<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
KOLL REAL ESTATE SERVICES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 6552 95-4502592
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
4343 VON KARMAN AVENUE
NEWPORT BEACH, CALIFORNIA 92660
(714) 833-9360
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RAYMOND E. WIRTA
CHIEF EXECUTIVE OFFICER
KOLL REAL ESTATE SERVICES
4343 VON KARMAN AVENUE
NEWPORT BEACH, CALIFORNIA 92660
(714) 833-9360
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
CYNTHIA M. DUNNETT, ESQ. RICHARD A. STRONG, ESQ.
RIORDAN & MCKINZIE KENNETH M. DORAN, ESQ.
300 SOUTH GRAND AVENUE, 29TH FLOOR GIBSON, DUNN & CRUTCHER LLP
LOS ANGELES, CALIFORNIA 90071 333 SOUTH GRAND AVENUE
(213) 629-4824 LOS ANGELES, CALIFORNIA 90071
(213) 229-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock ($.01 par value)........ $86,250,000 $29,742
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
KOLL REAL ESTATE SERVICES
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN FORM S-1 HEADING OR LOCATION IN PROSPECTUS
----------------------------------- ---------------------------------
<C> <C> <S>
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus............................. Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus.................... Inside Front Cover Page; Additional
Information; Outside Back Cover Page
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges..... Summary; Risk Factors
4. Use of Proceeds......................... Summary; Use of Proceeds
5. Determination of Offering Price......... Outside Front Cover Page; Underwriting
6. Dilution................................ Risk Factors; Dilution
7. Selling Security Holders................ Outside Front Cover Page; Principal and
Selling Stockholders
8. Plan of Distribution.................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered............................. Summary; Dividend Policy; Capitalization;
Description of Capital Stock
10. Interests of Named Experts and Counsel.. Legal Matters; Experts
11. Information with Respect to the
Registrant............................. Outside Front Cover Page; Summary; Risk
Factors; Dividend Policy; Capitalization;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Shares Eligible for Future
Sale; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 19, 1996
PROSPECTUS
SHARES
KOLL REAL ESTATE SERVICES
[LOGO OF KOLL REAL ESTATE SERVICES]
COMMON STOCK
-------
Of the shares of common stock, $.01 par value per share (the "Common
Stock"), of Koll Real Estate Services (the "Company") being offered hereby (the
"Offering"), shares are being sold by the Company and shares are
being sold by certain stockholders of the Company (the "Selling Stockholders").
The Company will not receive any proceeds from the sale of shares by the
Selling Stockholders. See "Principal and Selling Stockholders." Prior to the
Offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price will be $
per share. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price.
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the proposed symbol "KOLL."
SEE "RISK FACTORS" COMMENCING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
-------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
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Total(3)........................ $ $ $ $
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</TABLE>
(1) The Company, Koll Management Services, Inc. and the Selling Stockholders
have agreed to indemnify the several Underwriters against certain
liabilities under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the several Underwriters an option to purchase up
to an additional Shares of Common Stock to cover over-allotments. If
all of such Shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
-------
The Shares are offered by the several Underwriters subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel to the Underwriters. The Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that delivery of the shares of Common Stock will be
made in New York, New York on or about , 1996.
-------
MERRILL LYNCH & CO. BT SECURITIES CORPORATION
-------
The date of this Prospectus is , 1996.
<PAGE>
KOLL
<TABLE>
<S> <C>
Growth in Revenue Growth in EBITDA
[Bar Graph] [Bar Graph]
Investment Management Property & Corporate Services
Assets Under Management Square Feet Under Management
[Bar Graph] [Bar Graph]
Portfolio by Region Portfolio by Product Type
[Pie Chart] [Pie Chart]
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
[INSIDE FRONT COVER FOLDOUT]
KOLL PRINCIPAL OFFICES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[Photo 1] [Photo 4]
[Map 1]
[Photo 2] [Map 2] [Map 3] [Photo 5]
[Photo 3] [Photo 6]
</TABLE>
<TABLE>
<CAPTION>
WEST CENTRAL MIDWEST SOUTHEAST EAST INTERNATIONAL
- ---------- ------------- ------------ -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
San Fran-
cisco Albuquerque Chicago Nashville Philadelphia Jakarta
San Jose Denver Detroit Atlanta Boston Beijing
Foster
City Tulsa Cincinnati Tampa New York City Shanghai
Emeryville Oklahoma City Columbus Orlando Washington, D.C. Singapore
Los Ange-
les Kansas City Dayton Ft. Lauderdale Baltimore Tokyo
Long Beach Houston Indianapolis Raleigh Hartford
Newport
Beach Dallas Minneapolis Lexington Buffalo
San Diego New Orleans Florence Paramus
Las Vegas Abilene Providence
Seattle Austin
Portland San Antonio
Honolulu Phoenix
Tuscon
</TABLE>
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, as used in this
Prospectus (i) the term "KRES" refers to Koll Real Estate Services, a Delaware
corporation, the terms "KMS" and "Predecessor Company" refer to Koll Management
Services, Inc., a Delaware corporation and wholly-owned subsidiary of KRES, and
its subsidiaries, and the term "Company" refers to KRES and KMS and its
subsidiaries, and, with respect to periods prior to its acquisition by KRES, to
KMS and its subsidiaries, (ii) all information assumes that the over-allotment
option granted to the Underwriters has not been exercised and is not adjusted
to reflect a -for- stock split to be effected prior to the consummation of
the Offering and (iii) all references to a fiscal year shall mean the fiscal
year of the Company in which such year concludes (for example, the fiscal year
commencing April 1, 1995 and ending March 31, 1996 is referred to herein as
fiscal 1996). This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that
might cause such a difference include, but are not limited to, those discussed
in "Risk Factors."
THE COMPANY
The Company is a fully-integrated real estate services company that provides
property, facility and investment management services to institutional and
corporate owners of and investors in commercial real estate in the United
States and Asia. The Company's services include (i) property and facilities
management and leasing services for approximately 1,740 commercial properties
containing approximately 149 million square feet and over 19,000 tenants, (ii)
investment management for asset portfolios consisting primarily of commercial
real estate investments, which had an aggregate cost basis of approximately
$2.0 billion as of June 30, 1996 and (iii) a variety of related services which
provide the Company's clients with "one-stop shopping" throughout the ownership
of their real estate investments. The Company's approximately 2,600 employees
provide these services through a network of 279 offices located in 22 out of
the 25 largest Metropolitan Statistical Areas ("MSAs") in the United States and
in five major cities in Asia. According to Commercial Property News' 1996
Annual Survey of Property Managers, the Company is one of the ten largest
commercial property management companies in the United States.
Since fiscal 1992, the Company has implemented an aggressive growth strategy
through acquisitions, capitalizing upon its extensive real estate capabilities,
property and facilities management experience and reputation as a quality
service provider. From fiscal 1992 through fiscal 1996, the Company (i)
increased the total square footage it manages or leases from approximately 38
million square feet to approximately 149 million square feet, (ii) established
the Investment Management Division, which raised and invested approximately
$585 million in fiscal 1996, and (iii) developed numerous related services
which have been cross-marketed to the Company's existing and new clients. The
Company's revenue increased at a compound annual rate of approximately 42% from
$29.1 million for fiscal 1992 to $119.7 million for fiscal 1996 and the
Company's EBITDA (as defined herein) increased at a compound annual rate of
approximately 39% from $4.8 million to $17.7 million for the same periods.
The Company believes that its primary competitive advantages for continued
growth in the consolidating real estate services industry include its (i)
ability to offer customers comprehensive, high-quality services at competitive
prices in multiple geographic markets, (ii) large-scale operations, with the
appropriate corporate infrastructure to assimilate additional acquisitions,
(iii) ability to capitalize on the "Koll" name, which the Company believes is
widely recognized and respected in the real estate services industry, (iv)
innovative approach to developing new services in response to perceived market
demands, (v) experienced management team, the executive officers and key
employees of which have an average tenure of over 20 years in the real estate
services industry and who, after the Offering, will collectively own % of the
Company's Common Stock (assuming exercise of outstanding performance stock
options) and (vi) access to capital to fund continued internal growth and
acquisitions.
3
<PAGE>
The Company's growth strategy has focused on the acquisition of regional
property management companies in strategically-targeted markets, investment
management companies and other complementary service providers. Since fiscal
1992, the Company has completed 21 acquisitions for an aggregate purchase price
of approximately $43 million, and currently has five acquisitions pending, all
of which are listed below:
PROPERTY AND CORPORATE SERVICES DIVISION (1)
<TABLE>
<CAPTION>
SQUARE FEET
MANAGED AT
DATED DATE OF GEOGRAPHIC
ACQUIRED ACQUISITION ACQUISITION MARKET SERVED
-------- ----------- ------------- --------------
(IN MILLIONS)
<C> <C> <C> <S>
Pending Property Management and Brokerage
Company.................................. 5.5 California, Oregon and Washington
Pending Leasing and Brokerage Company (2)......... -- Southern California
Pending Relocations, Inc. (3)..................... -- China
Pending PT IPAC Propertindo (4)................... 1.7 Indonesia
Pending The Landmark Property Corporation (5)..... 3.0 Hawaii
7/96 Total Employee Relations, Inc. (6)........ -- United States
10/95 Bridgewood Properties..................... 1.8 New Jersey
7/95 The Shelard Group, Inc. .................. 7.9 Minnesota
4/95 Jones & Company........................... 1.0 Kansas and Missouri
3/95 Ross-Dove Company, Inc. (7)............... -- International
1/95 CBS Investment Realty, Inc. .............. 19.2 Southwestern and Western U.S.
10/94 Midstates Management Company, Inc. ....... 3.6 Illinois
2/94 Karsten Realty Advisors (8)............... 2.0 Southwestern, Western and
Eastern U.S.
2/94 The Peregrine White Company, Inc. (9)..... -- Eastern U.S.
2/94 Bonutto-Hofer Investments (8)............. 0.6 Western U.S.
7/93 Rubloff Inc. ............................. 32.0 Midwestern, Southern, Central and
Southeastern U.S.
1/93 Tishman Midwest Management Corp. ......... 2.2 New York
9/92 The Swearingen Management Company, Inc. .. 4.1 Texas
2/92 Sunwest Asset Management.................. 4.8 California
1/92 CC&F Asset Management Co., Inc. (10). .... 13.9 New England, Illinois
7/91 Tipton Associates, Inc ................... 1.3 Ohio
4/91 Linclay................................... 1.3 Ohio
4/91 Shannon Management Services, Inc. ........ 1.8 Texas
</TABLE>
(footnotes on following page)
4
<PAGE>
INVESTMENT MANAGEMENT DIVISION
<TABLE>
<CAPTION>
ASSETS UNDER
MANAGEMENT AT
DATED DATE OF
ACQUIRED ACQUISITION ACQUISITION SERVICES ACQUIRED
- -------- ----------- ------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
4/95 National Real Estate Index.......... $ 5 Real estate research & publishing,
investment management
5/94 Dover Retail Properties, Inc. (11).. -- Investment and property management
2/94 Karsten Realty Advisors (8)......... $637 Investment and property management
2/94 Bonutto-Hofer Investments (8)....... $351 General partner services
4/93 D.A. Management, Inc. .............. $ 59 Investment management
</TABLE>
- --------
(1) Unless otherwise noted, the entities listed below provide property and/or
facilities management or related services.
(2) Provides leasing and sales brokerage and consulting services for retail
real estate.
(3) Provides relocation services to employees of multinational corporations
relocating to Hong Kong and China.
(4) Pending acquisition of a 50% interest.
(5) Pending acquisition of a 99.8% interest.
(6) Provides employee relations consulting.
(7) Acquisition of a 50.1% interest. Provides capital asset disposition
services.
(8) Both property management and investment management contracts were included
as part of this acquisition.
(9) Provides leasing and tenant representation services.
(10) Acquisition of a 50% interest.
(11) Represents acquisition of remaining general partnership interests of
assets under management acquired with Bonutto-Hofer Investments.
After completing 20 acquisitions during the previous five years, in October
1995 the Company focused its resources on (i) assimilating these acquisitions,
(ii) enhancing its existing corporate infrastructure in order to accommodate
continued growth and (iii) improving its financial flexibility to fund future
acquisitions. The Company recently completed one smaller acquisition, currently
has five acquisitions pending and continually assesses acquisition
opportunities as part of its growth strategy. Management believes there are
significant opportunities in the fragmented and consolidating real estate
services industry to acquire additional companies that will complement and
expand the Company's existing operations. Following completion of the Offering,
the Company expects to have approximately $ million of net proceeds from the
Offering to fund future acquisitions.
The real estate services industry continues to experience consolidation.
Since the late 1980's, competition among real estate service providers has
increased dramatically, institutional ownership of real estate in the United
States has become more concentrated and corporate owners of real estate have
increasingly outsourced their real estate service needs to third-party
providers in order to refocus their resources on core businesses. The desire of
institutions and corporations to receive comprehensive real estate services
from a reduced number of providers capable of broad geographic coverage and the
downward pressure on fees paid to real estate service providers due to
increased competition, have driven, and should continue to drive, the
consolidation taking place in the industry today. The Company believes that
this consolidation will motivate the large number of local and regional real
estate service providers to sell to, or form alliances with, major national and
international companies. Despite this consolidation, the real estate services
industry still remains highly fragmented. As the chart below depicts, the top
ten property managers (based on square footage) manage less than 3% and the top
50 property managers manage less than 5% of the approximately 60 billion total
square feet of commercial property (industrial, office and retail) located in
the United States.
5
<PAGE>
[PIE CHART]
The Company provides a broad spectrum of real estate and real estate-related
services through two principal operating divisions: Property and Corporate
Services and Investment Management. The Property and Corporate Services
Division provides (i) property management services, which include maintenance,
marketing and leasing services for investor-owned, but not typically investor-
occupied, property and (ii) corporate and facilities management services, which
include the administration, management and maintenance of corporate-owned and
occupied property, as well as tenant representation, capital asset disposition,
strategic real estate consulting and other ancillary services for corporate
clients. The Investment Management Division provides a variety of services to
the pension fund and institutional real estate investment community including
(i) real estate investment fund and portfolio management, (ii) acquisition,
disposition, financing and valuation services related to commercial properties
and (iii) real estate market and securities research.
In order to support its broad geographic operations and diverse services, the
Company has developed a centralized corporate support structure that provides a
variety of uniform, high-quality technical and personnel support services to
the entire organization, including management information systems, risk
management, employee training and human resources administration. The Company
believes these centralized support services provide it with a distinct
competitive advantage and have been instrumental in the Company's ability to
assimilate acquisitions effectively. In addition, since a portion of the
Company's administrative costs are fixed, the Company believes it will be able
to add revenue associated with additional square footage and assets under
management without significantly increasing those costs.
The Company's primary business and operating strategy is to pursue increased
revenue, market share and profitability through growth in square footage under
management, assets under management and related new services combined with
proactive cost control. Key elements of the Company's strategy involve (i)
continuing to grow through acquisitions, (ii) continuing to provide and develop
new services for existing and prospective institutional and corporate clients,
(iii) capitalizing on the trend by large corporations to outsource their real
estate service needs to major national and international third-party providers,
(iv) positioning the Company to take advantage of currently recovering real
estate markets in the U.S. and emerging markets in Asia and (v) developing and
offering new services to property tenants and their employees.
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Compa-
ny................................ shares (1)
Common Stock Offered by the Selling
Stockholders...................... shares (2)
Common Stock to be outstanding af-
ter the Offering.................. shares (1)(3)
Use of Proceeds.................... The net proceeds of the Offering will be
used to repay indebtedness outstanding
under the Bank Credit Facility (as defined
herein), to fund acquisitions and internal
growth and for general corporate purposes.
See "Use of Proceeds."
Proposed Nasdaq National Market
Symbol............................ "KOLL"
</TABLE>
- --------
(1) Does not include up to shares of Common Stock subject to an over-
allotment option granted by the Company to the Underwriters. See
"Underwriting."
(2) The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.
(3) Does not include 548,500 shares of Common Stock issuable upon the exercise
of performance stock options outstanding as of June 30, 1996.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND ASSETS UNDER MANAGEMENT)
The following tables set forth summary financial and other data for the
Company on a consolidated historical basis and on a consolidated pro forma
basis for the periods and dates indicated. The summary historical financial
data as of March 31, 1996 and 1995 and for the years ended March 31, 1996 and
1994 and the four month and eight month periods ended March 31, 1995 and
November 30, 1994, respectively, are derived from, and are qualified by
reference to, the audited consolidated financial statements of the Company and
the Predecessor Company included elsewhere in this Prospectus. The summary
financial data as of March 31, 1994, 1993 and 1992 and for the years ended
March 31, 1993 and 1992 are derived from the audited consolidated financial
statements of the Predecessor Company not included herein. The summary
historical consolidated financial data as of and for the three month periods
ended June 30, 1996 and 1995 are derived from unaudited financial statements.
The unaudited financial statements include all adjustments, consisting of
normal recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Due to seasonality of the Company's business, operating results for
the three month period ended June 30, 1996 are not necessarily indicative of
the results that may be expected for the entire year ending March 31, 1997.
Pro forma amounts include completed and pending acquisitions as if such
acquisitions had occurred as of the beginning of the period for income
statement and other data and as of the end of the period for balance sheet
data. The pro forma amounts also reflect the application of a portion of the
net proceeds from the Offering in an amount sufficient to repay the pro forma
amount outstanding under the Company's Bank Credit Facility as of June 30,
1996. The pro forma financial data is not necessarily indicative of what the
Company's actual financial position and results of operations would have been
as of and for the periods indicated if those acquisitions had been consummated
on such dates, nor does it purport to represent the Company's financial
position and results of operations for future periods.
The financial and other data presented below are qualified by reference to
and should be read in conjunction with the Company's pro forma and audited
consolidated historical financial statements and notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
KOLL MANAGEMENT
KOLL REAL ESTATE SERVICES (1) SERVICES, INC. (PREDECESSOR) (1)
--------------------------------------------------------- ------------------------------------
PRO
FORMA PRO FORMA
-------- ---------
THREE FOUR EIGHT
MONTHS THREE MONTHS YEAR YEAR MONTHS MONTHS YEAR ENDED
ENDED ENDED JUNE 30, ENDED ENDED ENDED ENDED MARCH 31,
JUNE 30, ------------------ MARCH 31, MARCH 31, MARCH 31, NOVEMBER 30, -----------------------
1996 (2) 1996 (2) 1995 (2) 1996 1996 1995 1994 1994 1993 1992
-------- -------- -------- --------- --------- --------- ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $ 31,570 $ 29,630 $ 27,566 $129,620 $119,700 $ 32,490 $ 51,566 $59,671 $38,924 $29,096
Costs and expenses,
excluding depreciation,
amortization and
interest............... 28,515 26,711 24,578 112,161 102,899 28,939 47,472 53,152 33,742 24,322
Depreciation............ 563 535 420 2,012 1,883 486 682 736 184 98
Amortization............ 2,090 1,927 1,357 7,742 6,937 1,389 1,545 980 455 154
Operating income........ 887 942 1,118 8,617 8,893 1,565 1,822 5,143 4,543 4,522
Income (loss) before
provision for income
taxes and extraordinary
item................... 756 (55) 261 8,092 5,002 973 1,470 5,017 4,506 4,522
Net income (loss)....... 380 (26) 104 3,566 2,047 388 250 2,987 2,701 2,713
Earnings (loss) per
share..................
Average number of common
shares and common share
equivalents (3)........
OTHER DATA:
EBITDA (4).............. $ 3,540 $ 3,404 $ 2,895 $ 18,371 $ 17,713 $ 3,440 $ 5,257 $ 6,859 $ 5,182 $ 4,774
Square feet under
management (5)......... 159,388 149,188 136,287 155,405 145,205 129,976 106,555 91,425 65,275 58,699
Assets under management
(in millions)(5)....... 1,985 1,985 1,643 1,643 1,436 1,127 780
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital......... $ 15,701 $ 4,948 $ 3,738 -- $ 12,796 $ (2,298) -- $ 3,304 $ 9,832 $ 8,404
Total assets............ 126,896 122,379 106,923 -- 126,207 96,696 -- 32,858 17,357 14,500
Long-term liabilities... 8,404 40,363 33,482 -- 45,297 27,597 -- 2,832 250 --
Minority interest....... 12,076 11,542 8,907 -- 13,631 8,552 -- 2,383 552 244
Stockholders' equity.... 80,758 35,219 33,384 -- 35,245 32,985 -- 14,159 12,616 9,915
</TABLE>
(footnotes on following page)
8
<PAGE>
- --------
(1) The financial data for Koll Real Estate Services reflect the effects of the
Merger (as defined herein) and as a result are not comparable to the
financial data for Koll Management Services, Inc. (the Predecessor Company)
prior to the Merger.
(2) A significant component of the Company's revenue is transactional in nature
which is subject to certain seasonality. Historically, the Company's
revenue, operating income and net income in the first and fourth quarters
of its fiscal years are generally lower than in the second and third
quarters due to these fluctuations, which is consistent with industry
trends. Therefore, quarterly results are not necessarily representative of
results for the entire year.
(3) See Note 1 of Notes to Consolidated Financial Statements and the Pro Forma
Financial Statements for a description of the shares used in calculating
earnings (loss) per share.
(4) EBITDA represents net income before interest, income taxes, depreciation
and amortization, non-cash compensation under stock award plans and certain
other non-recurring items including compensation expense related to the
Merger of $1,208,000 for the eight months ended November 30, 1994.
Management believes that it is industry practice to evaluate real estate
services companies based on operating income before interest, taxes,
depreciation and amortization, which is generally equivalent to EBITDA.
EBITDA removes the effect of certain non-cash charges on operating
performance, such as the amortization of acquired management contracts and
merger costs, which management believes results in an effective measure of
operating performance. EBITDA does not represent cash flow from operations
as defined by generally accepted accounting principles ("GAAP"), is not
necessarily indicative of cash available to fund cash flow needs and should
not be considered as an alternative to net income for purposes of
evaluating the Company's operating performance.
(5) Square feet under management represents the properties for which the
Company provided management or leasing services through its Property and
Corporate Services Division as of the end of the period presented. Assets
under management represents the cost basis of assets the Company managed
through its Investment Management Division as of the end of the period
presented.
9
<PAGE>
RISK FACTORS
The following factors, in addition to information appearing elsewhere in
this Prospectus, should be carefully considered before making an investment in
the Common Stock offered hereby. This Prospectus contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed below.
RISKS INHERENT IN GROWTH STRATEGY
A substantial component of the Company's growth since 1991 has been through
acquisitions of selected property and investment management and related
services companies. The Company's future growth will be dependent in part upon
the continued availability of suitable acquisition candidates at favorable
prices and upon favorable terms and conditions. There can be no assurance that
future acquisitions can be consummated on favorable terms. Acquisitions entail
risks that acquisition candidates will fail to perform in accordance with
expectations and that business judgments with respect to the value, strengths
and weaknesses of acquisition candidates will prove inaccurate. A failure to
successfully continue its growth strategy could have an adverse effect on the
Company's results of operations. See "Business--Business Strategy" and "--
Acquisitions."
While the Company's experience to date in integrating operations acquired
from other companies has been generally favorable, there can be no assurance
that more significant difficulties will not be encountered in the future. The
Company's growth is expected to place significant demands on the Company's
financial and management resources. Such problems could reduce or eliminate
operating efficiencies and cost savings the Company hopes to realize upon the
integration of acquired operations.
NEED FOR ADDITIONAL FINANCING
The Company will require additional financing to sustain its acquisition
program. The Company expects to finance future acquisitions and internal
growth through a combination of funds available under its bank credit
facility, as amended (the "Bank Credit Facility"), cash on hand, including a
portion of the net proceeds from the Offering, cash flow from operations,
additional indebtedness incurred by the Company and public or private sales of
the Company's capital stock. There can be no assurance that the Company's
internal resources or other financing will be sufficient to finance
acquisitions and internal growth. The Company is presently negotiating an
amendment to the Bank Credit Facility that will provide additional
availability for both acquisitions and general corporate purposes after
consummation of the Offering. No assurance can be given that such negotiations
will be successfully concluded. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
COMPETITION
Recent economic conditions have led to increased competition among
commercial real estate service companies. Some of the Company's competitors
and potential competitors have greater financial and marketing resources than
the Company. There can be no assurance that the Company will not encounter
increased competition in the future which could limit its ability to maintain
or increase its market share and could adversely affect the Company's
financial results. Although there can be no assurance that increased
competition will not force the Company to reduce its prices in the future, the
Company believes that the broad range of real estate services it offers may
afford some protection against any downward pressure on fees. Competition in
the investment management business is based on scope of services provided,
fees charged and results achieved. Some of the Company's competitors in this
area have been in business longer, have more established business
relationships and may have larger dedicated research staffs than the Company.
However, the Company believes that the knowledge, experience and
accountability of its investment management personnel allow it to compete
effectively. See "Business--Competition."
10
<PAGE>
REAL ESTATE ECONOMIC CLIMATE
The condition of the real estate market tends to be cyclical and related to
the condition of the economy as a whole or, at least, to the perceptions of
investors and developers as to the economic outlook. The sharp downturn in the
commercial real estate market beginning in the late 1980's has caused and may
continue to cause some property owners to dispose of or lose their properties
through foreclosures and has caused certain real estate firms to undergo
restructurings or changes in control. Such changes in the ownership of
properties may be accompanied by a change in property and investment
management firms and could cause the Company to lose management agreements or
make the agreements it retains less profitable.
The Company's revenue from property management services is generally a
percentage of aggregate rent collections from the properties, with many of the
Company's management agreements providing for a specified minimum management
fee. Accordingly, the Company's continued success will be dependent in part
upon the performance of the properties it manages. Such performance in turn
will depend in part upon the Company's ability to attract and retain
creditworthy tenants, the magnitude of defaults by tenants under their
respective leases, the Company's ability to control operating expenses,
governmental regulations, local rent control or stabilization ordinances which
are or may be put into effect, various uninsurable risks, financial conditions
prevailing generally and in the areas in which such properties are located,
the nature and extent of competitive properties and the real estate market
generally. See "Business--Industry Trends."
RISK RELATED TO GENERAL PARTNER STATUS
The Company is a general partner in 33 general and limited partnerships.
Nine of such partnerships are involved in the acquisition, rehabilitation,
subdivision and sale of multi-tenant industrial business parks, eight of such
partnerships own shopping centers and 16 of such partnerships hold portfolios
of office, industrial and other retail real estate. As a general partner, the
Company may be liable to its partners as well as liable for the obligations of
such partnerships, including environmental liabilities. All of the Company's
general partnership interests are held through its subsidiaries and the
Company believes that its exposure to contingent liabilities is limited to the
total invested capital in and advances to its subsidiaries holding the general
partnership interests. Management does not believe that significant contingent
liabilities exist with respect to these general partnership interests.
RISKS ASSOCIATED WITH OPERATIONS OUTSIDE THE UNITED STATES
A portion of the Company's assets and operations is located outside the
United States. The Company's plans to expand its overseas operations may be
affected by economic, political and governmental conditions in the countries
where the Company's services are or are proposed to be provided. In addition,
changes in economic policies and political conditions in any of the foreign
countries in which the Company operates could result in new or additional
currency or exchange controls or other restrictions being imposed on the
operations of the Company.
CONTROL BY PRINCIPAL STOCKHOLDER
After the sale of the Common Stock offered hereby, FS&Co. will own
approximately % of the Common Stock ( % if the Underwriters' over-allotment
option is exercised in full). As used herein, "FS&Co." refers to Freeman
Spogli & Co. Incorporated, a private investment company, and its affiliated
investment partnerships or companies. As a result of its stock ownership in
and relationship with the Company, as well as the voting agreements contained
in that certain Third Amended and Restated Stockholders Agreement (the
"Restated Stockholders Agreement") to be entered into upon consummation of the
Offering by and among the Company, FS&Co., The Koll Company, The Koll Holding
Company ("KHC") and AP KMS Partners, L.P. ("Apollo"), FS&Co. will continue to
be able to control or strongly influence the business and affairs of the
Company, including but not limited to having sufficient voting power to
substantially control the election of a majority of the Board of Directors of
the Company and, in general, to significantly influence the outcome of certain
corporate transactions including mergers, consolidations, and the sale of
substantially all of the Company's assets, and preventing or causing a change
in the control of the Company. See "Principal and Selling Stockholders" and
"Certain Transactions--Stockholders Agreement."
11
<PAGE>
UNISSUED PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, as amended, the
Board of Directors has the authority to issue up to 2,000,000 shares of
preferred stock, $.01 par value per share ("Preferred Stock"), and to
determine the price, rights, preferences and privileges of those shares
without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of Preferred Stock that may be issued in the future.
The issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of the
holders of Common Stock. The Company has no present plans to issue any shares
of Preferred Stock.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market following
the Offering could adversely affect the market price of the Common Stock. In
addition to the 5,301,854 shares of Common Stock outstanding prior to the
Offering, up to 590,000 additional shares of Common Stock may be issued upon
exercise of options granted or to be granted pursuant to the Company's Amended
1994 Nonqualified Performance Stock Option Plan (the "Performance Option
Plan"), of which options with respect to 548,500 shares of Common Stock have
been granted and which will vest in five annual installments commencing March
31, 1997. Vesting may be accelerated in the event the Company achieves certain
operating results. The Company and its directors, executive officers and
existing stockholders have agreed, subject to certain limited exceptions, not
to offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or any securities convertible into or exercisable for Common Stock for a
period of days after the date of this Prospectus without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"). See "Principal and Selling Stockholders," "Shares Eligible for Future
Sale" and "Underwriting." Certain stockholders have certain registration
rights with respect to the securities held or which may be acquired by them.
See "Certain Transactions--Registration Rights Agreements" and "Shares
Eligible for Future Sale."
ABSENCE OF DIVIDENDS; DIVIDEND POLICY
The Company has not paid any dividends upon the Common Stock since its
formation. The Company does not currently intend to pay any dividends upon the
Common Stock in the foreseeable future. Any payment of future dividends and
the amounts thereof will be dependent upon the Company's earnings, financial
requirements and other factors deemed relevant by the Company's Board of
Directors, including the Company's contractual obligations. As a holding
company, the Company is dependent on distributions from its subsidiaries to
pay dividends. Such distributions are prohibited under the terms of the Bank
Credit Facility. See "Dividend Policy" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop or,
if developed, be sustained after the Offering. The initial public offering
price of the Common Stock offered hereby will be determined by negotiations
among the Company and representatives of the Underwriters (the
"Representatives"). See "Underwriting." In recent years, the stock market in
general and the stock prices of new public companies in particular have
experienced extreme price fluctuations, sometimes without regard to the
operating performance of particular companies. Factors such as quarterly
variations in actual or anticipated operating results, changes in or failure
to meet earnings estimates by analysts, market conditions in the industry,
regulatory actions and general market conditions may have a significant effect
on the market price of the Common Stock.
DILUTION
The initial public offering price will be substantially higher than the book
value per share of Common Stock. Investors purchasing shares of Common Stock
in the Offering will therefore incur immediate and substantial dilution in the
book value per share of Common Stock from the initial public offering price.
See "Dilution."
12
<PAGE>
THE COMPANY
The Company is a fully-integrated real estate services company that provides
property, facility and investment management services to institutional and
corporate owners of and investors in commercial real estate in the United
States and Asia. The Company's services include (i) property and facilities
management and leasing services for approximately 1,740 commercial properties
containing approximately 149 million square feet and over 19,000 tenants, (ii)
investment management for asset portfolios consisting primarily of commercial
real estate investments, which had an aggregate cost basis of approximately
$2.0 billion as of June 30, 1996 and (iii) a variety of related services which
provide the Company's clients with "one-stop shopping" throughout the
ownership of their real estate investments. The Company's approximately 2,600
employees provide these services through a network of 279 offices located in
22 out of the 25 largest MSAs in the United States and in five major cities in
Asia. According to Commercial Property News' 1996 Annual Survey of Property
Managers, the Company is one of the ten largest commercial property management
companies in the United States.
Since fiscal 1992, the Company has implemented an aggressive growth strategy
through acquisitions, capitalizing upon its extensive real estate
capabilities, property and facilities management experience and reputation as
a quality service provider. From fiscal 1992 through fiscal 1996, the Company
(i) increased the total square footage it manages or leases from approximately
38 million square feet to approximately 149 million square feet, (ii)
established the Investment Management Division, which manages portfolios of
assets which had an aggregate cost basis of approximately $2.0 billion at June
30, 1996, and (iii) established numerous related services which have been
cross-marketed to the Company's existing and new clients. The Company's
revenue increased at a compound annual rate of approximately 42% from
$29.1 million for fiscal 1992 to $119.7 million for fiscal 1996 and the
Company's EBITDA increased at a compound annual rate of approximately 39% from
$4.8 million to $17.7 million for the same periods.
The Company believes that its primary competitive advantages for continued
growth in the consolidating real estate services industry include its (i)
ability to offer customers comprehensive, high-quality services at competitive
prices in multiple geographic markets, (ii) large-scale operations, with the
appropriate corporate infrastructure to assimilate additional acquisitions,
(iii) ability to capitalize on the "Koll" name, which the Company believes is
widely recognized and respected in the real estate services industry, (iv)
innovative approach in developing new services in response to perceived market
demands, (v) experienced management team, the executive officers and key
employees of which have an average tenure of over 20 years in the real estate
services industry and who, after the Offering, will collectively own % of
the Company's Common Stock (assuming exercise of outstanding performance stock
options), and (vi) access to capital to fund continued internal growth and
acquisitions.
Koll Management Services, Inc. ("KMS") was incorporated in California in
June 1988 and reincorporated in Delaware in May 1991. On July 31, 1991, KMS
completed an initial public offering ("IPO") of 1.1 million shares of its
common stock at $10 per share, which yielded net proceeds to KMS of $5.4
million. KMS was traded on the Nasdaq National Market under the symbol "KOLL."
Prior to its IPO, KMS was a wholly-owned subsidiary of The Koll Company, a
real estate development, construction and management company founded in 1962
in Newport Beach, California, by Donald M. Koll, Chairman of the Company. In
the years following the IPO, KMS's management did not realize its expectation
to issue additional debt or equity at favorable terms in order to fund its
strategy for growth through acquisitions and, as a result, management
supported the completion of a merger (the "Merger") in 1994. Koll Real Estate
Services ("KRES") was organized in May 1994 by FS&Co. in order to effectuate
the Merger and FS&Co.'s investment in the Company. On November 23, 1994, the
stockholders of KMS approved the Merger pursuant to which each share of KMS's
common stock (other than shares held by KRES) was converted into the right to
receive $16.00. Upon consummation of the Merger, KMS became a wholly-owned
subsidiary of KRES and KMS's common stock was no longer publicly traded. In
connection with the settlement of stockholder litigation relating to the
Merger, in September 1995 KMS paid its former stockholders (other than KRES,
The Koll Company and KMS's former directors and officers) an additional $0.50
per share for each share of KMS common stock held by such stockholders.
13
<PAGE>
The Company's principal executive offices are located at 4343 Von Karman
Avenue, Newport Beach, California 92660, and its telephone number is (714)
833-9360.
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Common Stock
offered by the Company hereby are estimated to be approximately $ million
($ million if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $ per share and after deducting
estimated underwriting discounts and offering expenses payable by the Company.
The Company intends to use the net proceeds to repay approximately $
million of indebtedness expected to be outstanding under the Bank Credit
Facility upon closing of the Offering, of which approximately $ million was
used to fund acquisitions and the balance of which was used for general
corporate purposes. The remaining $ million of net proceeds ($ million if
the Underwriters' over-allotment option is exercised in full) will be used (i)
to fund acquisition opportunities of real estate services and investment
management companies, (ii) to fund internal growth and (iii) for general
corporate purposes. Pending such uses, the net proceeds will be invested in
short-term, investment grade, interest bearing securities. See "Business --
Business Strategy" and "--Recent and Pending Acquisitions."
The Company is continually assessing acquisition opportunities as part of
its growth strategy and currently has five acquisitions pending. Should these
acquisitions be consummated, they will be funded out of a portion of the
proceeds of the Offering. See "Business--Recent and Pending Acquisitions."
All amounts outstanding under the Bank Credit Facility, which has a final
maturity date of December 31, 1999, bear interest at a customary base rate or
Eurodollar rate plus a margin based upon KMS's leverage ratio (the ratio of
total debt to earnings before interest, taxes, depreciation and amortization
and costs related to the Merger), which margins range from 0% to 1.25% in the
case of the base rate and from 0.625% to 2.25% in the case of the Eurodollar
rate. The Company is currently negotiating an amendment to the Bank Credit
Facility. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain future earnings to finance its
operations and acquisitions, and therefore does not anticipate paying any cash
dividends in the foreseeable future. As a holding company, the Company is
dependent on distributions from its subsidiaries to pay dividends. Such
distributions are prohibited under the terms of the Bank Credit Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 5 of the Company's Notes
to Consolidated Financial Statements.
14
<PAGE>
CAPITALIZATION
The following table sets forth the Company's capitalization as of June 30,
1996. The table also sets forth the Company's capitalization as of June 30,
1996 as adjusted to reflect the Company's issuance and sale of shares of
Common Stock pursuant to the Offering, the Company's receipt of the estimated
net proceeds therefrom (at an assumed initial public offering price of $ per
share and after deducting the estimated underwriting discounts and offering
expenses payable by the Company), and the application of the estimated net
proceeds therefrom, as described under the caption "Use of Proceeds." The
information below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the pro
forma consolidated financial information and the financial statements and
notes thereto included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1996
------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to banks:
Bank Credit Facility...................................... $44,212 $ --
Other..................................................... 225 225
-------- -------
44,437 225
Acquisition obligations..................................... 4,845 4,845
Minority interest........................................... 11,542 11,542
Other long-term............................................. 4,039 4,039
Stockholders' equity:
Preferred Stock, $.01 par value; 2,000,000 shares
authorized; no shares outstanding........................ -- --
Common Stock, $.01 par value; 35,000,000 shares autho-
rized; 5,301,854 issued and outstanding; issued
and outstanding, as adjusted (1)......................... 53
Additional paid-in capital................................ 33,907
Retained earnings......................................... 2,409 2,409
Less notes receivable from stockholders................... (1,150) (1,150)
-------- -------
Total stockholders' equity.............................. 35,219
-------- -------
Total capitalization........................................ $100,082 $
======== =======
</TABLE>
- --------
(1) Does not include up to shares of Common Stock subject to an over-
allotment option granted by the Company to the Underwriters or 548,500
shares of Common Stock issuable upon the exercise of performance stock
options outstanding as of June 30, 1996. See "Underwriting."
15
<PAGE>
DILUTION
As of June 30, 1996, the Company had a deficit in net tangible book value of
$22.9 million, or $ per share of Common Stock. Net tangible book value per
share represents the amount of the Company's total tangible assets less total
liabilities, divided by the number of shares of Common Stock outstanding.
After giving effect to the Company's sale of shares of Common Stock
offered hereby at an assumed initial public offering price of $ per share,
and the application of estimated net proceeds therefrom (after deducting the
estimated underwriting discounts and offering expenses payable by the
Company), the Company's pro forma net tangible book value as of June 30, 1996
would have been approximately $ per share. This represents an immediate
increase of $ per share to existing stockholders and an immediate dilution
of $ per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share............................ $
---
Net tangible book value per share before Offering.................. $
---
Increase in net tangible book value per share attributable to new
public investors..................................................
---
Net tangible book value per share after Offering...................
---
Dilution per share to new investors................................ $
===
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the differences between the number of shares of Common Stock purchased from
the Company, the total consideration paid (before deducting the estimated
underwriting discounts and offering expenses payable by the Company), and the
average price per share paid by the existing stockholders and by the investors
purchasing shares of Common Stock in the Offering (based upon an assumed
initial public offering price of $ per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 5,301,854 % $35,151,020 % $6.63
New investors...............
--------- --- ----------- --- -----
Total..................... % $ % $
========= === =========== === =====
</TABLE>
The foregoing tables assume no exercise of any outstanding stock options
after June 30, 1996. As of June 30, 1996, there were 590,000 shares of Common
Stock reserved for issuance under the Performance Option Plan, of which
options had been granted with respect to 548,500 shares of Common Stock at a
weighted average exercise price of approximately $10.67 per share. To the
extent that these outstanding options are exercised, the dilution would be
$ per share to new investors. See "Management--Compensation Plans--Amended
1994 Nonqualified Performance Stock Option Plan" and Note 10 to Consolidated
Financial Statements.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND ASSETS UNDER MANAGEMENT)
The following tables set forth selected financial and other data for the
Company on a consolidated historical basis and on a consolidated pro forma
basis for the periods and dates indicated. The selected historical financial
data as of March 31, 1996 and 1995 and for the years ended March 31, 1996 and
1994 and the four month and eight month periods ended March 31, 1995 and
November 30, 1994, respectively, are derived from, and are qualified by
reference to, the audited consolidated financial statements of the Company and
the Predecessor Company included elsewhere in this Prospectus. The selected
financial data as of March 31, 1994, 1993 and 1992 and for the years ended
March 31, 1993 and 1992 are derived from the audited consolidated financial
statements of the Predecessor Company not included herein. The selected
historical consolidated financial data as of and for the three month periods
ended June 30, 1996 and 1995 are derived from unaudited financial statements.
