreement dated as of January 20, 2000, as
amended pursuant to which RSI is acquiring on the date hereof certain shares
of common stock of HQ Global Workplaces, Inc. ("HQ Global") owned by
CarrAmerica and such other parties (the "Transaction");
WHEREAS, the parties believe it is in their best interests to enter
into this Agreement and provide for certain rights and restrictions with
respect to the continuing investment by RSI and each Holder (as hereafter
defined) in the Company and the corporate governance of the Company; and
WHEREAS, it is a condition precedent to the completion of the
Transaction that the parties enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, certain capitalized terms not otherwise
defined herein shall have the following respective meanings:
"10% Holder" shall mean any Holder hereunder who, together with any
Affiliates, holds more than ten percent (10%) of the total number of issued
and outstanding shares of Common Stock of the Company.
"Affiliate" shall mean, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, or (ii) any officer, director, general partner, managing member
or trustee of such Person or any Person referred to in clause (i) above. For
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.
"Board" shall mean the board of directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended
(including for this purpose the amendments made to Section 856(c)(4)(B)(iii)
of the Code by Pub. L. No. 106-170, The Ticket to Work and Work Incentives
Improvement Act of 1999, 113 Stat. 1860 (the "RMA")), and any successor
thereto, including all of the rules and regulations promulgated thereunder.
"Common Stock" shall mean any common stock of the Company,
including, without limitation, the Voting Common Stock and the Nonvoting
Common Stock.
"Director" shall mean a member of the Board.
"Government Authority" shall mean any government or state (or any
subdivision thereof) of or in the United States or any foreign nation, or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
"Holder" shall mean CarrAmerica and any stockholder of the Company
that becomes a party to this agreement after the date hereof in accordance
with the terms herein.
"Immediate Family Member" shall mean, with respect to any natural
Person, (i) such natural Person's spouse, parents, descendants, nephews,
nieces, brothers and sisters, and (ii) any trust established by such Person or
any of the persons listed in clause (i) above, the sole beneficiaries of which
are such Person or any of the persons listed in clause (i) above.
"Independent Director" shall mean any Director who (i) is not an
officer or employee of the Company, (ii) is not an officer, employee or
director of RSI, (iii) does not have a material financial interest in or
relationship with RSI (it being agreed that for purposes of this definition,
any Director who owns less than five percent (5%) of the issued and
outstanding RSI common stock shall be deemed not to have a material financial
interest in or relationship with RSI by virtue of such stock ownership), and
(iv) is not an Affiliate or an Immediate Family Member of any Person covered
by clauses (i), (ii) or (iii) above.
"IPO" shall mean one or more sales of Common Stock by the Company
pursuant to one or more registration statements effective under the Securities
Act of 1933, as amended (the "1933 Act") that results in (i) gross proceeds to
the Company of not less than $150,000,000 and (ii) the listing for trading on
either the NASDAQ Stock Market or a national securities exchange of all shares
of Voting Common Stock of the Company.
"Majority Consent of the Holders" shall mean the approval of
Holders owning at least a majority of all of the issued shares of Voting
Common Stock owned by the Holders at such time.
"Nonvoting Common Stock" shall mean the Nonvoting Common Stock, par
value $.01 per share, of the Company.
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
other form of business or legal entity or Government Authority.
"Pereferred Stockholders Agreement" shall mean the Stockholders
Agreement by and among FrontLine Capital Group, HQ Global Holdings, Inc. and
certain holders of Series A Preferred Stock of HQ Global Holdings, Inc. named
therein, dated as of the date hereof.
"SEC" shall mean the Securities and Exchange Commission.
"RSI Board" shall mean the board of directors of RSI.
"transfer" means a sale, gift, assignment, exchange or other
disposition (including a voluntary or involuntary disposition under judicial
order, legal process, execution, attachment or enforcement of an encumbrance)
or any other transfer of beneficial interest of shares of Common Stock. A
"transfer" shall not include (i) in the case of an individual, a transfer to
an Immediate Family Member, (ii) in the case of a partnership, a transfer by
the partnership to an Affiliate or to its partners in connection with a
dissolution of the partnership, (iii) in the case of a corporation, a transfer
by the corporation to an Affiliate or to its stockholders in connection with
the dissolution of the corporation, (iv) in the case of a limited liability
company, a transfer by the limited liability company to an Affiliate or to its
members in connection with the dissolution of the limited liability company,
or (v) in the case of any entity referred to in clause (ii), (iii) or (iv)
above, any transfer of an interest in the securities of such entity or any
other indirect transfer that may occur as a result of either a consolidation,
merger or other business combination involving such entity or a sale, lease,
exchange or other transfer of all or substantially all of the assets of such
entity, or (vi) in the case of CarrAmerica, a transfer to an entity in which
it owns at least 90% of the economic interests of such entity; provided, that
a transferee under (i) -(vi) above agrees in writing to be bound by all of the
terms of this Agreement by executing and delivering to the Company a
counterpart signature page to this Agreement.
"U.S. Stock Purchase Agreement" shall mean the Stock Purchase
Agreement between CarrAmerica, RSI and certain other parties dated as of
January 20, 2000, as amended.
"Voting Common Stock" shall mean the Voting Common Stock, par value
$.01 per share, of the Company.
2. BOARD OF DIRECTORS OF THE COMPANY
2.1. Number of Directors
From and after the date hereof, the Board shall consist of thirteen
(13) Directors. The number of Directors may not be decreased unless such
decrease is approved by a Majority Consent of the Holders.
2.2. Holder Nominees
(a) Nomination of Directors. At each annual or special meeting of
stockholders of the Company at, or the taking of action by written consent of
stockholders of the Company with respect to, which any Directors are to be
elected, each Holder (a "Nominating Holder") shall have the right (but not the
obligation) to nominate for election to the Board that number of Directors
which represents the same proportion of the total number of Directors as is
represented by the number of shares of Voting Common Stock which such Holder
then owns, as of the applicable record date for such meeting or consent (or,
in the case of the first annual meeting of stockholders of the Company
following the Closing, if the record date for such annual meeting is prior to
the date of the Closing, then as of the date of the Closing), relative to the
number of shares of Voting Common Stock outstanding as of such date (such
Directors, "Holder Nominees"). Notwithstanding the foregoing, if a Holder
shall make an equity investment, through a joint venture or otherwise, in
Regus Business Corp., Servcorp or a company that, at the time such investment
is made, is a significant regional competitor of the Company in the executive
suites business, such Holder's right under this Section 2.2(a) shall
terminate. In computing the number of Holder Nominees, any fraction shall be
rounded down to the nearest whole number (and, if such fraction shall be less
than one, then such Holder shall have no right to nominate any Director for
election). If Directors are placed into two or more classes pursuant to the
Company's certificate of incorporation, the Holder Nominees shall be placed in
as many different classes as possible.
(b) Qualification of Holder Nominees. No Nominating Holder shall
name any person as a Holder Nominee if (i) such person is not reasonably
experienced in business or financial matters, (ii) such person has been
convicted of, or has pled nolo contendere to, a felony, (iii) the election of
such person would violate any applicable law, (iv) any event described in Item
401(f) of Regulation S-K promulgated under the 1933 Act has occurred with
respect to such person, or (v) such person is an Affiliate of, or has a
material financial interest in, (A) any individual or entity that engages, as
the principal component of its business, in activities that are directly
competitive with the Company in the executive suites business, or (B) any
entity whose primary business is to invest in business to business e-commerce
companies, which has invested an aggregate of at least $50 million in such
companies.
(c) Support of Holder Nominees by RSI and the Company. RSI shall
support, and the Board and any nominating committee (or any other committee
exercising a similar function) thereof shall recommend, the nomination of each
Holder Nominee to the Board. The Board shall recommend to the stockholders of
the Company the election of each Holder Nominee, and the Company and RSI shall
exercise all authority under applicable law to cause each Holder Nominee to be
elected to and to remain a member of the Board for the term for which the
Holder Nominee is nominated. Without limiting the generality of the foregoing,
with respect to each meeting of stockholders of the Company at which Directors
are to be elected, (i) the Company shall use its commercially reasonable
efforts to solicit from the stockholders of the Company eligible to vote in
the election of Directors proxies in favor of each Holder Nominee, and (ii)
RSI shall vote its shares of Voting Common Stock in favor of each Holder
Nominee at any stockholders meeting (or written consent in lieu thereof).
(d) Support of RSI Nominees by CarrAmerica. Provided that the
nominees proposed by RSI meet the qualifications set forth in Section
2.2(b)(i)-(iv) above (each, an "RSI Nominee"), CarrAmerica shall support and
the Board or any nominating committee (or any other committee exercising a
similar function) thereof shall recommend, the nomination of each RSI Nominee
to the Board. RSI shall have the right to nominate all of the directors other
than the Holder Nominees, except as may otherwise be provided for in the
Preferred Stockholders Agreement. The Board shall recommend to the
stockholders of the Company the election of each RSI Nominee and the Company
shall exercise all authority under applicable law to cause each RSI Nominee to
be elected to and to remain a member of the Board for the term for which the
RSI Nominee is nominated. With respect to each meeting of stockholders of the
Company at which Directors are to be elected, CarrAmerica shall vote its
shares of Voting Common Stock in favor of each RSI Nominee at any stockholders
meeting (or written consent in lieu thereof).
(e) Vacancies. In the event that any Holder Nominee shall cease to
serve as a Director for any reason other than the fact that the Nominating
Holder no longer has a right to nominate a Director, as provided in Section
2.2(a), the vacancy resulting thereby shall be filled by a Holder Nominee
designated by the Nominating Holder which nominated the vacating Director;
provided, however, that any Holder Nominee so designated shall satisfy the
qualification requirements set forth in Section 2.2(b).
2.3. Independent Directors
(a) Number of Independent Directors. From and after the date
hereof, the Board shall include at least two (2) Independent Directors.
(b) RSI and Holder Support of Independent Director Nominees. RSI
shall nominate and the Holders shall support, and the Board and any nominating
committee (or any other committee exercising a similar function) thereof shall
recommend, the nomination of at least two (2) Independent Directors at all
times, and the Company, the Holders and RSI shall exercise all authority under
applicable law to cause each Independent Director nominee so supported to be
elected to and remain a member of the Board for the term for which such
Independent Director is nominated. Without limiting the generality of the
foregoing, with respect to each meeting of stockholders of the Company at
which Directors are to be elected, (i) the Company shall use its commercially
reasonable efforts to solicit from the stockholders of the Company eligible to
vote in the election of Directors proxies in favor of each Independent
Director nominee that is nominated pursuant to this Section 2.3(b), and (ii)
RSI and the Holders shall vote their respective shares of Voting Common Stock
in favor of each Independent Director nominee that is nominated pursuant to
this Section 2.3(b).
2.4. Termination
The rights of the Holders pursuant to this Section 2 shall
terminate on the first date on which no Holder has a right to Board
representation pursuant to Section 2.2(a) hereof.
3. INFORMATION RIGHTS
3.1. Information Rights of All Holders
(a) Quarterly Financial Information. From and after the date
hereof, the Company shall deliver to each Holder as soon as available and in
any event within thirty (30) days after the close of each of the first, second
and third fiscal quarters of the Company, the unaudited consolidated balance
sheet of the Company and its subsidiaries as at the end of such period and the
related unaudited consolidated statements of income, retained earnings and
cash flows of the Company and its subsidiaries for such period, setting forth
in each case in comparative form the figures for the corresponding periods of
the previous fiscal year, all of which shall be certified by the chief
financial officer or the chief accounting officer of the Company, in his or
her opinion, to present fairly in all material respects and in accordance with
generally accepted accounting principles ("GAAP"), the consolidated financial
position of the Company and its subsidiaries as at the date thereof and the
results of operations for such period (subject to normal year-end
adjustments).
(b) Annual Financial Information. From and after the date hereof,
the Company shall deliver to each Holder as soon as available and in any event
within seventy-five (75) days after the end of each fiscal year of the
Company, the audited consolidated balance sheet of the Company and its
subsidiaries as at the end of such fiscal year and the related audited
consolidated statements of income, retained earnings and cash flows of the
Company and its subsidiaries for such fiscal year, setting forth in
comparative form the figures as at the end of and for the previous fiscal
year, all of which shall be certified by (A) the chief financial officer or
the chief accounting officer of the Company, in his or her opinion, to present
fairly in all material respects and in accordance with GAAP, the financial
position of the Company and its subsidiaries as of the date thereof and the
result of operations for such period and (B) independent certified public
accountants of recognized national standing.
3.2. Information Rights of 10% Holders
In addition to the information rights set forth in Section 3.1
hereof, from and after the date hereof, the Company shall:
(a) Financial Reports. Deliver to each 10% Holder, as soon as
practicable after the end of each month, an operating and financial statement
and management report of the Company and its subsidiaries (including each
subsidiary, if any, not consolidated with the Company) as at and for the end
of such month, all in such form as may be prepared by the Company for internal
use by management.
(b) Securities Filings. Deliver to each 10% Holder, as promptly as
practicable following filing, a copy of each report, schedule or other
document filed by the Company pursuant to the requirements of any federal or
state securities laws (collectively, the "Securities Filings").
(c) Opportunity to Review Securities Filings. Afford each 10%
Holder a reasonable opportunity to review any portion of any Securities Filing
which refers to, describes or mentions such 10% Holder prior to the time that
such Securities Filing is filed with or sent to the applicable Government
Authority.
(d) Delivery of Annual Budget of the Company. Deliver to each 10%
Holder a copy of the approved annual operating budget for the Company and its
subsidiaries.
3.3. Confidentiality
Each Holder shall keep all information provided to it or any of its
representatives pursuant to this Agreement confidential, and such Holder shall
not disclose such information to any Persons other than the directors,
officers, employees, financial advisors, legal advisors, accountants and
consultants of any Holder who reasonably need to have access to the
confidential information and (i) in the case of directors, officers,
employees, legal advisors and the principal accountants of such Holder, who
are advised of the confidential nature of such information, and (ii) in the
case of any financial advisors, other accountants or consultants of such
Holder, who execute an agreement with the Company agreeing to maintain the
confidentiality of such information; provided, however, the foregoing
obligation of each Holder shall not (A) relate to any information that (i) is
or becomes generally available other than as a result of unauthorized
disclosure by such Holder or by Persons to whom such Holder has made such
information available, or (ii) is or becomes available to such Holder on a
non-confidential basis from a third party that is not, to such Holder's
knowledge, bound by any other confidentiality agreement with the Company or
RSI, or (B) prohibit disclosure of any information if such Holder believes in
good faith that disclosure is required by law, rule, regulation, court order
or other legal or governmental process (including SEC or GAAP reporting
requirements) or if such Holder believes in good faith that disclosure is
advisable to explain a material deviation from its expected financial results
that arises from its investment in the Company; provided further, that in the
case of a disclosure described in clause (B) above, such Holder shall (i) give
prior notice to the Board of any such disclosure and (ii) consult with the
Board prior to making such disclosure.
3.4. Termination
The rights granted to the Holders pursuant to Section 3.1 and
Sections 3.2(a) and 3.2(d) shall terminate upon such date that the Company's
Common Stock is listed for trading on either the NASDAQ Stock Market or a
national securities exchange. The obligations assumed by the Holders pursuant
to Section 3.3 shall remain in full force and effect until the first
anniversary of the consummation of an IPO.
4. LIMITATIONS ON CORPORATE ACTIONS
4.1. REIT Restrictions
(a) Taxable REIT Subsidiary Election.
(i) Effective as of January 1, 2001 and for so long thereafter
as CarrAmerica continues to make the election to be taxed as a real estate
investment trust ("REIT") under Sections 856 through 860 of the Code, the
Company and any corporation in which the Company owns at least 35% of vote or
value of the stock (including OmniOffices (UK) Limited, a company incorporated
in England, and OmniOffices (Lux) 1929 Holding Company S.A., a company
organized under the laws of the Grand Duchy of Luxembourg), shall (A) elect to
be treated as a "taxable REIT subsidiary" of CarrAmerica pursuant to Section
856(l) of the Code (a "TRS") and (B) not take any action to cause the Company
to fail to qualify as a TRS of CarrAmerica. If CarrAmerica's ownership of the
Common Stock of the Company is (A) reduced below five percent (5%) for a
continuous period of six months or longer or (B) reduced below ten percent
(10%) for a continuous period of twelve months or longer, CarrAmerica shall,
at the request of the Company, consent to the revocation of such election for
the first taxable year following the taxable year in which the last month of
such six month or twelve month period, as applicable, occurs. Notwithstanding
the foregoing, for so long as CarrAmerica continues to make the election to be
taxed as a REIT, the Company shall, so long as the Company is a TRS of Equity
Office Properties Trust or any successor-in-interest thereof ("EOPT"), (A)
elect to be treated as a TRS of CarrAmerica and (B) not take any action to
cause the Company to fail to qualify as a TRS of CarrAmerica, provided that
CarrAmerica shall, at the request of the Company, consent to the revocation of
such election for the first taxable year following the taxable year in which a
CarrAmerica De Minimis Event (as defined below) shall occur. As a condition to
any merger, consolidation, reorganization or other business combination to
which the Company is a party pursuant to which CarrAmerica acquires any equity
interest in any entity other than the Company, such entity, so long as it is a
TRS of EOPT, shall agree to (A) file an election to be treated as a TRS of
CarrAmerica effective as of the date of consummation of such business
combination (or, if such business combination takes place before January 1,
2001, effective beginning January 1, 2001) and (B) not take any action that
would cause such entity to fail to qualify as a TRS of CarrAmerica for so long
thereafter as CarrAmerica continues to make the election to be treated as a
REIT; provided that CarrAmerica shall, at the request of such entity, consent
to and join in a revocation of such election if a Post-Merger De Minimis Event
(as defined below) shall occur any time after the date of consummation of the
business combination (which revocation shall be effective for the taxable year
immediately following the taxable year in which such Post-Merger De Minimis
Event occurs). CarrAmerica shall notify the Company or the surviving entity,
as the case may be, in writing of the occurrence of a CarrAmerica De Minimis
Event or a Post-Merger De Minimis Event no more than 10 Business Days
following the occurrence of such event. The determination of when a
"CarrAmerica De Minimis Event" or a "Post-Merger De Minimis Event" shall occur
shall be made in accordance with the principles of the respective definitions
of "EOP De Minimis Event" and "Post-Merger De Minimis Event" contained in
Section 4.1 of the Preferred Stockholders Agreement, as applied to Common
Stock or common stock of the surviving entity, as the case may be, owned by
CarrAmerica.
(ii) For so long as the Company is obligated to constitute a
TRS of CarrAmerica, if CarrAmerica shall so request in writing within
forty-five (45) days prior to the close of any quarter of any of CarrAmerica's
taxable years beginning after December 31, 2000, the Company shall provide,
within ten (10) days prior to the close of such quarter, written certification
in a form reasonably acceptable to CarrAmerica that the Company constitutes a
TRS of CarrAmerica. All references to the Company in this subparagraph (ii)
shall include references to any successor-in-interest to the Company.