The unaudited financial statements include all adjustments, consisting of
normal recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Due to seasonality of the Company's business, operating results for
the three month period ended June 30, 1996 are not necessarily indicative of
the results that may be expected for the entire year ending March 31, 1997.
Pro forma amounts include completed and pending acquisitions as if such
acquisitions had occurred as of the beginning of the period for income
statement and other data and as of the end of the period for balance sheet
data. The pro forma amounts also reflect the application of a portion of the
net proceeds from the Offering in an amount sufficient to repay the pro forma
amount outstanding under the Company's Bank Credit Facility as of June 30,
1996. The pro forma financial data is not necessarily indicative of what the
Company's actual financial position and results of operations would have been
as of and for the periods indicated if those acquisitions had been consummated
on such dates, nor does it purport to represent the Company's financial
position and results of operations for future periods.
The financial and other data presented below are qualified by reference to
and should be read in conjunction with the Company's pro forma and audited
consolidated historical financial statements and notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
KOLL MANAGEMENT
KOLL REAL ESTATE SERVICES (1) SERVICES, INC. (PREDECESSOR) (1)
--------------------------------------------------------- ------------------------------------
PRO
FORMA PRO FORMA
-------- ---------
THREE FOUR EIGHT
MONTHS THREE MONTHS YEAR YEAR MONTHS MONTHS YEAR ENDED
ENDED ENDED JUNE 30, ENDED ENDED ENDED ENDED MARCH 31,
JUNE 30, ------------------ MARCH 31, MARCH 31, MARCH 31, NOVEMBER 30, -----------------------
1996 (2) 1996 (2) 1995 (2) 1996 1996 1995 1994 1994 1993 1992
-------- -------- -------- --------- --------- --------- ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 31,570 $ 29,630 $ 27,566 $129,620 $119,700 $ 32,490 $ 51,566 $59,671 $38,924 $29,096
Costs and expenses,
excluding depreciation,
amortization and
interest............... 28,515 26,711 24,578 112,161 102,899 28,939 47,472 53,152 33,742 24,322
Depreciation............ 563 535 420 2,012 1,883 486 682 736 184 98
Amortization............ 2,090 1,927 1,357 7,742 6,937 1,389 1,545 980 455 154
Operating income........ 887 942 1,118 8,617 8,893 1,565 1,822 5,143 4,543 4,522
Income (loss) before
provision for income
taxes and extraordinary
item................... 756 (55) 261 8,092 5,002 973 1,470 5,017 4,506 4,522
Net income (loss)....... 380 (26) 104 3,566 2,047 388 250 2,987 2,701 2,713
Earnings (loss) per
share (3)..............
Average number of common
shares and common
shares equivalent (3)..
OTHER DATA:
EBITDA (4).............. $ 3,540 $ 3,404 $ 2,895 $ 18,371 $ 17,713 $ 3,440 $ 5,257 $ 6,859 $ 5,182 $ 4,774
Square feet under
management (5)......... 159,388 149,188 136,287 155,405 145,205 129,976 106,555 91,425 65,275 58,699
Assets under management
(in millions) (5)...... 1,985 1,985 1,643 1,643 1,436 1,127 780
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital......... $ 15,701 $ 4,948 $ 3,738 -- $ 12,796 $ (2,298) -- $ 3,304 $ 9,832 $ 8,404
Total assets............ 126,896 122,379 106,923 -- 126,207 96,696 -- 32,858 17,357 14,500
Long-term liabilities... 8,404 40,363 33,482 -- 45,297 27,597 -- 2,832 250 --
Minority interest....... 12,076 11,542 8,907 -- 13,631 8,552 -- 2,383 552 244
Stockholders' equity.... 80,758 35,219 33,384 -- 35,245 32,985 -- 14,159 12,616 9,915
</TABLE>
(footnotes on following page)
17
<PAGE>
- --------
(1) The financial data for Koll Real Estate Services reflect the effects of
the Merger and as a result are not comparable to the financial data for
Koll Management Services, Inc. (the Predecessor Company) prior to the
Merger.
(2) A significant component of the Company's revenue is transactional in
nature which is subject to certain seasonality. Historically, the
Company's revenue, operating income and net income in the first and fourth
quarters of its fiscal years are generally lower than in the second and
third quarters due to these fluctuations, which is consistent with
industry trends. Therefore, quarterly results are not necessarily
representative of results for the entire year.
(3) See Note 1 of Notes to Consolidated Financial Statements and the Pro Forma
Financial Statements for a description of the shares used in calculating
earnings (loss) per share.
(4) EBITDA represents net income before interest, income taxes, depreciation
and amortization, non-cash compensation under stock award plans and
certain other non-recurring items including compensation expense related
to the Merger of $1,208,000 for the eight months ended November 30, 1994.
Management believes that it is industry practice to evaluate real estate
services companies based on operating income before interest, taxes,
depreciation and amortization, which is generally equivalent to EBITDA.
EBITDA removes the effect of certain non-cash charges on operating
performance, such as the amortization of acquired management contracts and
merger costs, which management believes results in an effective measure of
operating performance. EBITDA does not represent cash flow from operations
as defined by GAAP, is not necessarily indicative of cash available to
fund all cash flow needs and should not be considered as an alternative to
net income for purposes of evaluating the Company's operating performance.
(5) Square feet under management represents the properties for which the
Company provided management or leasing services through its Property and
Corporate Services Division as of the end of the period presented. Assets
under management represents the cost basis of assets the Company managed
through its Investment Management Division as of the end of the period
presented.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's historical audited and pro forma consolidated financial statements
and notes thereto and "Selected Consolidated Financial and Operating Data"
included elsewhere in this Prospectus. This Prospectus contains forward-
looking statements which involve risks and uncertainties. The Company's actual
results may differ significantly from the results discussed in the forward-
looking statements. Factors that might cause such a difference include, but
are not limited to, those discussed in "Risk Factors."
GENERAL
Since fiscal 1992, the Company has implemented an aggressive growth plan as
it has continued its strategy of solidifying its position as a leading fully-
integrated real estate services company. The growth reflected in the Company's
financial statements is the result principally of acquisitions of real estate
service companies and secondarily internal growth from new assignments from
existing and first-time clients. The Company's acquisition program has focused
on (i) regional property management companies in strategically-targeted
markets, (ii) investment management companies and (iii) other complementary
service providers. Since fiscal 1992, the Company has completed 21
acquisitions for an aggregate purchase price of approximately $43.0 million,
the most significant of which (based on revenue and net income) were: The
Shelard Group, Inc. ("Shelard"), Ross-Dove Company, Inc. ("Ross-Dove"), CBS
Investment Realty, Inc. ("CBS"), Karsten Realty Advisors ("Karsten") and
Rubloff Inc. ("Rubloff"). Other acquisitions that were strategically
significant include National Real Estate Index ("NREI") and The Peregrine
White Company, Inc. ("Peregrine White").
The Company's revenue is derived primarily from services provided by the
Property and Corporate Services Division and Investment Management Division
("Fee Based Services") and includes property and investment management fees,
reimbursement for expenses related to management personnel, leasing and other
transaction commissions (net of related commissions paid to others),
construction management fees and auction commissions. A significant component
of the Company's revenue is transactional in nature which is subject to
certain seasonality. Historically, the Company's revenue, operating income and
net income in the first and fourth quarters of its fiscal years are generally
lower than in the second and third quarters due to this seasonality, which is
consistent with industry trends. Therefore, quarterly results are not
necessarily representative of results for an entire year. Costs and expenses
of Fee Based Services are generally those costs incurred directly in
connection with the Company's management of properties and assets, in addition
to the costs associated with the operations of the Company's regional offices.
Under the terms of the Company's typical property and facilities management
contract, a significant portion of the direct management costs are reimbursed.
Such reimbursement is included in revenue.
The Company's administrative costs represent the costs of the Company's
corporate management and the various overhead departments including
accounting, human resources, payroll and management information services.
Historically, revenue growth has outpaced increases in administrative costs.
This relationship has mitigated the effect on the Company of price competition
in the industry, enabling the Company to operate more competitively.
In the future, to the extent that the Company is successful in acquiring new
companies and management agreements, the Company will experience increased
expenses associated with the amortization of acquired management agreements
and goodwill and, if the acquisitions are financed by additional indebtedness,
an increase in interest expense. Accordingly, acquisitions may result in a
decrease in income from operations. However, the Company intends to pursue
acquisitions of management agreements that result in an increase in EBITDA
after all transaction costs relating to the acquistion are absorbed. EBITDA
represents net income before interest, income taxes, depreciation and
amortization, non-cash compensation under stock award plans and certain other
non-recurring items. Management believes that it is industry practice to
evaluate real estate services companies based on operating income before
interest, income taxes, depreciation and amortization, which is generally
equivalent to EBITDA. EBITDA removes the effect of certain non-cash charges on
operating performance, such as the amortization of acquired management
contracts and merger costs, which management
19
<PAGE>
believes results in an effective measure of operating performance. EBITDA does
not represent cash flow from operations as defined by GAAP, is not necessarily
indicative of cash available to fund all cash flow needs and should not be
considered as an alternative to net income for purposes of evaluating the
Company's operating performance.
In November 1994, KRES acquired 100% of the outstanding common stock of KMS
pursuant to the Merger (see "The Company"). Therefore, the following
information for fiscal 1995, which is derived from consolidated statements of
income for fiscal 1995, consists of four months of operations for KRES and
eight months of operations for KMS. For comparative purposes, the following
analyses compare these combined operations for fiscal 1995 to each of the
twelve months ended March 31, 1996 and 1994.
RESULTS OF OPERATIONS
The following tables set forth items derived from the Company's consolidated
statements of operations for each of the periods presented in dollars and as a
percent of revenue.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, YEAR ENDED MARCH 31,
------------------------------- ---------------------------------------------
COMBINED
1996 1995 1996 1995 1994
-------------- -------------- -------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Fee Based Services..... $29,193 98.5 % $26,962 97.8% $116,310 97.2% $81,758 97.3% $58,496 98.0%
Interest income........ 58 0.2 56 0.2 282 0.2 118 0.1 47 0.1
Other.................. 379 1.3 548 2.0 3,108 2.6 2,180 2.6 1,128 1.9
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
29,630 100.0 27,566 100.0 119,700 100.0 84,056 100.0 59,671 100.0
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Costs and Expenses:
Fee based services..... 22,025 74.3 18,963 68.8 80,497 67.2 57,007 67.8 38,003 63.7
Administrative costs... 5,510 18.6 4,736 17.2 21,723 18.1 17,102 20.4 14,247 23.9
Compensation expense
related to Merger..... -- -- -- -- -- -- 1,208 1.4 -- --
Interest expense....... 997 3.4 857 3.1 3,891 3.3 944 1.1 126 0.2
Depreciation expense... 535 1.8 420 1.5 1,883 1.6 1,168 1.4 736 1.2
Amortization expense... 1,927 6.5 1,357 4.9 6,937 5.8 2,934 3.5 980 1.7
Minority interest in
income (loss) of
consolidated
entities.............. (824) (2.8) 879 3.2 679 0.6 1,094 1.3 902 1.5
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
30,170 101.8 27,212 98.7 115,610 96.6 81,457 96.9 54,994 92.2
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Income before equity in
income of
unconsolidated
entities, income taxes
and extraordinary
item................... (540) (1.8) 354 1.3 4,090 3.4 2,599 3.1 4,677 7.8
Equity income (loss) of
unconsolidated
entities............... 485 1.6 (93) (0.3) 912 0.8 (156) (0.2) 340 0.6
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Income (loss) before
income taxes and
extraordinary item..... (55) (0.2) 261 1.0 5,002 4.2 2,443 2.9 5,017 8.4
Income taxes............ (29) (0.1) 157 0.6 2,955 2.5 1,327 1.6 2,030 3.4
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Income (loss) before
extraordinary item..... (26) (0.1) 104 0.4 2,047 1.7 1,116 1.3 2,987 5.0
Extraordinary item...... -- -- -- -- -- -- 478 0.6 -- --
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
$ (26) (0.1)% $ 104 0.4% $ 2,047 1.7% $ 638 0.7% $ 2,987 5.0%
======= ===== ======= ===== ======== ===== ======= ===== ======= =====
EBITDA.................. $ 3,404 11.5 % $ 2,895 10.5% $ 17,713 14.8% $ 8,697 10.3% $ 6,859 11.5%
======= ===== ======= ===== ======== ===== ======= ===== ======= =====
</TABLE>
20
<PAGE>
The following table summarizes the revenue, expenses, and operating margins
for Fee Based Services by operating segment for the three month periods ended
June 30, 1996 and 1995 and the years ended March 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, YEAR ENDED MARCH 31,
---------------------------- --------------------------------------------
COMBINED
1996 1995 1996 1995 1994
------------- ------------- -------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Property and Corporate
Services:
Revenue................ $24,576 100.0% $21,807 100.0% $ 95,625 100.0% $65,230 100.0% $52,225 100.0%
Costs of fee based
services.............. 18,868 76.8 16,148 74.1 69,583 72.8 47,779 73.2 34,286 65.6
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Gross operating margin
(1)................... 5,708 23.2 5,659 25.9 26,042 27.2 17,451 26.8 17,939 34.4
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Allocated
administrative costs.. 3,971 16.2 3,742 17.1 15,055 15.7 12,309 18.9 11,338 21.7
Depreciation and
amortization.......... 988 4.0 690 3.2 3,488 3.7 1,340 2.1 959 1.9
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Segment operating
profit................ $ 749 3.0% $ 1,227 5.6% $ 7,499 7.8% $ 3,802 5.8% $ 5,642 10.8%
======= ===== ======= ===== ======== ===== ======= ===== ======= =====
Investment Management:
Revenue................ $ 4,617 100.0% $ 5,155 100.0% $ 20,685 100.0% $16,528 100.0% $ 6,271 100.0%
Costs of fee based
services.............. 3,157 68.4 2,815 54.6 10,914 52.8 9,228 55.8 3,717 59.3
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Gross operating margin
(1)................... 1,460 31.6 2,340 45.4 9,771 47.2 7,300 44.2 2,554 40.7
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Allocated
administrative costs.. 257 5.6 235 4.6 938 4.5 822 5.0 267 4.2
Depreciation and
amortization.......... 709 15.3 438 8.5 2,161 10.4 1,034 6.3 212 3.4
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Segment operating
profit................ $ 494 10.7% $ 1,667 32.3% $ 6,672 32.3% $ 5,444 32.9% $ 2,075 33.1%
======= ===== ======= ===== ======== ===== ======= ===== ======= =====
Total Fee Based
Services:
Revenue................ $29,193 100.0% $26,962 100.0% $116,310 100.0% $81,758 100.0% $58,496 100.0%
Costs of fee based
services.............. 22,025 75.4 18,963 70.3 80,497 62.2 57,007 69.7 38,003 65.0
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Gross operating margin
(1)................... 7,168 24.6 7,999 29.7 35,813 30.8 24,751 30.3 20,493 35.0
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Allocated
administrative costs.. 4,228 14.5 3,977 14.8 15,993 13.8 13,131 16.1 11,605 19.8
Depreciation and
amortization.......... 1,697 5.8 1,128 4.2 5,649 4.9 2,374 2.9 1,171 2.0
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Total segment operating
profit................ $ 1,243 4.3% $ 2,894 10.7% $ 14,171 12.1% $ 9,246 11.3% $ 7,717 13.2%
======= ===== ======= ===== ======== ===== ======= ===== ======= =====
</TABLE>
- --------
(1) In addition to acquisitions, as part of its growth strategy the Company
develops new services and operations in response to perceived market
demands. These services and operations have included corporate advisory,
facilities management, international operations, medical services and
securitized investment management. The costs and expenses incurred by
these new services and operations are generally expensed as incurred.
Revenue is typically realized after associated expenses are incurred and
as such, the start-up of these services and operations has negatively
impacted the results for the periods shown. The Company's gross operating
margins for total Fee Based Services without these investments would have
been 27.8%, 30.8%, 33.4%, 32.1% and 36.2% for the three months ended June
30, 1996 and 1995 and for the years ended March 31, 1996, 1995 and 1994,
respectively.
The gross operating margins before allocated administrative costs and
depreciation and amortization expense in the Property and Corporate Services
Division have decreased since fiscal 1994 as a result of price competition and
start-up costs relating to new lines of business. In order to mitigate the
effect of decreasing gross margins, the Company has decreased administrative
costs as a percent of total revenue from fiscal 1994 to 1996 as a result of
the Company's ability to spread overhead over a larger revenue base. There can
be no assurance that the Company will continue to be able to decrease
administrative costs as a percentage of total revenue. The Property and
Corporate Services Division is generally characterized by lower gross margins
than the Investment Management Division due to price competition in the
property management business. Although the Investment Management Division is
also subject to the effect of downward pressure on investment management fees,
a significant portion of the Division's revenue is comprised of transaction-
based fees, which have not historically been subject to price competition to
the same extent as property management fees. The Company anticipates that its
business will continue to be subject to price competition which should result
in continuing opportunities for acquisitions.
21
<PAGE>
During fiscal 1996, approximately 12% of the Company's total Fee Based
Service revenue was derived from property and asset management fees under
management agreements with entities affiliated with the Company and 88% from
management agreements with third-party owners. Because of the Company's large
size and the diversity of its clients, the loss of any particular management
agreement for an individual property would not be likely to have a material
adverse effect on the Company. During fiscal 1996, no single client (including
as a single client any group of related entities) not affiliated with the
Company accounted for more than 5% of the Company's revenue. The Company
believes that the management agreements with affiliated entities and the long-
term relationships with unaffiliated entities provide a stable, recurring
revenue stream to the Company.
The Company's revenue is based in large part on property management fees
which are directly related to the level of rents collected at the properties.
For the last several years, occupancy and rental rates across the country have
generally been either stable or increasing. In most areas of the Company's
operations, the absence for several years of significant new commercial
property construction is now resulting in upward pressure on both occupancy
and rental levels. The Company believes that increased collected rents arising
from either higher occupancy or higher rents would have no material effect on
overhead costs and therefore an increase in collected rents, without other
changes, would produce a significantly greater percentage increase in pre-tax
net income. There can be no assurance that rent collections will increase or
that costs will not increase due to inflation or other causes.
FOR THE QUARTERS ENDED JUNE 30, 1996 AND 1995
Revenue from Property and Corporate Services Division. The majority of this
division's revenue is recurring base contract fees and direct cost
reimbursement. Other revenue includes commissions from leasing and property
sales transactions net of related commissions paid to others. Revenue of $24.6
million for the quarter ended June 30, 1996 increased $2.8 million (12.7%) as
compared to revenue of $21.8 million for the quarter ended June 30, 1995. The
Shelard acquisition in July 1995 added $2.4 million to revenue and facilities
management contracts added revenue of $1.9 million. Offsetting these increases
were lower transaction fees due to delays in expected transaction closings in
the quarter ended June 30, 1996. Managed square feet increased 12.9 million
square feet from June 30, 1995 to June 30, 1996.
Revenue from the Investment Management Division. Revenue is generated by
recurring base investment management fees and contract incentive fees related
to the achievement of yields in excess of base amounts stipulated in various
of the Company's investment management contracts. Other components of revenue
include fees associated with the acquisition and disposition of real estate
assets on behalf of clients. Revenue of $4.6 million for the quarter ended
June 30, 1996 decreased $538,000 (10.4%) as compared to revenue of
$5.2 million for the quarter ended June 30, 1995 primarily due to lower
acquisition activity due to the timing of the closing of a new investment
fund. Assets under management increased $ million from June 30, 1995 to
June 30, 1996.
Costs of Property and Corporate Services Division. Costs and expenses of
this division's Fee Based Services are generally those costs, primarily
salaries and wages, incurred directly in connection with the management of
properties and associated with the operations of this division's regional
offices. Costs of $18.9 million for the quarter ended June 30, 1996 increased
$2.7 million (16.8%) as compared to costs of $16.1 million for the quarter
ended June 30, 1995. The Shelard acquisition contributed $1.6 million to the
increase, $1.3 million was related to new facilities management contracts and
$624,000 of the increase was attributable to increased investment in the
Company's international operations. These increases were partially offset by
$1.1 million of reduced expenses primarily in the corporate advisory and
capital asset disposition groups.
22
<PAGE>
Costs of Investment Management Division. Costs and expenses of this
division's Fee Based Services are generally those costs, primarily salaries
and wages, incurred directly in connection with providing investment
management services. Costs of $3.2 million for the quarter ended June 30, 1996
increased $342,000 (12.1%) as compared to costs of $2.8 million for the
quarter ended June 30, 1995 primarily as a result of increased expenses of
$235,000 related to the establishment of ventures with Alliance and ENSR.
Gross Operating Margin. Due to the factors noted above, the Company's
margins for the Property and Corporate Services Division were 23.2% and 25.9%
of revenue and the Company's margins for the Investment Management Division
were 31.6% and 45.4% of revenue for the quarters ended June 30, 1996 and 1995,
respectively.
Administrative Costs. Administrative costs represent the costs of the
various corporate overhead departments including accounting, human resources,
payroll and management information services. Costs of $5.5 million for the
quarter ended June 30, 1996 increased $774,000 (16.3%) as compared to costs of
$4.7 million for the quarter ended June 30, 1995 due primarily to increased
staff in the Company's accounting departments in response to the Company's
recent growth.
Interest Expense. Interest expense of $997,000 increased $140,000 (16.3%)
for the quarter ended June 30, 1996 as compared to $857,000 the quarter ended
June 30, 1995 due to additional borrowings under the Bank Credit Facility to
finance the Shelard acquisition and for working capital purposes.
Depreciation Expense. Depreciation expense is computed using the straight-
line method over estimated useful lives ranging from three to seven years on
capital assets such as computer hardware and software, office furniture and
equipment and leasehold improvements. Depreciation expense of $535,000 for the
quarter ended June 30, 1996 increased $115,000 (27.4%) as compared to $420,000
for the quarter ended June 30, 1995 primarily as the result of the Company's
investment in computer hardware and software.
Amortization Expense. Amortization expense consists primarily of
amortization of the costs of acquired management agreements, covenants not to
compete and goodwill associated with the Merger and other acquisitions. The
costs associated with acquired management agreements are amortized on a
straight-line basis over the estimated periods benefited, ranging from two to
ten years. Covenants not to compete are amortized on a straight-line basis
over the periods benefited, ranging from five to ten years. Goodwill resulting
from the Merger is being amortized over 30 years and goodwill resulting from
other acquisitions is being amortized over a range of five to 30 years.
Amortization expense of $1.9 million increased $570,000 (42%) for the quarter
ended June 30, 1996 as compared to $1.4 million for the quarter ended June 30,
1995 primarily due to the amortization of the cost of management agreements
acquired from Shelard in July 1995 and the amortization of costs incurred in
the formation of an investment fund.
Minority Interest. The $1.7 million (193.7%) change in minority interest was
the result of (i) lower acquisition activity due to the timing of the closing
during the quarter of a new investment fund in a partnership in which the
Company has a 50.1% interest and (ii) lower fees in the Chicago region of a
subsidiary in which the Company has a 50% interest.
Equity Income (Losses). Equity income of $485,000 increased $578,000 for the
quarter ended June 30, 1996 as compared to a loss of $93,000 for the quarter
ended June 30, 1995 primarily due to the increase in earnings of Koll
Telecommunications Services, L.L.C. ("Koll Telecommunications"), an entity in
which the Company has a 30% interest.
Income (Loss) Before Extraordinary Item and EBITDA. Income (loss) before
extraordinary item decreased $130,000 from income of $104,000 for the quarter
ended June 30, 1995 to a loss of $26,000 for the quarter ended June 30, 1996
as a result of the factors cited above. EBITDA of $3.4 million for the quarter
ended June 30, 1996 increased $509,000 (17.6%) from $2.9 million for the
quarter ended June 30, 1995.
23
<PAGE>
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
Revenue from Property and Corporate Services Division. Revenue of $95.6
million for the year ended March 31, 1996 increased $30.4 million (46.6%) as
compared to revenue of $65.2 million for the year ended March 31, 1995. The
acquisitions of Shelard, CBS and Ross-Dove contributed $23.2 million of the
revenue increase. Other revenue contributions included (i) approximately $5.9
million in additional facilities management revenue, primarily from four new
contracts and (ii) a $2.1 million increase from two smaller acquisitions.
Managed square feet increased 14.6 million square feet from March 31, 1995 to
March 31, 1996.
Revenue from Investment Management Division. Revenue of $20.7 million for
the year ended March 31, 1996 increased $4.2 million (25.2%) as compared to
revenue of $16.5 million for the year ended March 31, 1995 primarily due to
acquisition and management fees earned from newly-formed investment funds.
Additionally, the NREI acquisition in April 1995 added $1.0 million in
revenue. Assets under management increased $207 million from March 31, 1995 to
March 31, 1996.
Costs of Property and Corporate Services Division. Costs of $69.6 million
for the year ended March 31, 1996 increased $21.8 million (45.6%) as compared
to $47.8 million for the year ended March 31, 1995. The acquisitions of
Shelard, CBS and Ross-Dove added expenses totaling $17.0 million. The balance
of the increase was primarily due to (i) approximately $4.1 million related to
new facilities management contracts, (ii) $1.6 million related to two smaller
acquisitions and (iii) approximately $1.5 million related to the Company's
investment in international operations. These increases were partially offset
by reduced expenses associated with headcount reductions and restructuring of
compensation arrangements.
Costs of Investment Management Division. Costs of $10.9 million for the year
ended March 31, 1996 increased $1.7 million (18.3%) as compared to costs of
$9.2 million for the year ended March 31, 1995 primarily due to the
acquisition of NREI in April 1995.
Gross Operating Margin. Due to the factors noted above, the Company's
margins for the Property and Corporate Services Division were 27.2% and 26.8%
of revenue and the Company's margins for the Investment Management Division
were 47.2% and 44.2% of revenue for the years ended March 31, 1996 and 1995,
respectively.
Administrative Costs. Costs of $21.7 million for the year ended March 31,
1996 increased $4.6 million (27.0%) as compared to costs of $17.1 million for
the year ended March 31, 1995 primarily due to increased staffing in various
overhead departments to support the Company's growth, including property and
corporate accounting and management information services. Administrative costs
as a percentage of the Company's revenue, however, decreased from 20.3% to
18.1%.
Interest Expense. Interest expense of $3.9 million for the year ended March
31, 1996 increased $2.9 million (312.2%) as compared to $944,000 for the year
ended March 31, 1995 as the result of borrowings under the Bank Credit
Facility, which was secured in connection with the Merger for acquisition and
working capital purposes. The Company borrowed $24.9 million primarily for the
acquisition of CBS, Ross-Dove and Shelard beginning in January 1995 and also
increased borrowings for working capital on the Bank Credit Facility.
Depreciation Expense. Depreciation expense of $1.9 million for the year
ended March 31, 1996 increased $715,000 (61.2%) as compared to $1.2 million
for the year ended March 31, 1995 primarily as a result of the Company's
investment in computer hardware and software.
Amortization Expense. Amortization expense of $6.9 million for the year
ended March 31, 1996 increased $4.0 million (136.4%) as compared to $2.9
million for the year ended March 31, 1995 as the result of amortization of
goodwill and acquired management contracts related to the Ross-Dove and CBS
acquisitions, which were completed in March 1995, the fiscal 1996
acquisitions, including Shelard, and the amortization of goodwill related to
the Merger.
24
<PAGE>
Minority Interest. Minority interest decreased $415,000 (37.9%) from $1.1
million for the year ended March 31, 1995 to $679,000 for the year ended March
31, 1996 due to an increase in the net loss of a subsidiary in which the
Company has a 50% interest, which was partially offset by an increase in
acquisition and management fees earned from newly-formed investment funds in
subsidiaries in which the Company has a 50.1% interest.
Equity Income (Losses). The $1.1 million change from an equity loss of
$156,000 for the year ended March 31, 1995 to equity income of $912,000 for
the year ended March 31, 1996 was primarily due to an increase in the net
income of Koll Telecommunications.
Income (Loss) Before Extraordinary Item and EBITDA. For the year ended March
31, 1996 as compared to the year ended March 31, 1995, income (loss) before
extraordinary item increased $931,000 (83.4%) from $1.1 million to $2.0
million and EBITDA increased $9.0 million (103.7%) from $8.7 million to $17.7
million primarily due to the Company's growth through acquisitions and
existing operations.
FOR THE YEARS ENDED MARCH 31, 1995 AND 1994
Revenue from Property and Corporate Services Division. Revenue of $65.2
million for the year ended March 31, 1995 increased $13.0 million (24.9%) as
compared to revenue of $52.2 million for the year ended March 31, 1994,
resulting from a $6.1 million revenue increase attributable to having a full
year of operations in fiscal 1995 for the Rubloff acquisition, which was
completed in July 1993, and to the fiscal 1995 fourth quarter closing of the
CBS and Ross-Dove acquisitions. Also contributing to the increase in revenue
was $3.3 million related to four smaller acquisitions and additional
facilities management revenue of $2.3 million. Managed square feet increased
33.2 million square feet from March 31, 1994 to March 31, 1995.
Revenue from Investment Management Division. Revenue of $16.5 million for
the year ended March 31, 1995 increased $10.3 million (163.6%) as compared to
revenue of $6.3 million for the year ended March 31, 1994, resulting from a
$4.1 million revenue increase attributable to having a full year of operations
in fiscal 1995 for the Karsten acquisition, which closed in February 1994, and
a $5.1 million revenue increase related to fees earned from newly-formed
investment funds. Assets under management increased $309 million from
March 31, 1994 to March 31, 1995.
Costs of Property and Corporate Services Division. Costs of $47.8 million
for the year ended March 31, 1995 increased $13.5 million (39.4%) as compared
to $34.3 million for the year ended March 31, 1994 primarily as the result of
having a full year of operations in fiscal 1995 for the Rubloff acquisition
and the acquisitions of CBS and Ross-Dove. These three acquisitions
contributed $7.4 million of the increase. The balance of the increase was
attributable to (i) the Company's further expansion into the tenant
representation business, which added approximately $2.2 million in expense,
and (ii) expenses of $676,000 related to one smaller acquisition.
Costs of Investment Management Division. Costs of $9.2 million for the year
ended March 31, 1995 increased $5.5 million (148.3%) as compared to $3.7
million for the year ended March 31, 1994 primarily due to having a full year
of operations in fiscal 1995 for the Karsten acquisition, which contributed
$3.5 million of the increase. Two smaller acquisitions and additional costs
related to the formation of investment funds also contributed to the increase.
Gross Operating Margin. Due to the factors noted above, the Company's
margins for the Property and Corporate Services Division decreased from 34.4%
to 26.8% of revenue and the Company's margins for the Investment Management
Division increased from 40.7% to 44.2% of revenue for the years ended March
31, 1994 and 1995, respectively.
Administrative Costs. Costs of $17.1 million for the year ended March 31,
1995 increased $2.9 million (20.0%) as compared to costs of $14.2 million for
the year ended March 31, 1994 primarily due to increased staffing in various
overhead departments to support the Company's growth, including management
information services, human resources, payroll and training. Administrative
costs as a percentage of revenue, however, decreased from 23.9% to 20.3%.
25
<PAGE>
Interest Expense. Interest expense of $944,000 for the year ended March 31,
1995 increased $818,000 (649.2%) as compared to $126,000 for the year ended
March 31, 1994 as the result of borrowings for acquisitions, including Karsten
and Rubloff, as well as an increase in the Company's working capital
requirements.
Depreciation Expense. Depreciation expense of $1.2 million for the year
ended March 31, 1995 increased $432,000 (58.7%) as compared to $736,000 for
the year ended March 31, 1994 primarily as a result of the Company's
investment in computer hardware and software.
Amortization Expense. Amortization expense of $2.9 million for the year
ended March 31, 1995 increased $2.0 million (199.4%) as compared to $980,000
for the year ended March 31, 1994 due primarily to amortization of acquired
management contracts related to the Rubloff and Karsten acquisitions and
amortization of goodwill resulting from the Merger.
Minority Interest. Minority interest of $1.1 million for the year ended
March 31, 1995 increased $192,000 (21.3%) as compared to $902,000 for the year
ended March 31, 1994 due to an increase in acquisition fees earned from newly-
formed investment funds in subsidiaries in which the Company has a 50.1%
interest, offset by a loss incurred by a subsidiary in which the Company has a
50% interest.
Equity Income (Losses). Equity income was $340,000 in fiscal 1994 as
compared to an equity loss of $156,000 in fiscal 1995. The subsidiaries which
contributed the income in fiscal 1994 contributed a similar amount of income
in fiscal 1995, however, this income was offset by losses incurred as the
result of the start-up of Koll Telecommunications and losses, related to the
various investment partnerships which were acquired in February and May 1994,
created primarily by depreciation expense on the partnerships' real estate
assets.
Income Taxes. The Company's effective income tax rate increased from 40% in
fiscal 1994 to 54% in fiscal 1995 primarily as a result of the non-
deductibility for income tax purposes of certain expenses related to the
Merger.
Income (Loss) Before Extraordinary Item and EBITDA. For the year ended March
31, 1995 as compared to the year ended March 31, 1994, income before
extraordinary item decreased $1.9 million (62.6%) from $3.0 million to $1.1
million and EBITDA increased $1.8 million (26.8%) from $6.9 million to $8.7
million primarily due to the Company's growth through acquisitions and
existing operations.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1996, the Company generated $9.5 million in cash flow from
operations, and net borrowings increased by $23.1 million. This cash was used
primarily to fund the Company's growth strategy, including $19.2 million paid
in connection with current and prior years' acquisitions and $6.6 million used
for other investing and financing activities, such as $2.2 million for capital
purchases, including $1.6 million for computer hardware and software, and the
balance for joint venture investments. The Company's accounts receivable
increased from $16.6 million to $25.8 million during fiscal 1996. The majority
of the increase was attributable to the growth in the Company's revenue and
the remainder was primarily caused by an increase in the percentage of
transaction-based revenue which generally has a longer collection period.
There was no commensurate increase in the allowance for doubtful accounts.
For the quarter ended June 30, 1996, the Company had a net increase of $2.1
million in borrowings on its Bank Credit Facility, which was used primarily to
fund $1.6 million in deferred consideration in connection with prior years'
acquisitions. The balance, together with cash-on-hand, was used for other
investing and financing activities totaling $4.3 million, such as capital
purchases and joint venture investments, and to finance the Company's $900,000
million use of cash from operations.
KMS has a Bank Credit Facility agented by Bankers Trust Company, which, as
of June 30, 1996, provided for a reducing revolving amount of senior bank
financing of up to $48.675 million with a $29.675 million acquisition sublimit
and a $19.0 million working capital sublimit. The Company recently completed
an
26
<PAGE>
amendment to the Bank Credit Facility to provide for senior bank financing of
up to $63.675 million with a $35.675 million acquisition sublimit and a
$28.0 million working capital sublimit. The Bank Credit Facility has a final
maturity date of December 31, 1999. All amounts outstanding under the Bank
Credit Facility bear interest at a customary base rate or Eurodollar rate plus
a margin based upon KMS's leverage ratio (the ratio of total debt to earnings
before interest, taxes, depreciation and amortization and costs related to the
Merger). The margins range from 0% to 1.25% in the case of the base rate and
from 0.625% to 2.25% in the case of the Eurodollar rate. Outstanding
borrowings under the acquisition sublimit must be prepaid in installments on
December 1996, March 1997, June 1997, December 1997, June 1998 and December
1998. The Bank Credit Facility is guaranteed by KRES and KMS's wholly-owned
subsidiaries and is secured by a pledge of stock of KMS and each of its
wholly-owned subsidiaries. As of June 30, 1996, $44.2 million was outstanding
under the Bank Credit Facility, consisting of $26.1 million on the acquisition
sublimit and $18.1 million on the working capital sublimit. The balance of
$3.6 million available on the acquisition sublimit as of June 30, 1996 has
been set aside as collateral for a letter of credit related to an acquisition
and will be drawn as payments are due on the underlying note. As of August 13,
1996, $45.1 million was outstanding under the Bank Credit Facility, consisting
of $26.1 million on the acquisition sublimit and $19.0 million on the working
capital sublimit.
The Bank Credit Facility contains certain customary affirmative and negative
covenants, including but not limited to covenants regarding the Company's
leverage, net worth, operating earnings and interest coverage, as well as
limitations on other indebtedness, liens, investments, restricted junior
payments (dividends, redemptions and payment on subordinated debt), and
mergers and acquisitions. Any single acquisition utilizing $10.0 million or
less of funds from the Bank Credit Facility is permitted without lender
consent if certain pro forma leverage requirements and other conditions are
satisfied.
The Company intends to use the net proceeds from the Offering to repay
amounts outstanding under the Bank Credit Facility in full. Amounts repaid
under the Bank Credit Facility from such proceeds cannot be reborrowed.
KMS is currently negotiating an amendment to the Bank Credit Facility to
provide, in addition to other terms, the ability to continue borrowing under
the Bank Credit Facility after completion of the Offering and increased
borrowing availability with a working capital sublimit of $30.0 million and an
acquisition sublimit of $45.0 million, subject to completion of the Offering.
No assurances can be given that such negotiations will be successful.
The Company expects that amounts available under the Bank Credit Facility,
as amended, cash-on-hand, including $ million of net proceeds remaining from
the Offering and cash flow from operations will be adequate to pursue
additional acquisitions and will support the Company's working capital
requirements for the foreseeable future.
27
<PAGE>
BUSINESS
OVERVIEW
The Company provides a broad spectrum of real estate and real estate-related
services through two principal operating divisions: Property and Corporate
Services and Investment Management. The Property and Corporate Services
Division provides (i) property management services and (ii) corporate and
facilities management services. The Investment Management Division provides
(i) real estate investment fund and portfolio management, (ii) acquisition,
disposition, financing and valuation services related to commercial properties
and (iii) real estate market and securities research.
The Property and Corporate Services Division delivers a broad array of
services through 13 regional offices and 258 field offices located in 22 out
of the 25 largest MSAs in the United States and in five major cities in Asia.
Property management typically involves performing services associated with the
operation of an investor-owned, but not typically investor-occupied, property,
including maintenance, marketing and leasing services. Corporate and
facilities management services include the administration, management and
maintenance of corporate-owned and occupied property, as well as tenant
representation, capital asset disposition, strategic real estate consulting
and other ancillary services for corporate clients. In order to serve the
growing need for comprehensive, high-quality real estate services required by
multinational corporations, in November 1994 the Company's Property and
Corporate Services Division established operations in Asia. The Company's
international operations, which are headquartered in Jakarta, Indonesia,
provide property and corporate and facilities management services similar to
those described above, although tailored to meet the unique needs of its
multinational customers. The Company believes that it is one of the first
U.S.-based real estate services firms to establish offices in Asia.
The Investment Management Division provides a variety of asset and portfolio
management services to the pension fund and institutional real estate
investment community including (i) real estate investment fund and portfolio
management, (ii) acquisition, disposition, financing and valuation services
related to commercial properties and (iii) real estate market and securities
research. As of June 30, 1996, the Investment Management Division managed
asset portfolios, consisting primarily of commercial real estate investments,
which had an aggregate cost basis of approximately $2.0 billion. The Company
is a sponsor and manager of 19 separate accounts and six commingled funds
which are invested principally in commercial properties and mortgage assets.
The Investment Management Division raises funds from new and existing clients,
acquires direct equity and mortgage positions in portfolios of real estate and
securitized real estate investments, actively manages these investments to
maximize their value, including ongoing strategic assessment of properties,
and evaluates and disposes of assets and investments to generate the highest
portfolio return consistent with client objectives. Unlike many of the
Company's investment management competitors, the Company is able to provide
its investment management clients with a comprehensive package of investment
management services by leveraging the extensive resources of its property
management and real estate research operations.
In order to support its broad geographic operations and diverse services,
the Company has developed a centralized corporate support structure that
provides a variety of uniform, high-quality technical and personnel support
services to the entire organization, including management information systems,
risk management, employee training and human resources administration. The
Company believes these centralized support services provide it with a distinct
competitive advantage and have been instrumental in the Company's ability to
assimilate acquisitions effectively. In addition, since a portion of the
Company's administrative costs are fixed, the Company believes it will be able
to add revenue associated with additional square footage and assets under
management without significantly increasing those costs.