(iii) Prior to the effective date of the Company's election to
be treated as a TRS of CarrAmerica, the Company shall not, without the prior
written consent of CarrAmerica, provide any tenant services with respect to
any property in which CarrAmerica owns a direct or indirect interest and in
which a flexible workplace center was operated by a predecessor-in-interest of
the Company prior to the date of this Agreement other than (A) the same types
of tenant services as were provided prior to the date of this Agreement, (B)
the same types of services as described in the ruling request filed by
CarrAmerica with the Internal Revenue Service with respect to services
provided by the Company, as supplemented, and as described in the private
letter ruling issued by the Internal Revenue Service in response to such
request and (C) any other services that would not cause more than 1% of the
gross income derived directly or indirectly by CarrAmerica from such property
to constitute impermissible tenant service income, as defined in Code Section
856(d)(7), provided that, with respect to any tenant services not described in
clauses (A) or (B) which the Company notifies CarrAmerica in writing that it
proposes to provide at any property, CarrAmerica shall provide such written
consent as soon as is practicable after receiving such notification unless
CarrAmerica determines, in its sole opinion, that the provision of such other
services would give rise to a reasonable likelihood that the 1% level
described in clause (C) would be exceeded at such property, and provided
further that CarrAmerica shall be deemed to have given such written consent if
it has not responded to the Company in writing, within 30 days of receipt of
such notification from the Company, that it does not consent to the provision
of the services described in the notification because it has determined that
the provision of such services would give rise to a reasonable likelihood that
such 1% level would be exceeded at such property. Copies of the ruling request
referred to in clause (B) and any supplements or amendments thereto through
the date of this Agreement, as well as copies of the private letter ruling
referred to in clause (B) and any supplements or amendments thereto through
the date of this Agreement, have been delivered by CarrAmerica to the Company
upon or prior to the execution of this Agreement (all of which may be marked
to conceal information other than any information concerning CarrAmerica and
that portion of its business that relates to the company or the Company's
business, the Company and its business and the relationship and business
arrangements between CarrAmerica and the Company). CarrAmerica shall deliver
to the Company copies of any further supplements or amendments to the ruling
request or the private letter ruling promptly after filing or receiving, as
the case may be, such supplements or amendments.
(b) Ten Percent Voting Securities Limitation.
(i) From the period commencing on the date hereof and ending on
January 1, 2001, the Company shall not undertake any transaction (including,
without limitation, a merger, reorganization, recapitalization, stock
dividend, split-off, stock repurchase or otherwise) that would result in
CarrAmerica owning (or being deemed for own) more that 10% of the outstanding
"voting securities" of any issuer (as determined under Section 856(c)(4)(B) of
the Code). For these purposes, in no event shall CarrAmerica be deemed to own
voting securities of an issuer merely as a result of the ownership of such
securities by the Company or by an entity in which the Company owns an
interest. Notwithstanding the foregoing, if the exception in Section
856(c)(4)(B)(iii) with respect to stock of "taxable REIT subsidiaries" which
was enacted as part of the RMA, and is to become effective on January 1, 2001,
is repealed, the prohibitions contained in this paragraph (b) shall not expire
on January 1, 2001, but shall continue to apply (x) if such repeal occurs
prior to June 16, 2002, through the date (the "Put Expiration Date") that is
either (I) if CarrAmerica does not exercise its 2002 Put Right, June 15, 2002,
or (II) if CarrAmerica exercises its 2002 Put Right, July 31, 2002, or (y) if
such repeal occurs on or after June 16, 2002, then, if CarrAmerica is a REIT
and still holds securities of the Company, until 30 days following the first
to occur of (I) an IPO, (II) the acquisition of the Company by a
publicly-traded company, or (III) such other transaction pursuant to which the
Company securities held by CarrAmerica become or are exchanged for securities
of a publicly traded company, provided that, in the case of any transaction
described in clause (I) or (III) above in which CarrAmerica is required (or at
the request of the Company agrees) to enter into a lock-up, whether pursuant
to Section 8.5 or otherwise, the commencement of the 30 days shall begin on
the last day of such lock-up period. For these purposes, the relevant
provision of the Code shall be considered to have been repealed upon the
passage of legislation that would repeal such provision by both houses of
Congress (prior to such legislation being signed into law and regardless of
whether such passage occurs prior to the effective date of such legislation).
In no event shall the provisions of this paragraph apply to a transaction that
takes place or to which the Company becomes contractually committed after
December 31, 2000 but prior to the repeal of Section 856(c)(4)(B)(iii)
(determined as set forth in the preceding sentence).
(ii) In the event of any transaction that would otherwise
result in a violation of this paragraph (b), the Company shall have the option
to cause CarrAmerica to be offered and, if offered, CarrAmerica shall accept,
consideration in the form of nonvoting securities rather than voting
securities to the extent necessary to reduce CarrAmerica's voting interest to
no more than 10% of the outstanding voting securities of such issuer;
provided, however, that CarrAmerica shall be required to accept such nonvoting
securities (or waive the restrictions set forth in this paragraph (b)) only if
(x) such nonvoting securities have economic terms that are at least as
favorable to CarrAmerica as the economic terms of the voting securities that
would otherwise be received by CarrAmerica, (y) CarrAmerica receives an
opinion of nationally recognized tax counsel to the effect that the securities
to be received will not be treated as voting securities for purposes of
Section 856(c)(4) of the Code, and (z) the nonvoting securities shall be
convertible into voting securities under the same circumstances that the
Nonvoting Common Stock is convertible into Voting Common Stock.
(c) Limitation on Acquisition of Securities.
(i) The Company shall not undertake any transaction (including,
without limitation, a merger, reorganization, distribution of securities, or
otherwise) prior to the Put Expiration Date that would cause CarrAmerica to be
considered to have acquired (as determined for purposes of Section
856(c)(4)(B) of the Code) any security of any issuer if, as a result thereof
and immediately after such transaction, CarrAmerica would not meet one or more
of the assets tests set forth in Section 856(c)(4) of the Code (the "Asset
Tests").
(ii) For purposes of determining whether a violation of one or
more of the Asset Tests would occur for purposes of subparagraph (i) above,
(A) the date of the transaction shall be treated as if it were the last day of
the calendar quarter in which the transaction would occur, (B) the value of
securities that CarrAmerica would be considered to have acquired in connection
with the transaction for purposes of the Asset Tests shall be deemed to be the
value of such securities as of the date of the transaction, increased to
reflect deemed appreciation in value at an annual rate of 25%, for the period
of time from the date of the transaction to the close of the calendar quarter
in which the transaction takes place, and (C) CarrAmerica shall be treated as
having acquired or disposed of, as the case may be, on the date of the
transaction any other assets that CarrAmerica is contractually committed, on
the later of the time it receives written notice of the transaction or twenty
(20) business days prior to the transaction, to acquire or dispose of, as the
case may be, at some future date during such calendar quarter.
(iii) The Company shall have the option to provide to
CarrAmerica at least twenty (20) business days' prior notice of a potential
transaction that could be subject to the prohibition in this Section 4.1(c).
Such notice shall contain a detailed description of the potential transaction,
including the maximum reasonably expected value of any securities to be
received by CarrAmerica in connection with such transaction as of the date the
transaction is expected to be completed. If the Company provides such notice
to CarrAmerica, CarrAmerica may, within ten (10) business days after receipt
of such notice, provide the Company an opinion of counsel or its independent
accountants to the effect that the execution of such transaction (taking into
account the principles set forth in subparagraph (ii) above) would reasonably
be expected to result in a violation of one or more of the Asset Tests (which
opinion may be based upon customary representations of CarrAmerica as to
factual matters). If the Company shall provide such notice to CarrAmerica, and
CarrAmerica shall fail to deliver such an opinion within the requisite ten
(10) business days, the Company shall be entitled to complete such transaction
without any liability under this subparagraph (c).
(iv) From and after the Put Expiration Date through December
31, 2003, so long as CarrAmerica owns any securities of the Company, the
Company shall provide to CarrAmerica twenty (20) business days' prior notice
of any transaction involving the Company that would result in CarrAmerica
being deemed to have acquired additional securities of any issuer for purposes
of Section 856(c)(4) of the Code, provided that such notice would not violate
any confidentiality obligations of the Company. If the notice requirement set
forth in this subparagraph (iv) would violate any confidentiality obligations
of the Company, the Company shall use commercially reasonable efforts to
obtain an exception to such confidentiality requirements in order to provide
the notice to CarrAmerica.
(v) CarrAmerica shall maintain strict confidentiality with
respect to any potential transaction of which it receives notice under
subparagraph (iii) or subparagraph (iv) above, and CarrAmerica shall join in
any confidentiality obligations to which the Company is subject with respect
to such transaction.
(vi) Notwithstanding any of the above, in the event of any
transaction that would otherwise result in a violation of this subparagraph
(c), CarrAmerica shall (x) accept consideration in the form of cash rather
than securities (or waive the restrictions set forth in this paragraph (c));
provided, that CarrAmerica shall not be obligated to accept cash (or waive the
restrictions set forth in this paragraph (c)) if the receipt of such cash
would reasonably be expected to cause CarrAmerica to violate any of the income
tests set forth in Section 856(c)(2) or 856(c)(3) of the Code for either of
the taxable years ending December 31, 2000 or December 31, 2001; and (y) at
the request of the Company, join to elect that the Company (or any successor)
be treated as a "taxable REIT subsidiary" of CarrAmerica (to the extent that
such an election is not then in effect and would be effective to avoid a
violation of this paragraph (c) or to minimize the amount of cash that
CarrAmerica must receive in order to avoid a violation of this paragraph (c)).
(d) Limitations on Transactions that Produce Gain.
(i) The Company shall not undertake any transaction (including,
without limitation, a dividend, merger, reorganization, distribution of
securities, or otherwise) (A) that shall result in the recognition of more
than $25 million of taxable income or gain by CarrAmerica during the taxable
year ending December 31, 2000 (in addition to any gain that will be recognized
by CarrAmerica by reason of the consummation of the transactions contemplated
by the Merger Agreement (the "Merger Agreement") dated as of January 20, 2000,
as amended, by and among HQ Global, CarrAmerica, RSI and Vantas Incorporated,
a Nevada corporation, and all ancillary agreements related thereto), or (B)
that shall result in the recognition of more than $75 million of taxable
income or gain for CarrAmerica during the taxable year ending December 31,
2001.
(ii) In the event that the Company contemplates undertaking any
transaction (including, without limitation, a dividend, merger,
reorganization, distribution of securities, or otherwise) that is reasonably
likely to result in the recognition of taxable income or gain for CarrAmerica
in any single calendar year through 2003 that equals or exceeds $25 million
(other than any gain that will be recognized by CarrAmerica by reason of the
consummation of the transactions contemplated by the Merger Agreement and all
ancillary agreements related thereto), the Company shall provide CarrAmerica
with not less than seventy-five (75) calendar days' prior written notice
thereof; provided, however, that if using commercially reasonable efforts it
is not practicable for the Company to provide at least seventy-five (75)
calendar days prior written notice of such proposed transaction, then the
Company shall provide written notice to CarrAmerica as soon as practicable
prior to the proposed transaction, but in no event less than thirty (30)
calendar days prior to the transaction, provided further, that such notice
would not violate any confidentiality obligations of the Company. If the
notice requirement set forth in this subparagraph (ii) would violate any
confidentiality obligations of the Company, the Company shall use commercially
reasonable efforts to obtain an exception to such confidentiality requirements
in order to provide the required notice to CarrAmerica.
(iii) For purposes of this paragraph (d), the Company may
assume that CarrAmerica's aggregate adjusted tax basis in its Common Stock is
$20 per share.
(iv) Failure by CarrAmerica to cooperate fully and promptly
with respect to any reasonable request made by the Company for information in
order to determine the applicability of this paragraph (d) to any potential
transaction under consideration by the Company shall relieve the Company from
its obligations under this paragraph (d).
(v) CarrAmerica shall maintain strict confidentiality with
respect to any potential transaction of which it receives notice hereunder,
and CarrAmerica shall join in any confidentiality obligations to which the
Company is subject with respect to such transaction.
(e) Successors and Assigns. For purposes of this Section 4.1, the
term "Company" refers both to the Company itself and to all successors and
assigns (direct or indirect) of the Company (including, without limitation,
any entity that acquires some or all of the outstanding capital stock of the
Company by reason of a merger or otherwise in which CarrAmerica thereafter
would own securities of such acquiror or any affiliate thereof), and any
direct or indirect subsidiaries of the Company (or such a successor or assign
thereto). This Section 4.1(e) is included to avoid any ambiguity in the
interpretation of this Section 4.1 and shall not limit or otherwise affect the
generality of Sections 11.2, 11.5 and 11.6 or the interpretation of other
Sections of this Agreement.
4.2. No Acquisition of Common Stock from RSI or its Affiliates
Without a Majority Consent of the Holders, the Company shall not
redeem, purchase or otherwise acquire any of the Common Stock of the Company
held by RSI or any entity controlled by RSI; provided, however, that no
Majority Consent of the Holders shall be required if such redemption, purchase
or acquisition is pursuant to a tender offer or other offer made on the same
terms to all holders of Common Stock, including, without limitation, the
Holders.
4.3. No Contravening Agreement
Each of RSI, each Holder and the Company covenants that, from and
after the date hereof, it will not enter into any contract, agreement or other
arrangement that would impair, limit or restrict its ability to perform any of
its obligations under this Agreement.
4.4. Termination
The rights granted to Holders pursuant to Section 4.2 shall
terminate on the closing date of an IPO.
5. PARTICIPATION RIGHTS
5.1. Right to Participate
Subject to Section 5.6 hereof, from and after the date hereof, if
the Company proposes to issue or sell any equity securities of the Company or
securities convertible into equity securities of the Company ("Company
Interests") other than Company Interests issued pursuant to employee benefit
plans approved by the Company's stockholders, each Holder and RSI (each a
"Participant" and collectively, the "Participants") shall have the right to
purchase or subscribe for its "pro rata share" (as defined below), and no less
than all of such Participant's pro rata share, of such Company Interests;
provided, however, each Participant shall be entitled, on one (1) occasion
only, to purchase or subscribe for less than all of such Participant's pro
rata share or not to participate in such issuance or sale. For purposes of
this Section 5.1, each Participant's "pro rata share" of the Company Interests
to be issued or sold in a transaction giving rise to the participation rights
described in this Section 5.1 (inclusive of the Company Interests to be
purchased or subscribed for by all Participants pursuant to the participation
rights provided for by this Section 5.1) shall equal the percentage of
outstanding Common Stock owned by such Participant as of the date immediately
preceding such issuance or sale. Notwithstanding the foregoing, each
Participant shall be permitted to designate that any or all of the Company
Interests that it is entitled to purchase pursuant to this Section 5.1 shall
be of a separate class or series with the same designations, preferences and
rights as the Company Interests proposed to be issued, except that any such
separate class or series (i) shall have no voting rights except as required by
law, and (ii) shall be convertible into the Company Interests under the same
circumstances that the Nonvoting Common Stock is convertible into Voting
Common Stock.
5.2. Notice
If the Company proposes to issue any Company Interests in a
transaction giving rise to the participation rights provided for in Section
5.1, the Company shall send a written notice (the "Participation Notice") to
each Participant setting forth (a) the number of the Company Interests which
the Company proposes to issue, (b) the price (before any commission or
discount) at which such the Company Interests are proposed to be issued (or,
in the case of an underwritten or privately placed offering in which the price
is not known at the time the Participation Notice is given, the method of
determining such price and an estimate thereof), (c) such Participant's "pro
rata share" as of the date of the Participation Notice, and (d) all other
relevant information as to such proposed transaction as may be necessary for
each Participant to determine whether or not to exercise the rights granted
pursuant to Section 5.1. At any time within ten (10) days after its receipt of
the Participation Notice, each Participant may exercise its participation
rights to purchase or subscribe for the Company Interests, as provided for in
this Section 5, by so informing the Company in writing (an "Exercise Notice").
Each Exercise Notice shall state the percentage of the proposed sale or
issuance that such Participant elects to purchase. Each Exercise Notice shall
be irrevocable, subject to the conditions to the closing of the transaction
giving rise to the participation right provided for in Section 5.1.
5.3. Abandonment of Sale or Issuance
The Company shall have the right, in its sole discretion, at all
times prior to consummation of any proposed issuance or sale giving rise to
the participation right granted by Section 5.1, to abandon, rescind, annul,
withdraw or otherwise terminate such issuance or sale, whereupon all
participation rights in respect of such proposed issuance or sale shall become
null and void, and the Company shall not have any liability or obligation to
any Participant by virtue of such abandonment, rescission, annulment,
withdrawal or termination.
5.4. Terms of Sale
The purchase or subscription by any Participant pursuant to Section
5.1 above shall be at the same price and such other terms and conditions,
including the date of sale or issuance, as are applicable to the purchasers or
subscribers of the Company Interests whose purchases or subscriptions give
rise to the participation rights, which price and other terms and conditions
shall be substantially as stated in the relevant Participation Notice (which
standard shall be satisfied if the price is not greater than 110% of the
estimated price set forth in the relevant Participation Notice); provided,
however, that if the consideration to be received by the Company in connection
with the issuance of the Company Interests giving rise to participation rights
hereunder is other than cash or cash equivalents, the price at which the
participation rights may be exercised shall be the price set forth in the
Participation Notice or determined in the manner set forth in the
Participation Notice (which shall in either event be the price as set forth in
the agreement pursuant to which such Company Interests are to be issued, with
the consideration to be received therefor being valued based upon the fair
market value thereof); provided further, that if the consideration to be
received by the Company in connection with the issuance of the Company
Interests giving rise to participation rights hereunder is other than cash or
cash equivalents, and the fair market value of the consideration to be
received is not determinable, the price at which the participation rights may
be exercised shall, (i) in the event that shares of capital stock with an
established trading market are being issued or sold, be the average ten-day
trailing market price of such shares as of the date of receipt of the
Participation Notice, and (ii) in the event any other interests are being
issued or sold, be determined by reference to the amount set forth above,
adjusted as may be appropriate to reflect the relationship between those
interests with an established trading market and those interests to be issued
in the relevant transaction; and provided, finally, that in the event the
purchases or subscriptions giving rise to the participation rights are
effected by an offering of securities registered under the 1933 Act and in
which offering it is not practical in the judgment of the Company for the
securities to be purchased by any Participant to be included, such securities
to be purchased by such Participant or Participants will be purchased in a
concurrent private placement if legally permissible.
5.5. Timing of Sale
If, with respect to any Participation Notice, any Participant fails
to deliver an Exercise Notice within the requisite time period, the Company
shall have one hundred fifty (150) days after the expiration of the time in
which the Exercise Notice is required to be delivered in which to sell or
issue not more than the number of the Company Interests described in the
Participation Notice and at a price and on terms not materially less favorable
to the Company than were set forth in the Participation Notice. If, at the end
of one hundred fifty (150) days following the expiration of the time in which
the Exercise Notice is required to be delivered, the Company has not completed
the issuance or sale of the Company Interests in accordance with the terms
described in the Participation Notice (or, in the case of the price, at a
price which is at least 90% of the estimated price set forth in the
Participation Notice, which price shall be deemed not to be materially less
favorable to the Company than the price set forth in the Participation
Notice), the Company shall again be obligated to comply with the provisions of
Section 5.2 with respect to, and provide Participants with the opportunity to
participate in, any proposed issuance or sale of the Company Interests;
provided, however, that notwithstanding the foregoing, if the price at which
such the Company Interests is to be sold in an underwritten offering is not at
least 90% of the estimated price set forth in the Participation Notice, the
Company may inform such Participant or Participants of such fact and such
Participant or Participants shall be entitled to elect, by written notice
delivered within two business days following receipt of such notice from the
Company, to participate in such offering in accordance with the provisions of
this Section 5.