INDUSTRY TRENDS
Historically, real estate services such as property management, investment
management and leasing and marketing were provided by separate companies who
each charged discrete, incremental fees for their services. In the late
1980's, the number of these real estate service providers increased
significantly when numerous real
28
<PAGE>
estate firms redirected their business focus to property and investment
management due to the severity and duration of the downturn in the commercial
real estate industry and the resulting lack of other income-producing
opportunities in that industry. As a result, competition among property and
investment managers increased dramatically, putting downward pressure on
prices and fees.
The downturn in the commercial real estate industry concurrently caused many
property owners to dispose of, or to lose through foreclosure, their
properties, resulting in a consolidation in the institutional ownership of
real estate in the United States. Larger institutional owners became
disenchanted with the complication and cost of interfacing with numerous
service providers for each property in their sizable and typically
geographically dispersed portfolios, and, in the early 1990's, began to seek
comprehensive real estate services from a reduced number of providers. The
desire of institutions and corporations to receive comprehensive real estate
services from a reduced number of providers capable of broad geographic
coverage and the downward pressure on fees paid to real estate service
providers due to increased competition, have driven, and should continue to
drive, the consolidation taking place in the industry today. The Company
believes that this consolidation will motivate many local and regional real
estate service providers to sell to, or form alliances with, major national
and international companies. Despite this consolidation, the real estate
services industry still remains highly fragmented. As the chart below depicts,
the top ten property managers (based on square footage) manage less than 3%
and the top 50 property managers manage less than 5% of the 60 billion total
square feet of commercial property (industrial, office and retail) located in
the United States.
[Pie Chart]
This fragmentation offers significant opportunities for continued expansion
and growth through acquisitions by well-capitalized companies with large-scale
operations that are able to offer customers comprehensive, high-quality
services at competitive prices. Viable competitors in the industry employ
experienced and well-trained management and personnel and have sufficient
resources to invest in state-of-the-art management information systems in
order to provide services efficiently. Because of the overhead required to
provide comprehensive services, management believes service providers that are
able to spread their costs over the revenue provided by a larger portfolio of
properties and assets under management are favored in the marketplace as they
are typically able to offer more competitive prices.
In addition to this consolidation trend, since the late 1980's corporate
owners of real estate have increasingly outsourced their real estate service
needs to third-party providers in order to refocus their resources on core
businesses. In recent years, outsourcing has accelerated and the types of
services being outsourced have broadened. This trend is expected to continue,
creating significant opportunities for full-service third-party real estate
service providers such as the Company.
Complementing these opportunities for continued expansion and growth through
acquisitions, property management fees from contracts with existing clients
have begun to increase as a result of the recent improvement in U.S. real
estate markets. Property management contracts are typically based upon a
percentage of total rent collections, and as a result, occupancy and rental
rate increases at the property level generate an increase in property
management fees to the service provider. According to the National Real Estate
Index National Overview, Volume 43 (published by the Company--see "Business--
Investment Management Division--Market Research"), the composite index for
national rental rates including apartment, warehouse, retail and central
business district office properties grew 9.4% over the two years ended March
31, 1996. As a result of anticipated job and population growth in many
geographic markets in the U.S., and the historically low level of development
of new space, management believes upward pressure on rents will continue in
1996 and 1997.
29
<PAGE>
In the investment management industry, the transition of properties from
private ownership to being publicly held has led to real estate capturing a
larger share of investment portfolios. Historically, fund managers have been
limited to a relatively fixed asset allocation among equity, debt and real
estate investments. The growing securitization of real estate through REITs
and REMICs since the early 1990's, however, has changed fund managers'
perceptions of real estate as an asset class since, unlike direct real estate
asset and mortgage investments, securitized real estate investments are liquid
and are perceived similarly to other freely-tradable equity and debt
securities. As a result, fund managers are allocating a greater portion of
their equity and debt portfolios to securitized real estate investments. The
Company believes that these trends are creating a growing market for real
estate investment management services. See "Risk Factors--Real Estate Economic
Climate."
BUSINESS STRATEGY
The Company's primary business objective is to pursue increased revenue,
market share and profitability through the following strategies:
. Continuing to grow through acquisitions. The Company plans to continue
its acquisition program to take advantage of the consolidation trend in
the real estate services industry. The Company believes that due to the
fragmented marketplace, opportunities exist to acquire smaller, regional
property and facilities management providers and complementary or niche
service providers at attractive prices. Through its acquisition program,
the Company intends to enhance its geographic market coverage, provide
additional services, further leverage its corporate overhead and
strengthen its overall position as a leading full service real estate
company.
. Continuing to provide and develop new services. The Company intends to
continue to broaden its array of real estate services provided or
offered to existing and prospective institutional or corporate clients
as these customers continue to consolidate their service providers. The
Company intends to strengthen its relationship with existing customers
and enhance its attractiveness to new clients by providing them with
efficient, "one-stop shopping" for their real estate investments. One of
the areas the Company intends to emphasize is the increased value
available to the Company's current and prospective investment management
clients by providing both investment advisory and property management
services for the underlying properties in their portfolios.
. Capitalizing on the corporate outsourcing trend. Large corporations
seeking to refocus on core competencies and reduce operating costs are
looking to the national and international real estate service provider
as an outsource vendor. This outsourcing trend has accelerated in recent
years and the Company believes that it will continue. The Company is one
of the major participants in this industry segment and believes that
only a small percentage of the market has been penetrated. This trend
provides the Company with attractive revenue and profit opportunities.
. Taking advantage of recovering and emerging real estate markets. Through
acquisitions and joint ventures, the Company plans to continue to expand
its geographic reach into markets it has specifically identified that
are currently not being served by the Company. By expanding its
geographic base, management believes the Company will further benefit
from increasing rental rates and property values as U.S. commercial real
estate markets continue to recover. In addition, the Company intends to
further pursue real estate service growth opportunities in Asia.
. Developing and offering new services to property tenants and their
employees. The Company believes there are significant revenue and profit
opportunities associated with convenience and cost-saving services the
Company can provide to the more than 19,000 tenants and their more than
325,000 employees occupying properties the Company manages. The Company
believes that its established relationships and name recognition provide
an advantage in expanding its services to this new and accessible
customer base.
30
<PAGE>
ACQUISITIONS
The Company's growth strategy has focused on the acquisition of regional
property management companies in strategically-targeted markets, investment
management companies and other complementary service providers. Since fiscal
1992, the Company has completed 21 acquisitions for an aggregate purchase
price of approximately $43 million, and currently has five acquisitions
pending, all of which are listed below:
PROPERTY AND CORPORATE SERVICES DIVISION (1)
<TABLE>
<CAPTION>
SQUARE FEET
MANAGED AT
DATED DATE OF
ACQUIRED ACQUISITION ACQUISITION GEOGRAPHIC MARKET SERVED
-------- ----------- ------------- ------------------------
(IN MILLIONS)
<C> <S> <C> <C>
Pending Property Management and
Brokerage Company......... 5.5 California, Oregon and
Washington
Pending Leasing and Brokerage
Company (2)............... -- Southern California
Pending Relocations, Inc. (3)..... -- China
Pending PT IPAC Propertindo (4)... 1.7 Indonesia
Pending The Landmark Property
Corporation (5)........... 3.0 Hawaii
7/96 Total Employee Relations,
Inc. (6).................. -- United States
10/95 Bridgewood Properties..... 1.8 New Jersey
7/95 The Shelard Group, Inc. .. 7.9 Minnesota
4/95 Jones & Company........... 1.0 Kansas and Missouri
3/95 Ross-Dove Company,
Inc.(7)................... -- International
1/95 CBS Investment Realty,
Inc. ..................... 19.2 Southwestern and Western
U.S.
10/94 Midstates Management
Company, Inc. ............ 3.6 Illinois
2/94 Karsten Realty Advisors
(8)....................... 2.0 Southwestern, Western and
Eastern U.S.
2/94 The Peregrine White
Company, Inc. (9)......... -- Eastern U.S.
2/94 Bonutto-Hofer Investments
(8)....................... 0.6 Western U.S.
7/93 Rubloff Inc............... 32.0 Midwestern, Southern,
Central and Southeastern
U.S.
1/93 Tishman Midwest Management
Corp. .................... 2.2 New York
9/92 The Swearingen Management
Company, Inc. ............ 4.1 Texas
2/92 Sunwest Asset Management.. 4.8 California
1/92 CC&F Asset Management Co.,
Inc. (10)................. 13.9 New England, Illinois
7/91 Tipton Associates, Inc. .. 1.3 Ohio
4/91 Linclay................... 1.3 Ohio
4/91 Shannon Management
Services, Inc. ........... 1.8 Texas
</TABLE>
(footnotes on following page)
31
<PAGE>
INVESTMENT MANAGEMENT DIVISION
<TABLE>
<CAPTION>
ASSETS UNDER
MANAGEMENT
DATED AT DATE OF
ACQUIRED ACQUISITION ACQUISITION SERVICES ACQUIRED
-------- ----------- ------------- -----------------
(IN MILLIONS)
<C> <S> <C> <C>
4/95 National Real Estate
Index................... $ 5 Real estate research & publishing,
investment management
5/94 Dover Retail Properties,
Inc. (11)............... -- Investment and property management
2/94 Karsten Realty Advisors
(8)..................... $637 Investment and property management
2/94 Bonutto-Hofer
Investments (8)......... $351 General partner services
4/93 D.A. Management, Inc.... $ 59 Investment management
</TABLE>
- --------
(1) Unless otherwise noted, the entities listed below provide property and/or
facilities management or related services.
(2) Provides leasing and sales brokerage and consulting services for retail
real estate.
(3) Provides relocation services to employees of multinational corporations
relocating to Hong Kong and China.
(4) Pending acquisition of a 50% interest.
(5) Pending acquisition of a 99.8% interest.
(6) Provides employee relations consulting.
(7) Acquisition of a 50.1% interest. Provides capital asset disposition
services.
(8) Both property management and investment management contracts were
included as part of this acquisition.
(9) Provides leasing and tenant representation services.
(10) Acquisition of a 50% interest.
(11) Represents acquisition of remaining general partnership interests of
assets under management acquired with Bonutto-Hofer Investments.
The following describes the Company's most strategically significant
acquisitions since July 1993:
The Shelard Group, Inc. In July 1995, the Company acquired Shelard, a
Minneapolis-based full-service real estate company that provides property,
facilities and construction management, brokerage and consulting services.
Shelard is one of the largest real estate service providers in Minnesota, and
provides many of the same types of client services as the Company. The
acquired portfolio of office, industrial, retail and corporate management
assignments consisted of approximately 7.9 million square feet of properties
located throughout the Minneapolis-St. Paul metropolitan area. This
acquisition formed the Company's Minnesota region of its Property & Corporate
Services Division.
National Real Estate Index. In April 1995, the Company acquired NREI, which
conducts real estate and REIT research and provides clients with real estate
price and rent trends in 64 major U.S. markets. NREI sells real estate market
trend publications and related print and disk products based on the
information it collects in its extensive transaction data base, which was
augmented by the Company's portfolio. NREI's publications and products are
subscribed to by many of the largest property managers, portfolio managers,
insurance companies, pension funds and other institutional investors. NREI
provides real-time data and information to enable its subscribers, as well as
the Company's property and investment management clients, to make better
investment, operational and financial decisions.
Ross-Dove Company, Inc. In March 1995, the Company acquired the assets of
Ross-Dove, a capital asset disposition firm, through its controlling interest
in a newly-formed limited liability company, Koll-Dove Global Disposition
Services, L.L.C. ("Koll-Dove"). Koll-Dove conducts auctions for the sale of
capital assets, commercial real estate, financial instruments, excess or
obsolete inventory and other assets. This acquisition enabled the Company to
provide its corporate and facilities clients with an additional service,
addressing their balance sheet and storage space needs, and introduced the
Company to a new client base.
32
<PAGE>
CBS Investment Realty, Inc. In January 1995, the Company acquired CBS, a
Phoenix, Arizona-based property management and brokerage company. Through
CBS's approximately 19.2 million square foot portfolio of commercial and
multi-family properties located in Arizona, New Mexico, Texas and California
and its array of facilities management, architectural design and construction,
market research and brokerage services, the Company was able to greatly
enhance its existing services and presence in these major markets.
The Peregrine White Company, Inc. In February 1994, the Company acquired
Peregrine White, a New York City-based real estate firm known for its tenant
representation activities for major corporations. This acquisition augmented
the growth of the Company's East Coast commercial brokerage services.
Karsten Realty Advisors. In February 1994, the Company acquired Karsten to
build its investment management and advisory business. This acquisition added
an investment and property management portfolio comprising approximately $637
million in assets under management and approximately 2.0 million square feet
of property management contracts. This base provided the Company with new
client relationships with pension funds, life insurance companies,
institutional clients and high-net worth individuals to whom the Company could
cross-market other real estate services. These clients provided a significant
amount of funds under management, which has enabled the Company to compete
with larger advisors for additional business.
Rubloff Inc. In July 1993, the Company acquired Rubloff, a Chicago-based
property, facilities and construction management and brokerage firm with
approximately 32.0 million square feet of commercial space under management.
These assets formed the Midwest, Central and Southeast regions of the
Company's Property & Corporate Services Division.
RECENT AND PENDING ACQUISITIONS
The Company is continually assessing acquisition opportunities as part of
its growth strategy and is at various stages of evaluation, discussion or
negotiation with a number of candidates. Management believes that there are
significant opportunities in the fragmented and consolidating real estate
services industry to acquire additional companies to complement and expand the
Company's existing operations. The Company has recently completed or is in
various stages of the acquisition process with respect to six acquisitions,
which are described below, for an aggregate purchase price of approximately
$6.0 million, including a deferred purchase price component of $2.7 million,
the payment of which is contingent upon each acquired company's performance.
The five pending acquisitions are subject to completion of due diligence and a
number of other contingencies and, as a result, no assurance can be given that
these or any other acquisitions will be completed. If these entities are
acquired, the Company expects to pay all or a portion of the purchase price
from a portion of the proceeds from the Offering. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
In July 1996, the Company acquired Total Employee Relations, Inc. an Irvine,
California-based employee relations consulting company which provides such
services as developing and revising employee handbooks, resolving labor
disputes, preparing affirmative action plans, installing alternative dispute
resolution programs, performing personnel audits, preparing employee attitude
surveys, training of supervisory/management personnel, providing union
organizational advice, consulting on unemployment insurance cost control and
providing executive search and outplacement programs. The Company anticipates
that this acquisition will also provide a foundation for expanding into
temporary employment and benefits consulting services.
The Company is negotiating to purchase the assets of The Landmark Property
Corporation, a Honolulu, Hawaii-based property management and brokerage
company that manages 3.0 million square feet of commercial properties.
The Company anticipates obtaining in August 1996 final approval from the
Investment Coordinating Board of the Republic of Indonesia to acquire a 50%
interest in PT IPAC Propertindo ("IPAC"), a real estate services
33
<PAGE>
company headquartered in Jakarta, Indonesia that manages over 1.7 million
square feet of office, retail and residential property in Indonesia. This
acquisition will enable the Company to expand its property management
operations in Asia using existing resources and infrastructure.
In April 1996, the Company executed a letter of intent to purchase
Relocations, Inc. ("Relocations"), a Hong Kong-based company that specializes
in providing professional relocation and orientation assistance to the
employees, and their families, of multinational companies relocating to the
Hong Kong, Beijing and Shanghai areas. Services provided by Relocations
include cultural training, home selection, shipping and moving, licensing and
political and governmental advisory services. Relocations employees are
knowledgeable in both local customs and cultures and the political and
business environment. Relocations also has offices in Beijing, Shanghai,
Shenzhen and Tianjin. This acquisition, which is scheduled to close in August
1996, will enhance the Company's marketing efforts in Asia and will provide
the Company with access to several Fortune 500 clients to whom the Company
will market additional real estate services.
The Company is negotiating to purchase the assets of a Newport Beach,
California-based property management and brokerage company that manages
approximately 5.5 million square feet of primarily retail properties in
California, Oregon and Washington.
The Company is negotiating to purchase the assets of an Irvine, California-
based company that provides leasing and sales brokerage and consulting
services for retail properties in Southern California.
PROPERTY & CORPORATE SERVICES DIVISION
OVERVIEW
The Company performs property and facilities management and leasing services
for an approximately 149 million square foot portfolio of office, industrial,
retail, multi-family and corporate space. The Company serves approximately
1,735 commercial properties located in various regions throughout the United
States and five commercial properties in Asia. The broad geographic area
served reduces the impact of local economic cycles on the overall operations
of the Company. The following table shows by region and by property type the
distribution of properties for which the Company provided management or
leasing services as of June 30, 1996.
<TABLE>
<CAPTION>
SQUARE FEET UNDER MANAGEMENT
-----------------------------------------------------------------------
(IN THOUSANDS)
MULTI- LEASING PERCENT
REGION OFFICE INDUSTRIAL RETAIL FAMILY(1) OTHER(2) ONLY(3) TOTAL OF TOTAL
------ ------ ---------- ------ --------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
West.................... 27,093 16,731 5,736 474 525 24 50,583 34.0%
Central................. 14,388 2,353 3,175 4,599 110 5,650 30,275 20.3%
Midwest................. 20,608 2,682 2,585 -- 2,150 822 28,847 19.3%
Southeast............... 7,070 3,966 84 -- 1,563 2,756 15,439 10.3%
East.................... 21,097 1,570 141 -- -- -- 22,808 15.3%
International........... 967 -- 4 179 86 -- 1,236 0.8%
------ ------ ------ ----- ----- ----- ------- -----
Total................. 91,223 27,302 11,725 5,252 4,434 9,252 149,188 100.0%
====== ====== ====== ===== ===== ===== ======= =====
Percent of Total...... 61.1% 18.3% 7.9% 3.5% 3.0% 6.2% 100.0%
====== ====== ====== ===== ===== ===== =======
</TABLE>
- --------
(1) Assumes 750 square feet per unit managed, which management believes to be
the industry standard for determining multi-family square feet under
management.
(2) Includes airline terminals, hotels, restaurants, libraries, train stations
and parking facilities.
(3) Represents total square footage of properties for which the Company
provides only leasing or brokerage services.
34
<PAGE>
PROPERTY MANAGEMENT
Property management services include maintenance, marketing and leasing
services for investor-owned, but not typically investor-occupied, property.
The Company works closely with its clients to implement their specific goals
and objectives, focusing on the enhancement of property values through
maximization of cash flow. The Company currently provides property management
services to more than 325 clients, including Cigna Life Insurance Company, The
Hancock Companies, Metropolitan Life Insurance Company, Teachers Insurance and
Annuity Association and The Travelers Group. A typical property management
agreement will require the Company to provide a number of services including:
. Bill and collect from tenants all rent payments and other charges
. Pay all expenses for property operations, including utility bills and
janitorial services
. Negotiate new leases, lease renewals and tenant expansions upon terms
approved by the property owner
. Develop and implement marketing plans and promotions for each property
using competitive surveys, leasing projections and other market data
. Take all necessary actions for the proper management of the properties,
including periodic physical inspections, supervision of maintenance
activities, responding to tenant requests and arranging for such
improvements, alterations and repairs as may be required by the property
owner
. Maintain records of funds received and disbursed in connection with a
property
. Negotiate service and labor contracts required in the ordinary course of
business to maintain a property
. Prepare required accounting and financial reports and prepare detailed
income and cash flow budgets
. Coordinate management activities with the property owner
. Procure legal services to assist in the collection of rent or the
eviction of tenants
Operations. The Company maintains a decentralized approach to property
management, bringing significant local knowledge and expertise to each
management and leasing assignment. The Company has 279 offices located in 22
of the 25 largest MSAs in the United States and in five major cities in Asia.
Each local office draws upon the broad range of support services provided by
the Company's centralized corporate resources to provide each client the
combination of local market knowledge and consistent, high-quality service.
Most property management services are performed by management teams located
on-site or in the vicinity of the properties they manage. This provides
property owners and tenants with immediate and easily accessible service and
accountability.
Compensation. Under a typical property management agreement, the Company
will be entitled to receive management fees and lease commissions. The
management fee in most cases is based upon a formula which gives the Company a
specified percentage of the monthly gross rental income generated and
collected from tenants occupying the property under management, and as a
result, will increase and decrease as building rents and occupancies increase
and decrease. Many of these property management agreements also include a
stated minimum management fee. The Company also may be entitled to
reimbursement for costs incurred that are directly attributable to management
of the property. Examples of reimbursable costs include the wages of on-site
employees and the cost of field office rent, furniture, computers, supplies
and utilities. Under certain property management agreements, the Company may
also be entitled to construction management fees. See "Risk Factors--Real
Estate Economic Climate."
Lease commissions, which are calculated as a percentage of the minimum rent
payable under the terms of the lease, are generally earned by the Company at
the commencement of a lease and are not contingent upon the tenant fulfilling
the terms of the lease. In cases where a real estate broker is not involved,
lease commissions earned by the Company for a new lease typically range
between 2% and 6% of minimum rent payable under the lease. For the renewal of
an existing lease, such fees are generally 50% of a new lease commission. In
cases where a third-party real estate broker is involved, the Company must
typically share 50% of the commission it would otherwise have received with
the broker.
35
<PAGE>
Term. A typical property management agreement contains an evergreen
provision which provides that the agreement remains in effect for an
indefinite period but enables the property owner to terminate the agreement
upon 30 days' prior written notice, which the Company believes to be a
customary industry termination provision. The Company historically has been
successful in retaining property management agreements, but has experienced
the loss of such agreements in certain instances when a property has been sold
or when a property owner decides to change property managers or to assume
direct responsibility for managing the property. As of June 30, 1996,
management believes that the Company's average tenure (including that of its
acquired predecessors) as manager of unaffiliated properties was over 3.4
years.
CORPORATE SERVICES
The Corporate Services Group specializes in the administration, management
and maintenance of properties that are owned and occupied by large
corporations and institutions, such as corporate headquarters, regional
offices, administrative offices and manufacturing and distribution facilities,
allowing those organizations to focus their resources on core competencies.
The Company's portfolio of corporate and facilities assignments has grown to
over 42 million square feet within the last four years and includes such
significant clients as Bank of America, Delta Airlines, Dow Chemical, Fleet
Bank and Hughes Aircraft. The Company provides a full-service approach to
facilities management, including reducing building and operations costs,
maintaining and enhancing the value of each facility and providing top-quality
managerial and technical support. Each corporate and facilities management
assignment is tailored to meet the specific needs of the client, ranging from
contracting for one of the group's services to a combination of all of the
services available. Services that the Company provides include tenant
representation, acquisition and disposition strategies, strategic real estate
consulting, operations and maintenance, lease administration, contract
management, operational surveys and audits, technical and administrative
support and ancillary services. The Company focuses on developing innovative
programs for its corporate clients in total quality management, operating cost
benchmarking, proprietary lease administration and building management
software and the establishment of vendor performance standards. The Company
has recently formed a business unit to deliver facilities management services
to the healthcare and medical industries.
Compensation. Under a typical facilities management agreement, the Company
is entitled to receive management fees and reimbursement for its costs
incurred that are directly attributable to management of the facility.
Examples of reimbursable costs include wages of on-site employees and the cost
of field office computers, supplies and utilities. In most instances, office
space and furniture for the on-site office are provided by the client. Under
certain facilities management agreements, the Company may also be entitled to
an additional incentive fee which is paid if the Company meets certain
performance criteria established in advance between the client and the
Company. The management fee in most cases is based upon a fixed annual amount
per square foot of the facility managed.
Term. A typical facilities management agreement is written for a stated term
of one or more years and may contain provisions for extensions of the
agreement. Agreements typically include a provision for cancellation by either
party upon the giving of notice within a specified time frame.
INTERNATIONAL OPERATIONS
In November 1994, the Company expanded its operations to Asia to capitalize
on the region's growth potential and demand for U.S. real estate expertise and
systems. In June 1995, the Company received a license to do business in China
enabling the Company to provide services in this large and emerging market.
Under the name "Koll Asia Pacific," the Company has hired and partnered with
experienced local professionals, gaining the necessary cultural and local
business knowledge to deliver services in Asia that are similar to those the
Company delivers in the United States. Koll Asia Pacific has offices in
Singapore, Shanghai, Tokyo and Jakarta, where the Company's operational
headquarters is located. The Company's technical support services are located
in Singapore.
36
<PAGE>
The Company believes that it is one of the first U.S.-based real estate
service firms to establish offices in Asia. The Company's most significant
ventures in Asia include development services for Kinghill Plaza, a
2.8 million square foot retail and entertainment center currently under
development, and property management and leasing for China Merchant Tower, a
700,000 square foot office and retail high-rise property, both in Shanghai,
China. In Japan, the Company has entered into a joint venture to provide
development services and leasing consulting related to the development of
shopping centers. The Company is in the process of acquiring a property
management company in Indonesia and a relocation services company in China.
See "Risk Factors--Risks Associated with Operations Outside the United States"
and "Business--Recent and Pending Acquisitions."
ADDITIONAL SERVICES
In addition to the services described above, the Company also provides its
institutional and corporate clients with the following services:
Capital Asset Disposition. Koll-Dove conducts auctions for capital assets,
commercial real estate, financial instruments, excess or obsolete inventory
and other assets. Clients seeking to dispose of excess capital assets include
major defense contractors, personal computer manufacturers and distributors,
printed circuit board companies and semiconductor fabrication firms. Clients
utilizing Koll-Dove's ability to auction commercial real estate include large
banks, commercial and asset-based lenders and insurance companies.
Telecommunications Services. Through its 30% interest in Koll Telecommunica-
tions, the Company provides site location and acquisition, entitlement and
zoning, leasing, and construction management services for telecommunication
cell sites in California, Florida, Georgia, Massachusetts and New York. Koll
Telecommunications' customers currently include American Personal Communica-
tions, Centel, Cox Communications, Los Angeles Cellular Telephone Company,
Metricom and The Sprint Communications Venture.
INVESTMENT MANAGEMENT DIVISION
The Investment Management Division provides a variety of asset and portfolio
management services to the pension fund and institutional real estate
investment community including (i) real estate investment fund and portfolio
management, (ii) acquisition, disposition, financing and valuation services
related to commercial properties and (iii) real estate market and securities
research. As of June 30, 1996, the Division managed asset portfolios,
consisting primarily of commercial real estate investments, which had an
aggregate cost basis of approximately $2.0 billion, over half of which had
been raised through a joint venture with The Bren Company, a New York-based
real estate investment management company. The Investment Management Division
has over 50 clients, such as pension funds, banks, insurance companies, high
net-worth individuals, partnerships and international investors. These clients
include AT&T Pension Fund, National Life Insurance Company, Orange County
Employee Retirement System and Teachers Retirement System of the State of
Illinois. The Company provides the following additional services for its real
estate investment clients: strategic planning, investment analysis, risk
management, fiduciary oversight, financial forecasts, due diligence, equity
and mortgage asset management, and mortgage banking. Certain subsidiaries of
the Company are Registered Investment Advisors under the Investment Advisors
Act of 1940.
DIRECT INVESTMENT MANAGEMENT
The Investment Management Division raises funds from new and existing
clients, acquires direct equity and mortgage positions in portfolios of real
estate and securitized real estate investments, actively manages these
investments to maximize their value, including ongoing strategic assessment of
properties, and evaluates and disposes of assets and investments to generate
the highest portfolio return consistent with client objectives. During the
last two years, the Company has raised in excess of $1.2 billion, has
completed acquisitions of real estate assets valued in excess of $1.0 billion
and has completed dispositions of real estate assets valued in excess of $1.0
billion.
37
<PAGE>
The Company acquires portfolios of direct equity and mortgage positions in
investment-grade real estate and performing and non-performing real estate
mortgages through the acquisition of portfolios and single assets that offer
strong growth potential in cash flow and investment value. Acquisition
services are provided by experienced professionals who focus on finding and
acquiring properties that satisfy clients' requirements. Management believes
that the Company's ability to provide its clients with national coverage as
well as specific market knowledge through its regional and local property
management offices and real estate research capabilities are competitive
advantages. The Company provides a full array of acquisition services for real
estate equities and mortgages involving industrial, retail, office, multi-
family, hotels and resorts and other types of property. These services include
pricing, transaction structuring, due diligence and market research.
Once assets are acquired, the Company assists each client in developing
individually tailored strategies for increasing the value of a mortgage or
equity asset. The plan is then implemented after conducting an analysis of the
relative market position of each asset, including its location and leasing
status, existing physical condition, legal and environmental issues and
current market conditions. The Company actively manages each asset, from
property management services to ongoing forecasting and valuation. In
addition, the Company services the mortgages it acquires. An investment
management team is accountable for maximizing the performance of and executing
the investment strategy for each asset to which it is assigned. This approach
brings to bear the coordination of a team of property managers, leasing
agents, risk managers, attorneys, accountants, financial analysts, architects
and engineers. The Company also has an experienced team of disposition
professionals who work closely with clients selling properties. The
disposition teams' expertise includes valuation, marketing strategy, marketing
material production, brokerage services, broker management, sale negotiations,
financial structuring and due diligence review.
SECURITIZED INVESTMENT MANAGEMENT
The Company's securitized investment management activities involve
management of clients' investments in real estate securities, principally
publicly-traded REITs. Through proprietary research models developed by NREI,
including REIT.Score, the Company manages portfolios of real estate securities
for individuals and institutions that typically desire greater liquidity than
is available through direct real estate investments. The Company believes that
its securitized investment management is positioned for solid growth due to
(i) the Company's extensive real estate research activities and (ii) the trend
of institutions and individuals to allocate greater assets to securitized real
estate investments. In response to this trend, in April 1996 the Company
formed a venture with Alliance Capital Management L.P. ("Alliance"), a
publicly-traded limited partnership whose largest unitholder is The Equitable
Companies Incorporated and a leading international investment advisor with
over $160 billion in assets under management, to establish REIT mutual funds
and offer REIT portfolio management. The Company is responsible for the
analysis of the properties owned by the REITs in which the venture is
investing as well as the markets in which the REITs' properties are located,
and Alliance is responsible for the securities and financial analysis,
portfolio construction and investment advisory contracts.
MARKET RESEARCH
Third-party institutional clients as well as the Company's property and
investment management clients benefit from the widely recognized market
research supplied by the Company through NREI. NREI's research focuses on
assisting clients with analysis and interpretation of market data in order to
provide them with a competitive edge in the rapidly changing real estate
marketplace. NREI's publications and products are sold to more than 3,000
subscribers, including many of the largest property managers, portfolio
managers, insurance companies and pension funds. NREI's real estate market
trend publications and related print and disk products provide real estate
price and rent data spanning 64 major U.S. markets. This research is based
upon two unique data bases consisting of (i) numerous real estate transactions
and (ii) quarterly information tracking the operating performance of over
2,000 commercial properties.
38
<PAGE>
ADDITIONAL SERVICES
The Company recently entered into a venture with ENSR, a leading
international environmental remediation firm, to assist the private sector in
remediating and increasing the value of contaminated properties. This venture
offers owners of impaired properties the skills and capital necessary to
remediate and dispose of such properties. ENSR will provide all remediation
services and capital required in connection with such remediation and the
Company will provide marketing, property management and disposition services.
This venture is structured to isolate the Company from any environmental
liability.
CORPORATE SUPPORT STRUCTURE
The Company provides numerous corporate functions that support the Company's
national needs and the needs of each of its regional and field offices. The
Company has focused heavily on the development of its corporate support
structure and believes that it provides the Company with a distinct
competitive advantage.
TECHNICAL SERVICES AND RISK MANAGEMENT
Management Information Systems. Koll Information Services utilizes
sophisticated computer and telecommunications systems to provide high-quality
on-site property management and a sophisticated data processing system which
tracks billing, collections and other key property information to provide
timely, comprehensive and customized financial and accounting reports to
property owners, property managers and investment managers. A staff of 40
operates the Company's data center, installs and repairs equipment, customizes
programs, implements special systems software and provides 24-hour, 7 day-a-
week telephone support for hardware and software.
The Company has adopted computer hardware and software standards to provide
a high level of control and efficiency. Each office is connected directly to
the AS/400 model 320-2050 computer for real-time, on-line access to project
operating reports and information. Each evening all data is backed up to tape
and back-up tapes are stored off-site. The Company's disaster recovery
services, including a "hot site," are provided by IBM's Business Recovery
Services. Remote communications can be through either a point-to-point or
dial-up line. The Company is currently in the process of implementing a Wide
Area Network utilizing frame relay technology to enhance remote
communications. In addition, the Company has the ability to connect to
international sites facilitated by satellites. The Company's management
information systems can be expanded economically, allowing the Company to
substantially increase its service volume without significant increases in
system costs.
Through a customized software system, the Company assimilates property
management information generated by the various property management software
programs that the Company utilizes at the request of its clients into a
centralized data base. The Company's system links this data base with an array
of management, valuation, accounting and reporting applications, allowing
employee and client users to view information through various levels of detail
and to sort data into customized formats. The Company utilizes all major
industry software applications, including Skyline, MRI and Timberline.
Risk Management. The Risk Management Group provides the Company's clients
with the opportunity to insure their properties under the Company's umbrella
policy, which has historically provided significant property insurance savings
for these clients. The Company currently carries insurance on over 225 client
properties valued at approximately $2.7 billion. In addition, as part of the
Company's commitment to risk management, specialized training is provided to
Company employees throughout the U.S. to teach the essentials of risk
management, which has resulted in a significant overall decline in incident
reports at Company-managed properties. The Risk Management Group is an in-
house resource for all insurance coverage issues, litigation management and
claim negotiating.
39
<PAGE>
PERSONNEL SUPPORT SERVICES
Training. Koll College offers the Company's employees and its clients one of
the most advanced training programs in the real estate industry and has been
recognized by the Institute of Real Estate Management (IREM) as one of the top
three real estate training programs in the U.S. Since its introduction in
1990, Koll College has become a full-service diversified training and
development institution. Established to develop the skills of employees, Koll
College has evolved into a revenue-generating training organization for
industry members and corporations, such as Disneyland, GTE, Microsoft, Nissan
and Xerox Corporation.
Koll College offers more than 50 courses that are customized to meet
clients' needs and skill levels. Courses emphasize management and professional
skills to improve productivity and services provided to clients and customers.
The curriculum is structured to address a variety of career levels and lines
of business. Course subject matter ranges from orientation information for new
employees to executive programs for senior management. Taught by a full-time
staff of instructors who are aided by the Company's internal "subject matter
experts" in specialized fields, the classes relate directly to the latest
industry knowledge and technology. As an example of the Company's involvement
in the industry, Koll College was asked to partner with the International
Facility Management Association to provide training programs to its members
nationwide.
Human Resources. The Company's Human Resources department provides a full
scope of services to the Company's employees, including organization
transition support, policy administration and communications, benefits design
and administration, human resources information systems, payroll services,
compensation administration, employment consulting, equal employment
opportunity and affirmative action programs and consulting, employee relations
consulting, human resources training and development and employment law
consulting. The department has played an important role in assisting in the
smooth assimilation of the Company's acquisitions.
Standards & Foundations. The Standards & Foundations department was
developed to identify and disseminate "best practices" examples and
performance standards throughout the organization supporting each region and
service line in achieving excellence and consistency in service delivery. In
addition, the department creates and distributes innovative operational and
marketing tools to the Company's employees.
EMPLOYEES
The Company believes that the quality of the management services it provides
is dependent in large part upon the experience and competence of its
personnel. The Company endeavors to hire and retain highly qualified personnel
who have the requisite education, training and experience to render superior
levels of service to clients and their tenants. Some of the Company's most
experienced managers joined the Company in connection with the Company's
acquisitions. The Company's executive officers and key employees have an
average of over 20 years of experience in property and/or investment
management or brokerage with a broad range of types of properties throughout
the United States.
The Company's employees are provided with a high level of training through
Koll College, with an emphasis on technical skills. The Company believes these
courses have resulted in improved productivity and tenant and property owner
relations. Employees also are encouraged to supplement courses offered at Koll
College with additional training programs. Over 100 of the Company's managers
have earned the Real Property Administrator (RPA) or Certified Property
Manager (CPM) professional designations awarded by the Building Owners and
Managers Association and IREM, respectively. The Company has been designated
an Accredited Management Organization (AMO) by IREM.
The Company had 2,661 employees as of June 30, 1996.
40
<PAGE>
COMPETITION
Recent economic conditions have led to increased competition among real
estate service companies. The Company experiences competition from national
property management companies as well as smaller, more localized property
managers, real estate development firms which have redirected their efforts to
property and facilities management due to the lack of development
opportunities in the current economy, and tenant representatives. The Company
believes that the competitive factors most important in its business are
quality and scope of services, reputation and the fees charged for the
services performed. The Company believes that it competes effectively with
respect to all of these factors and that it has established a superior record
as a quality manager and real estate services provider. The Company believes
that its management expertise and state-of-the-art computer and communications
systems allow it to offer its customized services efficiently and at a cost
which permits it to be competitive with other real estate management service
companies. In addition, the Company believes that its strategic acquisitions
have enhanced the portfolio of services it provides and have positioned the
Company to meet the growing demands of the marketplace for single source
providers of real estate services. The Company also believes that its
international operations will permit it to meet the needs of clients with
global scope and operations.
Competition in the investment management business is based on scope of
services provided, fees charged and results achieved. Although some of the
Company's competitors in this area have been in the business longer, have more
established business relationships and may have larger dedicated research
staffs than the Company, the Company believes that the knowledge, experience
and accountability of its investment management personnel allow it to compete
effectively in this market.
COMPANY FACILITIES
The Company's executive offices are located in Newport Beach, California and
consist of 102,339 square feet of office space leased from The Koll Company
and one of its affiliates. These offices are under four leases: 53,445 square
feet which is on a monthly basis, 9,381 and 20,481 square feet which expire
February 2002, and 19,032 square feet which expires June 2000. The Company
also has 13 regional offices, 258 field management offices and seven
administrative offices. Certain regional offices are leased from clients of
the Company on terms which the Company believes reflect the fair market value
of comparable office space. The field management offices are typically located
in managed properties and are often provided by the property owners without
charge to the Company.
LEGAL PROCEEDINGS
The Company is subject to claims and suits in the ordinary course of
business. There are no legal proceedings pending or, to the knowledge of
management, threatened against the Company that could, if determined
adversely, have a material adverse effect on the Company's financial
condition, results of operations or cash flows. Although the Company is a
defendant in an appraisal action by a single stockholder who did not
participate in the class action lawsuit in connection with the Merger,
management does not believe that this matter will have a material adverse
effect on the Company's financial condition, results of operations or cash
flows. See "The Company."
41
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information concerning the Company's
directors, executive officers and key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS
Donald M. Koll.......... 63 Chairman and Director
Raymond E. Wirta........ 52 Chief Executive Officer and Director
William S. Rothe, Jr. .. 50 President
Richard S. Abraham...... 45 Executive Vice President, Management Services
Richard G. Wollack...... 50 Executive Vice President, Investment Management
Gary W. Nielson......... 46 Senior Vice President, Finance
Bradford M. Freeman..... 54 Director
Jon D. Ralph............ 32 Director
W. Edward Scheetz....... 31 Director
J. Frederick Simmons.... 41 Director
Ronald P. Spogli........ 48 Director
KEY EMPLOYEES
D. Glen Raiger.......... 40 Executive Vice President, International
Daniel M. Ardell........ 55 Senior Vice President, Investment Management
Steven N. Corney........ 38 Senior Vice President, Southwest
Kim A. Culp............. 44 Senior Vice President, Minnesota
James C. Ewing.......... 48 Senior Vice President, Los Angeles, Northern California
William D. Fugazy, Jr. . 46 Senior Vice President, East
William M. Harris....... 46 Senior Vice President, Investment Management
Barry J. McGowan........ 37 Senior Vice President, Northeast
Edward N. Milton........ 45 Senior Vice President, Southeast
Nicholas S. Patin....... 44 Senior Vice President, Investment Management
Charles J. Schreiber, Jr. 44 Senior Vice President, Investment Management
Jana L. Turner.......... 41 Senior Vice President, Pacific Southwest, Pacific Northwest
</TABLE>
Mr. Koll has served as a director of KRES since November 1994 and as
Chairman since August 1996. He has served as Chairman of the Board and as a
director of KMS since June 1988 and also served as the Chief Executive Officer
of KMS from June 1988 to May 1991. Mr. Koll founded The Koll Company in 1962
and has served as Chairman of the Board and Chief Executive Officer of The
Koll Company since that time. Mr. Koll is also a member of the Board of
Directors of Koll Real Estate Group, Inc., a real estate development services
company, and The Irvine Company. He holds a Bachelor of Arts Degree from
Stanford University.
Mr. Wirta has served as the Chief Executive Officer of KRES since November
1994 and as Chief Executive Officer of KMS since May 1991. He has been a
director of KRES since November 1994 and of KMS since June 1988. Prior to that
time, Mr. Wirta held various management positions with KMS since 1981. Mr.
Wirta is also a member of the Board of Directors of Koll Real Estate Group,
Inc. Mr. Wirta is a Certified Property Manager and holds a Bachelor of Arts
Degree from Long Beach State University and a Master of Business
Administration Degree in International Management from Golden Gate University.
Mr. Rothe has served as President of KRES since November 1994. He has also
served as Chief Operating Officer of KMS since May 1991, as President of KMS
from May 1991 to November 1995, as Chief Financial Officer of KMS from
December 1993 to April 1995 and as a director of KMS from May 1991 to November
1994. From 1985 to 1991, Mr. Rothe held various management positions with the
Company. Mr. Rothe is a
42
<PAGE>
Certified Property Manager and holds a Bachelor of Arts Degree from Hanover
College, a Master's Degree in Business Economics from The Claremont Graduate
School and a law degree from the University of San Francisco.
Mr. Abraham has served as Executive Vice President, Management Services of
KRES since August 1996 and as President of KMS since November 1995. Prior to
joining the Company, Mr. Abraham was President of The Richard Abraham Company,
a management consulting firm he founded in June 1993. From March 1980 to June
1993, Mr. Abraham served as President of the John Buck Management Company, a
commercial real estate services company he co-founded in 1980. Mr. Abraham
holds a Bachelor of Science Degree from Southern Illinois University.
Mr. Wollack has served as Executive Vice President, Investment Management of
KRES since August 1996 and as Executive Vice President of KMS since April
1995. In addition, Mr. Wollack was Chief Financial Officer of KRES from April
1995 to August 1996. Since April 1988, Mr. Wollack has been Chairman of
Liquidity Financial Group, L.P. ("LFG"), the general partner in a series of
investment funds which have investments in real estate limited partnerships
acquired in the secondary market. In April 1995, the Company purchased a real
estate equity securities investment management advisory business and a
research publishing business from LFG. Mr. Wollack holds a Bachelor of Arts
Degree from the University of Illinois and a Masters of Business
Administration from the Stanford Graduate School of Business. Mr. Wollack is
an NASD-licensed Principal and Financial Principal.
Mr. Nielson has served as Senior Vice President, Finance of KRES since
August 1996 and as Senior Vice President, Finance of KMS since March 1995. Mr.
Nielson joined the Company in November 1992 and has served in various
management positions. From January 1989 to November 1992, Mr. Nielson was
Senior Vice President of Asset Management for First West Companies, a
commercial property investment and syndication company. Mr. Nielson holds a
Bachelor of Science Degree and a Master of Business Administration Degree from
the University of Southern California. Mr. Nielson is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants.
Mr. Freeman has served as a director of KRES and KMS since November 1994.
Mr. Freeman is a founding partner of FS&Co., which was founded in 1983. Mr.
Freeman holds a Bachelor of Arts Degree from Stanford University and a Master
of Business Administration Degree from Harvard University.
Mr. Ralph has served as a director of KRES and KMS since July 1996. Mr.
Ralph has been employed by FS&Co. since 1989. Mr. Ralph is also a member of
the Board of Directors of EnviroSource, Inc. Mr. Ralph holds a Bachelor of
Arts Degree from Amherst College.
Mr. Scheetz has served as a director of KRES since October 1995 and of KMS
since July 1996. Mr. Scheetz has been a limited partner of Apollo Real Estate
Advisors, L.P., a real estate investment partnership, since May 1993. From
1989 to 1993, Mr. Scheetz was a principal with Trammell Crow Ventures, Ltd., a
real estate investment firm. Mr. Scheetz is also a member of the Board of
Directors of Capital Apartment Properties, Inc. and Roland International, Inc.
Mr. Simmons has served as a director of KRES since October 1995 and of KMS
since July 1996. Mr. Simmons joined FS&Co. in 1986 and became a general
partner in January 1991. Mr. Simmons is also a member of the Board of
Directors of Buttrey Food and Drug Stores Company, Orchard Supply Hardware
Stores Corporation and EnviroSource, Inc. Mr. Simmons holds a Bachelor of Arts
Degree from Williams College and a Master of Business Administration Degree
from New York University.
Mr. Spogli has served as a director of KRES and KMS since November 1994. Mr.
Spogli is a founding partner of FS&Co., which was founded in 1983. Mr. Spogli
is the Chairman of the Board and a director of EnviroSource, Inc. Mr. Spogli
also serves on the Board of Directors of Mac Frugal's Bargains . Close-Outs
Inc., Orchard Supply Hardware Stores Corporation and Buttrey Food and Drug
Stores Company. Mr. Spogli holds a Bachelor of Arts Degree from Stanford
University and a Master of Business Administration Degree from Harvard
University.
43
<PAGE>
Mr. Raiger has served as Executive Vice President, International since May
1995 and as Senior Vice President, International since August 1994. From
September 1990 to August 1995, Mr. Raiger served as Senior Vice President,
Corporate and Facilities Services. Mr. Raiger holds a Bachelor of Science
Degree from Carnegie-Mellon University.
Mr. Ardell has served as Senior Vice President, Investment Management since
April 1993. Mr. Ardell co-founded D.A. Management in March 1978, a pension
fund advisor acquired by KMS in April 1993. Mr. Ardell holds a Bachelor of
Science Degree from California State University, San Jose. Mr. Ardell is a
Registered Investment Advisor.
Mr. Corney has served as Senior Vice President, Southwest Region since March
1995. From September 1983 until March 1995, Mr. Corney was employed by CBS
Investment Realty, Inc., a real estate brokerage and management company based
in Phoenix, Arizona, for which he served as the Managing Director from March
1992 until March 1995, when it was acquired by KMS. Mr. Corney is a Certified
Property Manager and holds a Bachelor of Arts Degree from St. Lawrence
University.
Mr. Culp has served as the Senior Vice President, Minnesota Region since
June 1995. From June 1987 to June 1995, Mr. Culp was President of The Shelard
Group, Inc., a commercial real estate brokerage and management company,
located in Eden Prairie, Minnesota, which sold substantially all of its assets
to KMS in June 1995. Mr. Culp holds a Bachelor of Science Degree from St.
John's University, Collegeville, Minnesota.
Mr. Ewing has served as the Senior Vice President, Los Angeles Region since
May 1992. He has served in the same capacity for the Northern California
Region since June 1996. Prior to joining KMS, Mr. Ewing was a partner with the
Charles Dunn Company in Los Angeles, a real estate brokerage and management
company, where he was employed from June 1974 until May 1992. Mr. Ewing is a
Certified Property Manager and holds a Bachelor of Arts Degree from the
University of La Verne, Los Angeles.
Mr. Fugazy has served as the Senior Vice President, Eastern Region since
January 1993. From September 1990 to January 1993, Mr. Fugazy was President of
Tishman Management and Leasing Services Corp., a national multi-service real
estate company which sold substantially all of its assets to KMS in January
1993. Mr. Fugazy holds a Bachelor of Science Degree from Fordham University.
Mr. Harris has served as Senior Vice President, Investment Management since
March 1996, and is responsible for the Company's direct investment management
activities. From August 1992 to March 1996 he was Senior Vice President,
Northern California Region of KMS. From December 1988 to July 1992, Mr. Harris
was employed by Aetna Realty Advisors, serving as its western regional
manager. Mr. Harris holds a Bachelor of Science Degree from the United States
Air Force Academy and a law degree from Boston University School of Law.
Mr. McGowan has served as the Senior Vice President, Northeast Region since
May 1994. He served as Senior Vice President Midwest Region from December 1992
to March 1995. From September 1991 to January 1993, he also served as the
Director of National Real Estate Services for KMS. Mr. McGowan holds a
Bachelor of Arts Degree from Brown University and a Master of Business
Administration Degree from Harvard University.
Mr. Milton has served as the Senior Vice President, Southeast Region since
July 1993. From October 1987 to July 1993, Mr. Milton served as the General
Manager of the Southeast Region of Rubloff Inc., a Chicago-based multi-service
real estate company, which sold substantially all of its assets to KMS in July
1993. Mr. Milton holds a Bachelor of Arts Degree from Auburn University and
holds a law degree from Emory University School of Law.
Mr. Patin has served as Senior Vice President, Investment Management since
July 1995, and is responsible for the Company's ventures with ENSR and
Alliance. From February 1988 to July 1995, Mr. Patin served as President of
Cornerstone Partners, Inc., a regional real estate investment banking firm he
founded in 1988. In February 1992, he formed Cornerstone Principals, Inc.
which provides investment programs to real estate
44
<PAGE>
investors. Mr. Patin holds a Bachelor of Science Degree from California
Polytechnic State University. He is a registered securities principal.
Mr. Schreiber has served as Senior Vice President, Investment Management
since September 1994, and is responsible for the Company's direct investment
management activities. From June 1989 to September 1994, he was Senior Vice
President of Corporate Acquisitions for KMS. Mr. Schreiber holds a Bachelor of
Science Degree from the University of Southern California.
Ms. Turner has served as Senior Vice President, Pacific Southwest Region
since April 1993 and in the same capacity for the Pacific Northwest Region
since July 1996. From June 1990 to April 1993, she was Senior Vice President
of the Orange County Region. Ms. Turner is a Certified Property Manager and
holds a Bachelor of Science Degree from Northern Arizona University.
All directors hold office until the next annual meeting of stockholders or
until their successors have been elected and qualified. Officers are appointed
by the Board of Directors and serve at the discretion of the Board. There are
no family relationships among the directors and executive officers of the
Company.
Upon consummation of the Offering, the Company will be subject to the Nasdaq
National Market requirement that it have two independent directors. The
Company anticipates nominating these independent directors as soon as possible
after consummation of the Offering.
BOARD COMMITTEES
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, which consists of Messrs. Ralph and Simmons, reviews the
results and scope of the audit and other services provided by the Company's
independent auditors, reviews and evaluates the Company's internal control
functions, and monitors transactions between the Company and its employees,
officers and directors. The Compensation Committee, which consists of Messrs.
Freeman and Simmons, administers the Performance Option Plan and deferred
compensation plans, and designates compensation levels for officers of the
Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Freeman and
Simmons.
Mr. Freeman has not at any time been an officer or employee of the Company.
Mr. Simmons was an officer of KRES prior to the Merger. From November 1994 to
August 1996, Mr. Wirta was a member of the Compensation Committee. Mr. Wirta
is Chief Executive Officer of the Company. No executive officer of the Company
serves as a member of the Board of Directors or Compensation Committee of any
other entity which has one or more executive officers of such entity serving
as a member of the Company's Board of Directors or Compensation Committee.
45
<PAGE>
DIRECTOR AND EXECUTIVE COMPENSATION
Directors do not receive compensation for serving on the Board or any
committee thereof. However, directors are eligible to receive grants of options
under the Performance Option Plan, and in April 1996, Mr. Koll was granted an
option to purchase 75,000 shares of Common Stock at an exercise price of $14.00
per share. With the exception of certain additional forfeiture provisions, the
terms of Mr. Koll's option are substantially similar to other options granted
under the Performance Option Plan. See "--Compensation Plans."
The following table sets forth information concerning the annual and long-
term compensation for services rendered to the Company in all capacities and
paid or accrued by the Company for each of the fiscal years in the three year
period ended March 31, 1996, to (i) the Company's Chief Executive Officer, and
(ii) each of the other four most highly compensated executive officers of the
Company or its subsidiaries (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ---------------------- --------
SECURITIES
OTHER RESTRICTED UNDERLYING ALL OTHER
ANNUAL STOCK OPTIONS/ LTIP COMPEN-
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS SATION
POSITIONS YEAR ($) ($) ($) ($) (#)(1) ($) ($)
------------------ ------ ------- ------- -------------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond E. Wirta (2).... 1996 210,000 0 -- 0 -- 0 --
Chief Executive Officer 1995 206,000 0 -- 0 -- 0 --
1994 190,000 0 -- 0 -- 0 --
William S. Rothe........ 1996 175,000 240,000 -- 0 -- 0 --
President 1995 147,969 200,700 -- 0 115,000 0 --
1994 133,000 180,000 -- 0 -- 0 --
Richard S. Abraham (3).. 1996 189,667 88,000 -- 0 35,000 0 --
Executive Vice 1995 -- -- -- 0 -- 0 --
President, 1994 -- -- -- 0 -- 0 --
Management Services
Richard G. Wollack (4).. 1996 239,583 116,420 -- 0 20,000 0 --
Executive Vice Presi- 1995 -- -- -- 0 -- 0 --
dent, Investment 1994 -- -- -- 0 -- 0 --
Management
Gary W. Nielson......... 1996 100,000 123,000 -- 0 -- 0 --
Senior Vice President, 1995 92,500 45,000 -- 0 -- 0 --
Finance 1994 85,000 30,000 -- 0 -- 0 --
</TABLE>
- --------
(1) Represents options granted under the Performance Option Plan, which were
granted at fair market value on the date of the grant, at an exercise price
of $10.00 per share from January 1995 until October 1995 and $12.00 per
share after October 1995. See "--Compensation Plans--Amended 1994
Nonqualified Performance Stock Option Plan."
(2) Mr. Wirta serves as an executive officer of the Company, The Koll Company
and Koll Real Estate Group, Inc., and through arrangements among them,
receives compensation from each of them based on the time devoted to each.
Pursuant to a management services agreement between the Company and The
Koll Company, for fiscal 1996 the Company paid $200,000, or 42%, of Mr.
Wirta's annual salary under his employment arrangement with The Koll
Company. Mr. Wirta's salary for fiscal 1996 also reflects a payment of
$10,000, a retroactive adjustment for compensation paid to Mr. Wirta from
fiscal 1992 to fiscal 1995. On April 1, 1996 Mr. Wirta agreed to devote 75%
of his time to the Company until October 1, 1996 and 95% of his time
thereafter and therefore, the Company will pay those percentages of Mr.
Wirta's annual salary of $475,000. See "Certain Transactions--Transactions
with The Koll Company."
(3) Mr. Abraham joined the Company in November 1995. Salary for fiscal 1996
includes $85,500 of consulting fees earned by Mr. Abraham prior to becoming
an employee of the Company. See "Certain Transactions--Other Transactions."
(4) Mr. Wollack joined the Company in April 1995.
46
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding each grant of stock
options made during the fiscal year ended March 31, 1996 to each of the Named
Executive Officers.
OPTION GRANTS TABLE
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR OPTION
OPTIONS EMPLOYEES IN EXERCISE TERM
GRANTED FISCAL YEAR PRICE EXPIRATION ---------------------------
NAME (#)(1) (%) ($/SH) DATE 5%($) 10%($)
---- ---------- -------------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond E. Wirta........ -- -- -- -- -- --
William S. Rothe, Jr.... -- -- -- -- -- --
Richard S. Abraham...... 35,000 38% $12.00 11/01/05 $264,136 $669,372
Richard G. Wollack...... 20,000 22% $10.00 05/26/05 $125,779 $318,748
Gary W. Nielson......... -- -- -- -- -- --
</TABLE>
- --------
(1) All of the options set forth in the table above were granted pursuant to
the Performance Option Plan. For a discussion of the material terms of
these options, see "--Compensation Plans--Amended 1994 Nonqualified
Performance Stock Option Plan."
AGGREGATE STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
The following table sets forth the number and value of the exercisable and
unexercisable options held by each of the Named Executive Officers at March
31, 1996. None of the Named Executive Officers exercised any options during
the fiscal year ended March 31, 1996.
OPTION EXERCISES AND YEAR END VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/ IN-THE-MONEY
SARS AT OPTIONS/SARS AT
MARCH 31, 1996(#)(1) MARCH 31, 1996($)(2)
--------------------- --------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ --------------------- --------------------
<S> <C> <C> <C> <C>
Raymond E. Wirta........ -- -- 0 / 0 0 / 0
William S. Rothe, Jr. .. -- -- 0 /115,000 0 /
Richard S. Abraham...... -- -- 0 / 35,000 0 /
Richard G. Wollack...... -- -- 0 / 20,000 0 /
Gary W. Nielson......... -- -- 0 / 0 0 / 0
</TABLE>
- --------
(1) Represents options granted under the Performance Option Plan. See "Summary
Compensation Table."
(2) The value of such unexercisable options is based on an assumed Offering
price of $ per share.
COMPENSATION PLANS
STOCK SUBSCRIPTION PLAN
The Company has sold 257,150 shares of Common Stock pursuant to the
Company's Amended 1994 Employee Stock Subscription Plan (the "Stock
Subscription Plan"). In connection with these stock subscriptions,
approximately 50% of the aggregate purchase price relating to such
subscriptions, including those of Messrs. Rothe, Abraham and Wollack, was paid
by delivery of the purchaser's full recourse promissory note secured by a
pledge of the purchased shares. Such notes are for a term of four to five
years and bear interest at the "prime rate" of interest, as designated by
Bankers Trust from time to time. As of June 30, 1996, promissory notes
totaling $1,150,000 were held by the Company with respect to the Stock
Subscription Plan, including notes in the amount of $125,000 and $60,000 from
Messrs. Rothe and Abraham, respectively.
47
<PAGE>
AMENDED 1994 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN
The Company's Performance Option Plan was adopted in November 1994 and
amended in May 1995 and April 1996. The purpose of the Performance Option
Plan, and of granting options to specified officers, directors and key
employees of the Company pursuant thereto, is to provide incentives to such
persons by allowing them to benefit directly from the Company's growth,
development and financial success. The Performance Option Plan provides for
the grant of nonqualified stock options only. A reserve of 590,000 shares of
the Company's Common Stock has been established for issuance under the
Performance Option Plan. As of June 30, 1996, options with respect to 548,500
shares were outstanding under the Performance Option Plan at a weighted
average exercise price of $10.67 per share and 41,500 shares remained
available for future option grants under the Performance Option Plan.
The Performance Option Plan is administered by the Compensation Committee of
the Board of Directors. The Compensation Committee has discretion to
determine, among other things, which eligible individuals are to receive
option grants and the number of shares subject to each such grant and the
performance criteria and vesting schedule to be in effect for the option
grant. The maximum term of options granted under the Performance Option Plan
is ten years, subject to earlier termination following an optionee's cessation
of service with the Company. Outstanding options vest in five equal annual
installments commencing March 31, 1997, subject to accelerated vesting on
March 31, 1999 in the event the Company achieves specified operating results.
Once vested, an option may be exercised by the optionee by written notice to
the Company specifying the number of shares to be purchased and accompanied by
payment of the full purchase price therefor. Such payment may be made in cash,
by check or in such other form of lawful consideration (including shares of
Common Stock then held) as the Compensation Committee may approve from time to
time. Options granted under the Performance Option Plan are non-transferable
and generally expire 90 days after the termination of an optionee's service to
the Company. In general, if an optionee is permanently disabled or dies during
his or her service to the Company, such option may be exercised 180 days
following such disability or death.
Upon the dissolution or liquidation of the Company or upon any
reorganization, merger or consolidation or sale of all or substantially all of
the assets of the Company, the Performance Option Plan and each outstanding
option granted thereunder terminates; provided, that each optionee to whom no
substitute option has been tendered by the surviving corporation has the right
to exercise in whole or in part any unexpired option or options issued to him
or her, to the extent such option is then vested and exercisable.
The Board of Directors may amend or modify the Performance Option Plan and
outstanding options at any time, including but not limited to accelerating
vesting provisions, provided that no such amendment or modification may
adversely affect the rights and obligations of the participants with respect
to their outstanding options or unvested shares without their consent. The
Performance Option Plan will terminate at the earliest time when all shares of
Common Stock which may be issued under the Performance Option Plan have been
so issued, upon dissolution or liquidation of the Company or upon any
reorganization, merger or consolidation or sale of all or substantially all of
the assets of the Company, unless sooner terminated by the Board.
401(K) PLAN.
The Company participates in The Koll Company's 401(k) Plus Plan (the "401(k)
Plan"). The 401(k) Plan is administered by the Company on behalf of The Koll
Company pursuant to a management services agreement between the Company and
The Koll Company. See "Certain Transactions--Transactions With The Koll
Company--Management Services Agreement." The 401(k) Plan covers all of the
Company's regular employees who work 20 hours or more per week. Such employees
become eligible to participate in the 401(k) Plan the first quarter following
60 days of employment. Eligible employees may contribute up to 15% of their
annual base earnings to the 401(k) Plan, up to the annual maximum amount
prescribed by the Internal Revenue Service. The Company may, in its
discretion, make matching contributions for each dollar contributed by the
participant. The Company does not currently match employee contributions to
the 401(k) Plan.
48
<PAGE>
EMPLOYMENT AND OTHER AGREEMENTS
Mr. Abraham serves as Executive Vice President, Management Services. Under
his Employment Agreement with KMS, which may be terminated at any time by
either party, Mr. Abraham receives an annual salary of not less than $250,000,
and is entitled to receive an annual bonus based on the performance of the
Property and Corporate Services Division. Under certain termination
circumstances, Mr. Abraham is entitled to receive severance in an amount equal
to the then-current year's salary plus an amount equal to his bonus for the
most recently completed fiscal year, and in no event less than $250,000. Mr.
Abraham is also entitled to participate in certain benefit programs generally
available to executive officers of the Company and to receive reimbursement of
certain business expenses. During the term of the agreement, Mr. Abraham is
prohibited from engaging or participating in any business that is in
substantial competition with KMS. Pursuant to his Employment Agreement, Mr.
Abraham was granted options to purchase 35,000 shares of Common Stock under
the Performance Option Plan at an exercise price of $12.00 per share, the fair
market value at the time of grant, and purchased 10,000 shares of Common Stock
under the Stock Subscription Plan for a purchase price of $12.00 per share,
the fair market value at the time of purchase. If Mr. Abraham's employment is
terminated for any reason, under certain circumstances the Company is
obligated to repurchase all of the Common Stock then-owned by Mr. Abraham.
Mr. Wollack serves as Executive Vice President, Investment Management. Under
his Employment and Noncompetition Agreement with KMS, Mr. Wollack receives an
annual salary of $250,000 and is entitled to incentive compensation based on
the performance of the Company and certain business lines which are under his
management. Mr. Wollack's Employment and Noncompetition Agreement may be
terminated at any time by either party. Under certain termination
circumstances during the first five years of employment, Mr. Wollack is
entitled to receive a severance amount equal to the amount of total annual
compensation received by him on the most recent anniversary of his hire date.
Mr. Wollack is also entitled to participate in certain benefit programs
generally available to executive officers of the Company and to receive
reimbursement of certain business expenses. Mr. Wollack is also a principal in
Liquidity Financial Group, L.P. ("LFG"), the general partner in a series of
investment funds which have investments in real estate limited partnerships
acquired in the secondary market. Under a non-compete provision, Mr. Wollack
may not during the term of the agreement engage or participate in any business
which is in competition with KMS. However, Mr. Wollack's Employment and
Noncompetition Agreement permits his continued equity position and
participation in LFG. In the event of termination, he is also prohibited
thereafter from engaging in certain competitive activities for certain periods
of time, all of which are to be determined based on the reasons for
termination. Pursuant to his Employment and Noncompetition Agreement, Mr.
Wollack was granted options to purchase 20,000 shares of Common Stock under
the Performance Option Plan at an exercise price of $10.00 per share, the fair
market value at the time of grant, and purchased 10,000 shares of Common Stock
under the Stock Subscription Plan for a purchase price of $10.00 per share,
the fair market value at the time of purchase. See "Certain Transactions--
Other Transaction."
In April 1996, in connection with the sale of Common Stock by KHC, Mr. Koll
entered into a four-year noncompetition and confidentiality agreement with the
Company, FS&Co. and Apollo. In addition, as part of an effort by the Company
to ensure continued focus by Mr. Koll on Company opportunities despite the
sale of a significant portion of his Common Stock, as of April 1, 1996, Mr.
Koll became an employee of the Company with an annual salary of $150,000 and
in August 1996 Mr. Koll became Chairman of the Company. See "Certain
Transactions--Recent Stock Transactions."
49
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 30, 1996, and as adjusted
to reflect the sale of the shares of Common Stock being offered hereby, by (i)
each person (or group of affiliated persons) known by the Company to own
beneficially more than 5% of the Company's Common Stock, (ii) the Selling
Stockholders, (iii) each of the Company's directors, (iv) the Company's Chief
Executive Officer and each of the other Named Executive Officers and (v) the
Company's directors and executive officers as a group. Except as indicated in
the footnotes to this table, the persons named in the table, based on
information provided by such persons, have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES OF
SHARES OF SHARES COMMON STOCK
COMMON STOCK TO BE BENEFICIALLY
BENEFICIALLY SOLD OWNED
OWNED PRIOR IN THE AFTER THE
TO THE OFFERING OFFERING OFFERING (1)
----------------------- -------- -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER NUMBER PERCENTAGE
- ------------------------ --------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Freeman Spogli & Co.
Incorporated (2)....... 3,274,142 61.8% -- 3,274,142
Bradford M. Freeman
Ronald P. Spogli
J. Frederick Simmons
Jon D. Ralph (3)
The Koll Holding Company
(4).................... 946,037 17.8% -- 854,757(5)
Donald M. Koll
AP KMS Partners, L.P.
(5).................... 824,525 15.6% -- 824,525
W. Edward Scheetz
Raymond E. Wirta........ 672,000(7) 12.7% 67,200(6) 604,800
William S. Rothe, Jr.... 125,800(8) 2.4% 24,080(6) 101,720
Richard S. Abraham...... 10,000 * -- 10,000 *
Richard G. Wollack...... 10,000 * -- 10,000 *
Gary W. Nielson......... -- -- -- -- --
All directors and
executive officers as a
group (11 persons)..... 5,089,704 96.0% 91,280 4,998,424
</TABLE>
- --------
* Less than 1%.
(1) Does not include shares subject to the Underwriters' over-allotment option
granted by the Company.
(2) 3,157,272 shares and 116,870 shares of Common Stock are owned by FS Equity
Partners III, L.P. and FS Equity Partners International, L.P.
(collectively, "Equity Partners"), respectively. As general partner of FS
Capital Partners, L.P. ("FS Capital"), which is general partner of FSEP
III, FS Holding, Inc. ("FSHI") has the sole power to vote and dispose of
the shares owned by FSEP III. As general partner of FS&Co. International,
L.P. ("FS&Co. International"), which is the general partner of FSEP
International, FS International Holding Limited ("FS International
Holdings") has the sole power to vote and dispose of the shares owned by
FSEP International. Messrs. Freeman, Spogli and Simmons and William M.
Wardlaw, John M. Roth and Charles P. Rullman are the sole directors,
officers and shareholders of FSHI and FS International Holdings, and as
such may be deemed to be the beneficial owners of the shares of the
Company's capital stock owned by FSEP III and FSEP International. Does not
include shares subject to the Safeco Option described in footnote 4 below.
The business address of FSEP III, FS Capital, FSHI and its sole directors,
officers and shareholders is 11100 Santa Monica Boulevard, Suite 1900, Los
Angeles, California 90025 and the business address of FSEP International,
FS&Co. International and FS International Holdings is c/o Paget-Brown &
Company, Ltd., West Winds Building, Third Floor, Grand Cayman, Cayman
Islands, B.W.I.
(3) Mr. Ralph is an employee of an affiliate of Freeman Spogli & Co.
Incorporated.
50
<PAGE>
(4) The Koll Holding Company ("KHC") is a wholly-owned subsidiary of The Koll
Company, which is wholly-owned by The Koll Company Stock Trust, of which
Mr. Koll is the trustee and Mr. Koll and Dorothy B. Koll are its co-
trustors and sole beneficiaries. 772,800 of such shares are subject to a
pledge in favor of Safeco Insurance Company of America ("Safeco") pursuant
to a Pledge Agreement dated November 13, 1995, as amended, by and among The
Koll Company, KHC, Safeco and Mr. Wirta (the "Safeco Pledge Agreement"). In
the event the Safeco Pledge Agreement is not terminated by November 13,
1996, the shares of Common Stock owned by KHC, other than shares subject to
an option in favor of Mr. Rothe, are subject to an option (the "Safeco
Option") in favor of Equity Partners and AP KMS Partners, L.P., a Delaware
limited partnership ("Apollo"), which may be exercised to cause the
termination of the Safeco Pledge Agreement. See "--Stockholders Agreement."
In addition, 672,000 of these shares are subject to an option in favor of
Mr. Wirta and 100,800 of these shares are subject to an option in favor of
Mr. Rothe. The business address of KHC, The Koll Company, The Koll Company
Stock Trust and Mr. and Mrs. Koll is 4343 Von Karman Avenue, Newport Beach,
California 92660.
(5) As general partner of AP-GP KMS Partners, L.P., which is general partner of
AP KMS Partners, L.P., AP KMS Acquisition Corporation has the sole power to
vote and dispose of the shares owned by AP KMS Partners, L.P. Mr. Scheetz
disclaims beneficial ownership of the shares of the Company's capital stock
owned by AP KMS Partners, L.P. Does not include shares subject to the
Safeco Option. The business address of AP KMS Partners, L.P., AP-GP KMS
Partners, L.P., AP KMS Acquisition Corporation and Mr. Scheetz is 1301
Avenue of the Americas, 38th Floor, New York, New York 10019.
(6) Immediately prior to consummation of the Offering, Messrs. Wirta and Rothe
intend to exercise certain options granted by KHC to purchase 67,200 shares
and 24,080 shares, respectively, of Common Stock held by KHC and to sell
such shares in the Offering.
(7) These shares may be acquired upon exercise of a presently-exercisable stock
option on outstanding shares held by KHC at an exercise price of $4.53 per
share.
(8) Includes 100,800 shares which may be acquired upon exercise of a presently-
exercisable stock option on outstanding shares held by KHC at an exercise
price of $4.53 per share.
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 35,000,000 shares of
Common Stock, $.01 par value and 2,000,000 shares of Preferred Stock, $.01 par
value.
The following summary of certain provisions of the capital stock of the
Company does not purport to be complete and is subject to, and qualified in
its entirety by, the Certificate of Incorporation and Bylaws of the Company
that are included as exhibits to the Registration Statement of which this
Prospectus forms a part, and by the provisions of applicable law.
COMMON STOCK
As of June 30, 1996, there were 5,301,854 shares of Common Stock outstanding
and held by 37 stockholders of record.
The holders of Common Stock are entitled to one vote for each share held of
record. Subject to preferences that may be applicable to any then outstanding
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of the Company, holders of the Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preferences of any then outstanding Preferred Stock.
Holders of Common Stock do not have preemptive rights or rights to convert
their Common Stock into any other securities. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding shares
of Common Stock are, and all shares of Common Stock to be outstanding upon
completion of the Offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is empowered to issue one or more series of Preferred
Stock and to determine the rights, preferences, privileges and restrictions to
be granted to, or imposed upon, any such series, including the voting rights,
redemption provisions (including sinking fund provisions), dividend rights,
dividend rates, liquidation preferences and conversion rights and the
description and number of shares constituting any wholly unissued series of
Preferred Stock. The Board of Directors, without further stockholder approval,
can issue Preferred Stock with rights that could adversely affect the rights
of the holders of the Common Stock. No shares of Preferred Stock are presently
outstanding and the Company currently has no plans to issue shares of
Preferred Stock. The issuance of shares of Preferred Stock under certain
circumstances could have the effect of delaying or preventing a change of
control in the Company or other corporation action.
CERTAIN CHARTER AND BYLAW PROVISIONS
The Company has included in its Certificate of Incorporation and Bylaws
provisions to (i) eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by the General Corporation Law of the State of Delaware (the "GCL"),
and (ii) indemnify its directors and officers to the fullest extent permitted
by Section 145 of the GCL, including circumstances in which indemnification is
otherwise discretionary. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
The Company is also empowered under its Certificate of Incorporation and
Bylaws to enter into indemnification contracts with its directors, officers,
employees and agents. The Company also intends to purchase liability insurance
covering its directors and officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock of the Company is .
52
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH THE KOLL COMPANY
MANAGEMENT SERVICES AGREEMENTS
In April 1993, the Company entered into a management services agreement with
The Koll Company (the "Management Services Agreement") whereby (i) The Koll
Company, through certain key personnel primarily employed by The Koll Company,
including Mr. Wirta, provided executive management services to the Company and
(ii) the Company provides management information, personnel and human
resources services (including administration of The Koll Company's 401(k)
Plan) to The Koll Company and certain of its affiliates. Payments by the
Company to The Koll Company for Mr. Wirta's executive management services and
occupancy costs for fiscal 1996 totaled $281,000. In addition, in March 1995,
the Company entered into an agreement with Koll Real Estate Group, Inc.
whereby the Company provides management information systems and human resource
services to Koll Real Estate Group, Inc. similar to those provided under the
Management Services Agreement. Payments by The Koll Company and certain of its
affiliates to the Company for management information, personnel and human
resources services provided by the Company under the Management Services
Agreement for fiscal 1996 totaled $793,000. As of April 1, 1996, Mr. Wirta
became an employee of the Company and The Koll Company no longer provided
executive management services to the Company under the Management Services
Agreement. See "Management--Executive Compensation." The Company continues to
provide management information services and personnel and human resources
services to The Koll Company.
Effective July 1, 1993, the Company began paying the costs of health
insurance benefits for The Koll Company and its affiliates. The Koll Company
and each affiliate are billed monthly for their pro-rata portion (based on
number of employees) of the payments. In fiscal 1996, billings to The Koll
Company and its affiliates for such health insurance benefits were
approximately $1.7 million.
LICENSE AGREEMENT
Under the terms of an amended license agreement (the "License Agreement") by
and between the Company and The Koll Company dated November 23, 1994, the
Company was granted a perpetual, royalty-free license ("License") to use, and
to allow its subsidiaries to use, the "Koll" name and certain logos associated
therewith ("Licensed Marks") solely in connection with the provision of real
estate management services, including property, facility, asset and investment
management services relating to real property ("Licensee Services"). Pursuant
to the License Agreement, The Koll Company retains the right to use and grant
others the right to use the Licensed Marks for any purpose, provided that it
shall not use nor grant a third party the right to use the Licensed Marks in
connection with the provision of Licensee Services. In general, The Koll
Company may only terminate the License if (i) the Company fails to honor the
terms of the License Agreement, including maintaining the quality of the
services associated with the Licensed Marks and protecting against
infringement of the Licensed Marks by third parties, (ii) the Company abandons
use of the Licensed Marks for three consecutive years, or (iii) the Company is
deemed insolvent.
LEASE AGREEMENTS
The Company leases its headquarters office space and some of its regional
and field offices from partnerships in which The Koll Company and Messrs. Koll
and Wirta are partners. The initial rent under each lease was based upon the
fair market value of the premises at the time the lease was signed. The
Company is not responsible for property taxes, insurance or maintenance
expenses of the leased premises under the terms of the leases. Rental payments
made by the Company to partnerships in which The Koll Company and Messrs. Koll
and Wirta are partners totaled $584,000 for fiscal 1996. Two leases for the
Company's headquarters were the only leases with terms in excess of one year
and for which annual rental payments exceeded $100,000 each.
53
<PAGE>
LEASE GUARANTY
Pursuant to a lease guaranty dated November 15, 1994 (the "Lease Guaranty")
made by the Company for the benefit of a general partnership (in which The
Koll Company and Messrs. Koll and Wirta are partners) and Aetna Life Insurance
Company ("Aetna"), the Company has guaranteed payment and performance by The
Koll Company of a lease agreement covering the building in which the Company's
headquarters are located. The Company subleases its headquarters office space
from The Koll Company. Such general partnership has assigned all of its rights
under the Lease Guaranty to Aetna in connection with a loan in the original
principal amount of $9.0 million made by Aetna to such general partnership.
AGREEMENT REGARDING BUSINESS OPPORTUNITIES
Pursuant to a business opportunities agreement (the "Business Opportunities
Agreement") entered into in 1991 by and between the Company and The Koll
Company and its affiliates, the Company was afforded the exclusive right to
pursue, through subcontracting and otherwise, any and all real property and
asset management opportunities awarded to The Koll Company and its affiliates
by any source (including the Resolution Trust Corporation), other than certain
pension and retirement fund clients to whom a subsidiary of The Koll Company
was providing real property management services as of April 1991. The terms of
the Business Opportunities Agreement provided that it would continue until The
Koll Company owned less than 20% of the outstanding common stock of KMS. In
April 1996 The Koll Company's beneficial ownership of KMS dropped below 20%
and the Business Opportunities Agreement terminated. See "--Recent Stock
Transactions."
TRANSACTIONS WITH PARTNERSHIPS AFFILIATED WITH THE KOLL COMPANY
The Company is responsible for managing properties in which The Koll Company
and certain executive officers and key employees of the Company, including
Messrs. Koll, Wirta or Rothe, have an ownership interest. Approximately $5.2
million, or 4%, of the Company's management revenue for fiscal 1996 was
derived from managing properties that are owned by partnerships which are
affiliates of The Koll Company. The partnerships that own these properties
typically include a financial institution that was responsible for initially
financing the development or acquisition of the project. The management
agreements between the Company and these partnerships typically are negotiated
between the financial partner in the partnerships and the Company and are
believed to reflect fair market value terms. These management agreements are
for an indefinite period but generally provide the property owner with the
right to terminate upon 30 days' prior written notice.
It is anticipated that certain executive officers and directors of the
Company, including Messrs. Koll and Wirta, will participate in future
partnerships formed or organized by The Koll Company or one of its affiliates
for the purpose of acquiring or developing real estate projects. The Company
may receive property management agreements and potentially other service
agreements from one or more of these partnerships. Any such agreements will be
on terms and conditions no less favorable to the Company than could be
obtained from unaffiliated third parties. As of March 31, 1996, the Company
had loaned an aggregate of approximately $640,000 to one of these
partnerships.
OPTION AGREEMENTS
In 1991, Messrs. Wirta and Rothe were each granted options ("KMS Options")
to purchase from The Koll Company 420,000 and 63,000 shares of common stock of
KMS, respectively, held by The Koll Company at an exercise price of $7.25 per
share. The KMS Options held by Messrs. Wirta and Rothe were converted, upon
consummation of the Merger, into options to purchase from KHC, The Koll
Company's wholly-owned subsidiary, 672,000 and 100,800 shares, respectively,
of Common Stock outstanding after the Merger and owned by KHC. All of these
options are vested and may be exercised at any time until May 30, 2001 at an
exercise price of $4.53 per share (which represents the same aggregate
exercise price of their options prior to the conversion).
54
<PAGE>
OTHER TRANSACTIONS
In March 1995, pursuant to an asset purchase agreement (the "Asset Purchase
Agreement") entered into by and among KMS, Liquidity Financial Group, L.P.
("LFG"), and Mr. Wollack and Brent Donaldson (as shareholders of LFG), KMS
acquired substantially all of the assets associated with certain of LFG's (a)
real estate market trends publications business, including, among other
publications, the National Real Estate Index (collectively, the "Index"), (b)
REIT investment management services business and (c) business of providing
investment management services to Boatmens Trust and Liquidity Fund 24 in
exchange for (x) $1.0 million paid by KMS to LFG at the closing and (y) a $1.0
million deferred payment in the form of a promissory note due on March 31, 2001
(the "Deferred Portion"), such Deferred Portion being subject to (A) downward
adjustments based on the performance of the Index business during fiscal 1996,
(B) interest equal to the prime interest rate plus 6% on the outstanding balance
of the Deferred Portion after March 31, 1998, and (C) accelerated payment based
on the performance of the Index business. Pursuant to and concurrently with the
Asset Purchase Agreement, Mr. Wollack and KMS entered into an Employment and
Non-Competition Agreement under which, if Mr. Wollack's employment with KMS
terminates before April 15, 2000 other than for "cause," Mr. Wollack shall have
the right to acquire the Index business and assets from the Company in exchange
for his assumption of KMS's obligation to pay to LFG the Deferred Portion, to
the extent not previously paid by KMS, and, if his employment terminates after
April 15, 1998, his payment to KMS of $600,000 plus the amount of Deferred
Portion previously paid by KMS minus KMS's cash flow from the Index that KMS did
not pay to LFG. See "Management--Employment and Other Agreements."
In 1993 the Company and Mr. Abraham entered into a consulting agreement
whereby Mr. Abraham provided general consulting services to KMS for the
development of curriculum at Koll College. Payments by the Company to Mr.
Abraham under this consulting agreement for fiscal 1996 totaled $85,500. The
consulting agreement was terminated when Mr. Abraham became an employee of the
Company in November 1995. See "Management--Employment and Other Agreements."