5.6. Termination of Participation Right
The participation rights granted to Participants pursuant to this
Section 5 shall terminate on the earlier of (i) with respect to each
Participant on an individual basis, the first date on which such Participant's
ownership of Common Stock of the Company, together with any shares of Common
Stock transferred by such Participant to a majority owned subsidiary or an
Immediate Family Member of such Participant and still owned by such transferee
or any other permitted transferee, shall have been (x) in the case of any
Holder, less than 90% of the number of shares of Common Stock of the Company
set forth opposite the name of such Holder on the signature page hereto (as
the same may be increased pursuant to a prior exercise of a participation
right granted pursuant to Section 5.1 and subject to adjustment in the event
of stock splits, stock dividends and similar events) for a continuous period
of ninety (90) days, and (y) in the case of RSI, less than 65% of the number
of shares of Common Stock of the Company set forth opposite RSI's name on the
signature page hereto (as the same may be increased pursuant to a prior
exercise of a participation right granted pursuant to Section 5.1 and subject
to adjustment in the event of stock splits, stock dividends and similar
events), (ii) the closing date of an IPO, or (iii) if such Participant has
previously elected either to purchase or subscribe for less than such
Participant's pro rata share or not to participate in such issuance or sale in
accordance with the proviso set forth in the first sentence of Section 5.1,
the date on which the Company subsequently consummates a transaction which was
subject to this Section 5 and such Participant did not elect to purchase or
subscribe for all of its pro rata share of the Company Interests. The
participation rights granted pursuant to Section 5.1 shall not apply to an IPO
and shall not be assignable or transferable to a third party; provided,
however, that any party hereto that is an entity may assign its rights and
obligations pursuant to this Section 5 in connection with a transfer of all or
substantially all of its assets or a merger, consolidation or other similar
business combination transaction. Notwithstanding anything to the contrary
contained herein, if a Participant delivers an Exercise Notice to the Company,
and the Company has not otherwise abandoned the transaction to which the
Exercise Notice applies, and such Participant fails to fulfill its obligations
to purchase the shares set forth in the Exercise Notice on the date set for
closing the transaction to which the Exercise Notice applies, such
Participant's rights under this Section 5 will terminate and such Participant
shall pay to the Company any expenses (including reasonable attorneys' fees)
incurred by the Company in connection with the transaction with the
Participant.
6. TAG-ALONG RIGHTS
6.1. Rights and Notice
Subject to Section 6.4 of this Agreement and the last sentence of
this Section 6.1, if RSI receives a bona fide offer to purchase from it,
whether in one transaction or in a series of related transactions, shares of
Common Stock of the Company from any person other than an Affiliate of RSI (a
"Purchase Offer"), RSI shall not accept such Purchase Offer unless each of the
Holders is entitled to sell pursuant to the Purchase Offer that percentage of
the shares of Common Stock owned by such Holder equal to the percentage of the
number of shares of Common Stock owned by RSI proposed to be included in the
Purchase Offer. Sales by the Holders pursuant to the Purchase Offer shall be
on the same terms and conditions as the Purchase Offer, without reduction for
minority interest, absence of voting rights, illiquidity or otherwise. Not
later than fifteen (15) days prior to consummation of the Purchase Offer, RSI
shall send a notice (the "Tag-Along Notice") to each Holder, which notice
shall include, among other things, (a) the number of shares of Common Stock
that are the subject of the Purchase Offer, (b) the price at which the bona
fide purchaser is willing to purchase the Common Stock, and (c) all other
relevant information as to such proposed transaction as may be necessary for
each Holder to determine whether or not to exercise the Tag-Along Right. Upon
receipt of the Tag-Along Notice, each Holder shall have the right (the
"Tag-Along Right") to sell in accordance with the terms of the Purchase Offer
up to the number of shares of Common Stock equal to the product of (a) the
total number of shares of Common Stock proposed to be sold by all of the
Holders pursuant to the Purchase Offer and (b) a fraction, the numerator of
which shall be the number of shares of Common Stock owned by such Holder and
the denominator of which shall be the number of shares of Common Stock owned
by all Holders electing to participate in such purchase. A Holder may exercise
the Tag-Along Right by delivering, not later than ten (10) days after receipt
of the Tag-Along Notice, a written notice to RSI (a "Holder Tag-Along Notice")
stating the number of shares of Common Stock that such Holder wishes to sell
pursuant to the Purchase Offer. Notwithstanding the foregoing, RSI shall have
the right to sell up to an aggregate of twenty-five percent (25%) of the total
number of shares of Common Stock of the Company owned by RSI as of the date
hereof (subject to future adjustment in the event of stock splits, stock
dividends and similar events) prior to the second anniversary hereof without
triggering any rights under this Section 6.
6.2. Abandonment of Sale
RSI shall have the right, in its sole discretion, at all times
prior to consummation of the proposed transaction giving rise to the Tag-Along
Rights, to abandon, withdraw or otherwise terminate its participation in the
proposed transaction, and RSI shall not have any liability or obligation to
the Holders as a result of such abandonment, withdrawal or other termination.
6.3. Timing of Sale
If any Holder fails to deliver a Holder Tag-Along Notice within the
requisite time period, RSI shall have one hundred fifty (150) days after the
expiration of the time in which the Holder Tag-Along Notice is required to be
delivered to consummate the proposed transaction identified in the Holder
Purchase Offer at the price and on the terms that are not more favorable to
RSI than those set forth in the Holder Tag-Along Notice (except that the price
may be increased by up to 10% from the price set forth in the Holder Tag-Along
Notice). If, at the end of such one hundred fifty (150)-day period, RSI has
not consummated the proposed transaction, RSI shall again be obligated to
comply with the provisions of this Section 6.
6.4. Termination of Tag-Along Right
The Tag-Along Rights granted to Holders pursuant to this Section 6
shall terminate upon the closing of an IPO.
7. PUT RIGHTS
7.1. 2000 Put Right
(a) 2000 Put Right. At any time during the period commencing on
October 31, 2000 and ending on November 15, 2000 (the "2000 Put Period"), each
Holder shall have the right (the "2000 Put Right") to require that RSI
purchase up to 16.67 % of the Common Stock owned by such Holder, for a price
per share equal to the 2000 Put Price (as defined below). The "2000 Put Price"
of each share of Common Stock to be sold pursuant to the 2000 Put Right shall
be the greater of: (i) the Fair Market Value (as defined below) of such Common
Stock, determined in accordance with the procedures set forth Section 7.4;
(ii) the Consideration (as defined in the U.S. Stock Purchase Agreement,
subject to future adjustment in the event of stock splits, stock dividends and
similar events); or (iii) the highest price per share of Common Stock (or the
implied value of the Common Stock in connection with the issuance of any
convertible security of the Company) (subject to future adjustment in the
event of stock splits, stock dividends and other similar events) received by
RSI or the Company in any sale or issuance thereof (i) in connection with the
transactions contemplated by the Merger Agreement or (ii) from and after the
date hereof through the last day of the 2000 Put Period but in no event less
than $__________ per share.
(b) Consideration.
(i) Cash. The consummation of the sale and purchase of Common
Stock pursuant to Section 7.1(a) shall occur on December 7, 2000 (the "2000
Put Right Closing"). RSI shall pay the 2000 Put Price in cash in full at the
2000 Put Right Closing unless it elects the alternative consideration payment
set forth in clause (ii) below. The Designated Holder (as defined below) shall
have the right to inquire by notice to RSI as to the form of the consideration
to be paid by RSI at any time from the twelfth day prior to the 2000 Put Right
Closing up to and including the fifth day preceding the 2000 Put Right
Closing. RSI shall inform the Designated Holder of the form of the
consideration not later than the second day prior to the 2000 Put Right
Closing. If RSI fails to so inform the Designated Holder, RSI shall be
responsible for any actual damages incurred by the Holders as a result of such
failure.
(ii) Alternative Consideration - RSI Stock. Subject to the
following sentence, at RSI's option, all or a portion of the consideration
payable upon exercise of the 2000 Put Right may be paid by delivery of a
number of shares of common stock of RSI equal to (x) the 2000 Put Price, less
any cash paid pursuant to Section 7.1(b)(i) hereof, divided by (y) 98% of the
volume weighted average price of a share of common stock of RSI on the NASDAQ
Stock Market or other national securities exchange on which RSI's shares are
then traded for the ten (10) trading days ending on the third trading day
prior to the date of the 2000 Put Right Closing. RSI may pay all or a portion
of the 2000 Put Price in shares of common stock of RSI only if (i) RSI's
common stock is then listed on the NASDAQ Stock Market or other national
securities exchange on which RSI's shares are then traded, and (ii) the shares
to be issued to the 2000 Put Exercising Holder shall be eligible for immediate
sale, subject to a resale registration statement under the 1933 Act being
declared effective by the SEC. RSI covenants and agrees that it will file
within thirty (30) days after receipt of such 2000 Put Notice and will use its
best efforts to have declared effective within ninety (90) days of receipt of
such 2000 Put Notice a resale registration statement for the RSI common stock
issued pursuant hereto.
(c) Minimum Put Requirement. No exercise by any Holder of the 2000
Put Right shall be permitted unless such exercise is with respect to the
lesser of (i) 200,000 shares of Common Stock or (ii) all of the shares of
Common Stock owned by such Holder.
7.2. 2001 Put Right
(a) 2001 Put Right. Unless an IPO has occurred prior to July 31,
2001, at any time during the period commencing on October 31, 2001 and ending
on November 15, 2001 (the "2001 Put Period"), each Holder shall have the right
(the "2001 Put Right") to require that RSI purchase up to 50% of the Common
Stock owned by such Holder (but subject to the minimum put requirement set
forth in Section 7.2(c)), for a price per share equal to the Fair Market Value
of such Common Stock (the "2001 Put Price"), determined in accordance with the
procedures set forth in Section 7.4. Each Holder electing to exercise the 2001
Put Right (a "2001 Put Exercising Holder") shall exercise such right by a
written notice (the "2001 Put Notice") delivered to RSI and the Company during
the 2001 Put Period.
(b) Consideration.
(i) Cash. The consummation of each sale and purchase of Common
Stock pursuant to Section 7.2(a) shall occur on December 7, 2001 (the "2001
Put Right Closing"). RSI shall pay the 2001 Put Price in cash in full at the
2001 Put Right Closing, unless it elects either (but not both) of the
alternative consideration payments set forth in clauses (ii) and (iii) below.