RECENT STOCK TRANSACTIONS
On October 18, 1995, KHC, which is a wholly owned subsidiary of The Koll
Company, sold to AP KMS Partners, L.P., a Delaware limited partnership
("Apollo"), 635,202 shares of Common Stock at a price of $14.00 per share, for
an aggregate purchase price of $8,892,828. In connection with this sale of
shares, KHC, Apollo, the Company, FS&Co. and The Koll Company entered into an
Amended and Restated Stockholders Agreement dated October 18, 1995 under which
Apollo was provided certain rights and assumed certain obligations. The
Company entered into a Registration Rights Agreement with Apollo under which
Apollo received demand registration rights subject to certain conditions.
Apollo also was granted "piggyback" registration rights.
Pursuant to Stock Purchase Agreements dated March 29, 1996 and April 1,
1996, FS&Co. and Apollo purchased 751,790 shares and 189,323 shares,
respectively, of Common Stock from KHC at $14.00 per share, for an aggregate
purchase price of $10,525,060 and $2,650,522, respectively. In connection with
this sale of shares, the Company, FS&Co., KHC, The Koll Company and Apollo
entered into a Second Amended and Restated Stockholders Agreement dated March
29, 1996 (the "Second Amended Stockholders Agreement"), which restricts the
transferability of Common Stock and provides for certain rights and
obligations, including rights of first offer, co-sale rights, approval rights,
obligations to sell and voting rights, all as more specifically described
therein. As a result of the cumulative sale of more than 50% of the shares of
Common Stock that KHC initially held after consummation of the Merger, KHC's
rights, but not its obligations, under the Second Amended and Restated
Stockholders Agreement terminated. The Second Amended Stockholders Agreement
will be superceded and replaced by the Restated Stockholders Agreement (as
defined below) upon consummation of the Offering. In addition, the Company
entered into amended Registration Rights Agreements with FS&Co. and Apollo,
and Mr. Koll entered into a four-year noncompetition and confidentiality
agreement with the Company, FS&Co. and Apollo. See "Management--Employment and
Other Agreements," "Certain Transactions--Stockholders Agreement" and "--
Registration Rights Agreements."
55
<PAGE>
STOCKHOLDERS AGREEMENT
Upon consummation of the Offering, the Company will enter into a Third
Amended and Restated Stockholders Agreement (the "Restated Stockholders
Agreement") with FS&Co., The Koll Company, KHC and Apollo which will provide
for certain rights and obligations, all as more specifically described
therein. The Restated Stockholders Agreement provides that, as long as FS&Co.
holds a majority of the Voting Securities (as defined therein) held by FS&Co.,
KHC and Apollo, the Board of Directors of the Company and each of its
subsidiaries shall be comprised of seven directors, with FS&Co. nominating
four directors, KHC and Apollo each nominating one director and the Company's
Chief Executive Officer (or if the Company has no Chief Executive Officer, the
most senior executive officer of the Company) being the other director. In the
event FS&Co. does not continue to hold such a majority of Voting Securities,
FS&Co., KHC and Apollo have agreed, subject to certain exceptions, to vote
their shares of Common Stock to elect up to seven directors in proportion to
their respective percentage ownership of Voting Securities.
In addition, the Restated Stockholders Agreement grants an option (the
"Option") to FS&Co. and Apollo such that, in the event The Koll Company and
KHC do not terminate the Safeco Pledge Agreement by November 13, 1996, then
FS&Co. and Apollo may, for a period of 60 days after the later of November 13,
1996 or the date upon which the interest of Apollo in any shares of KHC held
in escrow is terminated, exercise such Option for an exercise price of $14.00
to purchase shares of Common Stock held by KHC, the proceeds of which shall be
used to cause Safeco to terminate the Safeco Pledge Agreement. The Option is
exercisable first with respect to those shares of Common Stock held by KHC
which are not subject to an option in favor of Mr. Wirta or Mr. Rothe and
then, subject to certain limitations, with respect to those shares which are
subject to an option in favor of Mr. Wirta. In no event shall the Option apply
to shares subject to an option in favor of Mr. Rothe. The Option is
exercisable by FS&Co. and Apollo pro rata with respect to the aggregate shares
purchased by each of them from KHC on March 29, 1996 and April 1, 1996.
REGISTRATION RIGHTS AGREEMENTS
The Company has entered into a Registration Rights Agreement with FS&Co.
which provides that FS&Co. is entitled to demand (on one occasion only), at
any time after consummation of the Offering, that the Company register shares
of Common Stock owned by FS&Co. for sale to the public (at the Company's
expense). In addition, the Company has entered into Registration Rights
Agreements with each of KHC and Apollo. The Registration Rights Agreement with
Apollo provides that Apollo is entitled to demand (on one occasion only), at
any time after six months from the consummation of the Offering, that the
Company register shares of Common Stock owned by Apollo for sale to the public
(at the Company's expense). The Registration Rights Agreement with KHC
provides that KHC is entitled to demand (on one occasion only), at any time
after six months from the consummation of the Offering, that the Company
register shares of Common Stock owned by KHC for sale to the public (at the
Company's expense), subject to certain rights of first offer in favor of
FS&Co. and Apollo under the Second Amended Stockholders Agreement, and
provided that KHC has not otherwise been able to find a buyer for its shares.
The Company's obligation under each of the Registration Rights Agreements will
not be satisfied until the subject registration statement has become effective
under the federal securities laws and has remained effective as long as is
necessary to allow the stockholder who is exercising its demand registration
rights to dispose of its registered shares of Common Stock (but never longer
than nine months from the effective date of the registration statement
covering such shares).
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have an aggregate of
shares of Common Stock outstanding (assuming no exercise of the Underwriters'
over-allotment option or of options outstanding under the Performance Option
Plan). Of these shares, the shares being sold in the Offering will be
freely tradeable without restriction under the Securities Act, unless
purchased by "affiliates" of the Company, as that term is defined in Rule 144
of the Securities Act. The Company has granted options to purchase 548,500
shares of Common Stock under the Performance Option Plan, which vest in five
annual installments commencing March 31, 1997 (subject to acceleration in the
event the Company achieves certain operating results).
The remaining 5,210,574 shares of Common Stock held by existing stockholders
are "restricted securities" as that term is defined under the Securities Act.
Sales of such shares in the public market, or the availability of such shares
for sale, may adversely affect the market price of the Company's Common Stock.
Of such shares, approximately will become tradeable (subject to compliance
with the volume limitations of Rule 144) upon the expiration of lock-up
agreements with the Underwriters. The holders of Common Stock subject to such
lock-up agreements, including the Company's directors, executive officers and
existing stockholders, and the Company have agreed, subject to certain limited
exceptions, not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable for
Common Stock for a period of days after the date of this Prospectus without
the prior written consent of Merrill Lynch. See "Principal and Selling
Stockholders" and "Underwriting."
In general, under Rule 144 as currently in effect, an affiliate for the
Company, or a person (or persons whose shares are aggregated) who has
beneficially owned restricted securities for at least two years, will be
entitled to sell in any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of the Company's
Common Stock (approximately shares immediately after the Offering), or
(ii) the average weekly trading volume on the Nasdaq National Market during
the four calendar weeks immediately preceding the date on which notice of the
sale is filed with the Commission. Sales pursuant to Rule 144 are subject to
certain requirements relating to manner of sale, notice and availability of
current public information about the Company.
There has been no prior public market for the Common Stock, and there is no
assurance a significant public market for the Common Stock will develop or be
sustained after the Offering. Sales of substantial amounts of Common Stock in
the public market could adversely affect the market price of the Common Stock.
57
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), acting through their
representatives, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") and BT Securities Corporation (the "Representatives"), have severally
agreed, subject to the terms and conditions of a purchase agreement with the
Company (the "Purchase Agreement"), to purchase from the Company the number of
shares of Common Stock set forth below opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Merrill Lynch, Pierce Fenner & Smith
Incorporated................................................
BT Securities Corporation............................................
---
Total...........................................................
===
</TABLE>
In the Purchase Agreement, the several Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the shares of
Common Stock being sold pursuant to such Purchase Agreement if any of the
shares of Common Stock being sold pursuant to such Purchase Agreement are
purchased. Under certain circumstances, the commitments of non-defaulting
Underwriters may be increased as set forth in the Purchase Agreement.
The Company has granted the Underwriters an option exercisable for 30 days
after the date hereof to purchase up to additional shares of Common Stock
to cover over-allotments, if any, at the initial public offering price, less
the underwriting discount. If the Underwriters exercise this option, each of
the Underwriters will have a firm commitment, subject to certain conditions,
to purchase approximately the same percentage thereof which the number of
shares of Common Stock to be purchased by it shown in the foregoing table is
of the shares of Common Stock initially offered hereby.
The Representatives of the Underwriters have advised the Company that they
propose initially to offer the shares to the public at the public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $ per share. The Underwriters
may allow, and such dealers may reallow, a discount not in excess of $ per
share on sales to certain other dealers. After the initial public offering,
the offering price, concession and discount may be changed.
Prior to the Offering, there has been no active public market for the Common
Stock. The initial public offering price will be determined by negotiations
among the Company and the Representatives. Among the factors to be considered
in such negotiations are the Company's recent results of operations, the
future prospects of the Company and its industry in general, the price-
earnings ratios and market prices of securities of companies engaged in
activities similar to those of the Company and prevailing conditions in the
securities markets. There can be no assurance that an active trading market
will develop for the Common Stock or that the Common Stock will trade in the
public market subsequent to the Offering at or above the initial public
offering price.
The Company and its directors, executive officers and existing shareholders
have agreed not to sell or otherwise dispose of any shares of Common Stock
(other than shares purchased pursuant to the Offering) or securities
convertible into or exercisable for Common Stock without the prior written
consent of Merrill Lynch for a period of days after the date of this
Prospectus. See "Shares Eligible for Future Sale."
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
In the Purchase Agreement, the Company, KMS and the Selling Stockholders
have agreed to indemnify the several Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Underwriters may be required to make in respect thereof.
58
<PAGE>
BT Securities Corporation is an affiliate of Bankers Trust Company, which is
the agent and lead lender under the Bank Credit Facility, for which Bankers
Trust Company has received and will receive customary compensation. Bankers
Trust Company and BT Securities Corporation may from time to time lend funds
to or provide services to the Company and its affiliates in the future.
Some of the proceeds to the Company from the Offering will be applied to
reduce indebtedness under the Bank Credit Facility. See "Use of Proceeds."
Because more than 10% of the net proceeds of the Offering will be paid to an
affiliate of BT Securities Corporation, a member of the National Association
of Securities Dealers, Inc. (the "NASD") and a participant in the distribution
of the Common Stock being offered hereby, the Offering is being made pursuant
to Conduct Rule 2710(c)(8) of the NASD Manual, which requires that the price
of the Common Stock offered hereby be no higher than that recommended by a
"qualified independent underwriter." In accordance with this requirement,
Merrill Lynch is serving in such role, and the maximum price of the Common
Stock will be no higher than that recommended by Merrill Lynch. Merrill Lynch
also participated in the preparation of the Registration Statement of which
this Prospectus is a part and performed due diligence with respect thereto.
Merrill Lynch will receive no additional compensation as such in connection
with the Offering.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Riordan & McKinzie, a Professional Corporation, 300
South Grand Avenue, Los Angeles, California 90071, and for the Underwriters by
Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, California
90071. Principals and employees of Riordan & McKinzie are limited partners in
partnerships which are limited partners of FSEP III, the Company's principal
stockholder. See "Principal and Selling Stockholders."
EXPERTS
The consolidated financial statements of the Company as of March 31, 1996
and 1995 and for each of the periods in the three years ended March 31, 1996
included in this Prospectus and the financial statement schedules included
elsewhere in the Registration Statement, and the (i) statement of operations
for the Business Acquired from Karsten Realty Advisors for the year ended
December 31, 1993, (ii) statement of operations for the Business Acquired from
Midstates Management Company, Inc. for the year ended September 30, 1994,
(iii) the combined statements of operations for the Business Acquired from CBS
Investment Realty, Inc. and Affiliates for the years ended December 31, 1994
and 1993 and (iv) the combined statements of operations for The Shelard Group,
Inc. for the years ended December 31, 1994 and 1993 have been audited by Ernst
& Young LLP, independent auditors, as set forth in their reports appearing
herein and elsewhere in the Registration Statement, and are so included in
reliance upon the reports given upon the authority of such firm as experts in
accounting and auditing.
The combined financial statements of The Ross-Dove Company, Inc., Dovetech,
Inc., Dovemedia, Ltd. and Dove Capital, Inc. as of March 13, 1995 and December
31, 1994 and 1993 and for the period from January 1, 1995 to March 13, 1995
and the years ended December 31, 1994 and 1993 included in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
59
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-1 (of which this Prospectus is a
part) under the Securities Act with respect to the securities offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the SEC. Statements contained in the
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference and the exhibits and schedules thereto. For further information
regarding the Company and the shares of Common Stock offered hereby, reference
is hereby made to the Registration Statement and such exhibits and schedules
which may be obtained from the SEC at the Public Reference Section of the SEC,
maintained by the SEC at its principal office located at 450 Fifth Street,
N.W., Washington, D.C. 20549, the New York Regional office located at Seven
World Trade Center, New York, New York 10048, and the Chicago Regional Office
located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, at
prescribed rates.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent accountants and
quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year.
60
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
KOLL REAL ESTATE SERVICES
Pro Forma Financial Data (Unaudited)..................................... F-2
Pro Forma Consolidated Balance Sheet.................................... F-3
Notes to Pro Forma Consolidated Balance Sheet........................... F-4
Pro Forma Consolidated Statements of Income............................. F-6
Notes to Pro Forma Consolidated Statements of Income.................... F-8
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
Consolidated Financial Statements
Report of Independent Auditors.......................................... F-9
Consolidated Balance Sheets at June 30, 1996 (Unaudited) and March 31,
1996 and 1995.......................................................... F-10
Consolidated Statements of Operations for the three months ended June
30, 1996 and 1995 (Unaudited), the year ended March 31, 1996, the four
months ended March 31, 1995, the eight months ended November 30, 1994
and the year ended March 31, 1994...................................... F-11
Consolidated Statements of Stockholders' Equity for the year ended March
31, 1994, the eight months ended November 30, 1994, the four months
ended March 31, 1995, the year ended March 31, 1996 and the three
months ended June 30, 1996 (Unaudited)................................. F-12
Consolidated Statements of Cash Flows for the three months ended June
30, 1996 and 1995 (Unaudited), the year ended March 31, 1996, the four
months ended March 31, 1995, the eight months ended November 30, 1994
and the year ended March 31, 1994...................................... F-13
Notes to Consolidated Financial Statements.............................. F-14
BUSINESS ACQUIRED FROM KARSTEN REALTY ADVISORS
Report of Independent Auditors........................................... F-32
Statement of Operations for the year ended December 31, 1993............. F-33
Notes to Statement of Operations......................................... F-34
BUSINESS ACQUIRED FROM MIDSTATES MANAGEMENT COMPANY, INC.
Report of Independent Auditors........................................... F-36
Statement of Operations for the year ended September 30, 1994............ F-37
Notes to Statement of Operations......................................... F-38
BUSINESS ACQUIRED FROM CBS INVESTMENT REALTY, INC. AND AFFILIATES
Report of Independent Auditors........................................... F-39
Combined Statements of Operations for the years ended December 31, 1994
and 1993................................................................ F-40
Notes to Combined Statements of Operations............................... F-41
BUSINESS ACQUIRED FROM THE SHELARD GROUP, INC. AND AFFILIATE
Report of Independent Auditors........................................... F-43
Combined Statements of Operations for the six month periods ended June
30, 1995 and 1994 (Unaudited) and the years ended December 31, 1994 and
1993.................................................................... F-44
Notes to Combined Statements of Operations............................... F-45
ROSS-DOVE COMPANY, INC., DOVETECH, INC., DOVEMEDIA, LTD. AND DOVE CAPITAL,
INC.
Report of Independent Public Accountants................................. F-47
Combined Balance Sheets as of March 13, 1995 and December 31, 1994 and
1993.................................................................... F-48
Combined Statements of Operations for the period from January 1, 1995
through March 13, 1995 and the years ended December 31, 1994 and 1993... F-49
Combined Statements of Shareholders' Equity (Deficit) for the period from
January 1, 1995 to March 13, 1995 and the years ended December 31, 1994
and 1993................................................................ F-50
Combined Statements of Cash Flows for the period from January 1, 1995 to
March 13, 1995 and the years ended December 31, 1994 and 1993........... F-51
Notes to Combined Financial Statements................................... F-52
</TABLE>
F-1
<PAGE>
KOLL REAL ESTATE SERVICES
PRO FORMA FINANCIAL DATA
(UNAUDITED)
The following unaudited Pro Forma Consolidated Balance Sheet is presented as
if (i) the Offering had occurred on June 30, 1996 at $ a share, (ii) any
acquisitions consummated subsequent to June 30, 1996 and any pending
acquisitions considered probable had occurred on June 30, 1996, and (iii) a
portion of the net proceeds from the Offering were used to repay the pro forma
amount outstanding under the Bank Credit Facility, including any current
amounts due for any completed or pending acquisitions mentioned in (ii) above.
The following unaudited Pro Forma Consolidated Statement of Income for the
three months ended June 30, 1996 has been prepared as if (i) any acquisitions
consummated subsequent to March 31, 1996 and any pending acquisitions
considered probable had occurred on April 1, 1996, and (ii) a portion of the
net proceeds from the Offering were available on April 1, 1996 and were used
to repay the pro forma amounts outstanding under the Bank Credit Facility
during the three month period.
The following unaudited Pro Forma Consolidated Statement of Income for the
year ended March 31, 1996 has been prepared as if (i) any acquisitions
consummated during or subsequent to the year ended March 31, 1996 and any
pending acquisitions considered probable had occurred on April 1, 1995, and
(ii) a portion of the net proceeds from the Offering were available on April
1, 1995 and were used to repay the pro forma amounts outstanding under the
Bank Credit Facility during the year.
The information with respect to the Company in the following unaudited pro
forma statements has been derived from the financial statements of the Company
appearing elsewhere in this Prospectus. The information with respect to
acquisitions was derived from the unaudited financial statements of these
companies for the periods and as of the dates set forth in the notes to the
pro forma financial statements. The pro forma adjustments represent the
Company's determination of all adjustments necessary to present fairly the
Company's pro forma results of operations and financial position and are based
upon available information and certain assumptions considered reasonable in
the circumstances.
THE PRO FORMA FINANCIAL INFORMATION SET FORTH BELOW SHOULD BE READ IN
CONJUNCTION WITH THE HISTORICAL FINANCIAL STATEMENTS AND NOTES THERETO OF THE
COMPANY, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE PRO FORMA EARNINGS ARE
NOT NECESSARILY INDICATIVE OF THE ACTUAL RESULTS THAT WOULD HAVE OCCURRED HAD
THE ACQUISITIONS BEEN CONSUMMATED AT THE BEGINNING OF THE PERIOD INDICATED AND
DO NOT PURPORT TO INDICATE RESULTS OF OPERATIONS AS OF ANY FUTURE DATE OR FOR
ANY FUTURE PERIOD.
F-2
<PAGE>
KOLL REAL ESTATE SERVICES
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED--IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED PRO FORMA ADJUSTMENT PRO FORMA
HISTORICAL ACQUISITIONS ADJUSTMENTS REFERENCE CONSOLIDATED
------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 2,299 $ 171 $ 2,470
Cash held in trust..... 2,096 57 2,153
Accounts receivable.... 25,926 1,094 27,020
Accounts receivable
from affiliates....... 2,885 2,885
Deferred income taxes.. 1,880 3 1,883
Prepaid expenses and
other current assets.. 5,117 741 $ (910) (A) 4,948
-------- ------ -------- --------
Total current
assets............. 40,203 2,066 (910) 41,359
Furniture, fixtures and
equipment.............. 5,995 546 (250) (B) 6,291
Investments and
advances............... 7,279 7,279
Covenants not to
compete................ 2,533 2,533
Management agreements... 19,925 2,311 (C) 22,236
Goodwill................ 35,623 82 3,054 (D) 38,759
Other assets............ 10,821 71 (2,453) (E) 8,439
-------- ------ -------- --------
$122,379 $2,765 $ 1,752 $126,896
======== ====== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities... $ 12,064 $1,970 $ (797) (F) $ 13,237
Trust account
liability............. 2,087 2,087
Accrued compensation
and benefits.......... 7,722 7,722
Notes payable to
banks................. 10,725 259 (10,809) (G) 175
Current portion of
acquisition
obligations........... 2,233 204 (H) 2,437
Income taxes payable... 424 459 (883) (I) --
-------- ------ -------- --------
Total current
liabilities........ 35,255 2,688 (12,285) 25,658
Acquisition obligations,
less current portion... 2,612 1,438 (J) 4,050
Notes payable to banks.. 33,712 90 (33,537) (K) 265
Deferred income taxes... 2,391 2,391
Other long-term
obligations............ 1,648 50 1,698
Minority interest....... 11,542 534 (L) 12,076
Stockholders' equity:
Common stock........... 53 71 (71) (M) 53
Additional paid-in
capital............... 33,907 153 46,834 (N) 80,894
Retained earnings...... 2,409 (287) (1,161) (O) 961
Stock subscription
notes................. (1,150) (1,150)
-------- ------ -------- --------
35,219 (63) 45,602 80,758
-------- ------ -------- --------
$122,379 $2,765 $ 1,752 $126,896
======== ====== ======== ========
</TABLE>
F-3
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ACQUISITIONS
The Pro Forma Consolidated Balance Sheet as of June 30, 1996 includes the
following completed and pending acquisitions as if they had occurred on June
30, 1996 and is based upon application of the purchase method of accounting.
<TABLE>
<CAPTION>
DATE
ACQUIRED ACQUISITION
--------- -------------------------------------------
<C> <S>
Pending Property management and brokerage company
Pending Leasing and brokerage company
Pending Relocations, Inc. ("Relocations")
PT IPAC Propertindo ("IPAC")--50 percent
Pending interest
Pending The Landmark Property Corporation
("Landmark")
--99.8 percent interest
July 1996 Total Employee Relations, Inc. ("TERS")
</TABLE>
(A) The Company advanced funds to IPAC, a pending acquisition, which for
purposes of the pro forma consolidation are eliminated against the payable
on IPAC's balance sheet. The pro forma adjustment also reflects the
exclusion of certain non-operating assets that will not be purchased from
TERS, and an income tax benefit receivable resulting from the assumed
write-off of unamortized loan costs (see (E) below). The transactions
making up the adjustment are as follows:
<TABLE>
<S> <C>
Elimination of IPAC receivable..................................... $(797)
TERS assets not purchased.......................................... (235)
Tax benefit receivable............................................. 122
-----
$(910)
=====
</TABLE>
(B) Reflects the following transactions:
<TABLE>
<S> <C>
Purchase accounting adjustment to fixed assets of Landmark......... $(190)
TERS asset not purchased........................................... (60)
-----
$(250)
=====
</TABLE>
(C) Reflects the allocation of the purchase price to management agreements
related to the property management and brokerage company ($2,059) and the
leasing and brokerage company ($252).
(D) Reflects the aggregate excess of the purchase price over the net assets
acquired for Relocations ($536), IPAC ($1,081) and TERS ($1,437).
(E) Reflects the assumed write-off of unamortized loan costs related to the
Bank Credit Facility upon repayment of pro forma amounts outstanding with
a portion of the net proceeds from the Offering.
(F) Elimination of the IPAC payable.
F-4
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET--(CONTINUED)
(DOLLARS IN THOUSANDS)
(G) Reflects the following transactions:
<TABLE>
<S> <C>
Use of a portion of the net proceeds from the Offering to repay
the current portion of amounts outstanding under the Bank
Credit Facility............................................... $(10,725)
Adjustment for note payable not assumed from TERS.............. (43)
Liability not assumed in the purchase of the property
management and brokerage company.............................. (41)
--------
$(10,809)
========
</TABLE>
(H) Acquisition obligations due to the sellers of the property management and
brokerage company ($116) and the leasing and brokerage company ($88).
(I) Reflects the following transactions:
<TABLE>
<S> <C>
Income tax benefit at 41% from the assumed write-off of the
unamortized loan costs related to the Bank Credit Facility...... $1,005
Reduction of income taxes payable................................ (883)
------
Income tax benefit receivable (see Note A)....................... $ 122
======
</TABLE>
(J) Reflects acquisition obligations due to the sellers of TERS ($300), the
property management and brokerage company ($1,050) and the leasing and
brokerage company ($88).
(K) Reflects the following transactions:
<TABLE>
<S> <C>
Use of a portion of the net proceeds from the Offering to repay
the non-current portion of amounts outstanding under the Bank
Credit Facility............................................... $(33,487)
Net adjustment of long term-debt not assumed for purchase of
Landmark...................................................... (50)
--------
$(33,537)
========
</TABLE>
(L) Reflects the minority partner's interest in the net assets of IPAC after
application of purchase accounting.
(M) Reflects the elimination of historical equity of acquirees.
(N) Reflects the following:
<TABLE>
<S> <C>
Elimination of acquirees' historical additional paid-in
capital...................................................... $ (153)
A portion of the net proceeds from the Offering used to:
Repay amounts outstanding under the Bank Credit Facility
Current................................................... 10,725
Non-current............................................... 33,487
-------
44,212
Fund acquisitions........................................... 2,775
-------
$46,834
=======
</TABLE>
(O) Reflects the following:
<TABLE>
<S> <C>
Elimination of acquirees' historical retained earnings......... $ 287
Assumed write-off of unamortized loan costs related to the Bank
Credit Facility, net of income tax benefit.................... (1,448)
-------
$(1,161)
=======
</TABLE>
F-5
<PAGE>
KOLL REAL ESTATE SERVICES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30, 1996
(UNAUDITED--IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED PRO FORMA ADJUSTMENT PRO FORMA
HISTORICAL ACQUISITIONS ADJUSTMENTS REFERENCE CONSOLIDATED
------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Fee based services..... $29,193 $1,913 $31,106
Interest income........ 58 58
Other.................. 379 27 406
------- ------ ----- -------
29,630 1,940 31,570
Costs and expenses:
Fee based services..... 22,025 1,880 23,905
Administrative......... 5,510 5,510
Interest expense....... 997 9 $(875) (P) 131
Depreciation expense... 535 33 (5) (Q) 563
Amortization expense... 1,927 1 162 (R) 2,090
Minority interest in
income (loss) of
consolidated
entities.............. (824) (76) (S) (900)
------- ------ ----- -------
30,170 1,923 (794) 31,299
------- ------ ----- -------
Income (loss) before
equity in income
(losses) of
unconsolidated entities
and income taxes....... (540) 17 794 271
Equity in income
(losses) of
unconsolidated
entities............... 485 485
------- ------ ----- -------
Income (loss) before
income taxes........... (55) 17 794 756
Income tax expense
(benefit).............. (29) 11 394 (T) 376
------- ------ ----- -------
Net income (loss)....... $ (26) $ 6 $ 400 $ 380
======= ====== ===== =======
Earnings (loss) per
share.................. $ $
======= =======
Average number of common
shares and common share
equivalents............ (U)
======= =======
</TABLE>
F-6
<PAGE>
KOLL REAL ESTATE SERVICES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED MARCH 31, 1996
(UNAUDITED--IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED PRO FORMA ADJUSTMENT PRO FORMA
HISTORICAL ACQUISITIONS ADJUSTMENTS REFERENCE CONSOLIDATED
------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Fee based services..... $116,310 $11,144 $(1,445) (T) $126,009
Interest income........ 282 63 345
Other.................. 3,108 158 3,266
-------- ------- ------- --------
119,700 11,365 (1,445) 129,620
Costs and expenses:
Fee based services..... 80,497 11,207 (1,587) (T) 90,117
Administrative......... 21,723 21,723
Interest expense....... 3,891 24 (3,390) (P) 525
Depreciation expense... 1,883 153 (24) (Q) 2,012
Amortization expense... 6,937 5 800 (R) 7,742
Minority interest in
income (loss) of
consolidated
entities.............. 679 (358) (S) 321
-------- ------- ------- --------
115,610 11,389 (4,559) 122,440
-------- ------- ------- --------
Income (loss) before
equity in income of
unconsolidated entities
and income taxes....... 4,090 (24) 3,114 7,180
Equity in income of
unconsolidated
entities............... 912 912
-------- ------- ------- --------
Income (loss) before
income taxes........... 5,002 (24) 3,114 8,092
Income tax expense...... 2,955 64 1,507 (T) 4,526
-------- ------- ------- --------
Net income (loss)....... $ 2,047 $ (88) $ 1,607 $ 3,566
======== ======= ======= ========
Earnings per share...... $ $
======== ========
Average number of common
shares and common share
equivalents............ (U)
======== ========
</TABLE>
F-7
<PAGE>
KOLL REAL ESTATE SERVICES
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
ACQUISITIONS
The Pro Forma Consolidated Statements of Income for the three months ended
June 30, 1996 and the year ended March 31, 1996 include the results of
operations for the following completed and pending acquisitions as if they had
occurred at the beginning of the respective periods and are based upon
application of the purchase method of accounting.
<TABLE>
<CAPTION>
DATE
ACQUIRED ACQUISITION
------------ --------------------------------------------------------
<C> <S>
Pending Property management and brokerage company
Pending Leasing and brokerage company
Pending Relocations, Inc.
Pending PT IPAC Propertindo--50 percent interest
Pending The Landmark Property Corporation--99.8 percent interest
July 1996 Total Employee Relations, Inc.
October 1995 Bridgewood Properties
July 1995 The Shelard Group, Inc.
</TABLE>
P) Reduction in interest expense assuming that a portion of the net proceeds
from the Offering were available at the beginning of the period and were
used to repay amounts outstanding under the Bank Credit Facility.
Q) Depreciation expense reduction for revalued fixed assets of Landmark.
R) Additional amortization of acquired management contracts and goodwill
resulting from the application of purchase accounting.
S) Minority partner's share in net loss of IPAC for the period.
T) Additional tax expense related to acquisitions and the pro forma
adjustments.
T) Adjustment for the portion of the business of TERS not acquired.
U) Average number of common shares and common share equivalents includes
shares of the total Common Stock issued in the Offering, necessary
in order to yield sufficient net proceeds to repay the pro forma amounts
outstanding under the Bank Credit Facility.
F-8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Koll Real Estate Services
We have audited the accompanying consolidated balance sheets of Koll Real
Estate Services (the "Company") as of March 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year ended March 31, 1996 and the four months ended March 31, 1995. We
also have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Koll Management Services, Inc. (the
"Predecessor Company") for the eight months ended November 30, 1994 and the
year ended March 31, 1994. These financial statements are the responsibility
of the Companies' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Koll Real Estate Services at March 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for the year ended March 31, 1996
and the four months ended March 31, 1995, and the consolidated results of
operations and cash flows of Koll Management Services, Inc. for the eight
months ended November 30, 1994 and the year ended March 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Note 4 to the financial statements, in 1996 the Company
changed its method of accounting for certain of its investee partnerships in
which it had attained control from the equity method to consolidation.
Ernst & Young LLP
Newport Beach, California
August 16, 1996, except Note 10,
as to which the date is , 1996
The foregoing report is in the form that will be signed upon the completion
of the transactions described in Note 10 to the consolidated financial
statements.
/s/ Ernst & Young LLP
Newport Beach, California
August 16, 1996
F-9
<PAGE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
KOLL REAL ESTATE SERVICES
-----------------------------
MARCH 31,
JUNE 30, -----------------
1996 1996 1995
----------- -------- -------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 2,299 $ 6,968 $ 138
Cash held in trust............................ 2,096 3,292 1,671
Accounts receivable, net of allowance for
doubtful accounts of $1,174 in June 1996,
$1,147 in March 1996 and $965 in March 1995.. 25,926 25,802 16,614
Accounts receivable from affiliates........... 2,885 2,238 2,154
Deferred income taxes......................... 1,880 1,851 740
Prepaid expenses and other current assets..... 5,117 4,679 3,947
-------- -------- -------
Total current assets........................ 40,203 44,830 25,264
Furniture, fixtures and equipment............... 5,995 5,961 5,593
Investments and advances........................ 7,279 4,996 3,039
Covenants not to compete........................ 2,533 2,570 2,861
Management agreements........................... 19,925 20,170 16,145
Goodwill........................................ 35,623 36,025 36,033
Other assets.................................... 10,821 11,655 7,761
-------- -------- -------
$122,379 $126,207 $96,696
======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities...... $ 12,064 $ 11,518 $ 9,484
Trust account liability....................... 2,087 3,977 1,652
Accrued compensation and benefits............. 7,722 8,277 4,765
Notes payable to banks........................ 10,725 4,675 --
Current portion of acquisition obligations.... 2,233 2,154 11,661
Income taxes payable.......................... 424 1,433 --
-------- -------- -------
Total current liabilities................... 35,255 32,034 27,562
Acquisition obligations, less current portion... 2,612 3,574 4,373
Notes payable to banks.......................... 33,712 37,664 19,250
Deferred income taxes........................... 2,391 2,391 1,628
Other long-term obligations..................... 1,648 1,668 2,346
Minority interest............................... 11,542 13,631 8,552
Commitments and contingencies (Notes 8 and 13)
Stockholders' equity:
Preferred Stock, $.01 par value, 2,000,000
shares authorized, none issued or
outstanding.................................. -- -- --
Common stock, $.01 par value, 35,000,000
shares authorized, 5,301,854 shares issued
and outstanding in June and March 1996 and
5,267,704 shares issued and outstanding in
March 1995................................... 53 53 53
Additional paid-in capital...................... 33,907 33,907 33,604
Retained earnings............................... 2,409 2,435 388
Stock subscription notes........................ (1,150) (1,150) (1,060)
-------- -------- -------
35,219 35,245 32,985
-------- -------- -------
$122,379 $126,207 $96,696
======== ======== =======
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
KOLL MANAGEMENT
KOLL REAL ESTATE SERVICES SERVICES, INC.
-------------------------------------------- -----------------------
THREE MONTHS ENDED FOUR MONTHS EIGHT MONTHS
JUNE 30, YEAR ENDED ENDED ENDED YEAR ENDED
-------------------- MARCH 31, MARCH 31, NOVEMBER 30, MARCH 31,
1996 1995 1996 1995 1994 1994
--------- --------- ---------- ----------- ------------ ----------
(UNAUDITED) (RESTATED--NOTE 4)
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Fee based services
(including affiliated
revenue of $3,302,
$3,511, $14,445,
$3,475, $5,275 and
$10,517 for the three
month periods ended
June 30, 1996 and
1995, the year ended
March 31, 1996, four
months ended March 31,
1995, eight months
ended November 30,
1994 and year ended
March 31, 1994,
respectively)......... $ 29,193 $ 26,962 $116,310 $31,494 $50,264 $58,496
Interest income........ 58 56 282 97 21 47
Other (including
affiliated revenue of
$197, $247, $793,
$554, $696 and $696
for the three month
periods ended June 30,
1996 and 1995, the
year ended March 31,
1996, four months
ended March 31, 1995,
eight months ended
November 30, 1994 and
year ended March 31,
1994, respectively)... 379 548 3,108 899 1,281 1,128
--------- --------- -------- ------- ------- -------
29,630 27,566 119,700 32,490 51,566 59,671
COSTS AND EXPENSES:
Fee based services..... 22,025 18,963 80,497 22,331 34,676 38,003
Administrative
(including rent paid
to affiliates of $253,
$224, $1,055, $473,
$896 and $860 for the
three month periods
ended June 30, 1996
and 1995, the year
ended March 31, 1996,
four months ended
March 31, 1995, eight
months ended
November 30, 1994 and
year ended March 31,
1994, respectively)... 5,510 4,736 21,723 6,161 10,941 14,247
Compensation expense
related to Merger..... -- -- -- -- 1,208 --
Interest expense....... 997 857 3,891 592 352 126
Depreciation expense... 535 420 1,883 486 682 736
Amortization expense... 1,927 1,357 6,937 1,389 1,545 980
Minority interest in
income (loss) of
consolidated
entities.............. (824) 879 679 447 647 902
--------- --------- -------- ------- ------- -------
30,170 27,212 115,610 31,406 50,051 54,994
--------- --------- -------- ------- ------- -------
Income (loss) before
equity in income
(losses) of
unconsolidated
entities, income taxes
and extraordinary
item................... (540) 354 4,090 1,084 1,515 4,677
Equity in income
(losses) of
unconsolidated
entities............... 485 (93) 912 (111) (45) 340
--------- --------- -------- ------- ------- -------
Income (loss) before
income taxes and
extraordinary item..... (55) 261 5,002 973 1,470 5,017
Income tax expense
(benefit).............. (29) 157 2,955 585 742 2,030
--------- --------- -------- ------- ------- -------
Income (loss) before ex-
traordinary item....... (26) 104 2,047 388 728 2,987
Extraordinary item--
Merger transaction
costs (net of income
tax benefit of $339)... -- -- -- -- 478 --
--------- --------- -------- ------- ------- -------
Net income (loss)....... $ (26) $ 104 $ 2,047 $ 388 $ 250 $ 2,987
========= ========= ======== ======= ======= =======
Earnings (loss) per
share.................. $ $ $ $
========= ========= ======== =======
Average number of common
shares and common share
equivalents............
========= ========= ======== =======
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL STOCK
-------------- PAID-IN RETAINED SUBSCRIPTION
SHARES AMOUNT CAPITAL EARNINGS NOTES TOTAL
------ ------ ---------- -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
KOLL MANAGEMENT
SERVICES, INC.
Balance at March 31,
1993................... 3,300 $ 33 $ 5,349 $ 7,234 $ -- $12,616
Stock repurchase...... (150) (1) (1,443) -- -- (1,444)
Net income............ -- -- -- 2,987 -- 2,987
----- ---- ------- ------- ------- -------
Balance at March 31,
1994................... 3,150 32 3,906 10,221 -- 14,159
Options exercised..... 3 -- 37 -- -- 37
Net income............ -- -- -- 250 -- 250
----- ---- ------- ------- ------- -------
Balance at November 30,
1994................... 3,153 $ 32 $ 3,943 $10,471 $ -- $14,446
===== ==== ======= ======= ======= =======
KOLL REAL ESTATE
SERVICES
Balance at inception.... -- $-- $ -- $ -- $ -- $ --
Sale of common stock,
net of offering costs
of $1,153............ 2,746 28 26,273 -- (1,060) 25,241
Issuance of common
stock for stock of
subsidiary (at
predecessor cost).... 2,522 25 7,331 -- -- 7,356
Net income............ -- -- -- 388 -- 388
----- ---- ------- ------- ------- -------
Balance at March 31,
1995................... 5,268 53 33,604 388 (1,060) 32,985
Additional offering
costs................ -- -- (65) -- -- (65)
Sale of common stock.. 36 -- 376 -- (188) 188
Stock repurchased..... (2) -- (8) -- 8 --
Collections on stock
subscription notes... -- -- -- -- 90 90
Net income............ -- -- -- 2,047 -- 2,047
----- ---- ------- ------- ------- -------
Balance at March 31,
1996................... 5,302 53 33,907 2,435 (1,150) 35,245
Net loss (unaudited).. -- -- -- (26) -- (26)
----- ---- ------- ------- ------- -------
Balance at June 30, 1996
(unaudited)............ 5,302 $ 53 $33,907 $ 2,409 $(1,150) $35,219
===== ==== ======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-12
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
KOLL MANAGEMENT
KOLL REAL ESTATE SERVICES SERVICES, INC.