The Designated Holder (as defined below) shall have the right to inquire by
notice to RSI as to the form of the consideration to be paid by RSI at any
time from the twelfth day prior to the 2001 Put Right Closing up to and
including the fifth day preceding the 2001 Put Right Closing. RSI shall inform
the Designated Holder of the form of the consideration not later than the
second day prior to the 2001 Put Right Closing. If RSI fails to so inform the
Designated Holder, RSI shall be responsible for any actual damages incurred by
the Holders as a result of such failure.
(ii) Alternative Consideration - Promissory Note. At RSI's
option, all or a portion of the consideration payable upon exercise of the
2001 Put Right may be paid by delivery of a promissory note (the "Note")
payable in cash to a 2001 Put Exercising Holder in the amount of the 2001 Put
Price payable to such 2001 Put Exercising Holder, less any cash paid pursuant
to Section 7.2(b)(i). The Note shall mature on July 31, 2002, shall be
non-interest bearing, and shall be prepayable at any time, at RSI's option.
(iii) Alternative Consideration - RSI Stock. Subject to the
following sentence, at RSI's option, all or a portion of the consideration
payable upon exercise of the 2001 Put Right may be paid by delivery of a
number of shares of common stock of RSI equal to (x) the 2001 Put Price, less
any cash paid pursuant to Section 7.2(b)(i) hereof, divided by (y) 98% of the
volume weighted average price of a share of common stock of RSI on the NASDAQ
Stock Market or other national securities exchange on which RSI's shares are
then traded for the ten (10) trading days ending on the third trading day
prior to the date of the 2001 Put Right Closing. RSI may pay all or a portion
of the 2001 Put Price in shares of common stock of RSI only if (i) RSI's
common stock is then listed on the NASDAQ Stock Market or other national
securities exchange on which RSI's shares are then traded, and (ii) the shares
to be issued to the 2001 Put Exercising Holder shall be eligible for immediate
sale, subject to a resale registration statement under the 1933 Act being
declared effective by the SEC. RSI covenants and agrees that it will file
within thirty (30) days after receipt of such 2001 Put Notice and will use its
best efforts to have declared effective within ninety (90) days of receipt of
such 2001 Put Notice a resale registration statement for the RSI common stock
issued pursuant hereto.
(c) Minimum Put Requirement. No exercise by any Holder of the 2001
Put Right shall be permitted unless such exercise is with respect to the
lesser of (i) 200,000 shares of Common Stock or (ii) all of the shares of
Common Stock owned by such Holder.
7.3. 2002 Put Right
(a) 2002 Put Right. Unless an IPO has occurred prior to April 1,
2002, at any time during the period commencing on June __, 2002 and ending on
June 17, 2002 (the "2002 Put Period" and, together with the 2000 Put Period
and the 2001 Put Period, a "Put Period"), each Holder shall have the right
(the "2002 Put Right") to require that RSI purchase any or all of the Common
Stock owned by such Holder (but subject to the minimum put requirement set
forth in Section 7.3(c)), for a price per share equal to the Fair Market Value
of such Common Stock (the "2002 Put Price"), determined in accordance with the
procedures set forth in Section 7.4. Each Holder electing to exercise the 2002
Put Right (a "2002 Put Exercising Holder" and together with a 2001 Put
Exercising Holder, the "Exercising Holders") shall exercise such right by a
written notice (the "2002 Put Notice") delivered to RSI during the 2002 Put
Period.
(b) Consideration.
(i) Cash. The consummation of each sale and purchase of Common
Stock pursuant to Section 7.3(a) shall occur on July 31, 2002 (the "2002 Put
Right Closing"). RSI shall pay the 2002 Put Price in cash in full at the 2002
Put Right Closing, unless it elects the alternative consideration payment set
forth in clause (ii) below. The Designated Holder (as defined below) shall
have the right to inquire by notice to RSI as to the form of the consideration
to be paid by RSI at any time from the twelfth day prior to the 2002 Put Right
Closing up to and including the fifth day preceding the 2002 Put Right
Closing. RSI shall inform the Designated Holder of the form of the
consideration not later than the second day prior to the 2002 Put Right
Closing. If RSI fails to so inform the Designated Holder, RSI shall be
responsible for any actual damages incurred by the Holders as a result of such
failure.
(ii) Alternative Consideration. Subject to the following
sentence, at RSI's option, all or a portion of the consideration payable upon
exercise of the 2002 Put Right may be paid by delivery of a number of shares
of common stock of RSI equal to (x) the 2002 Put Price, less any cash paid
pursuant to Section 7.3(b)(i) hereof, divided by (y) 98% of the volume
weighted average price of a share of common stock of RSI on the NASDAQ Stock
Market or other national securities exchange on which RSI's shares are then
traded for the ten (10) trading days ending on the third trading day prior to
the date of the 2002 Put Right Closing. RSI may pay all or a portion of the
2002 Put Price in shares of common stock of RSI only if (i) RSI's common stock
is then listed on the NASDAQ Stock Market or other national securities
exchange on which RSI's shares are then traded, and (ii) the shares to be
issued to the 2002 Put Exercising Holder shall be eligible for immediate sale,
subject to a resale registration statement under the 1933 Act being declared
effective by the SEC. RSI covenants and agrees that it will file within thirty
(30) days after receipt of such 2002 Put Notice and will use its best efforts
to have declared effective within ninety (90) days of receipt of such 2002 Put
Notice a resale registration statement for the RSI common stock issued
pursuant hereto.
(c) Minimum Put Requirement. No exercise by any Holder of the 2002
Put Right shall be permitted unless such exercise is with respect to the
lesser of (i) 200,000 shares of Common Stock or (ii) all of the shares of
Common Stock owned by such Holder.
7.4. Procedures to Determine Fair Market Value
(a) Not later than sixty (60) days prior to the commencement of a
Put Period, the Designated Holder, on behalf of all Holders, and RSI shall
each select an independent investment banking firm of nationally recognized
expertise in the valuation of companies comparable to the Company. The
agreement pursuant to which each such firm is retained shall require such firm
to deliver to each of the Designated Holder and RSI a valuation report setting
forth its determination of the total equity value of the Company not later
than thirty (30) days prior to the commencement of a Put Period. The total
equity value shall be calculated as of October 31, 2000 (in the case of the
2000 Put Right), October 31, 2001 (in the case of the 2001 Put Right) or June
__, 2002 (in the case of the 2002 Put Right). If the lower valuation of the
two investment banking firms so selected by the Designated Holder and RSI is
90% or more of the higher valuation, then the average of two valuations shall
be considered the "total equity value" of the Company for purposes of this
Section 7.4. If the lower valuation is not at least 90% of the higher
valuation, then such investment banking firms shall select a third independent
investment banking firm of nationally recognized expertise in the valuation of
companies comparable to the Company, which shall choose, not later than the
commencement of a Put Period, one of the values determined by the investment
banking firms so selected by the Designated Holder and RSI, which shall be the
"total equity value" of the Company for purposes of this Section 7.4. Any
determination of the "total equity value" of the Company in accordance with
the provisions of this paragraph shall be final and binding. The costs of the
investment bankers retained in accordance with this Section 7.4 shall be borne
equally by RSI and the Exercising Holders (pro rata based on the respective
number of shares sold), or, in the case of the 2000 Put Right or if there
shall be no Exercising Holders, equally by RSI and CarrAmerica. The "Fair
Market Value" of each share of Common Stock for purposes of determining the
2000 Put Price, the 2001 Put Price or the 2002 Put Price, as applicable, shall
be determined by dividing (i) the total equity value of the Company as of
October 31, 2000 (in the case of the 2000 Put Right), October 31, 2001 (in the
case of the 2001 Put Right) or June __, 2002 (in the case of the 2002 Put
Right), as determined in the manner described above, by (ii) the number of
shares of Common Stock outstanding as of October 31, 2000, October 31, 2001 or
June __, 2002, as applicable (including any securities convertible into Common
Stock calculated on a fully diluted basis). The Fair Market Value of each
share of Common Stock shall be determined without giving effect to any factor
specifically relating to the Common Stock, including, without limitation,
liquidity premiums or discounts relating to the Common Stock, minority
position or lack of voting power.
(b) During the 2000 Put Period, the 2001 Put Period, the 2002 Put
Period and the ten trading days ending on the 3rd business day prior to the
date of the applicable Put Right Closing (each such period, a "Measuring
Period"), neither CarrAmerica nor any of its controlled Affiliates shall,
directly or indirectly, engage in short sales of (and, during the ten trading
days prior to the date of the applicable Put Right Closing, engage in sales
of), or purchase put options on, shares of RSI common stock or securities
convertible into or exchangeable for shares of RSI common stock, or otherwise
enter into or execute hedging or arbitrage transactions on the NASDAQ Stock
Market, or on any national securities exchange on which RSI common stock is
listed or with third party intermediaries with the purpose or intention, or
having the effect, of decreasing the market price of RSI common stock during
each Measuring Period.
7.5. Indemnification of Designated Holder
Each Holder hereby irrevocably appoints the Designated Holder as
its representative under Section 7 hereof for purposes of determining the Fair
Market Value of the Common Stock. Each Holder hereby indemnifies the
Designated Holder for, and holds the Designated Holder harmless against, any
loss, liability, disbursements, expenses, losses, costs or cash damages
(including reasonable attorneys' fees) incurred on the part of the Designated
Holder, arising out of or in connection with Designated Holder carrying out
its duties herein, including costs and expenses of defending the Designated
Holder against any claim of liability with respect thereto, provided that the
Designated Holder has acted in good faith.
8. TRANSFER RESTRICTIONS
8.1. RSI Right of First Offer
(a) Subject to Section 8.4 hereof, before any Holder shall transfer
any shares of capital stock of the Company, such Holder shall first deliver a
written notice (the "Holder Notice of Offer") to RSI offering to sell the
number of shares proposed to be sold by such Holder to RSI (the "RSI Right of
First Offer"). The Holder Notice of Offer shall specify (i) the number and
classes of all shares of Common Stock proposed to be sold by such Holder to
RSI (the "Holder Offered Securities"), (ii) the minimum proposed cash
consideration per share that Holder desires to receive for the Holder Offered
Securities (the "Holder Offer Price"), and (iii) any other terms and
conditions of the offer. The Holder Notice of Offer shall constitute an
irrevocable offer by such Holder to sell to RSI all, but not less than all, of
the Holder Offered Securities at the Holder Offer Price, in accordance with
this Section 8.