---------------------------------------- -----------------------
THREE MONTHS FOUR MONTHS EIGHT MONTHS
ENDED JUNE 30, YEAR ENDED ENDED ENDED YEAR ENDED
---------------- MARCH 31, MARCH 31, NOVEMBER 30, MARCH 31,
1996 1995 1996 1995 1994 1994
------- ------- ---------- ----------- ------------ ----------
(UNAUDITED) (RESTATED--NOTE 4)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....... $ (26) $ 104 $ 2,047 $ 388 $ 250 $ 2,987
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Provision for deferred
income taxes.......... (29) (7) (126) (60) (41) (220)
Depreciation and
amortization.......... 2,462 1,777 8,820 1,875 2,227 1,716
Provision for doubtful
accounts.............. 135 38 834 65 -- 115
Reserves on equity
investments........... -- -- -- 325 -- --
Equity in income of
unconsolidated
entities and minority
interest, net......... (1,225) 846 605 158 349 27
Changes in operating
assets and liabilities:
Accounts receivable.... (259) (1,668) (10,022) (2,468) (3,424) (6,848)
Accounts receivable
from affiliates....... (647) (687) (84) (362) 603 (311)
Prepaid expenses and
other assets.......... 250 (823) (1,593) (2,667) (1,566) (1,109)
Accounts payable and
accrued liabilities... 36 413 4,107 (821) 2,800 735
Accrued compensation
and benefits.......... (555) 819 3,512 (283) (958) 2,900
Income taxes payable... (1,009) -- 1,433 -- (412) 412
------- ------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities............. (867) 812 9,533 (3,850) (172) 404
------- ------- -------- -------- -------- --------
INVESTING ACTIVITIES
Acquisitions of
management agreements
and businesses......... (237) (756) (8,418) (2,648) (804) (2,661)
Purchases of furniture,
fixtures and
equipment.............. (574) (674) (2,190) (1,409) (1,408) (1,723)
Investments and
advances, net.......... (2,496) (678) (636) (2,405) 618 744
Deferred costs.......... -- -- (1,931) (299) (588) (930)
Liquidation of
investments in
marketable securities.. -- -- -- -- -- 500
Acquisition of Koll
Management Services,
Inc.................... -- -- (719) (25,040) -- --
------- ------- -------- -------- -------- --------
Net cash used in
investing activities... (3,307) (2,108) (13,894) (31,801) (2,182) (4,070)
------- ------- -------- -------- -------- --------
FINANCING ACTIVITIES
Payment of deferred
financing costs........ -- (156) (412) (889) (683) --
Borrowings on lines of
credit................. 9,325 13,950 52,821 21,100 23,750 15,949
Repayments on lines of
credit................. (7,227) (7,832) (29,732) (8,130) (19,926) (13,849)
Payment of acquisition
obligations............ (1,328) (484) (10,802) (2,307) (483) (1,727)
Sales (repurchases) of
common stock and
collections on
subscription notes..... -- -- 215 25,241 37 (1,444)
Minority interests'
contributions to
(distributions from)
consolidated entities.. (1,265) (525) (899) (235) (165) 930
------- ------- -------- -------- -------- --------
Net cash provided by
(used in) financing
activities............. (495) 4,953 11,191 34,780 2,530 (141)
------- ------- -------- -------- -------- --------
Net (decrease) increase
in cash and cash
equivalents............ (4,669) 3,657 6,830 (871) 176 (3,807)
Cash and cash
equivalents at
beginning of period.... 6,968 138 138 1,009 833 4,640
------- ------- -------- -------- -------- --------
Cash and cash
equivalents at end of
period................. $ 2,299 $ 3,795 $ 6,968 $ 138 $ 1,009 $ 833
======= ======= ======== ======== ======== ========
Supplemental Disclosures
of Cash Flow
Information
Cash paid for
interest.............. $ 935 $ 729 $ 3,471 $ 384 $ 210 $ 75
======= ======= ======== ======== ======== ========
Income taxes paid...... $ 1,009 $ 14 $ 1,499 $ 597 $ 1,182 $ 1,322
======= ======= ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(INFORMATION FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 IS
UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Koll Real Estate Services ("Koll" or the "Company", formerly KMS Holding
Corporation), a Delaware corporation, was organized to acquire Koll Management
Services, Inc. ("KMS" or the "Predecessor Company") in November 1994. KMS was
incorporated in California in June 1988 and reincorporated in Delaware in May
1991.
KMS was a wholly-owned subsidiary of The Koll Company ("TKC") until July 31,
1991, when it completed an initial public offering of common stock. On
November 23, 1994, Koll acquired 100% of the outstanding common stock of KMS
pursuant to a merger agreement (the "Merger"). In connection with the Merger,
TKC transferred all of its stock in KMS to The Koll Holding Company ("KHC"),
of which 1,576,000 shares of common stock (representing 50% of the outstanding
stock of KMS) were contributed to Koll for a 48% interest. Koll accounted for
the acquisition of these shares at KHC's predecessor cost, or $7,356,000. Koll
then acquired the remaining 50% of KMS' common stock for $25,224,000 ($16 per
share), of which 36% was acquired from KMS' public shareholders and the
remaining 14% interest was acquired from KHC. KMS subsequently agreed to pay
the public shareholders an additional $0.50 per share, which totaled an
additional $569,000. The aggregate purchase price, including direct
transaction costs of $366,000, was $33,515,000.
The Merger resulted in $18,955,000 of purchase price in excess of the
estimated fair value of the net assets acquired. This amount, net of
subsequent amortization, is included in goodwill in the accompanying
consolidated balance sheets. Transaction costs associated with the Merger and
incurred by KMS were recorded as an extraordinary item, net of applicable
income taxes of $339,000.
The accompanying consolidated financial statements present the Merger as if
it had occurred after the close of business on November 30, 1994, the
designated effective date of the transaction for accounting purposes.
The accompanying consolidated statements of operations, stockholders'
equity, and cash flows for the year ended March 31, 1994, and the eight months
ended November 30, 1994 present the consolidated results of the Predecessor
Company's operations and its cash flows prior to the Merger. The consolidated
results of the Company's operations and its cash flows for the four months
ended March 31, 1995, the year ended March 31, 1996 and the three months ended
June 30, 1996 and 1995 reflect the results of the Merger and, as a result, are
not comparable to the financial position, results of operations and cash flows
of the Predecessor Company in periods prior to the Merger.
BUSINESS
The Company provides real estate management and advisory services throughout
the United States and in certain portions of Asia. The services provided
include property management, asset management, facility management, commercial
brokerage, asset disposition, institutional investment and pension fund
advisory and construction management services. A portion of the Company's
business is conducted with affiliates of TKC (Note 11).
INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements as of June 30,
1996 and for the three months ended June 30, 1996 and 1995, have been prepared
in accordance with generally accepted accounting principles and the
requirements of Regulation S-X for interim financial information. Accordingly,
they do not include all
F-14
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of the information required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation, have been included. Operating results for the three months ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1997. The Company provides for income
taxes during interim periods based on the estimated annual effective tax rate.
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries and partnerships in which it has controlling
interests. Results of operations of acquired entities are recognized commencing
on the effective date of each entity's acquisition. All significant
intercompany transactions have been eliminated in consolidation.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of March 31, 1996
and 1995, and revenue and expenses for the periods presented. Actual results
could differ from those estimates.
Significant estimates made in preparing the consolidated financial statements
include allowances for doubtful accounts, amounts used in evaluating the
recoverability of investments, advances and intangible assets, as well as the
amortization lives used for the Company's intangible assets.
CASH EQUIVALENTS
Cash equivalents consist of short-term, highly-liquid investments with
maturities of 90 days or less when purchased.
CASH HELD IN TRUST AND TRUST ACCOUNT LIABILITY
Cash held in trust consists principally of gross proceeds from auctions
collected on behalf of the selling parties which is held in a trust account
until the final settlement date of the auction. Such amounts held at year-end
are shown as cash held in trust in the accompanying consolidated balance
sheets. Cash held in trust is excluded from cash and cash equivalents for
purposes of the consolidated statements of cash flows.
The trust account liability represents the portion of cash proceeds and
credit card receivables, which are included in accounts receivable, that must
be remitted to the selling parties.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of cash and cash equivalents and the current portion of long-term
debt approximate the carrying value because of the short period of time to
maturity. The fair value of long-term debt approximates its carrying value
because the fixed rates of interest on a portion of the debt approximate
current market rates and the remaining portion of the debt has variable rates
of interest.
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist primarily of prepaid
insurance, various deposits and miscellaneous receivables.
F-15
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment are stated at cost (Note 3). Depreciation
is computed using the straight-line method over estimated useful lives ranging
from three to seven years.
INVESTMENTS AND ADVANCES
Investments consist principally of noncontrolling interests in service and
real estate entities. The Company accounts for investments in which it has
significant influence (generally 20% to 50% interests) using the equity method
of accounting. Under the equity method, the Company includes its share of the
income or losses of such entities in its operating results. Certain investees
that primarily hold investments in real estate have fiscal years that end on
December 31. Accordingly, the Company records its share of the income or losses
of such entities 90-days in arrears. The Company accounts for entities in which
it does not have significant influence (generally under 20% interests) using
the cost method.
COVENANTS NOT TO COMPETE
Costs related to covenants not to compete are amortized on a straight-line
basis over the periods benefited, ranging from five to ten years. Payments for
covenants not to compete that are contingent based upon future events are
capitalized when the contingency is resolved and amortized over the remaining
period benefited. Accumulated amortization totaled $415,000 and $122,000 at
March 31, 1996 and 1995, respectively.
MANAGEMENT AGREEMENTS
Management agreements include direct costs paid for such agreements to
unaffiliated management companies and costs allocated to management agreements,
based upon their estimated fair value, in connection with the Merger (Note 1--
Organization) and acquisitions of the stock or assets of other companies (Note
2). The management agreements typically contain evergreen provisions which
provide that the agreements remain in effect for an indefinite period but
generally enable the property owner and the Company to terminate the agreement
upon thirty days prior written notice.
The cost associated with each "pool" of management agreements is amortized on
a straight-line basis over the estimated periods benefited, ranging from two to
ten years. The estimated period benefited is established based upon managements
assessment of the risk associated with retaining the individual agreements
within each pool. The "attrition" factors considered include the relationships
with the owners of the underlying properties, the extent to which the Company
retains the senior management that had historically managed the properties, and
the cash flow of the properties. Accumulated amortization totaled $3,754,000
and $581,000 at March 31, 1996 and 1995, respectively.
Management annually evaluates impairment of management agreements and the
reasonableness of the remaining amortization period by comparing the projected
cash flow of each pool of management agreements, on an undiscounted basis, over
the remaining amortization period of the pool to the remaining unamortized cost
of the pool in order to determine whether impairment has occurred. If the
projected undiscounted cash flow of any pool were less than the unamortized
cost of the pool, then the recorded cost of the pool would be written down to
an amount equal to its estimated fair value.
Projected cash flow for each pool of management agreements represents
estimates, based on present plans and intentions, of management fees and other
revenue less direct costs. The estimation process involved in the
F-16
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
determination of projected cash flow is inherently uncertain since it requires
estimates as to future events and conditions. Such future events and conditions
include economic, political and market conditions, as well as the availability
of suitable financing to fund development and construction activities, and the
repayments or refinancing of existing indebtedness. Such economic, political,
market and financing conditions may affect occupancy rates of the managed
properties. As the amount and timing of the fees to be earned under such
contracts is dependent upon such future uncertain events and conditions, the
ultimate realization may be materially different in the near term from amounts
presently estimated in determining projected cash flow.
GOODWILL
Goodwill related to the Merger (Note 1--Organization), as well as
acquisitions of unrelated companies, is amortized over the estimated periods
benefited. Goodwill resulting from the Merger amounts to $18,955,000 and is
being amortized over 30 years. Goodwill resulting from other acquisitions is
being amortized over a range of 5 to 30 years. Accumulated amortization of
goodwill amounted to $1,755,000 and $202,000 at March 31, 1996 and 1995,
respectively.
OTHER ASSETS
Other assets includes costs incurred by the Company to organize and structure
investment funds in which the Company holds general partnership interests and
for which the Company performs investment management and advisory services.
Such costs are amortized using the straight-line method over the estimated
period benefited of five years. Other assets also includes organization and
deferred financing costs incurred in connection with the Merger. Organization
costs are being amortized on a straight-line basis over five years. Deferred
financing costs are being amortized on a straight-line basis over the term of
the related loan agreements. Accumulated amortization totaled $2,506,000 and
$723,000 at March 31, 1996 and 1995, respectively. Other assets also includes
certain long-term fees receivable, net of allowances of $541,000 and $312,000
at March 31, 1996 and 1995, respectively.
REVENUE
Revenue consists primarily of management fees, certain onsite reimbursements,
leasing commissions, investment sales commissions and auction fees. Base fee
revenue (management fees and onsite reimbursements) is generally recognized as
the services are rendered. Transaction fee revenue (such as leasing
commissions, asset acquisition and disposition fees) is recognized when earned,
generally upon the closing of the related transaction.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company and the
Predecessor Company incurred $622,000, $450,000, $229,000 and $196,000 in
advertising costs during the year ended March 31, 1996, the four months ended
March 31, 1995, the eight months ended November 30, 1994 and the year ended
March 31, 1994, respectively.
STOCK OPTIONS
The Company follows Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for
employee stock options.
INCOME TAXES
The Company accounts for income taxes in accordance with Financial Accounting
Standards Board Statement No. 109, Accounting for Income Taxes ("Statement No.
109"). Under Statement No. 109, the liability
F-17
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
method is used, whereby, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of the assets
and liabilities and are measured using enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Since the effective date of the Merger, KMS' operating results are included
in the consolidated tax return of the Company for federal and certain state
income tax purposes. Prior to the Merger, in certain states, KMS had filed
combined state tax returns with TKC and tax expense had been apportioned based
on a tax sharing agreement.
LONG-LIVED ASSETS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of ("SFAS No. 121"), in March
1995. In accordance with SFAS No. 121, long-lived assets and certain
intangibles held and used by the Company will be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The recoverability test is to be performed
at the lowest level at which undiscounted net cash flows can be directly
attributable to long-lived assets. SFAS No. 121 is effective for fiscal years
beginning after December 15, 1995. The Company adopted SFAS No. 121 in the
first quarter of fiscal 1997 and there was no material effect on its financial
position, results of operations or liquidity.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform with the presentation in the 1996 financial statements.
EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of shares of
common stock and common stock equivalents outstanding during the year. In
accordance with the accounting rules of the Securities and Exchange Commission,
common stock and stock options issued by the Company in the twelve month period
prior to the Company's initial public offering have been included in the
calculation of common and common equivalent shares as if they were outstanding
for all periods presented, computed using the treasury stock method and the
assumed initial offering price.
2. ACQUISITIONS
Effective January 1, 1995, the Company purchased the stock of CBS Investment
Realty, Inc. and CBS Investment Realty of New Mexico, Inc., property management
and brokerage companies with headquarters in Phoenix, Arizona ("CBS"). The
Company also purchased the business and assets of affiliated companies with
property management and brokerage operations in Texas and California. The
combined purchase price consisted of two promissory notes secured by letters of
credit. One note was due and paid in January 1996. The second note bears
interest at 9% per annum, payable quarterly, with principal installments due in
April 1996 (which was paid), 1997, 1998 and 1999. The purchase price in excess
of the estimated fair value of net assets acquired totaled $7,068,000 and is
included, net of amortization, in goodwill in the March 31, 1996 and 1995
consolidated balance sheets.
In May 1996, the Company executed an amendment to the CBS purchase agreement
which provided for the buyout of the earnout portion of the purchase price. The
buyout consists of four equal installments due May 1996 (which was paid), 1997,
1998 and 1999 and releases the Company from any further obligation to the
former owners.
F-18
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In March 1995, the Company formed Koll-Dove Global Disposition Services,
L.L.C. ("Koll-Dove"), a limited liability company engaged in asset disposition
services. The Company has a 50.1% controlling interest in Koll-Dove, and the
other 49.9% is owned by parties related to and including The Dove Holdings
Corporation (formerly The Ross-Dove Company, Inc.) (collectively, "Dove
Group"), an asset disposition company based in Northern California. The Company
contributed cash at closing plus a promissory note which was paid in full by
March 31, 1996. Dove Group contributed substantially all of its non-real estate
assets and related liabilities, excluding receivables from its shareholders.
The contributions by the Company and Dove Group exceeded the estimated fair
value of the net assets contributed by $10.3 million. This excess is included,
net of amortization, in goodwill in the March 31, 1996 and 1995 consolidated
balance sheets.
In April 1995, the Company acquired a real estate market research and
publishing operation from Liquidity Financial Group, L.P. by purchasing certain
assets, including publishing rights, contracts, trademarks and research
information. The purchase price included a payment which was made in April
1995, plus an additional amount which is subject to downward adjustment based
on earnings through May 2001. The purchase price in excess of the estimated
fair value of net assets acquired totaled $1,247,000 and is included, net of
amortization, in goodwill in the March 31, 1996 balance sheet.
In July 1995, the Company acquired certain business and assets of two
affiliated Minneapolis-based companies, The Shelard Group, Inc. and SCI
Services, Inc. (collectively "Shelard"). Shelard provides property and facility
management services, commercial real estate brokerage services and general
contractor and construction services in Minneapolis and St. Paul. The purchase
price consisted of cash at closing and a portion of net operating income (as
defined) above a specified amount, over a four-year period. The Company also
entered into employment and noncompetition agreements with certain Shelard
shareholders.
These transactions have been accounted for as purchase business acquisitions
and, accordingly, the results of operations of the acquired entities have been
included in the Company's consolidated results of operations from the
respective dates of acquisition.
The following summarizes the aggregate net purchase price of all acquisitions
(excluding the acquisition of KMS by Koll) and the allocation to the assets
acquired for the following periods (in thousands):
<TABLE>
<CAPTION>
KOLL REAL ESTATE
SERVICES KOLL MANAGEMENT SERVICES, INC.
---------------------- ----------------------------------
FOUR MONTHS EIGHT MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
MARCH 31, MARCH 31, NOVEMBER 30, MARCH 31,
1996 1995 1994 1994
---------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C>
Furniture, fixtures and
equipment.............. $ 251 $ 244 $ -- $ 612
Covenants not to com-
pete................... -- 104 457 2,647
Management agreements... 7,105 6,136 2,859 6,910
Goodwill................ 1,372 17,443 -- --
Other assets............ -- 1,320 -- 225
------ ------- --------------- ---------------
8,728 25,247 3,316 10,394
Less minority interests
and purchase price fi-
nanced through the as-
sumption of liabilities
and seller financing... 310 22,599 2,512 7,733
------ ------- --------------- ---------------
Cash paid for acquisi-
tions of management
agreements and busi-
nesses................. $8,418 $ 2,648 $ 804 $ 2,661
====== ======= =============== ===============
</TABLE>
F-19
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The pro forma unaudited results of operations for the year ended March 31,
1996, assuming that all 1996 acquisitions had been consummated as of April 1,
1995, are as follows (in thousands except per share data):
<TABLE>
<S> <C>
Revenue.......................................................... $122,488
Net income....................................................... $ 1,820
Earnings per share............................................... $
</TABLE>
Pro forma financial information is not presented for periods prior to April
1, 1995 because such periods are not comparable to the year ended March 31,
1996 due to the Merger.
3. FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31
---------------
1996 1995
------- ------
<S> <C> <C>
Leasehold improvements................................... $ 695 $ 488
Office furniture and equipment........................... 1,957 1,695
Computer hardware and software........................... 5,681 4,060
------- ------
8,333 6,243
Less: accumulated depreciation and amortization.......... (2,372) (650)
------- ------
$ 5,961 $5,593
======= ======
</TABLE>
4. INVESTMENTS AND ADVANCES
The Company has noncontrolling interests in various entities that are
accounted for using the equity and cost methods. The Company's investments in
and advances to these entities are as follows at March 31, 1996 and 1995 (in
thousands):
<TABLE>
<CAPTION>
DUE (TO)
FROM
1996 INTEREST INVESTMENT INVESTEES TOTAL
---- -------- ---------- --------- ------
<S> <C> <C> <C> <C>
Koll Telecommunication Services,
L.L.C. ................................. 30% $1,298 $ 2 $1,300
Insignia CCP III Acquisition, L.L.C. .... 40% 608 -- 608
Insignia CCP IV Acquisition, L.L.C. ..... 40% 1,642 -- 1,642
K/B Opportunity Fund III, L.P. .......... * 500 (500) --
K/B Fund II.............................. * 1,600 (1,100) 500
K/B Fund III............................. * 1,500 (1,000) 500
Other.................................... ** 86 360 446
------ ------- ------
$7,234 $(2,238) $4,996
====== ======= ======
<CAPTION>
DUE (TO)
FROM
1995 INTEREST INVESTMENT INVESTEES TOTAL
---- -------- ---------- --------- ------
<S> <C> <C> <C> <C>
Koll Telecommunication Services,
L.L.C. ................................. 30% $ 112 $ -- $ 112
Insignia CCP III Acquisition, L.L.C. .... 40% 769 -- 769
Insignia CCP IV Acquisition, L.L.C. ..... 40% 1,602 -- 1,602
Other.................................... ** (51) 607 556
------ ------- ------
$2,432 $ 607 $3,039
====== ======= ======
</TABLE>
- --------
* Interests of 1% or less
** Various interests ranging up to 50%
F-20
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Amounts due from (to) investees are non-interest bearing and are due on
demand.
Effective April 1, 1995, the Company attained control in K/B Investors I, K/B
Opportunity Investors, K/B Prime Investors and K/B Investors II, general and
limited partnerships in which the Company and its subsidiaries previously had
noncontrolling 50.1% interests. As a result, the Company changed its method of
accounting for these investments from the equity method to consolidation as
required by generally accepted accounting principles. Accordingly, KMS' 1995
and 1994 financial statements have been restated to reflect the consolidation
of the assets, liabilities, revenue and expenses of the investees. The change
in the method of accounting for these investees had no effect on stockholder's
equity, income before extraordinary item or net income.
In fiscal 1996, the Company contributed subscription notes payable to certain
investee partnerships. The aggregate notes contributed to K/B Opportunity Fund
III, L.P., K/B Fund II and K/B Fund III totaled $500,000, $1,600,000 and
$1,500,000, respectively, of which $500,000, $1,100,000 and $1,000,000,
respectively, consist of nonrecourse notes that are netted with the investment
balances. The remaining two notes, $500,000 each to K/B Fund II and K/B Fund
III, are recourse and are included in other long-term obligations at March 31,
1996. The notes accrue interest at the long-term applicable federal rate
circulated by the Internal Revenue Service (6.07% at March 31, 1996). The notes
mature upon the earlier of December 31, 2005 or the termination of the
respective investee partnerships. Principal and interest payments are to be
made as distributions are received from the investee partnerships.
As of March 31, 1996, certain subsidiaries are obligated to contribute
additional nonrecourse capital notes to the investee partnerships in an
aggregate amount of approximately $400,000.
As a general partner, the Company and its subsidiaries may be liable for the
obligations of such partnerships, including any environmental liabilities that
may arise. All of the general partnership interests, except for one (which was
dissolved in 1996), are held by subsidiaries of KMS, and management believes
that the Company's exposure to liabilities is limited to the total invested
capital in and advances to the subsidiaries holding the general partnership
interests. Management does not believe that any significant contingent
liabilities exist with respect to its general partnership interests.
Condensed unaudited financial information for the entities accounted for
using the equity method, excluding those entities whose business is to invest
in real estate, is as follows (in thousands):
Condensed Statement of Operations Information for the years ended March
31:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net revenue.......................................... $9,469 $3,038 $2,495
Income from operations............................... 1,671 23 962
Net income........................................... 1,616 23 962
</TABLE>
Condensed Balance Sheet Information at March 31:
<TABLE>
<CAPTION>
1996 1995
------ ----
<S> <C> <C>
Current assets................................................ $5,551 $745
Noncurrent assets............................................. 132 100
Current liabilities........................................... 3,818 846
Noncurrent liabilities........................................ 31 --
</TABLE>
F-21
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Condensed unaudited financial information for the entities accounted for
using the equity method with investments in real estate is as follows for the
years ending December 31 (in thousands):
Condensed Statement of Operations Information for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Net revenue..................................... $59,534 $30,323 $ 29,827
Income (loss) from operations................... (498) 463 (15,966)
Net income (loss)............................... (498) 463 (15,966)
</TABLE>
Condensed Balance Sheet Information December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current assets.......................................... $ 23,519 $ 23,759
Noncurrent assets....................................... 237,301 291,132
Current liabilities..................................... 16,930 32,252
Noncurrent liabilities.................................. 303,029 324,427
</TABLE>
The above tables do not include amounts related to K/B Fund II, K/B Fund III,
K/B Opportunity Fund I, K/B Opportunity Fund II or K/B Opportunity Fund III
(the "Funds"), of which the Company has no current profit participation. The
aggregate assets of the Funds, consisting primarily of investments in real
property and mortgage notes receivable, totaled $675,000,000 at December 31,
1995.
At March 31, 1996, consolidated retained earnings includes $541,000 in
undistributed earnings from investees that are accounted for using the equity
method.
5. NOTES PAYABLE TO BANKS
As of March 31, 1996, the Company has a $48,675,000 line of credit
($50,000,000 at March 31, 1995) for acquisition ($29,675,000) and working
capital ($19,000,000) purposes which expires on December 31, 1999. At March 31,
1996, borrowings under the line of credit are secured by the common stock of
KMS and its subsidiaries, and the maintenance of certain financial ratios is
required. A commitment fee ranging from .25% to .375% per annum of the line
amount, depending upon KMS' leverage ratio, is required. Borrowings bear
interest at either (i) prime plus a margin, ranging from 0% to 0.75% or (ii)
adjusted Eurodollar rate plus a margin, ranging from 0.625% to 1.75%. The
margins adjust depending upon KMS' leverage ratio, as specified in the credit
agreement. At March 31, 1996, the interest rates ranged from 7% to 9% and
$42,025,000 was outstanding under the credit line, consisting of $24,925,000 on
the acquisition line and $17,100,000 on the working capital revolver. In
addition, $4,750,000 has been set aside on the acquisition line as collateral
for a $4,750,000 letter of credit related to an acquisition that closed in
fiscal 1995 and will be drawn as payments are due on the underlying note.
Accordingly, at March 31, 1996, the Company has no additional availability
under the acquisition line and $1,900,000 of availability on the working
capital revolver.
Management believes the Company is in compliance with all covenants under the
credit agreement. The covenants restrict KMS from distributing funds to Koll,
except to enable Koll to pay certain administrative expenses and to repurchase,
pursuant to the terms of certain subscription agreements, Company common stock
from management (Note 7).
Koll-Dove has a revolving line of credit which is secured by Koll-Dove's
proceeds on auctions and bears interest at prime plus 2% (10.25% at March 31,
1996). All outstanding principal plus accrued and unpaid interest
F-22
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
are due on demand or, if no demand is made, on April 15, 1997. At March 31,
1996, Koll-Dove has $314,000 outstanding under the line with $286,000 available
to draw.
Future maturities of notes payable to banks at March 31, 1996 are as follows
(in thousands):
<TABLE>
<S> <C>
1997.............................................................. $ 4,675
1998.............................................................. 10,314
1999.............................................................. 10,250
2000.............................................................. 17,100
-------
Total............................................................. $42,339
=======
</TABLE>
6. ACQUISITION OBLIGATIONS
Acquisition obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
BALANCE
MARCH 31,
-----------------
RANGE OF
INTEREST
RATES MATURITY
1996 DATES 1996 1995
------------ --------- ------- --------
<S> <C> <C> <C> <C>
Obligations assumed................ 8.0% to 8.25% 1997-1998 $ 453 $ 3,647
Amounts due under covenants not to
compete........................... -- -- -- 1,405
Notes payable to sellers........... 9% 1997-2000 4,750 10,092
Other amounts due sellers.......... -- 1997 525 890
------- --------
5,728 16,034
Less current portion............... (2,154) (11,661)
------- --------
$ 3,574 $ 4,373
======= ========
</TABLE>
Future maturities of acquisition obligations at March 31, 1996 are as follows
(in thousands):
<TABLE>
<S> <C>
1997............................................................... $2,154
1998............................................................... 1,196
1999............................................................... 1,191
2000............................................................... 1,187
------
Total.............................................................. $5,728
======
</TABLE>
7. STOCK SUBSCRIPTION NOTES
Stock subscription notes represent notes receivable from certain members of
the Company's management for their purchases of the Company's stock. Koll had
$1,150,000 in subscription notes receivable from such members of management at
March 31, 1996 related to 257,000 shares of common stock. These notes bear
interest, which is payable quarterly, at the prime rate of interest (8.25% at
March 31, 1996). These notes are secured by the purchased shares and are due
four to five years from date of issue. The Company has the right to repurchase
from any member of management, upon termination of employment with the Company,
all of such management member's shares.
F-23
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. OPERATING LEASES
The Company has commitments under month-to-month and noncancelable operating
leases for office facilities and office equipment. Total rent expense under
office and equipment leases was $6,004,000 for the year ended March 31, 1996,
$1,745,000 for the four months ended March 31, 1995, $3,319,000 for the eight
months ended November 30, 1994 and $3,402,000 for the year ended March 31,
1994.
Minimum future rentals under noncancelable operating lease commitments in
effect at March 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
NON-
AFFILIATE AFFILIATE TOTAL
--------- --------- -------
<S> <C> <C> <C>
1997............................................. $1,184 $ 2,582 $ 3,766
1998............................................. 1,029 2,195 3,224
1999............................................. 919 1,589 2,508
2000............................................. 929 1,017 1,946
2001............................................. 540 686 1,226
Thereafter....................................... 319 2,262 2,581
------ ------- -------
Total.......................................... $4,920 $10,331 $15,251
====== ======= =======
</TABLE>
9. INCOME TAXES
Significant components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
KOLL MANAGEMENT
KOLL REAL ESTATE SERVICES SERVICES, INC.
-------------------------- -----------------------
EIGHT MONTHS
YEAR ENDED FOUR MONTHS ENDED YEAR ENDED
MARCH 31, ENDED MARCH 31, NOVEMBER 30, MARCH 31,
1996 1995 1994 1994
---------- --------------- ------------ ----------
<S> <C> <C> <C> <C>
Current:
Federal................. $2,410 $483 $333 $1,789
State................... 671 162 111 461
------ ---- ---- ------
3,081 645 444 2,250
Deferred:
Federal................. (114) (41) (29) (205)
State................... (12) (19) (12) (15)
------ ---- ---- ------
(126) (60) (41) (220)
------ ---- ---- ------
$2,955 $585 $403 $2,030
====== ==== ==== ======
</TABLE>
F-24
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The differences between federal income taxes computed at the statutory rate
and the total provision for income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
KOLL REAL ESTATE KOLL MANAGEMENT
SERVICES SERVICES, INC.
---------------------- -----------------------
FOUR MONTHS EIGHT MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
MARCH 31, MARCH 31, NOVEMBER 30, MARCH 31,
1996 1995 1994 1994
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Federal income taxes at
statutory rate............. $1,751 $341 $229 $1,706
State income taxes, net of
federal tax benefit........ 428 93 64 294
Non-deductible amortization
of goodwill................ 475 71 -- --
Valuation allowance for
foreign losses............. 105 -- -- --
Permanent differences....... 196 80 110 30
------ ---- ---- ------
$2,955 $585 $403 $2,030
====== ==== ==== ======
</TABLE>
Deferred income taxes reflect the tax effects of temporary differences
between the value of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
--------------
1996 1995
------ ------
<S> <C> <C>
Deferred tax assets:
Accrued vacation.......................................... $ 762 $ 485
Merger costs.............................................. 338 338
Insurance liability accrual............................... 645 220
Reserves.................................................. 359 500
Other accruals............................................ 544 11
Capital loss carryforwards................................ 60 --
Foreign loss carryforward................................. 105 --
Valuation allowance for deferred tax assets............... (105) --
------ ------
Total deferred tax assets............................... 2,708 1,554
Deferred tax liabilities:
Investments in partnerships and subsidiaries.............. 1,302 638
Management contracts basis................................ 1,559 1,409
Other..................................................... 387 395
------ ------
Total deferred tax liabilities.......................... 3,248 2,442
------ ------
Net deferred tax liability.................................. $ (540) $ (888)
====== ======
</TABLE>
Income before income taxes and extraordinary item from domestic and foreign
operations is as follows (in thousands):
<TABLE>
<CAPTION>
KOLL MANAGEMENT
KOLL REAL ESTATE SERVICES SERVICES, INC.
-------------------------- -----------------------
EIGHT MONTHS
YEAR ENDED FOUR MONTHS ENDED YEAR ENDED
MARCH 31, ENDED MARCH 31, NOVEMBER 30, MARCH 31,
1996 1995 1994 1994
---------- --------------- ------------ ----------
<S> <C> <C> <C> <C>
United States............. $6,349 $1,002 $1,445 $5,026
Foreign................... (1,347) (29) 25 (9)
------ ------ ------ ------
$5,002 $ 973 $1,470 $5,017
====== ====== ====== ======
</TABLE>
F-25
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMON STOCK AND STOCK AWARD PLANS
On , 1996, the Board of Directors authorized a for stock split
to be distributed on or about , 1996, to shareholders of record on
, 1996. In addition, authorized common shares was increased from 6,000,000 to
35,000,000. All references in the financial statements to number of shares and
per share amounts of the Company's common stock have been retroactively
restated to reflect the increased number of common shares outstanding.
During fiscal 1995, the Company adopted the Koll Real Estate Services 1994
Nonqualified Performance Stock Option Plan, as amended (the "Performance
Option Plan"), under which officers, certain directors, key employees and
consultants of the Company and its subsidiaries are eligible to be granted
options to purchase common stock of the Company. Through March 31, 1996 the
Company's Board of Directors had set aside 515,000 shares of common stock to
be issued pursuant to the Performance Option Plan, which is being administered
by a committee established by the Company's Board of Directors. The vesting of
options under the plan may be based on the Company's attainment of performance
criteria specified at the time options are granted and may also be based on
the passage of time. The percentage of the options granted through March 31,
1996 that will vest, if any, was to be determined based on adjusted cumulative
earnings, as defined, during the five fiscal years ended March 31, 1999. At
March 31, 1996, no compensation expense was accrued related to outstanding
options under the Performance Option Plan since achievement of the minimum
specified performance criteria was not yet deemed probable.
The following table summarizes activity under the Performance Option Plan
through March 31, 1996:
<TABLE>
<CAPTION>
OPTION PRICE NUMBER OF AVAILABLE FOR
PER SHARE OPTIONS FUTURE GRANT
------------- --------- -------------
<S> <C> <C> <C>
Outstanding at December 1, 1994........... -- -- --
Granted................................... $10.00 390,000 125,000
Exercised................................. -- -- --
Canceled.................................. -- -- --
------- -------
Outstanding at March 31, 1995............. $10.00 390,000 125,000
Granted................................... $10.00-$12.00 91,000 (91,000)
Exercised................................. -- -- --
Canceled.................................. $10.00 (7,500) 7,500
------- -------
Outstanding at March 31, 1996............. $10.00-$12.00 473,500 41,500
======= =======
</TABLE>
On April 1, 1996, the Company's Board of Directors increased the number of
shares set aside under the Performance Option Plan to 590,000 shares of common
stock and granted an option to a director to purchase 75,000 shares of common
stock at $14 per share. In addition, effective April 1, 1996, the Company
modified the option agreements for all outstanding options to include a five
year fixed vesting period commencing April 1, 1996, with accelerated vesting
based on the achievement of earnings goals for the three years ending March
31, 1999. This modification results in a new measurement date under generally
accepted accounting principles. Accordingly, non-cash compensation expense of
$1,824,000 will be recognized over the vesting period.
In May 1991, the Predecessor Company's Board of Directors adopted the Koll
Management Services, Inc. 1991 Stock Award Plan (the "Stock Award Plan"). The
Predecessor Company set aside 330,000 shares of its common stock to be issued
pursuant to the Stock Award Plan. The Stock Award Plan was administered by the
Compensation Committee appointed by the Predecessor Company's Board of
Directors and provided for the grant of nonqualified and incentive stock
options, restricted stock awards and stock appreciation rights. The grant
prices and exercise period of options were determined by the Compensation
Committee. Options typically expired after 10 years.
F-26
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes activity under the Predecessor Company's Stock
Award Plan:
<TABLE>
<CAPTION>
OPTION PRICE NUMBER OF AVAILABLE FOR
PER SHARE OPTIONS FUTURE GRANT
------------- --------- -------------
<S> <C> <C> <C>
Outstanding at March 31, 1993............. $10.00-$12.50 248,720 81,280
Granted................................... $9.75-$13.25 24,000 (24,000)
Exercised................................. -- -- --
Canceled.................................. $9.75-$13.25 (20,350) 20,350
------- -------
Outstanding at March 31, 1994............. $10.00-$13.25 252,370 77,630
Granted................................... -- -- --
Exercised................................. $12.50 (2,940) (2,940)
Canceled.................................. $10.00-$11.50 (9,610) 9,610
------- -------
Outstanding at November 30, 1994.......... $10.00-$13.25 239,820 84,300
======= =======
</TABLE>
In connection with the Merger, the Predecessor Company paid $1,208,000, which
has been charged to expense in the eight-month period ended November 30, 1994,
to cancel all vested stock options.
11. RELATED PARTY TRANSACTIONS
The Company and KMS have provided services to affiliates of the Company. Such
services include property and asset management, information, personnel, human
resource and various other services. Total revenue earned for providing such
services to affiliates was $15,238,000, $4,029,000, $5,971,000 and $11,213,000
for the year ended March 31, 1996, the four months ended March 31, 1995, the
eight months ended November 30, 1994 and the year ended March 31, 1994,
respectively.
Under a management agreement with TKC, the Company and KMS were provided
executive management services by certain key personnel primarily employed by
TKC. KMS compensates TKC for those services based on an annual estimate of the
time spent by such personnel on business of the Company and its subsidiaries.
During the year ended March 31, 1996, the four months ended March 31, 1995, the
eight months ended November 30, 1994 and the year ended March 31, 1994, TKC
billed $281,000, $87,000, $189,000 and $345,000, respectively, for such
executive management services. On April 1, 1996, this agreement terminated and
certain TKC executives became employees of KMS.
The Company and KMS also began paying costs of the health insurance benefits
for TKC and its affiliates effective July 1, 1993 and bills TKC and each
affiliate monthly in amounts approximating their pro-rata portion (based on
employee head count) of the premium obligations. The total billings for such
health insurance benefits for the year ended March 31, 1996, the four months
ended March 31, 1995, the eight months ended November 30, 1994 and the year
ended March 31, 1994 were $1,721,000, $426,000, $736,000 and $929,000,
respectively. These billings are netted in cost of fee based services and
administrative expenses in the accompanying consolidated statements of income.
The Company and KMS paid consulting fees totaling $350,000, $117,000,
$233,000 and $275,000 during the year ended March 31, 1996, the four months
ended March 31, 1995, the eight months ended November 30, 1994 and the year
ended March 31, 1994, respectively, to an investment advisor who was a director
of KMS and is an officer of one of its wholly-owned subsidiaries. This
individual is also a partner in four of the Company's consolidated investee
partnerships and received distributions from such partnerships totaling
$900,000 for the year ended March 31, 1996, $235,000 for the four months ended
March 31, 1995, $65,000 for the eight months ended November 30, 1994 and
$100,000 for the year ended March 31, 1994.
F-27
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of March 31, 1996 and 1995, KMS had loaned an aggregate of approximately
$640,000 and $550,000, respectively, to a customer partnership which includes
as partners TKC and certain current and former officers and employees of either
TKC or KMS.
Three officers of KMS participate in the earnings of K/B Investors I and K/B
Opportunity Investors, both of which are 50.1% owned and consolidated
partnerships. The officers' aggregate participation interests are 12.4% and
13%, respectively. The amounts accrued for such payments at March 31, 1996 and
1995 was $98,000 and $201,000, respectively. The aggregate amounts paid under
the participation agreement was $592,000 during the year ended March 31, 1996
and $62,000 during the eight months ended November 30, 1994. No amounts were
paid during the four months ended March 31, 1995 or the year ended March 31,
1994.
Payments by KMS to TKC for state income taxes totaled $220,000 and $242,000
during the eight months ended November 30, 1994, and the year ended March 31,
1994, respectively. No payments were made to TKC for income taxes for the year
ended March 31, 1996 or the four months ended March 31, 1995.
12. EMPLOYEE BENEFIT PLANS
The Company's employees may participate, subject to eligibility, in TKC's
401(k) Plus Employee Savings Plan (the "401(k) Plan"). Employees are eligible
to participate in the 401(k) Plan after 60 days of service and, at the
Company's discretion, a portion of employee contributions may be matched by the
Company at a rate up to 50%. No matching contributions were made by the Company
or KMS during any of the periods presented.
13. COMMITMENTS AND CONTINGENCIES
The Company is the guarantor of TKC's obligations under an operating lease
for the Company's headquarters that requires minimum monthly payments of
approximately $111,000 through August 31, 2007. The Company, as the primary
occupant of the building, currently pays monthly rent to TKC of approximately
$75,000.
The Company is a defendant in various lawsuits and, based upon the advice of
legal counsel, management believes that the outcome of such actions will not
have a material effect on the Company's consolidated financial position,
results of operations or liquidity.
14. INDUSTRY SEGMENTS
The Company operates primarily in two business segments: (1) Property and
Corporate Services, and (2) Investment Management. The Property and Corporate
Services segment provides services including property management, leasing and
marketing, general contracting and construction management, capital asset
disposition and acquisition and other real estate management services. The
Investment Management segment provides investment management services,
including property acquisition, disposition, financing and valuation consulting
and general partner management services for real estate limited partnerships
throughout the United States.
F-28
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes selected financial data by business segment
for the periods indicated (in thousands):
<TABLE>
<CAPTION>
KOLL REAL ESTATE KOLL MANAGEMENT
SERVICES SERVICES, INC.
---------------------- ----------------------
YEAR FOUR MONTHS EIGHT MONTHS YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, NOVEMBER 30, MARCH 31,
1996 1995 1994 1994
--------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Identifiable assets, end of
period
Property and corporate
services..................... $ 69,750 $48,753 $33,213 $21,798
Investment management......... 23,167 16,109 11,071 7,894
Investments and advances...... 4,996 3,039 648 130
Corporate..................... 28,294 28,795 15,559 3,036
-------- ------- ------- -------
$126,207 $96,696 $60,491 $32,858
======== ======= ======= =======
Revenue
Property and corporate
services--Nonaffiliates...... $ 89,940 $23,238 $38,857 $44,104
--Affiliates.......... 5,685 1,585 1,550 8,121
Investment management
--Nonaffiliates....... 11,925 4,782 6,131 3,875
--Affiliates.......... 8,760 1,890 3,725 2,396
Corporate
--Nonaffiliates....... 2,597 441 607 479
--Affiliates.......... 793 554 696 696
-------- ------- ------- -------
$119,700 $32,490 $51,566 $59,671
======== ======= ======= =======
Operating profit
Property and corporate
services..................... $ 7,499 $ 364 $ 3,438 $ 5,642
Investment management......... 6,672 3,085 2,359 2,075
-------- ------- ------- -------
14,171 3,449 5,797 7,717
Minority interest in (income)
loss of consolidated entities.. (679) (447) (647) (902)
Equity in income (loss) of
unconsolidated entities........ 912 (111) (45) 340
Corporate expenses.............. (5,511) (1,325) (3,283) (2,012)
Interest expense................ (3,891) (592) (352) (126)
-------- ------- ------- -------
Income before income taxes and
extraordinary item............. $ 5,002 $ 973 $ 1,470 $ 5,017
======== ======= ======= =======
Depreciation and amortization...
Property and corporate
services..................... $ 3,489 $ 472 $ 868 $ 959
Investment management......... 2,161 463 571 212
Corporate..................... 3,170 940 788 545
-------- ------- ------- -------
$ 8,820 $ 1,875 $ 2,227 $ 1,716
======== ======= ======= =======
Capital expenditures
Property and corporate
services..................... $ 859 $ 550 $ 548 $ 672
Investment management......... 209 141 141 172
Corporate..................... 1,122 718 719 879
-------- ------- ------- -------
$ 2,190 $ 1,409 $ 1,408 $ 1,723
======== ======= ======= =======
</TABLE>
Identifiable assets by industry segment are those assets used in the Company
and subsidiaries' operations in each industry segment. Corporate assets are
principally made up of deferred taxes, general prepaids, capitalized
acquisition costs and deferred financing costs.
F-29
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has a 30% interest in Koll Telecommunication Services, L.L.C.
("KTS"), whose operations are in the United States and Canada and are
vertically integrated with the Company's Property and Corporate Services
segment. The Company's equity in KTS' net income (loss) totaled $643,000,
($140,000) and ($48,000) during the year ended March 31, 1996, the four months
ended March 31, 1995 and the eight months ended November 30, 1994. The
Company's investment in KTS' net assets totaled $1,298,000, $112,000 and
$102,000 as of March 31, 1996 and 1995 and November 30, 1994, respectively.
The Company has 40% interests in Insignia CCP III Acquisition, L.L.C. and
Insignia CCP IV Acquisition L.L.C. Each of these L.L.C.'s hold limited
partnership interests in limited partnerships that own real estate throughout
the United States. These operations are not vertically integrated into any of
the Company's reported segments.
The Company and KMS have provided services to customers in diversified
industries, and no single customer represented more than 10% of total revenue
in any period presented in the accompanying consolidated financial statements.
The percentage of the Company and its subsidiaries' total revenue to customers
in the insurance industry was approximately 22% in 1996.
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Credit losses have been
within management's expectations and within amounts provided through the
allowance for doubtful accounts. At March 31, 1996, accounts receivable from
customers in the insurance industry were $3,800,000.
15. QUARTERLY RESULTS OF OPERATIONS
The following is a summary of the quarterly results of operations (unaudited)
for the periods presented in the years ended March 31, 1996 and 1995 (in
thousands):
<TABLE>
<CAPTION>
KOLL REAL ESTATE SERVICES
---------------------------------------------
THREE MONTHS ENDED
---------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
1996 1995 1995 1995
--------- ------------ ------------- --------
<S> <C> <C> <C> <C>
1996
Revenue........................... $29,610 $31,640 $30,884 $27,566
Net income........................ 396 715 832 104
Earnings per share................ $ $ $ $
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
KOLL MANAGEMENT
KOLL REAL ESTATE SERVICES SERVICES, INC.
------------------------- -----------------------------------
THREE MONTHS ONE MONTH TWO MONTHS THREE MONTHS ENDED
ENDED ENDED ENDED ----------------------
MARCH 31, DECEMBER 31, NOVEMBER 30, SEPTEMBER 30, JUNE 30,
1995 1994 1994 1994 1994
------------ ------------ ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
1995
Revenue................. $23,796 $8,696 $12,912 $20,061 $18,593
Net income (loss)....... (190) 578 (758) 502 506
Earnings (loss) per
share.................. $ $
======= ======
</TABLE>
F-30
<PAGE>
KOLL REAL ESTATE SERVICES AND KOLL MANAGEMENT SERVICES, INC. (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. SUBSEQUENT EVENT
On August 14, 1996, the Company's $48,675,000 line of credit payable to a
bank was amended such that the total commitment was increased to $63,675,000
($35,675,000 for acquisitions and $28,000,000 for working capital). In
addition, the fees and interest rate margins, which are more fully discussed in
Note 5, were adjusted to the following ranges:
<TABLE>
<S> <C>
Commitment Fee........................................... .25% to .50%
Letter of Credit Fee..................................... .625% to 2.25%
Margin Over Prime........................................ 0% to 1.25%
Margin Over Eurodollar................................... .625% to 2.25%
</TABLE>
F-31
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Koll Real Estate Services
We have audited the statement of operations of the Business Acquired from
Karsten Realty Advisors (the "Acquired Karsten Business") for the year ended
December 31, 1993. This financial statement is the responsibility of the
Acquired Karsten Business' management. Our responsibility is to express an
opinion on the financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the results of operations of the Acquired Karsten
Business for the year ended December 31, 1993 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Newport Beach, California
August 7, 1996
F-32
<PAGE>
BUSINESS ACQUIRED FROM
KARSTEN REALTY ADVISORS
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUE
Fee-based services................................................... $5,652
EXPENSES
Fee-based services................................................... 4,166
Administrative....................................................... 1,347
Depreciation and amortization........................................ 211
------
Total expenses....................................................... 5,724
------
Net loss............................................................... $ (72)
======
</TABLE>
See accompanying notes.
F-33
<PAGE>
BUSINESS ACQUIRED FROM
KARSTEN REALTY ADVISORS
NOTES TO STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Karsten Realy Advisors, Inc. ("Karsten"), an investment advisor registered
under the Investment Advisors Act of 1940, provided real estate management,
leasing and advisory services to various employee benefit plans,
municipalities, financial institutions and corporations throughout the United
States. The accompanying statment of operations includes only revenue and
expenses arising from the operations of Karsten related to the real estate
management leasing and advisory services business that was acquired by Koll
Management Services, Inc. in November 1994 (the "Acquired Karsten Business").
This statement is not intended to and does not reflect the results of Karsten
for the year presented.
The financial information included herein may not necessarily reflect the
results of operations of the Acquired Karsten Business in the future or what
the results of operations of the Acquired Karsten Business would have been had
it been a separate stand-alone company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses for the
period presented. Actual results could differ from those estimates.
REVENUE
Revenue consists primarily of management and advisory fees and leasing and
investment sales commissions. Management and advisory fees are recognized as
the services are rendered and transaction fees are recognized when earned,
generally upon the closing of the related transaction.
DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is computed principally using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the term of the lease or the estimated useful
lives of the improvements, whichever is shorter.
INCOME TAXES
Income tax expense for the Acquired Karsten Business was determined using
the deferred method. Using this method, deferred tax expense is based on items
of income and expense that are reported in different years in the financial
statements and tax returns and are measured at the rate in effect in the year
the difference originated. There is no income tax benefit for the 1993 net
loss due to recurring operating losses.
3. OPERATING LEASES
Karsten's headquarters were leased under a lease agreement which covered the
ten-year period from March 1985 through February 1995. The lease provided for
abated rent during 1985 with certain scheduled rent increases in subsequent
years. Karsten also has separate leases in other locations for office space.
Occupancy
F-34
<PAGE>
BUSINESS ACQUIRED FROM
KARSTEN REALTY ADVISORS
NOTES TO STATEMENT OF OPERATIONS--(CONTINUED)
costs associated with these leases are accrued on a straight-line basis over
the term of the related leases. Future minimum commitments under noncancelable
operating leases as of December 31, 1993 were as follow:
<TABLE>
<S> <C>
1994................................................................ $146,000
1995................................................................ 135,000
1996................................................................ 54,000
--------
$335,000
========
</TABLE>
Rent expense for the year ended December 31, 1993 totaled $485,000.
4. SIGNIFICANT CUSTOMER INFORMATION
Three significant customers accounted for $2,955,000 (52%) of revenue during
the year ended December 31, 1993. No other single customer accounted for more
than 10% of revenue in 1993.
F-35
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Koll Real Estate Services
We have audited the statement of operations of the Business Acquired from
Midstates Management Company, Inc. (the "Acquired Midstates Business") for the
year ended September 30, 1994. This financial statement is the responsibility
of Acquired Midstates Business' management. Our responsibility is to express
an opinion on the financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the results of operations of the Acquired Midstates
Business for the year ended September 30, 1994 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young llp
Newport Beach, California
July 27, 1996
F-36
<PAGE>
BUSINESS ACQUIRED FROM MIDSTATES MANAGEMENT COMPANY, INC.
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUE, including $61 from affiliates.................................. $2,474
COSTS AND EXPENSES
Fee-based services.................................................... 1,871
Administrative........................................................ 443
Depreciation.......................................................... 27
------
2,341
------
Net income.............................................................. $ 133
======
</TABLE>
See accompanying notes.
F-37
<PAGE>
BUSINESS ACQUIRED FROM MIDSTATES MANAGEMENT COMPANY, INC.
NOTES TO STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Midstates Management Company, Inc. ("Midstates") provided retail and
commercial property management, leasing and brokerage services in Illinois and
Indiana. The accompanying financial statement includes only the revenue and
expenses arising from the operations of Midstates related to the management,
leasing and brokerage business that was acquired by Koll Management Services,
Inc. in October 1994 (the "Acquired Midstates Business"). This statement is
not intended to and does not reflect the results of operations of Midstates
for the year presented.
The financial information included herein may not necessarily reflect the
results of operations of the Acquired Midstates Business in the future or what
the results of operations of the Acquired Midstates Business would have been
had it been a separate, stand-alone company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses for the
period presented. Actual results could differ from those estimates.
REVENUE
Revenue consists primarily of property management fees and leasing and
brokerage commissions. Management fees are generally recognized as the
services are rendered. Leasing and brokerage commissions are recognized when
earned, generally upon the closing of the related transaction.
DEPRECIATION
Depreciation is computed by using the straight-line method over estimated
useful lives of the assets which range from five to seven years.
INCOME TAXES
For federal and state purposes, Midstates elected under the Internal Revenue
Code to be taxed as an S corporation. In lieu of corporate income taxes, the
shareholders of an S corporation are taxed on their proportionate share of the
company's taxable income. Therefore, no provision or liability for federal
income taxes has been included in this financial statement.
3. SIGNIFICANT CUSTOMER INFORMATION
Five significant customers accounted for $1,927,000 (78%) of revenue during
the year ended September 30, 1994. No other single customer accounted for more
than 10% of revenue for the year.
F-38
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Koll Real Estate Services
We have audited the combined statements of operations of the Business
Acquired from CBS Investment Realty, Inc. and Affiliates (the "Acquired CBS
Business") for the years ended December 31, 1994 and 1993. These financial
statements are the responsibility of the Acquired CBS Business' management.
Our responsibility is to express an opinion on the financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations of the Acquired CBS
Business for the years ended December 31, 1994 and 1993 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Newport Beach, California
August 2, 1996
F-39
<PAGE>
BUSINESS ACQUIRED FROM
CBS INVESTMENT REALTY, INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
REVENUE
Fee-based services.......................................... $13,609 $12,125
Interest.................................................... 15 17
Other....................................................... 529 342
------- -------
14,153 12,484
COSTS AND EXPENSES
Fee-based services.......................................... 7,249 6,635
Administrative.............................................. 5,663 5,768
Interest.................................................... 37 19
Depreciation and amortization............................... 222 175
------- -------
13,171 12,597
------- -------
Net income (loss)............................................. $ 982 $ (113)
======= =======
</TABLE>
See accompanying notes.
F-40
<PAGE>
BUSINESS ACQUIRED FROM
CBS INVESTMENT REALTY, INC. AND AFFILIATES
NOTES TO COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1993
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
CBS Investment Realty, Inc. and Affiliates ("CBS," formerly CBS Property
Services, Inc.) includes the combined accounts of the following corporations
which were under common management and control of the stockholders of CBS
Investment Realty, Inc., an Arizona S corporation ("CBS-Arizona"):
1. CBS-Arizona and its majority-owned subsidiaries:
A. CBS Investment Realty, Inc., a Texas Corporation ("CBS-Texas"), owned
90% by CBS-Arizona and its stockholders and 10% by an unrelated
individual.
B. CBS Investment Realty of New Mexico, Inc., and Arizona S corporation
("CBS-New Mexico"), owned 95% by CBS-Arizona and its stockholders and
5% by unrelated individuals.
2. CBS Investment Realty of California, Inc., an Arizona S corporation
("CBS-California") which is wholly-owned by the stockholders of CBS-
Arizona.
CBS provided commercial and multifamily property management, leasing,
brokerage, construction management and design services in Arizona, New Mexico,
California and Texas.
The accompanying combined statements of operations include only the revenue
and expenses arising from the operations of CBS related to the business that
was acquired by Koll Management Services, Inc. effective January 1, 1995 (the
"Acquired CBS Business"). It is not intended to and does not reflect the
combined results of operations of CBS for the years presented.
All significant intercompany balances and transactions have been eliminated
in combination. The financial information included herein may not necessarily
reflect the results of the operations of the Acquired CBS Business in the
future or what the results of operations of the Acquired CBS Business would
have been had it been a separate, stand-alone company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses for the
periods presented. Actual results could differ from those estimates.
Revenue consists primarily of property and construction management fees and
leasing and brokerage commissions. Management and construction fees are
generally recognized as the services are rendered. Leasing and brokerage
commissions are recognized when earned, generally upon the closing of the
related transaction.
Depreciation
Depreciation is computed principally using the straight-line method over the
estimated useful lives of the assets (generally five years.) Leasehold
improvements are amortized over the term of the lease or the estimated useful
lives of the improvements, whichever is shorter.
F-41
<PAGE>
BUSINESS ACQUIRED FROM
CBS INVESTMENT REALTY, INC. AND AFFILIATES
NOTES TO COMBINED STATEMENTS OF OPERATIONS--(CONTINUED)
Income Taxes
For federal and state purposes, CBS Investment Realty and Affiliates have
elected under the Internal Revenue Code to be taxed as an S corporation. In
lieu of corporate income taxes, the shareholders of an S corporation are taxed
on their proportionate share of the company's taxable income. Therefore, no
provision or liability for federal income taxes has been included in these
financial statements.
3. COMMITMENTS AND CONTINGENCIES
The Acquired CBS Business rents office facilities in buildings that it
manages under several operating leases expiring through 1998. These leases
contain certain provisions which allow for rental reductions or terminations
of the lease contracts if the office facilities are no longer managed by the
Acquired CBS Business. The Acquired CBS Business also leases equipment under
operating leases that expire through March 1995. Aggregate future minimum
rentals under operating leases as of December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995............................................................ $ 391,000
1996............................................................ 349,000
1997............................................................ 319,000
1998............................................................ 86,000
----------
$1,145,000
==========
</TABLE>
Rent expense was $477,000 and $484,000 for the years ended December 31, 1994
and 1993, respectively.
4. EMPLOYEE BENEFIT PLAN
During the year ended December 31, 1992, the Acquired CBS Business
implemented a defined contribution 401(k) plan for all employees who are at
least 21 years of age, have completed one year of service and have worked at
least 1,000 hours in a plan year. Contributions to this plan are discretionary
and are determined annually by the Board of Directors and totaled $16,000 and
$24,000 for the years ended December 31, 1994 and 1993, respectively.
F-42
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Koll Real Estate Services
We have audited the combined statements of operations of the Business
Acquired from The Shelard Group, Inc. and Affiliate (the "Acquired Shelard
Business") for the years ended December 31, 1994 and 1993. These financial
statements are the responsibility of Acquired Shelard Business' management.
Our responsibility is to express an opinion on the financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations of the Acquired Shelard
Business for the years ended December 31, 1994 and 1993 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Newport Beach, California
August 5, 1996
F-43
<PAGE>
BUSINESS ACQUIRED FROM
THE SHELARD GROUP, INC. AND AFFILIATE
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30 DECEMBER 31
--------------- -------------
1995 1994 1994 1993
------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Fee-based services............................. $ 4,871 $ 4,407 $8,147 $6,184
Other revenue.................................. 186 110 119 88
------- ------- ------ ------
5,057 4,517 8,266 6,272
COSTS AND EXPENSES
Cost of fee-based services..................... 3,030 2,662 5,198 3,913
General and administrative..................... 731 637 1,431 1,196
Depreciation and amortization.................. 52 53 125 98
Interest....................................... 27 15 36 17
------- ------- ------ ------
3,840 3,367 6,790 5,224
------- ------- ------ ------
Net income....................................... $ 1,217 $ 1,150 $1,476 $1,048
======= ======= ====== ======
</TABLE>
See accompanying notes.
F-44
<PAGE>
BUSINESS ACQUIRED FROM
THE SHELARD GROUP, INC. AND AFFILIATE
NOTES TO COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1993
(INFORMATION FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 IS
UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The Shelard Group, Inc. and affiliate (collectively "Shelard") includes the
accounts of The Shelard Group, Inc. and one of its affiliates, SCI Services,
Inc. Shelard provided property management, commercial brokerage and
construction management services in Minnesota. The accompanying financial
statements include only the revenue and expenses arising from the operations
of Shelard related to the management, commercial brokerage and construction
management business that was acquired by Koll Management Services, Inc. in
July 1995 (the "Acquired Shelard Business"). These statements are not intended
to and do not reflect the results of operations of Shelard for the periods
presented. All significant intercompany transactions have been eliminated in
combination.
The financial information included herein may not necessarily reflect the
results of the operations of the Acquired Shelard Business in the future or
what the results of operations of the Acquired Shelard Business would have
been had it been a separate, stand-alone company.
INTERIM FINANCIAL INFORMATION
The accompanying unaudited combined financial statements for the six months
ended June 30, 1995 and 1994, have been prepared in accordance with generally
accepted accounting principles and the requirements of Regulation S-X for
interim financial information. Accordingly, they do not include all of the
information required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation, have been included. Operating results for the six months ended
June 30,1995 are not necessarily indicative of the results that would have
been achieved for the year ended December 31, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses for the
periods presented. Actual results could differ from those estimates.
REVENUE
Revenue consists primarily of property and construction management fees and
leasing and brokerage commissions. Management and construction fees are
generally recognized as the services are rendered. Leasing and brokerage
commissions are recognized when earned, generally upon the closing of the
related transaction.
DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment was computed principally using the
straight-line method over the estimated useful lives of the assets.
Amortization of leasehold improvements is completed using the straight-line
method over the lease term or estimated useful lives of the improvements,
whichever is shorter.
F-45
<PAGE>
BUSINESS ACQUIRED FROM
THE SHELARD GROUP, INC. AND AFFILIATE
NOTES TO COMBINED STATEMENTS OF OPERATIONS--(CONTINUED)
INCOME TAXES
For federal and state purposes, Shelard has elected under the Internal
Revenue Code to be taxed as an S corporation. In lieu of corporate income
taxes, the shareholders of an S corporation are taxed on their proportionate
share of the company's taxable income. Therefore, no provision or liability
for federal income taxes has been included in the financial statements.
3. RELATED PARTY TRANSACTIONS
Included in fee-based services revenue is revenue from affiliates totaling
$709,000 and $587,000 for the years ended December 31, 1994 and 1993,
respectively.
4. OPERATING LEASES
Shelard occupies office space under two operating leases with a related
party. One lease, commencing on July 15, 1994, provides for payments ranging
from $78,000 to $87,000 annually and expires on June 30, 1997; the other lease
provides for payments ranging from $156,000 to $178,000 annually and expires
December 31, 2000. Prior to the July 1994 lease, Shelard occupied office space
under an operating lease which expired in June 1994.
Future commitments under these operating leases at December 31, 1994 were as
follows:
<TABLE>
<S> <C>
1995........................................................... $ 324,000
1996........................................................... 382,000
1997........................................................... 343,000
1998........................................................... 310,000
1999........................................................... 311,000
Thereafter..................................................... 311,000
----------
$1,981,000
==========
</TABLE>
Rental expense was $253,000 and $251,000 for the years ended December 31,
1994 and 1993, respectively.
5. SALARY SAVINGS AND PROFIT SHARING PLAN
Shelard established a Salary Savings and Profit Sharing Plan in 1989 under
Section 401(k) of the Internal Revenue Code in which both the company and
eligible employees contribute. Shelard's contribution is 50% of employee
contributions based on the first 4% of employee salary deferral. Profit
sharing expense for the years ended December 31, 1994 and 1993 was $57,000 and
$42,000, respectively.
F-46
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Ross-Dove Company, Inc.:
We have audited the accompanying combined balance sheets of Ross-Dove
Company, Inc., Dovetech, Inc., Dovemedia, Ltd. and Dove Capital, Inc. (all
California corporations, collectively the "Company") as of March 13, 1995 and
December 31, 1994 and 1993, and the related combined statements of operations,
shareholders' equity (deficit) and cash flows for the period from January 1,
1995 to March 13, 1995 and the years ended December 31, 1994 and 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Ross-Dove
Company, Inc., Dovetech, Inc., Dovemedia, Ltd. and Dove Capital, Inc. as of
March 13, 1995 and December 31, 1994 and 1993, and the results of their
operations and their cash flows for the period from January 1, 1995 to March
13, 1995 and the years ended December 31, 1994 and 1993 in conformity with
generally accepted accounting principles.
As discussed more fully in Note 1 to the financial statements, on March 13,
1995, substantially all non-real estate assets and liabilities of the Company
were contributed to a newly-formed limited liability company in which the
Company's shareholders have an interest.
/s/ Arthur Andersen llp
San Jose, California
July 19, 1996
F-47
<PAGE>
ROSS-DOVE COMPANY, INC., DOVETECH, INC.,
DOVEMEDIA, LTD. AND DOVE CAPITAL, INC.
COMBINED BALANCE SHEETS
MARCH 13, 1995 AND DECEMBER 31, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................................. $ 1,343 $ 51 $ 169
Cash in trust..................................... 2,061 790 5,309
Accounts receivable, less allowance of $35, $35
and $25 in 1995, 1994 and 1993, respectively..... 417 1,366 976
Accounts receivable from shareholders............. 807 807 781
Prepaid expenses and other current assets......... 426 246 346
------- ------- -------
Total current assets............................ 5,054 3,260 7,581
------- ------- -------
PROPERTY AND EQUIPMENT, at cost:
Buildings and improvements........................ 6,531 6,532 3,169
Equipment and vehicles............................ 1,140 1,119 892
------- ------- -------
7,671 7,651 4,061
Less--Accumulated depreciation.................... (1,262) (1,184) (818)
------- ------- -------
6,409 6,467 3,243
------- ------- -------
Total assets.................................... $11,463 $ 9,727 $10,824
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Due to Koll-Dove Global Disposition Services LLC.. $ 2,000 $ -- $ --
Bank overdraft.................................... -- 141 920
Notes payable and lines of credit................. 2,914 2,978 500
Current portion of long-term debt................. 266 266 125
Accounts payable.................................. 1,966 2,534 974
Accrued liabilities............................... 1,098 835 598
Income taxes payable.............................. -- -- 27
Trust account liability........................... 2,039 654 3,575
------- ------- -------
Total current liabilities....................... 10,283 7,408 6,719
------- ------- -------
DEFERRED INTEREST................................... 123 123 130
------- ------- -------
LONG-TERM DEBT, net of current portion.............. 4,779 4,812 1,930
------- ------- -------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY (DEFICIT):
Ross-Dove Company, Inc. common stock, no par
value, Authorized--100,000 shares, Outstanding--
90,738 shares in 1995 and 1994 and 100,000 shares
in 1993.......................................... 59 59 65
Dovetech, Inc. common stock, no par value,
Authorized--100,000 shares, Outstanding--300
shares........................................... 30 30 30
Dovemedia, Ltd. common stock, no par value,
Authorized--100,000 shares, Outstanding--45,000
shares........................................... 45 45 45
Dove Capital, Inc. common stock, no par value,
Authorized--50,000 shares, Outstanding--50,000
shares........................................... 5 5 --
Retained earnings (deficit)....................... (3,861) (2,755) 1,905
------- ------- -------
(3,722) (2,616) 2,045
------- ------- -------
Total liabilities and shareholders' equity
(deficit)...................................... $11,463 $ 9,727 $10,824
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-48
<PAGE>
ROSS-DOVE COMPANY, INC., DOVETECH, INC.,
DOVEMEDIA, LTD. AND DOVE CAPITAL, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1995 TO MARCH 13, 1995
AND THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
GROSS PROCEEDS FROM AUCTIONS:
High-tech........................................ $ 8,287 $ 56,866 $ 46,150
Loans and real estate............................ 2,352 498,152 809,198
------- -------- --------
$10,639 $555,018 $855,348
======= ======== ========
REVENUES (Note 2):
Auctions of consigned merchandise................ $ 1,430 $ 14,849 $ 15,685
Auctions of purchased merchandise................ 127 1,359 257
Appraisal and other services..................... 255 981 640
------- -------- --------
Total revenues............................... 1,812 17,189 16,582
------- -------- --------
OPERATING EXPENSES:
Auction costs:
Consigned merchandise-related.................. 689 7,586 6,857
Purchased merchandise-related.................. 80 1,263 198
Shareholders' compensation....................... 83 664 460
General and administrative expenses.............. 1,937 10,276 7,793
------- -------- --------
Total operating expenses..................... 2,789 19,789 15,308
------- -------- --------
Income (loss) from operations before unusual
item........................................ (977) (2,600) 1,274
UNUSUAL ITEM--loss on IBM product auction.......... -- (1,240) --
------- -------- --------
Income (loss) from operations................ (977) (3,840) 1,274
------- -------- --------
OTHER EXPENSES:
Interest expense, net............................ 129 404 200
Other (income) expense........................... -- (11) --
------- -------- --------
Total other expenses......................... 129 393 200
------- -------- --------
Income (loss) before provision or state income
taxes........................................... (1,106) (4,233) 1,074
PROVISION FOR STATE INCOME TAXES................... -- -- 27
------- -------- --------
NET INCOME (LOSS).................................. $(1,106) $ (4,233) $ 1,047
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-49
<PAGE>
ROSS-DOVE COMPANY, INC., DOVETECH, INC.,
DOVEMEDIA, LTD. AND DOVE CAPITAL, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM JANUARY 1, 1995 TO MARCH 13, 1995
AND THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------------------------
ROSS-DOVE DOVETECH, DOVEMEDIA, DOVE CAPITAL,
COMPANY, INC. INC. LTD. INC. RETAINED
--------------- ------------- ------------- ------------- EARNINGS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT (DEFICIT) TOTAL
------- ------ ------ ------ ------ ------ ------ ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1992................... 100,000 $65 300 $30 45,000 $45 -- $ -- $ 858 $ 998
Income for the year.... -- -- -- -- -- -- -- -- 1,047 1,047
------- --- --- --- ------ --- ------ ----- ------- -------
BALANCE, DECEMBER 31,
1993................... 100,000 65 300 30 45,000 45 -- -- 1,905 2,045
Issuance of common
stock at $.10 per
share................. -- -- -- -- -- -- 50,000 5 -- 5
Repurchase of common
stock................. (9,262) (6) -- -- -- -- -- -- (427) (433)
Loss for the year...... -- -- -- -- -- -- -- -- (4,233) (4,233)
------- --- --- --- ------ --- ------ ----- ------- -------
BALANCE, DECEMBER 31,
1994................... 90,738 59 300 30 45,000 45 50,000 5 (2,755) (2,616)
Loss for the period.... -- -- -- -- -- -- -- -- (1,106) (1,106)
------- --- --- --- ------ --- ------ ----- ------- -------
BALANCE, MARCH 13,
1995................... 90,738 $59 300 $30 45,000 $45 50,000 $ 5 $(3,861) $(3,722)
======= === === === ====== === ====== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-50
<PAGE>
ROSS-DOVE COMPANY, INC., DOVETECH, INC.,
DOVEMEDIA, LTD. AND DOVE CAPITAL, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1995 TO MARCH 13, 1995
AND THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................. $(1,106) $(4,233) $ 1,047
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation expense............................... 78 336 246
Gain on exchange of property, plant and
equipment......................................... -- (12) --
Changes in assets and liabilities:
(Increase) decrease in cash in trust.............. (1,271) 4,519 (4,370)
Decrease (increase) in accounts receivable........ 949 (390) 1,027
(Increase) decrease in prepaid expenses and other
current assets................................... (180) 100 (167)
Increase (decrease) in trust account liability.... 1,385 (2,921) 2,783
(Decrease) increase in accounts payable........... (568) 1,560 (663)
Increase in accrued liabilities................... 263 237 379
Decrease in income taxes payable.................. -- (27) (146)
Decrease in deferred interest..................... -- (7) (7)
------- ------- -------
Net cash provided by (used for) operating
activities...................................... (450) (838) 129
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................ (20) (3,599) (204)
------- ------- -------
Net cash used for investing activities........... (20) (3,599) (204)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash repaid under lines of credit.............. (64) (500) (350)
Repayments of notes payable and long-term debt..... (33) (6,732) (123)
Proceeds from borrowings of notes and long-term
debt.............................................. -- 12,414 --
Loans to shareholders, net of repayments........... -- (89) (447)
Proceeds from issuance of common stock............. -- 5 --
Investment by Koll Management Services, Inc........ 2,000 -- --
------- ------- -------
Net cash provided by (used for) financing
activities...................................... 1,903 5,098 (920)
------- ------- -------
NET INCREASE (DECREASE) IN CASH..................... 1,433 661 (995)
CASH, beginning of year............................. (90) (751) 244
------- ------- -------
CASH, end of year................................... $ 1,343 $ (90) $ (751)
======= ======= =======
CASH................................................ $ 1,343 $ 51 $ 169
BANK OVERDRAFT...................................... -- (141) (920)
------- ------- -------
$ 1,343 $ (90) $ (751)
======= ======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Fair value of equipment exchange................... $ -- $ 20 $ --
Offset of shareholder loan on stock repurchase..... -- 107 --
Note issued for stock repurchase................... -- 326 --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................. $ 181 $ 414 $ 253
Cash paid for income taxes......................... -- 2 161
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-51
<PAGE>
ROSS-DOVE COMPANY, INC., DOVETECH, INC.,
DOVEMEDIA, LTD. AND DOVE CAPITAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
MARCH 13, 1995
1. BASIS OF PRESENTATION, ORGANIZATION AND BUSINESS:
BACKGROUND
The accompanying financial statements combine the accounts of Ross-Dove
Company, Inc. (Ross-Dove), Dovetech, Inc. ("Dovetech"), Dovemedia, Ltd.
("Dovemedia") and Dove Capital, Inc. ("Dovecapital") (collectively the
"Company") for all periods presented. All significant intercompany
transactions between Ross-Dove, Dovetech, Dovemedia and Dovecapital have been
eliminated.
All references to the period ended March 13, 1995 refer to the period from
January 1, 1995 to March 13, 1995. The results for this period are not
necessarily indicative of a full-year's results.
Ross-Dove was incorporated on January 25, 1985. Its principal line of
business is conducting auctions. Subsequent to March 13, 1995, Ross-Dove
changed its name to The Dove Holdings Corporation (Dove Holdings).
Dovetech was incorporated on February 6, 1992. On November 24, 1992, all of
the assets, liabilities and obligations of the appraisal business of Ross-Dove
totaling net assets of $30,000 were transferred to Dovetech in exchange for
the issuance of 300 shares of common stock. On November 25, 1992, Dove
Holdings distributed as a dividend all of these shares of Dovetech common
stock on a pro rata basis to the shareholders of Ross-Dove common stock. Its
principal line of business is the provision of asset appraisal services.
Dovemedia was also incorporated on February 6, 1992 and is owned by the same
shareholders as the entities referred to above. Its principal line of business
is providing advertising services to Ross-Dove, the revenue from which
totalled $350,000 in 1995, $3,847,000 in 1994 and $2,665,000 in 1993 and is
eliminated in combination.
Dovecapital was incorporated on April 15, 1994 and is owned by the same
shareholders as Ross-Dove. Dovecapital specializes in asset pricing and
disposition strategies.
On November 23, 1995, Dovemedia and Dovecapital were merged into Dove
Holdings.
FORMATION OF KOLL-DOVE GLOBAL DISPOSITION SERVICES LLC
In March 1995, the Company entered into a series of agreements with Koll
Management Services, Inc. (Koll), a real estate services company headquartered
in Newport Beach, California, including:
(1) the formation of a limited liability company, Koll-Dove Global
Disposition Services LLC (Koll-Dove), to which substantially all of the
Company's non-real estate assets and related liabilities, excluding the
receivables from shareholders, were contributed,
(2) the contribution by Koll of $5 million to Koll-Dove in exchange for a
50 percent ownership interest (subsequently increased to 50.1 percent);
Koll made a $2 million payment to the Company in March, 1995 which was
subsequently remitted to Koll-Dove and an additional $3 million payment was
made to Koll Dove during 1995,
(3) the execution of employment agreements and buy/sell agreements by the
Company's shareholders.
F-52
<PAGE>
ROSS-DOVE COMPANY, INC., DOVETECH, INC.,
DOVEMEDIA, LTD. AND DOVE CAPITAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following amounts are included in the accompanying financial statements,
but are related to assets and liabilities not contributed to Koll-Dove:
<TABLE>
<CAPTION>
AS OF
-----------------------------------
MARCH 13, DECEMBER 31, DECEMBER 31,
1995 1994 1993
--------- ------------ ------------
<S> <C> <C> <C>
Property & equipment, net........... $6,418 $6,418 $3,168
Amounts receivable from
shareholders....................... 807 807 781
Security deposits................... 21 17 13
Long-term debt...................... 4,521 4,740 2,020
Deferred interest................... 123 123 130
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR/PERIOD ENDED
-----------------------------------
MARCH 13, DECEMBER 31, DECEMBER 31,
1995 1994 1993
--------- ------------ ------------
<S> <C> <C> <C>
Rental income......................... $ 80 $ 195 $ 67
Depreciation expense.................. (107) (180) (47)
Interest expense...................... (202) (381) (58)
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION
The Company's commission income from auctions is recognized upon completion
of the related auction and when there are no significant uncertainties as to
ultimate collection of auction proceeds. Revenues from appraisal and
advertising services are recognized when the services are performed. Costs
related to appraisal services are included within general and administrative
expenses in the accompanying combined statements of operations. Reimbursements
of expenses incurred by the Company in connection with auctions represented
approximately $324,000, $3.9 and $5.5 million of total revenues during the
period ended March 13, 1995 and the years ended December 31, 1994 and 1993,
respectively.
Revenues from significant customers were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Customer A................................................. 4% -- 16%
Customer B................................................. 7% 1% 12%
Customer C................................................. -- 4% 11%
Customer D................................................. 56% 16% 9%
</TABLE>
Customer A is a government agency.
DEPRECIATION
Depreciation is provided over the estimated useful lives of the assets using
the straight-line method. These useful lives range from three to five years
for equipment and vehicles and three to 31.5 years for buildings and
improvements.
CASH IN TRUST
The Company generally collects the gross proceeds of an auction on behalf of
the selling parties and holds such proceeds in a trust account until the final
settlement date of the auction. Such amounts held at year-end are shown as
cash in trust in the accompanying combined balance sheets. Cash in trust is
excluded from cash for purposes of the combined statements of cash flows.
F-53
<PAGE>
ROSS-DOVE COMPANY, INC., DOVETECH, INC.,
DOVEMEDIA, LTD. AND DOVE CAPITAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The portion of the proceeds that must be remitted to the owner of the goods
that were sold during an auction is reflected as a trust account liability in
the accompanying combined balance sheets, net of the Company's commissions and
expense reimbursements that have not been disbursed from the trust account.
LEASES
Leases for which the Company assumes substantially all property rights and
risks of ownership are considered capital leases and are capitalized as
property and equipment. The related obligation is shown in debt as capital
lease obligations. All other leases are considered operating leases and rental
payments are charged to expense as incurred.
INCOME TAXES
As the Company's tax filing status is that of an S corporation, taxable
income or loss is generally passed through to the individual shareholders of
the Company for tax reporting purposes. Through December 31, 1993, the Company
was subject to a 2 1/2% California state income tax on its taxable earnings.
Effective January 1, 1994, the rate was reduced to 1 1/2% of taxable income.
The benefit relating to the 1994 and 1995 net operating losses has been
fully reserved, under the provisions of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes."
RECLASSIFICATIONS
Certain 1993 amounts have been reclassified to conform to the current year
presentation.
3. NOTES PAYABLE AND LINES OF CREDIT:
At March 13, 1995 and December 31, 1994, the Company had a note payable to a
financial institution with an outstanding balance of $2,603,000. This note
bore interest at the prime rate (as announced by the N.Y. Clearinghouse
Association) plus 1.5% and was paid during 1995. This note was secured by
personal guarantees of the shareholders.
At March 13, 1995 and December 31, 1994, the Company had an installment note
payable to a bank with an outstanding balance of $318,333 and $375,000,
respectively. This note bore interest at the bank's base rate plus .5% and
matured on June 30, 1995.
At December 31, 1993, the Company had two lines of credit with a bank. One
line of credit had a maximum facility of $2,500,000 and the other had a
maximum facility of $500,000. There was $500,000 outstanding under these
facilities at December 31, 1993. These lines of credit expired in 1994.
F-54
<PAGE>
ROSS-DOVE COMPANY, INC., DOVETECH, INC.,
DOVEMEDIA, LTD. AND DOVE CAPITAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT:
As of March 13, 1995 and December 31, 1994 and 1993, long-term debt
consisted of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Term note payable to a bank, secured by certain
real property and personal guarantees by the
Company's two shareholders, interest at 10.31% per
annum, principal and interest due in equal monthly
installments of $10 through 1999.................. $ 451 $ 457 $ 526
Mortgage loan, secured by a deed of trust and
personally guaranteed by a shareholder, interest
at 10% per annum, principal and interest due in
monthly installments of $12 through February
2011.............................................. 1,183 1,188 1,212
Mortgage loan, guaranteed by a shareholder,
interest at 10% per annum, principal and interest
due in equal monthly installments of $4 through
February 2003..................................... 261 263 281
Mortgage loan, guaranteed by a deed of trust,
interest at 8.67% per annum, principal and
interest due in monthly installments of $19
through January 2004.............................. 1,840 1,852 --
Mortgage loan, guaranteed by a deed of trust,
interest at 6.94% per annum, principal and
interest due in monthly installments of $8 through
March 2014........................................ 974 979 --
Term note payable to a related party (see Note 5),
interest at 6.25% per annum, principal and
interest due in monthly installments of $4 through
August 2003....................................... 314 317 --
Capital lease obligations.......................... 22 22 36
------ ------ ------
5,045 5,078 2,055
Less-current portion............................... (266) (266) (125)
------ ------ ------
Long-term portion.................................. $4,779 $4,812 $1,930
====== ====== ======
</TABLE>
Future maturities of long-term debt as of March 13, 1995 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995.............................................................. $ 233
1996.............................................................. 273
1997.............................................................. 296
1998.............................................................. 316
1999.............................................................. 332
Thereafter........................................................ 3,595
------
Total........................................................... 5,045
Less--Current portion............................................. (266)
------
Long-term portion................................................. $4,779
======
</TABLE>
F-55
<PAGE>
ROSS-DOVE COMPANY, INC., DOVETECH, INC.,
DOVEMEDIA, LTD. AND DOVE CAPITAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. STOCK REPURCHASE:
On July 31, 1994, Ross-Dove and two of its shareholders purchased all of the
outstanding shares of a third shareholder. The Company purchased 9,262 shares
in exchange for a term note of $326,000 and offset of indebtedness from the
shareholder of $107,000. The two shareholders purchased the remaining shares
(12,036 shares each).