(b) Within thirty (30) days following its receipt of the Holder
Notice of Offer, RSI shall notify such Holder whether it intends to exercise
its right to purchase all (but not less than all) of the Holder Offered
Securities (the "RSI Notification"). A RSI Notification that indicates that
RSI intends to purchase the Holder Offered Securities shall be deemed to be an
irrevocable commitment of RSI to purchase the Holder Offered Securities.
Should RSI elect to exercise the RSI Right of First Offer, the RSI
Notification shall include a subscription for the offered shares and RSI shall
purchase the Holder Offered Securities on the date for closing specified in
the Holder Notice of Offer, which date shall be no less than thirty (30) days
after the date of the RSI Notification. If RSI does not subscribe for and
purchase all of the Holder Offered Securities pursuant to this Section 8.1(b),
such Holder may thereafter sell the Holder Offered Securities to any third
party on the terms and conditions (including, but not limited to, the number
of shares of Holder Offered Securities and the Holder Offer Price) as
specified in the Holder Notice of Offer, provided, that such sale is
consummated within one hundred fifty (150) days of the date of the Holder
Notice of Offer; and provided further, that the fair market value of the price
paid for such shares by a third party (which price may consist of cash,
securities, other non-cash consideration or a combination thereof) is at least
90% of the Holder Offer Price. If the price to be paid for such shares by a
third party is payable in whole or in part in consideration other than cash or
securities traded on a national securities exchange or the NASDAQ Stock
Market, and RSI objects to the Holder's determination of the cash fair market
value of the non-cash portion of the consideration, then such determination
shall be made by (i) Goldman, Sachs & Co., (ii) Merrill Lynch & Co., if
Goldman, Sachs & Co. is unable or unwilling to make such determination, or
(iii) if neither of the foregoing firms is able or willing to deliver such
valuation, such other independent investment banking firm or other qualified
appraiser mutually agreeable to and promptly selected by the Holder and RSI,
such determination shall be final and binding on the parties. After the
expiration of such 150-day period, such Holder shall again comply with the
provisions of this Section 8.1 before selling any shares of the Company.
8.2. Holder Right of First Offer
(a) Subject to Section 8.4 hereof, the second sentence of this
paragraph and provided that the Holders collectively own at least 95% of the
total number of shares of Common Stock of the Company set forth opposite the
names of such Holders on the signature page hereto (subject to future
adjustment in the event of stock splits, stock dividends and similar events),
if RSI desires to transfer, in a single transaction or a series of related
transactions, a number of shares of Common Stock of the Company not in excess
of twenty percent (20%) of the total shares of Common Stock of the Company
outstanding as of such date, RSI shall first deliver a written notice (the
"RSI Notice of Offer") to the Designated Holder offering to sell the lesser of
(i) the number of shares proposed to be sold by RSI or (ii) 20% of the number
of shares of issued and outstanding Common Stock of the Company as of the date
of the RSI Notice of Offer, to Holders (the "Holder Right of First Offer" and,
together with the RSI Right of First Offer, the "Rights of First Offer").
Notwithstanding the foregoing, RSI shall have the right to sell up to an
aggregate of twenty-five percent (25%) of the total number of shares of Common
Stock of the Company owned by RSI as of the date hereof (subject to future
adjustment in the event of stock splits, stock dividends and similar events)
prior to the second anniversary hereof without triggering any rights under
this Section 8.2. The RSI Notice of Offer shall specify (i) the number and
classes of all shares of Common Stock proposed to be sold by RSI to the
Holders (the "RSI Offered Securities"), (ii) the minimum proposed cash
consideration per share that RSI desires to receive for the RSI Offered
Securities (the "RSI Offer Price"), and (iii) any other terms and conditions
of the offer. The RSI Notice of Offer shall constitute an irrevocable offer by
RSI to sell to the Participating Holders (as defined below), as the case may
be, all, but not less than all, of the RSI Offered Securities at the RSI Offer
Price, in accordance with this Section 8.2(a).
(b) Within ten (10) days following its receipt of the RSI Notice of
Offer, the Designated Holder shall determine whether it intends to exercise
its right to purchase all (but not less than all) of the RSI Offered
Securities. If the Designated Holder elects to exercise the Holder Right of
First Offer, it shall send all of the other Holders a copy of the RSI Notice
of Offer not later than the eleventh (11th) day after the Designated Holder's
receipt thereof. If, but only if, the Designated Holder elects to exercise the
Holder Right of First Offer, each Holder shall have the right to purchase all,
but not less than all, of its "pro rata share" of the RSI Offered Securities.
As used herein, a Holder's "pro rata share" means a fraction, the numerator of
which is the number of shares of Common Stock owned by such Holder and the
denominator of which is the number of shares of Common Stock owned by all of
the Holders (including the Designated Holder). Each Holder shall have ten (10)
days to notify the Designated Holder of the number of shares such Holder
elects to purchase pursuant to the RSI Right of First Offer. Within thirty
(30) days of receipt of the RSI Notice of Offer, the Designated Holder shall
notify RSI whether the Holders are exercising the Holder Right of First Offer
(the "Designated Holder Notification"). A Designated Holder Notification that
indicates that Participating Holders intend to purchase the RSI Offered
Securities shall be deemed to be an irrevocable commitment of such
Participating Holders to purchase the RSI Offered Securities. Should all or
any portion of the Holders (the "Participating Holders") elect to exercise the
Holder Right of First Offer, the Designated Holder Notification shall include
a subscription for the offered shares and the Participating Holders shall
purchase the Offered Securities on the date for closing specified in the RSI
Notice of Offer, which date shall be no less than thirty (30) days after the
date of the Designated Holder Notification. If the Holders do not subscribe
for and purchase all of the RSI Offered Securities pursuant to this Section
8.2(b), RSI may thereafter sell the RSI Offered Securities to any third party
on the terms and conditions (including, but not limited to, the number of
shares of RSI Offered Securities and the RSI Offer Price) as specified in the
RSI Notice of Offer, provided, that such sale is consummated within one
hundred fifty (150) days of the date of the RSI Notice of Offer; and provided
further, that the fair market value of the price paid for such shares by a
third party (which price may consist of cash, securities, other non-cash
consideration or a combination thereof) is at least 90% of the RSI Offer
Price. If the price to be paid for such shares by a third party is payable in
whole or in part in consideration other than cash or securities traded on a
national securities exchange or the NASDAQ Stock Market, and Designated Holder
objects to RSI's determination of the cash fair market value of the non-cash
portion of the consideration, then such determination shall be made by (i)
Goldman, Sachs & Co., (ii) Merrill Lynch & Co., if Goldman, Sachs & Co. is
unable or unwilling to make such determination, or (iii) if neither of the
foregoing firms is able or willing to deliver such valuation, such other
independent investment banking firm or other qualified appraiser mutually
agreeable to and promptly selected by the Designated Holder and RSI, such
determination shall be final and binding on the parties. After the expiration
of such 150-day period, RSI shall again comply with the provisions of this
Section 8.2 before selling any shares of the Company.
8.3. No Obligation to Purchase
RSI shall not be obligated to purchase any Holder Offered
Securities pursuant to any Holder Notice of Offer in accordance with the
provisions of Section 8.1 and no Holder shall be obligated to purchase any RSI
Offered Securities pursuant to any RSI Notice of Offer in accordance with the
provisions of Section 8.2.
8.4. Termination of the Rights of First Offer
The Rights of First Offer granted pursuant to this Section 8 shall
terminate upon the closing of an IPO.
8.5. IPO Lock-Up
Each Holder hereby agrees, and will any cause any transferee who
acquires shares of Common Stock from Holder during the applicable period to
agree, that, if requested by the underwriters in connection with an IPO, such
Holder (or transferee) will agree not to sell, pledge, make any short sale of,
loan, grant any option for the purchase of any shares of Common Stock owned by
it (whether pursuant to a registration statement or otherwise) either through
the agency of a broker-dealer or the facilities of the national securities
exchange on which the Company's shares of Common Stock are listed for a
reasonable period following the IPO, such period not to exceed ninety (90)
days. If the Company determines in good faith that it would be advantageous to
the Company for any Holder to be subject to a lock-up in accordance with the
terms and conditions of the preceding sentence for a period in excess of
ninety (90) days, such Holder shall agree to such lock-up, not to exceed an
additional ninety (90) days; provided, that (i) such Holder shall be permitted
to sell as a selling stockholder in the IPO up to fifty percent (50%) (the
exact amount to be determined by such Holder) of the shares of Common Stock
held by such Holder as of the closing date of the IPO; (ii) RSI shall acquire,
at the closing of the IPO, up to fifty percent (50%) (the exact amount to be
determined by such Holder) of the shares of Common Stock held by such Holder
as of the closing date of the IPO, either (y) for cash at the IPO price, or
(z) for a number of shares of common stock of RSI equal to (A) the value of
the shares of Common Stock proposed to be sold by such Holder (such value
being deemed equal to the initial public offering price in the IPO), divided
by (B) the average closing trading price of a share of common stock of RSI on
the NASDAQ Stock Market or other national securities exchange on which RSI's
shares are traded for the ten (10) trading days ending on the third trading
day prior to the closing date of the IPO; provided that RSI's common stock is
then listed on the NASDAQ Stock Market or other national securities exchange
on which RSI's shares are then traded, and the shares to be issued to such
Holder shall be eligible for immediate sale, subject to a resale registration
statement under the 1933 Act being declared effective by the SEC; or (iii) any
combination of (i) or (ii) above which results in such Holder disposing of up
to fifty percent (50%) (the exact amount to be determined by such Holder) of
its shares of Common Stock. With respect to the proviso set forth in clause
(ii) above, RSI covenants and agrees that it will file within thirty (30) days
after the closing of the IPO and will use its best efforts to have declared
effective within ninety (90) days after the closing of the IPO a resale
registration statement for the RSI common stock issued pursuant hereto.