Concurrent with this agreement, the two shareholders also purchased the
outstanding shares of Dovetech and Dovemedia from the third shareholder. In
consideration for these and the Dove Holdings shares purchased, the two
shareholders each entered into a private annuity contract with the selling
shareholder.
6. PROFIT-SHARING PLAN:
Effective June 1, 1985, the Company adopted a 401(k) profit sharing plan
(the "Plan") for the benefit of its employees. Profit sharing contributions to
the Plan are made at the discretion of the Company and members of the Plan may
make voluntary contributions. In addition, effective January 1, 1992, the
Company began matching employee contributions. The Company's contributions for
the period ended March 13, 1995 and the years ended December 31, 1994 and 1993
were approximately $0, $150,000 and $110,000 respectively, and are included in
general and administrative expenses in the accompanying combined statements of
operations.
In January 1995, the Company amended the Plan to provide for participant
directed investments and to discontinue matching of employee contributions.
Koll-Dove assumed the rights and obligations of the Plan pursuant to the
formation of Koll-Dove as discussed in Note 1.
7. COMMITMENTS AND CONTINGENCIES:
The Company is involved in certain legal matters, all of which in the
opinion of management are normal business matters that will not result in a
material adverse effect on the financial position or results of operations of
the Company.
Effective May 31, 1996, the Company agreed to settle litigation which
alleged certain claims arising from an appraisal performed. The settlement
resolved prior litigation which initially ruled in the Company's favor but was
reversed on appeal. The $1 million settlement is due in installments
commencing June 1, 1996 to October 1, 1997.
The Company leases office space and telephone equipment under operating
leases. Rental expense under these leases was $103,000 in 1995, $281,000 in
1994 and $130,000 in 1993. These operating leases are noncancellable and have
minimum lease payment requirements of $198,000 in 1995, $133,000 in 1996,
$96,000 in 1997 and $8,000 in 1998.
8. UNUSUAL ITEM--LOSS ON IBM PRODUCT AUCTION:
In July 1994, the Company recognized a loss of approximately $1.2 million on
revenues of approximately $7.3 million related to an auction of IBM products.
This auction was unusual due to the size of the auction and the infrequent
nature of purchased merchandise auctions. The Company intends to limit the
size and frequency of future purchased merchandise auctions.
F-56
<PAGE>
[Inside Back Cover]
[Client List]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 3
Risk Factors............................................................. 10
The Company.............................................................. 13
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Consolidated Financial and Operating Data....................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 28
Management............................................................... 42
Principal and Selling Stockholders....................................... 50
Description of Capital Stock............................................. 52
Certain Transactions..................................................... 53
Shares Eligible for Future Sale.......................................... 57
Underwriting............................................................. 58
Legal Matters............................................................ 59
Experts.................................................................. 59
Additional Information................................................... 60
Index to Financial Statements............................................ F-1
</TABLE>
---------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
LOGO
KOLL REAL ESTATE SERVICES
COMMON STOCK
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
BT SECURITIES CORPORATION
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Graphics Appendix
Inside Front Cover Foldout:
Photo 1: Exterior view of office park in Irvine, California.
Photo 2: Exterior view of facility in Findlay, Ohio.
Photo 3: Exterior view of office building in Boston, Massachusetts.
Photo 4: Exterior view of industrial building in the Seattle, Washington area.
Photo 5: Exterior view of a retail center in La Jolla, California.
Photo 6: Exterior view of an office park in Minneapolis, Minnesota.
Map 1: Map of United States showing location of principal offices by region
and square feet managed by region.
Map 2: Insert map of Hawaii indicating location of office.
Map 3: Insert map of China, Japan and Indonesia showing location of offices
and square feet managed.
Page 6: Pie chart showing property management of the top 10 and top 50 property
managers of the total U.S. commercial real estate market.
Page 29: Pie chart showing property management of the top 10 and top 50 property
managers of the total U.S. commercial real estate market.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses and costs (other than
underwriting discounts and commissions) expected to be incurred in connection
with the sale and distribution of the securities being registered. All of the
amounts shown are estimated except the registration fee of the Securities and
Exchange Commission and the filing fee for the National Association of
Securities Dealers, Inc.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- ---------
<S> <C>
SEC registration fee.............................................. $ 29,742
NASD filing fee................................................... 9,125
Nasdaq listing fee................................................ *
Blue Sky fees and expenses........................................ *
Printing and engraving expense.................................... *
Legal fees and expenses........................................... *
Officers and directors insurance.................................. *
Accounting fees and expenses...................................... *
Transfer agent and registrar fees................................. *
Miscellaneous..................................................... *
---------
Total........................................................... $ *
=========
</TABLE>
- --------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Koll Real Estate Services ("KRES") is a Delaware corporation. Article VI of
KRES's Bylaws provides that KRES may indemnify its officers and Directors to
the full extent permitted by law. Section 145 of the General Corporation Law
of the State of Delaware (the "GCL") provides that a Delaware corporation has
the power to indemnify its officers and directors in certain circumstances.
Subsection (a) of Section 145 of the GCL empowers a corporation to indemnify
any director or officer, or former director or officer, who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred in connection with such
action, suit or proceeding provided that such director or officer acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, provided that such director or officer had no cause to believe his
or her conduct was unlawful.
Subsection (b) of Section 145 of the GCL empowers a corporation to indemnify
any director or officer, or former director or officer, who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses actually and reasonably incurred
in connection with the defense or settlement of such action or suit provided
that such director or officer acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification may be made in respect of any claim, issue or
matter as to which such director or officer shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action was brought shall determine that
despite the adjudication of liability such director or officer is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
II-1
<PAGE>
Section 145 of the GCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action,
suit or proceeding referred to in subsections (a) and (b) or in the defense of
any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
or her in connection therewith; that indemnification provided for by Section
145 shall not be deemed exclusive of any other rights to which the indemnified
party may be entitled; and that the corporation shall have power to purchase
and maintain insurance on behalf of a director or officer of the corporation
against any liability asserted against him or her or incurred by him or her in
any such capacity or arising out of his or her status as such whether or not
the corporation would have the power to indemnify him or her against such
liabilities under Section 145.
Article IX of KRES's Certificate of Incorporation currently provides that
each director shall not be personally liable to KRES or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to KRES or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the GCL, or (iv) for any transaction from which the Director derived an
improper benefit.
Reference is made to the Form of Purchase Agreement (to be filed as Exhibit
1.1 to this Registration Statement) which provides for indemnification by the
Underwriters under certain circumstances of the directors and officers of KRES
signing the Registration Statement and certain controlling persons of KRES
against certain liabilities, including those arising under the Securities Act.
KRES intends to carry directors' and officers' liability insurance covering
its directors and officers.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that,
in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the formation of KRES on November 23, 1994, KRES issued
2,522,352 shares of Common Stock, $.01 par value per share ("Common Stock"),
of KRES to Equity Partners for an aggregate purchase price of $25,223,520 in
cash, or $10.00 per share and 2,522,352 shares of Common Stock to KHC in
exchange for 1,576,470 shares of common stock of Koll Management Services,
Inc. valued at $25,223,520. These issuances of Common Stock were made by
private placement in reliance on the exemption from the registration
provisions of the Securities Act provided for in Section 4(2) of the
Securities Act.
On October 1, 1995, KRES sold an aggregate of 248,650 shares of Common Stock
to certain members of management of the Company for an aggregate purchase
price of $2,486,500, or $10.00 per share. An aggregate of $1,252,100 of such
purchase price was paid in cash and $1,234,400 was paid in the form of full
recourse secured promissory notes. These sales of Common Stock were made by
private placement in reliance on the exemption from the registration
provisions of the Securities Act in reliance on Rule 701 promulgated under the
Securities Act.
On February 14, 1996, KRES sold 10,000 shares of Common Stock to a member of
management of the Company for a purchase price of $120,000, or $12.00 per
share, of which $60,000 was paid in cash and $60,000 was paid in the form of a
full recourse secured promissory note. This sale of Common Stock was made by
private placement in reliance on the exemption from the registration
provisions of the Securities Act in reliance on Rule 701 promulgated under the
Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1++ Form of Underwriting Agreement.
2.1**** Agreement and Plan of Merger, dated as of July 26, 1994, by and among
Koll Management Services, Inc., KMS Holding Corporation and KMS
Acquisition Corporation.
2.2**** Exchange Agreement, dated July 26, 1994, by and among KMS Holding
Corporation, FS Equity Partners III, L.P., FS Equity Partners
International, L.P., The Koll Company, Ray Wirta and William S.
Rothe.
3.1++ Restated Certificate of Incorporation of the Registrant.
3.2++ Bylaws of the Registrant, as amended and currently in effect.
5.1++++ Opinion of Riordan & McKinzie, a Professional Law Corporation
regarding the validity of the issuance of the securities registered
hereunder.
10.1++ Credit Agreement, dated as of November 23, 1994, by and among Koll
Management Services, Inc., Berliner Handels-Und Frankfurter Bank and
Bankers Trust Company.
10.2++ First Amendment to Credit Agreement, dated as of January 16, 1995, by
and among Koll Management Services, Inc., BHF-Bank Aktiengesellschaft
(formerly Berliner Handels-Und Frankfurter Bank) and Bankers Trust
Company.
10.3++ Second Amendment to Credit Agreement, dated as of January 12, 1996,
by and among Koll Management Services, Inc., BHF-Bank
Aktiengesellschaft (formerly Berliner Handels-Und Frankfurter Bank)
and Bankers Trust Company.
10.4++ Third Amendment and Waiver, dated as of January 12, 1996, by and
among Koll Management Services, Inc., BHF-Bank Aktiengesellschaft
(formerly Berliner Handels-Und Frankfurter Bank) and Bankers Trust
Company.
10.5++ Fourth Amendment to Credit Agreement, dated as of August 14, 1996, by
and among Koll Management Services, Inc., BHF-Bank Aktiengesellschaft
(formerly Berliner Handels-Und Frankfurter Bank) and Bankers Trust
Company.
10.6++ Pledge Agreement, dated as of November 23, 1994, by and between Koll
Management Services, Inc. and Bankers Trust Company.
10.7++ Pledge Agreement, dated as of November 23, 1994, by and between KMS
Holding Corporation and Bankers Trust Company.
10.8++ Registration Rights Agreement, dated as of November 23, 1994, by and
between KMS Holding Corporation, FS Equity Partners III, L.P. and FS
Equity Partners International, L.P.
10.9++ First Amendment to Registration Rights Agreement, dated October 18,
1995, by and among KMS Holding Corporation, FS Equity Partners III,
L.P., and FS Equity Partners International, L.P.
10.10++ Second Amendment to Registration Rights Agreement, dated as of April
1, 1996, by and among KMS Holding Corporation, FS Equity Partners
III, L.P. and FS Equity Partners International, L.P.
10.11++ Registration Rights Agreement, dated as of November 23, 1994, by and
between KMS Holding Corporation and The Koll Holding Company.
10.12++ First Amendment to Registration Rights Agreement, dated October 18,
1995, by and among KMS Holding Corporation and The Koll Holding
Company.
10.13++ Registration Rights Agreement, dated October 18, 1995, by and among
KMS Holding Corporation and AP KMS Partners, L.P.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.14++ First Amendment to Registration Rights Agreement, dated as of April
1, 1996, by and among KMS Holding Corporation and AP KMS Partners,
L.P.
10.15++ Second Amended and Restated Stockholders Agreement, dated as of
March 29, 1996, by and among KMS Holding Corporation, FS Equity
Partners III, L.P., FS Equity Partners International, L.P., The Koll
Holding Company, The Koll Company and AP KMS Partners, L.P.
10.16++++ Form of Third Amended and Restated Stockholders Agreement by and
among KMS Holding Corporation, FS Equity Partners III, L.P., FS
Equity Partners International, L.P., The Koll Holding Company, The
Koll Company and AP KMS Partners, L.P.
10.17*** Management Services Agreement, effective as of April 1, 1993, by and
between the Koll Management Services, Inc. and The Koll Company.
10.18* Business Opportunities Agreement, dated as of April 1, 1991, by and
among the Koll Management Services, Inc., The Koll Company and
certain other parties.
10.19++ License Agreement, dated as of November 23, 1994, by and between The
Koll Company and Koll Management Services, Inc.
10.20++ Form of Lease, dated April 13, 1995, between Koll Management
Services, Inc. and Koll Center Newport Number 14.
10.21++ Form of Lease, dated October 2, 1995, between Koll Management
Services, Inc. and Koll Center Newport Number 14.
10.22++ Amendment Number 1, dated June 6, 1996, to the Office Building Lease
dated October 2, 1995.
10.23++ Lease Guaranty, dated as of November 15, 1994, by Koll Management
Services, Inc. for the benefit of Koll Corporate Associates and
Aetna Life Insurance Company.
10.24* The Koll Company 401(k) Plus Plan and Trust.
10.25++ Form of Indemnity Agreement.
10.26++ Employment Agreement by and between Koll Management Services, Inc.
and Richard G. Wollack.
10.27++ Employment Agreement by and between Koll Management Services, Inc.
and Richard S. Abraham.
10.28++ Amended 1994 Employee Stock Subscription Plan.
10.29++ Amended 1994 Nonqualified Performance Stock Option Plan.
10.30++ Amended and Restated Option Agreement, dated November 23, 1994, by
and among The Koll Company, The Koll Holding Company, William S.
Rothe, KMS Holding Corporation and Ray Wirta.
10.31++ Amended and Restated Option Agreement, dated as of November 23,
1994, by and among The Koll Company, The Koll Holding Company, Ray
Wirta and Koll Management Services, Inc.
10.32++ Noncompetition and Confidentiality Agreement, dated April 1, 1996,
by and among KMS Holding Corporation, FS Equity Partners III, L.P.,
FS Equity Partners International, L.P. and Donald M. Koll.
10.33++ Noncompetition and Confidentiality Agreement, dated April 1, 1996,
by and among KMS Holding Corporation, AP KMS Partners, L.P. and
Donald M. Koll.
10.34** Agreement of General Partnership of Koll/CC&F Management Services,
dated as of December 12, 1991, by and between Koll Management
Services, Inc. and CC&F Management Co., Inc.
10.35++ First Amendment to Agreement of General Partnership of Koll/CC&F
Management Services, dated November 1, 1993, by and between Koll
Management Services, Inc. and CC&F Asset Management Co., Inc.
Certain portions of this exhibit have been omitted from the copies
filed as part of this Form S-1 and are the subject of a request for
confidential treatment with respect thereto pursuant to Rule 406
promulgated under the Securities Act of 1933, as amended.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.36++ Stock Purchase Agreement, dated as of March 31, 1993, by and among
Daniel M. Ardell and David B. Ardell, as Trustee of the David Barclay
Ardell and Cynthia Sieling Ardell Family Trust, dated January 18,
1985, Koll Management Services, Inc. and D.A. Management, Inc. Certain
portions of this exhibit have been omitted from the copies filed as
part of this Form S-1 and are the subject of a request for
confidential treatment with respect thereto pursuant to Rule 406
promulgated under the Securities Act of 1933, as amended.
<C> <S>
10.37++ Stock Purchase Agreement, dated as of January 28, 1994, by and among
John A. Bonutto, Harold C. Hofer, John A. Bonutto and Teresa L.
Bonutto, as Trustees of the J&T Bonutto Revocable Trust u/d/t dated
October 12, 1990, and Harold C. Hofer and Lisa Anne Hofer, as Trustees
of the H&L Hofer Revocable Trust u/d/t dated March 1, 1990, Koll
Partnerships I, Inc., Interstar Management, Inc. and Bonutto-Hofer
Investments. Certain portions of this exhibit have been omitted from
the copies filed as part of this Form S-1 and are the subject of a
request for confidential treatment with respect thereto pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
10.38++ Asset Purchase Agreement of Certain General Partnership Interests,
dated as of May 10, 1994, by and among Koll Partnerships II, Inc. and
Dover Retail Properties, Inc. Certain portions of this exhibit have
been omitted from the copies filed as part of this Form S-1 and are
the subject of a request for confidential treatment with respect
thereto pursuant to Rule 406 promulgated under the Securities Act of
1933, as amended.
10.39++ First Amendment to Asset Purchase Agreement of Certain General
Partnership Interests, dated as of May 10, 1994, by and between Koll
Partnerships II, Inc. and Dover Retail Properties, Inc.
10.40++ Asset Purchase Agreement, dated as of September 14, 1994, by and among
Steven M. Pagnotta and David A. Petersen, Koll Management Services,
Inc. and Midstates Management Co., Inc. Certain portions of this
exhibit have been omitted from the copies filed as part of this Form
S-1 and are the subject of a request for confidential treatment with
respect thereto pursuant to Rule 406 promulgated under the Securities
Act of 1933, as amended.
10.41++ Stock and Asset Purchase Agreement, dated as of March 4, 1995, by and
among Bradley C. Burgess, James W. Schlesing, J. Robert White, Jr.,
CBS Investment Realty of California, Inc., Koll Management Services,
Inc., CBS Investment Realty of New Mexico, Inc. and CBS Investment
Realty, Inc. Certain portions of this exhibit have been omitted from
the copies filed as part of this Form S-1 and are the subject of a
request for confidential treatment with respect thereto pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
10.42++ First Amendment to Stock and Asset Purchase Agreement and Mutual
Release, dated as of May 1, 1996, by and among Bradley C. Burgess,
James W. Schlesing, J. Robert White, Jr., CBS Investment Realty of
California, Inc. and Koll Management Services, Inc. Certain portions
of this exhibit have been omitted from the copies filed as part of
this Form S-1 and are the subject of a request for confidential
treatment with respect thereto pursuant to Rule 406 promulgated under
the Securities Act of 1933, as amended.
10.43++ Asset Purchase Agreement, dated as of March 24, 1995, by and among
Richard G. Wollack, Brent Donaldson, Koll Management Services, Inc.
and Liquidity Financial Group, L.P. Certain portions of this exhibit
have been omitted from the copies filed as part of this Form S-1 and
are the subject of a request for confidential treatment with respect
thereto pursuant to Rule 406 promulgated under the Securities Act of
1933, as amended.
10.44++ Asset Purchase Agreement, dated as of June 30, 1995, by and between
The Shelard Group, Inc. and SCI Services, Inc. and Koll Management
Services, Inc. Certain portions of this exhibit have been omitted from
the copies filed as part of this Form S-1 and are the subject of a
request for confidential treatment with respect thereto pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.45++ Amendment to Asset Purchase Agreement and Agreement for Construction
Management Services, dated as of August 5, 1995, by and between Koll
Management Services, Inc. and SCI Services, Inc.
<C> <S>
10.46++ Operating Agreement for Koll-Dove Global Disposition Services, LLC,
dated as of March 13, 1995, by and among Ross-Dove Company, Inc.,
Dovemedia Ltd., Dove Capital Corporation and Koll Management
Services, Inc. Certain portions of this exhibit have been omitted
from the copies filed as part of this Form S-1 and are the subject of
a request for confidential treatment with respect thereto pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
10.47++ Koll-Dove Global Disposition Services, LLC Contribution Agreement,
dated as of March 9, 1995, by among Ross-Dove Company, Inc.,
Dovetech, Inc., Dovemedia, Ltd., Dove Capital Corporation, Ross Dove,
Kirk Dove and Koll Management Services, Inc. Certain portions of this
exhibit have been omitted from the copies filed as part of this Form
S-1 and are the subject of a request for confidential treatment with
respect thereto pursuant to Rule 406 promulgated under the Securities
Act of 1933, as amended.
10.48++ Buy/Sell Agreement, dated as of March 13, 1995, by and among Koll-
Dove Global Disposition Services, LLC, Ross-Dove Company, Inc. and
Dove Capital Corporation. Certain portions of this exhibit have been
omitted from the copies filed as part of this Form S-1 and are the
subject of a request for confidential treatment with respect thereto
pursuant to Rule 406 promulgated under the Securities Act of 1933, as
amended.
11++ Statement Re: Computation of Per Share Earnings.
21++ List of Subsidiaries of the Registrant.
23.1++++ Consent of Riordan & McKinzie (contained in Exhibit 5.1).
23.2++ Consent of Ernst & Young LLP.
23.3++ Consent of Ernst & Young LLP.
23.4++ Consent of Arthur Andersen LLP.
24.1++ Powers of Attorney (included on the signature page).
27.1++ Financial Data Schedule.
</TABLE>
- --------
* Filed an exhibit to the Koll Management Services, Inc.'s Registration
Statement on Form S-1 (Registration No. 33-40948) on May 31, 1991 and
incorporated herein by reference.
** Filed as an exhibit to Koll Management Services, Inc.'s Form 8-K dated
January 1, 1992 and incorporated herein by reference.
*** Filed as an exhibit to Koll Management Services, Inc.'s Annual Report on
Form 10-K for the fiscal year ended March 31, 1993 and incorporated
herein by reference.
**** Filed as an exhibit to Koll Management Services, Inc.'s Schedule 13E-3
filed August 18, 1994 and incorporated herein by reference.
++ Filed herewith.
++++ To be filed by amendment.
II-6
<PAGE>
(b) Financial Statement Schedules
Report of Independent Auditors
Schedule I--Condensed Financial Information of Registrant
Condensed Balance Sheets--March 31, 1996 and 1995
Condensed Statements of Income--year ended March 31, 1996 and four
months ended March 31, 1995
Condensed Statements of Cash Flows--year ended March 31, 1996 and
four months ended March 31, 1995
Notes to Condensed Financial Statements
Schedule II--Valuation and Qualifying Accounts--year ended March 31, 1996,
four months ended March 31, 1995, eight months ended November 30, 1994 and
year ended March 31, 1994
Other schedules are not included because the required information is not
present or is included in the consolidated financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the purchase agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Registrant pursuant to the provisions described in Item 14 above, or
otherwise, Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a director, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEWPORT BEACH, STATE OF
CALIFORNIA, ON THE 16TH DAY OF AUGUST 1996.
KOLL REAL ESTATE SERVICES
/s/ Raymond E. Wirta
By: _________________________________
RAYMOND E. WIRTA
CHIEF EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Raymond E. Wirta and William S. Rothe, Jr., and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald M. Koll Chairman and August 16, 1996
- ------------------------------------- Director
DONALD M. KOLL
/s/ Raymond E. Wirta Chief Executive August 16, 1996
- ------------------------------------- Officer and
RAYMOND E. WIRTA Director (Principal
Executive Officer)
/s/ William S. Rothe, Jr. President August 16, 1996
- -------------------------------------
WILLIAM S. ROTHE, JR.
/s/ Gary W. Nielson Senior Vice August 16, 1996
- ------------------------------------- President, Finance
GARY W. NIELSON (Principal
Financial Officer)
II-8
<PAGE>
SIGNATURE TITLE DATE
/s/ Michelle T. Tiffany Chief Accounting August 16, 1996
- ------------------------------------- Officer
MICHELLE T. TIFFANY
/s/ Bradford M. Freeman Director August 16, 1996
- -------------------------------------
BRADFORD M. FREEMAN
/s/ Jon D. Ralph Director August 16, 1996
- -------------------------------------
JON D. RALPH
/s/ W. Edward Scheetz Director August 16, 1996
- -------------------------------------
W. EDWARD SCHEETZ
/s/ J. Frederick Simmons Director August 16, 1996
- -------------------------------------
J. FREDERICK SIMMONS
/s/ Ronald P. Spogli Director August 16, 1996
- -------------------------------------
RONALD P. SPOGLI
II-9
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
Koll Real Estate Services
We have audited the consolidated financial statements of Koll Real Estate
Services as of March 31, 1996 and 1995, and for each of the periods presented
in the three years ended March 31, 1996 and have issued our report thereon
dated August 16, 1996, except Note 10, as to which the date is , 1996,
included elsewhere in this Registration Statement. Our audits also included
the financial statement schedules listed in Item 16(b) of this Registration
Statement. These schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Newport Beach, California
August 16, 1996, except Note 2 to
Schedule I, as to which the date is
, 1996
The foregoing report is in the form that will be signed upon completion of
the stock split described in Note 2 to Schedule I.
/s/ Ernst & Young LLP
Newport Beach, California
August 16, 1996
S-1
<PAGE>
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
KOLL REAL ESTATE SERVICES
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Assets
Prepaid expenses and other current assets................... $ 24 $ 77
Investment in subsidiary.................................... 35,902 33,731
Other assets................................................ 235 284
------- -------
$36,161 $34,092
======= =======
Liabilities and stockholders' equity
Current liabilities......................................... $ 916 $ 1,107
Stockholders' equity
Common stock................................................ 53 53
Other stockholders' equity.................................. 36,342 33,992
Stock subscription notes.................................... (1,150) (1,060)
------- -------
35,245 32,985
------- -------
$36,161 $34,092
======= =======
</TABLE>
See accompanying notes.
S-2
<PAGE>
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
KOLL REAL ESTATE SERVICES
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED
MARCH 31, MARCH 31,
1996 1995
---------- -----------
<S> <C> <C>
Interest income.......................................... $ 98 $ 33
Amortization expense..................................... (60) (23)
------ ----
Income before equity in net income of subsidiary......... 38 10
Equity in net income of subsidiary....................... 2,009 378
------ ----
Net income............................................... $2,047 $388
====== ====
</TABLE>
See accompanying notes.
S-3
<PAGE>
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
KOLL REAL ESTATE SERVICES
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED
MARCH 31, MARCH 31,
1996 1995
---------- -----------
<S> <C> <C>
Cash used in operating activities........................ $ (51) $ (201)
Investing activities
Acquisition of Koll Management Services, Inc........... (162) (25,040)
Financing activities
Net proceeds from sale of common stock................. 123 25,241
Payments received on stock subscription notes.......... 90 --
----- --------
213 25,241
----- --------
Change in cash........................................... $ -- $ --
===== ========
</TABLE>
See accompanying notes.
S-4
<PAGE>
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
KOLL REAL ESTATE SERVICES
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1996
1. BASIS OF PRESENTATION
In these condensed parent company-only financial statements, the Company's
investment in subsidiary is stated at cost plus equity in undistributed
earnings since the date of acquisition. The Company's share of net income of
its unconsolidated subsidiary is included in consolidated income using the
equity method. The condensed parent company-only financial statements should
be read in conjunction with the Company's consolidated financial statements.
Current liabilities includes $947,000 and $707,000 in amounts due to the
unconsolidated subsidiary at March 31, 1996 and 1995, respectively.
2. SUBSEQUENT EVENT
On , 1996, the Board of Directors authorized a for stock split to
be distributed on or about , 1996, to shareholders of record on , 1996.
In addition, authorized common shares was increased from 6,000,000 to
35,000,000. All references in the financial statements to number of shares and
per share amounts of the Company's common stock have been retroactively
restated to reflect the increased number of common shares outstanding.
S-5
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
KOLL REAL ESTATE SERVICES
YEAR ENDED MARCH 31, 1996, FOUR MONTHS ENDED MARCH 31, 1995,
EIGHT MONTHS ENDED NOVEMBER 30, 1994 AND YEAR ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
ADDITIONS
----------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS -- BALANCE AT END
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
----------- ------------ ---------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
KOLL REAL ESTATE
SERVICES
YEAR ENDED MARCH 31,
1996
Reserves and allowances
deducted from asset
accounts
Allowance for uncol-
lectible accounts.... $965,000 $834,000 $ -- $652,000(1) $1,147,000
FOUR MONTHS ENDED MARCH
31, 1995
Reserves and allowances
deducted from asset
accounts
Allowance for uncol-
lectible accounts.... $638,000 $644,000 $ -- $317,000 $ 965,000
- ----------------------------------------------------------------------------------------
KOLL MANAGEMENT
SERVICES, INC.
(PREDECESSOR)
EIGHT MONTHS ENDED
NOVEMBER 30, 1994
Reserves and allowances
deducted from asset
accounts
Allowance for uncol-
lectible accounts.... $138,000 $500,000 $ -- $ -- $ 638,000
YEAR ENDED MARCH 31,
1994
Reserves and allowances
deducted from asset
accounts
Allowance for uncol-
lectible accounts.... $211,000 $115,000 $ -- $188,000(1) $ 138,000
</TABLE>
- --------
(1) Uncollectible accounts written off, net of recoveries.
S-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1++ Form of Underwriting Agreement.
2.1**** Agreement and Plan of Merger, dated as of July 26, 1994, by and among
Koll Management Services, Inc., KMS Holding Corporation and KMS
Acquisition Corporation.
2.2**** Exchange Agreement, dated July 26, 1994, by and among KMS Holding
Corporation, FS Equity Partners III, L.P., FS Equity Partners
International, L.P., The Koll Company, Ray Wirta and William S.
Rothe.
3.1++ Restated Certificate of Incorporation of the Registrant.
3.2++ Bylaws of the Registrant, as amended and currently in effect.
5.1++++ Opinion of Riordan & McKinzie, a Professional Law Corporation
regarding the validity of the issuance of the securities registered
hereunder.
10.1++ Credit Agreement, dated as of November 23, 1994, by and among Koll
Management Services, Inc., Berliner Handels-Und Frankfurter Bank and
Bankers Trust Company.
10.2++ First Amendment to Credit Agreement, dated as of January 16, 1995, by
and among Koll Management Services, Inc., BHF-Bank Aktiengesellschaft
(formerly Berliner Handels-Und Frankfurter Bank) and Bankers Trust
Company.
10.3++ Second Amendment to Credit Agreement, dated as of January 12, 1996,
by and among Koll Management Services, Inc., BHF-Bank
Aktiengesellschaft (formerly Berliner Handels-Und Frankfurter Bank)
and Bankers Trust Company.
10.4++ Third Amendment and Waiver, dated as of January 12, 1996, by and
among Koll Management Services, Inc., BHF-Bank Aktiengesellschaft
(formerly Berliner Handels-Und Frankfurter Bank) and Bankers Trust
Company.
10.5++ Fourth Amendment to Credit Agreement, dated as of August 14, 1996, by
and among Koll Management Services, Inc., BHF-Bank Aktiengesellschaft
(formerly Berliner Handels-Und Frankfurter Bank) and Bankers Trust
Company.
10.6++ Pledge Agreement, dated as of November 23, 1994, by and between Koll
Management Services, Inc. and Bankers Trust Company.
10.7++ Pledge Agreement, dated as of November 23, 1994, by and between KMS
Holding Corporation and Bankers Trust Company.
10.8++ Registration Rights Agreement, dated as of November 23, 1994, by and
between KMS Holding Corporation, FS Equity Partners III, L.P. and FS
Equity Partners International, L.P.
10.9++ First Amendment to Registration Rights Agreement, dated October 18,
1995, by and among KMS Holding Corporation, FS Equity Partners III,
L.P., and FS Equity Partners International, L.P.
10.10++ Second Amendment to Registration Rights Agreement, dated as of April
1, 1996, by and among KMS Holding Corporation, FS Equity Partners
III, L.P. and FS Equity Partners International, L.P.
10.11++ Registration Rights Agreement, dated as of November 23, 1994, by and
between KMS Holding Corporation and The Koll Holding Company.
10.12++ First Amendment to Registration Rights Agreement, dated October 18,
1995, by and among KMS Holding Corporation and The Koll Holding
Company.
10.13++ Registration Rights Agreement, dated October 18, 1995, by and among
KMS Holding Corporation and AP KMS Partners, L.P.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.14++ First Amendment to Registration Rights Agreement, dated as of April
1, 1996, by and among KMS Holding Corporation and AP KMS Partners,
L.P.
10.15++ Second Amended and Restated Stockholders Agreement, dated as of
March 29, 1996, by and among KMS Holding Corporation, FS Equity
Partners III, L.P., FS Equity Partners International, L.P., The Koll
Holding Company, The Koll Company and AP KMS Partners, L.P.
10.16++++ Form of Third Amended and Restated Stockholders Agreement by and
among KMS Holding Corporation, FS Equity Partners III, L.P., FS
Equity Partners International, L.P., The Koll Holding Company, The
Koll Company and AP KMS Partners, L.P.
10.17*** Management Services Agreement, effective as of April 1, 1993, by and
between the Koll Management Services, Inc. and The Koll Company.
10.18* Business Opportunities Agreement, dated as of April 1, 1991, by and
among the Koll Management Services, Inc., The Koll Company and
certain other parties.
10.19++ License Agreement, dated as of November 23, 1994, by and between The
Koll Company and Koll Management Services, Inc.
10.20++ Form of Lease, dated April 13, 1995, between Koll Management
Services, Inc. and Koll Center Newport Number 14.
10.21++ Form of Lease, dated October 2, 1995, between Koll Management
Services, Inc. and Koll Center Newport Number 14.
10.22++ Amendment Number 1, dated June 6, 1996, to the Office Building Lease
dated October 2, 1995.
10.23++ Lease Guaranty, dated as of November 15, 1994, by Koll Management
Services, Inc. for the benefit of Koll Corporate Associates and
Aetna Life Insurance Company.
10.24* The Koll Company 401(k) Plus Plan and Trust.
10.25++ Form of Indemnity Agreement.
10.26++ Employment Agreement by and between Koll Management Services, Inc.
and Richard G. Wollack.
10.27++ Employment Agreement by and between Koll Management Services, Inc.
and Richard S. Abraham.
10.28++ Amended 1994 Employee Stock Subscription Plan.
10.29++ Amended 1994 Nonqualified Performance Stock Option Plan.
10.30++ Amended and Restated Option Agreement, dated November 23, 1994, by
and among The Koll Company, The Koll Holding Company, William S.
Rothe, KMS Holding Corporation and Ray Wirta.
10.31++ Amended and Restated Option Agreement, dated as of November 23,
1994, by and among The Koll Company, The Koll Holding Company, Ray
Wirta and Koll Management Services, Inc.
10.32++ Noncompetition and Confidentiality Agreement, dated April 1, 1996,
by and among KMS Holding Corporation, FS Equity Partners III, L.P.,
FS Equity Partners International, L.P. and Donald M. Koll.
10.33++ Noncompetition and Confidentiality Agreement, dated April 1, 1996,
by and among KMS Holding Corporation, AP KMS Partners, L.P. and
Donald M. Koll.
10.34** Agreement of General Partnership of Koll/CC&F Management Services,
dated as of December 12, 1991, by and between Koll Management
Services, Inc. and CC&F Management Co., Inc.
10.35++ First Amendment to Agreement of General Partnership of Koll/CC&F
Management Services, dated November 1, 1993, by and between Koll
Management Services, Inc. and CC&F Asset Management Co., Inc.
Certain portions of this exhibit have been omitted from the copies
filed as part of this Form S-1 and are the subject of a request for
confidential treatment with respect thereto pursuant to Rule 406
promulgated under the Securities Act of 1933, as amended.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.36++ Stock Purchase Agreement, dated as of March 31, 1993, by and among
Daniel M. Ardell and David B. Ardell, as Trustee of the David Barclay
Ardell and Cynthia Sieling Ardell Family Trust, dated January 18,
1985, Koll Management Services, Inc. and D.A. Management, Inc. Certain
portions of this exhibit have been omitted from the copies filed as
part of this Form S-1 and are the subject of a request for
confidential treatment with respect thereto pursuant to Rule 406
promulgated under the Securities Act of 1933, as amended.
10.37++ Stock Purchase Agreement, dated as of January 28, 1994, by and among
John A. Bonutto, Harold C. Hofer, John A. Bonutto and Teresa L.
Bonutto, as Trustees of the J&T Bonutto Revocable Trust u/d/t dated
October 12, 1990, and Harold C. Hofer and Lisa Anne Hofer, as Trustees
of the H&L Hofer Revocable Trust u/d/t dated March 1, 1990, Koll
Partnerships I, Inc., Interstar Management, Inc. and Bonutto-Hofer
Investments. Certain portions of this exhibit have been omitted from
the copies filed as part of this Form S-1 and are the subject of a
request for confidential treatment with respect thereto pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
10.38++ Asset Purchase Agreement of Certain General Partnership Interests,
dated as of May 10, 1994, by and among Koll Partnerships II, Inc. and
Dover Retail Properties, Inc. Certain portions of this exhibit have
been omitted from the copies filed as part of this Form S-1 and are
the subject of a request for confidential treatment with respect
thereto pursuant to Rule 406 promulgated under the Securities Act of
1933, as amended.
10.39++ First Amendment to Asset Purchase Agreement of Certain General
Partnership Interests, dated as of May 10, 1994, by and between Koll
Partnerships II, Inc. and Dover Retail Properties, Inc.
10.40++ Asset Purchase Agreement, dated as of September 14, 1994, by and among
Steven M. Pagnotta and David A. Petersen, Koll Management Services,
Inc. and Midstates Management Co., Inc. Certain portions of this
exhibit have been omitted from the copies filed as part of this Form
S-1 and are the subject of a request for confidential treatment with
respect thereto pursuant to Rule 406 promulgated under the Securities
Act of 1933, as amended.
10.41++ Stock and Asset Purchase Agreement, dated as of March 4, 1995, by and
among Bradley C. Burgess, James W. Schlesing, J. Robert White, Jr.,
CBS Investment Realty of California, Inc., Koll Management Services,
Inc., CBS Investment Realty of New Mexico, Inc. and CBS Investment
Realty, Inc. Certain portions of this exhibit have been omitted from
the copies filed as part of this Form S-1 and are the subject of a
request for confidential treatment with respect thereto pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
10.42++ First Amendment to Stock and Asset Purchase Agreement and Mutual
Release, dated as of May 1, 1996, by and among Bradley C. Burgess,
James W. Schlesing, J. Robert White, Jr., CBS Investment Realty of
California, Inc. and Koll Management Services, Inc. Certain portions
of this exhibit have been omitted from the copies filed as part of
this Form S-1 and are the subject of a request for confidential
treatment with respect thereto pursuant to Rule 406 promulgated under
the Securities Act of 1933, as amended.
10.43++ Asset Purchase Agreement, dated as of March 24, 1995, by and among
Richard G. Wollack, Brent Donaldson, Koll Management Services, Inc.
and Liquidity Financial Group, L.P. Certain portions of this exhibit
have been omitted from the copies filed as part of this Form S-1 and
are the subject of a request for confidential treatment with respect
thereto pursuant to Rule 406 promulgated under the Securities Act of
1933, as amended.
10.44++ Asset Purchase Agreement, dated as of June 30, 1995, by and between
The Shelard Group, Inc. and SCI Services, Inc. and Koll Management
Services, Inc. Certain portions of this exhibit have been omitted from
the copies filed as part of this Form S-1 and are the subject of a
request for confidential treatment with respect thereto pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.45++ Amendment to Asset Purchase Agreement and Agreement for Construction
Management Services, dated as of August 5, 1995, by and between Koll
Management Services, Inc. and SCI Services, Inc.
10.46++ Operating Agreement for Koll-Dove Global Disposition Services, LLC,
dated as of March 13, 1995, by and among Ross-Dove Company, Inc.,
Dovemedia Ltd., Dove Capital Corporation and Koll Management
Services, Inc. Certain portions of this exhibit have been omitted
from the copies filed as part of this Form S-1 and are the subject of
a request for confidential treatment with respect thereto pursuant to
Rule 406 promulgated under the Securities Act of 1933, as amended.
10.47++ Koll-Dove Global Disposition Services, LLC Contribution Agreement,
dated as of March 9, 1995, by among Ross-Dove Company, Inc.,
Dovetech, Inc., Dovemedia, Ltd., Dove Capital Corporation, Ross Dove,
Kirk Dove and Koll Management Services, Inc. Certain portions of this
exhibit have been omitted from the copies filed as part of this Form
S-1 and are the subject of a request for confidential treatment with
respect thereto pursuant to Rule 406 promulgated under the Securities
Act of 1933, as amended.
10.48++ Buy/Sell Agreement, dated as of March 13, 1995, by and among Koll-
Dove Global Disposition Services, LLC, Ross-Dove Company, Inc. and
Dove Capital Corporation. Certain portions of this exhibit have been
omitted from the copies filed as part of this Form S-1 and are the
subject of a request for confidential treatment with respect thereto
pursuant to Rule 406 promulgated under the Securities Act of 1933, as
amended.
11++ Statement Re: Computation of Per Share Earnings.
21++ List of Subsidiaries of the Registrant.
23.1++++ Consent of Riordan & McKinzie (contained in Exhibit 5.1).
23.2++ Consent of Ernst & Young LLP.
23.3++ Consent of Ernst & Young LLP.
23.4++ Consent of