9. LEASE GUARANTEE INDEMNIFICATION
RSI indemnifies CarrAmerica for, and holds it harmless against, any
loss, liability, disbursements, expenses, losses, costs or cash damages
(including reasonable attorneys' fees) arising from and after the date hereof
and incurred by, arising out of or in connection with those certain guarantees
of obligations of HQ Global and its affiliates listed on Exhibit A, including
costs and expenses of defending CarrAmerica against any claim of liability
with respect thereto.
10. PURCHASE RIGHT AGREEMENT ANTI-DILUTION PROTECTION
In the event of an IPO, the Company hereby assigns to CarrAmerica,
and CarrAmerica hereby assumes, the obligation of the Company to sell 100% of
the shares of common stock required to be sold under the Purchase Right
Agreement, dated as of March 4, 1998, among the Company, Robert A. Arcoro and
Joseph Kaidanow with respect to each percentage point decrease in the Debt
Ratio (as defined in such Purchase Right Agreement) below 55% and above and
including 40%.
11. MISCELLANEOUS
11.1. RSI Assurance
RSI unconditionally, absolutely and irrevocably guarantees and
assures the due and punctual performance and observance by the Company of all
terms, covenants and conditions of Section 4.1 of this Agreement, whether
according to the present terms hereof or pursuant to any amendment in the
terms, covenants and conditions hereof now or at any time hereafter made or
granted, and regardless of whether recovery on such liability may be or
hereafter become barred by any statute of limitations or such liability may
otherwise be or become unenforceable; provided, that, such guarantee and
assurance shall be applicable to a transaction giving rise to a violation of
Section 4.1(b), 4.1(c) or 4.1(d) only to the extent such transaction has been
approved by the Board, and; provided, further, such guarantee shall terminate
on the closing date of an IPO.
11.2. Assignment
None of the parties hereto shall be permitted to assign any of
their respective rights or obligations hereunder to any third party, except
that each Holder shall be permitted to assign its rights and obligations
hereunder to any other Person in connection with a transfer of shares of
Common Stock by such Holder made in accordance with Section 8 hereof;
provided, that such Person agrees to be bound by this Agreement; and provided
further, that any party hereto that is an entity may assign its rights and
obligations hereunder in connection with a transfer of all or substantially
all of its assets or a merger, consolidation or other similar business
combination transaction. Any agreement in violation hereof shall be void ab
initio and of no force or effect.
11.3. Entire Agreement; Amendment
This Agreement, including the Appendices and Exhibits hereto and
other writings referred to herein or delivered pursuant hereto, constitutes
the entire agreement among the parties hereto with respect to the transactions
contemplated herein, and it supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein.
No amendment, modification or discharge of this Agreement shall be valid or
binding unless set forth in writing and duly executed by the Company, RSI and
a Majority Consent of the Holders.
11.4. Waiver
No delay or failure on the part of any party hereto in exercising
any right, power or privilege under this Agreement or under any other
instruments given in connection with or pursuant to this Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and
signed by the party against whom enforcement of such waiver is sought and then
only to the extent expressly specified therein.
11.5. Limitation on Benefit
It is the explicit intention of the parties hereto that no person
or entity other than the parties hereto is or shall be entitled to bring any
action to enforce any provision of this Agreement against any of the parties
hereto and their respective successors, heirs, executors, administrators,
legal representatives and permitted assigns, and the covenants, undertakings
and agreements set forth in this Agreement shall be solely for the benefit of,
and shall be enforceable only by, the parties hereto or their respective
successors, heirs, executors, administrators, legal representatives and
permitted assigns.
11.6. Binding Effect
This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
11.7. Governing Law
This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of Delaware (excluding the choice of law
rules thereof).
11.8. Notices
All notices, demands, requests, or other communications which may
be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be
hand-delivered, sent by documented overnight delivery service or mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or, to the extent receipt is confirmed, transmitted by telegram,
telecopy, facsimile or other electronic transmission or telex, addressed as
follows:
(i) If to the Company:
HQ Global Holdings, Inc.,
15950 North Dallas Parkway, Suite 400
Dallas, Texas 75248
Attn.: Jill B. Louis
Facsimile No.: 972/361-8101
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher
1717 Main Street, Suite 5500
Dallas, Texas 75201
Attn.: Harlan Cohen, Esq.
Facsimile No.: 214/698-3400
(ii) If to RSI:
FrontLine Capital Group
1350 Avenue of the Americas
New York, New York 10019
Attn.: Jason Barnett, General Counsel
Facsimile No.: 212/931-8001
with a copy (which shall not constitute notice) to:
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0057
Attn.: Joseph W. Armbrust, Jr.
J. Gerard Cummins
Facsimile No.: 212/839-5599
(iii) If to CarrAmerica:
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn.: Linda A. Madrid, General Counsel
Facsimile No.: 202/729-1160
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attn.: J. Warren Gorrell, Jr.
David W. Bonser
Facsimile No.: 202/637-5910
Notice to each Holder, other than CarrAmerica, shall be delivered
to such Holder at the address indicated on the signature page hereof.
Each party may designate by notice in writing a new address to
which any notice, demand, request, or communication may thereafter be so
given, served or sent. Each notice, demand, request, or communication which
shall be hand-delivered, sent by documented overnight delivery service,
mailed, transmitted, telecopied, faxed, e-mailed, or telexed in the manner
described above, or which shall be delivered to a telegraph company, shall be
deemed sufficiently given, served, sent, received, or delivered for all
purposes at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, or the answerback being deemed conclusive, but
not exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
11.9. Headings
Article and Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect
the meaning, construction or scope of any of the provisions thereof. All
references to Sections or Articles contained herein mean Sections or Articles
of this Agreement unless otherwise stated.
11.10. Execution in Counterparts
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall
be sufficient that the signature of, or on behalf of, each party appear on one
or more of the counterparts. Copies of executed counterparts transmitted by
telecopy, facsimile or other electronic transmission service shall be
considered original executed counterparts for purposes of this Section 11.10;
provided, that receipt of copies of such counterparts is confirmed. All
counterparts shall collectively constitute a single agreement. It shall not be
necessary in making proof of this Agreement to produce or account for more
than a number of counterparts containing the respective signatures of, or on
behalf of, all of the parties hereto.
11.11. Interpretation; Absence of Presumption
(a) For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender shall be
held to include the other gender as the context requires, (ii) the terms
"hereof," "herein," and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole and not
to any particular provision of this Agreement, and Article, Section and
paragraph references are to the Articles, Sections and paragraphs to this
Agreement unless otherwise specified, (iii) the word "including" and words of
similar import when used in this Agreement shall mean "including, without
limitation," unless the context otherwise requires or unless otherwise
specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall
apply, when appropriate, to successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
11.12. Severability
Any provision hereof which is invalid or unenforceable shall be
ineffective to the extent of such invalidity or unenforceability, without
affecting in any way the remaining provisions hereof. 11.13. Specific
Performance
Each of the Company, RSI and each Holder acknowledges that, in view
of the uniqueness of arrangements contemplated by this Agreement, the parties
hereto would not have an adequate remedy at law for money damages in the event
that this Agreement were not performed in accordance with its terms, and
therefore agrees that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.
11.14. Consent to Jurisdiction
Each party to this Agreement: (v) agrees to commence any action,
suit or proceeding relating hereto either in a federal court located in the
State of Delaware or in a Delaware state court; (w) irrevocably submits and
consents to personal jurisdiction in any such suit; (x) agrees that any
service of process, summons, notice or document delivered by U.S. registered
mail to such party's respective address set forth in Section 11.8 above shall
be effective service of process for any action, suit or proceeding in Delaware
with respect to any matters to which such party has submitted to jurisdiction
in this Section 11.14; (y) irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (i) any Delaware
state court or (ii) any federal court located in the State of Delaware; and
(z) irrevocably and unconditionally waives and agrees not to plead or claim in
any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT.
11.15. Litigation Costs
If any litigation with respect to the obligations of the parties
under this Agreement results in a final nonappealable order of a court of
competent jurisdiction that results in a final disposition of such litigation,
the prevailing party, as determined by the court ordering such disposition,
shall be entitled to reasonable attorneys' fees as shall be determined by such
court. Contingent or other percentage compensation arrangements shall not be
considered reasonable attorneys' fees.
[signature pages follow]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties hereto as of the day first above written.
FRONTLINE CAPITAL GROUP
By: /s/ Jason Barnett
-------------------------------------
Name: Jason Barnett
Title: Executive Vice President
and General Counsel
Number of Shares of Common Stock
Owned of Record:___________________
HQ GLOBAL HOLDINGS, INC.
By: /s/ Jill B. Louis
-------------------------------------
Name: Jill B. Louis
Title: Vice President, Secretary
and General Counsel
HOLDERS
-------
CARRAMERICA REALTY CORPORATION
By: /s/ Karen B. Dorigan
-------------------------------------
Name: Karen B. Dorigan
Title: Managing Director
Number of Shares of Common Stock
Owned of Record:___________________
<PAGE>
EXHIBIT A
Lease Guarantees
1. San Mateo
Metro Corporation Center - Landlord
1840 Gateway Drive, 2nd Floor
Lease Ends: 3/31/05
Renewal Option: 3/31/12
2. San Jose
Kattelus Development Corp. - Landlord
2550 N. First St., Suite 301
Lease Ends: 10/31/08
Renewal Option: 10/31/13
3. One Liberty Plaza
New York, New York
Bank of Nova Scotia - Landlord
Lease Ends: 3/31/08
Renewal Option: 9/30/13
4. 590 Madison Avenue
590 Madison Avenue Associates L.P. - Landlord
Lease Ends: 9/30/07
Renewal Option: None
<PAGE>
EXHIBIT B
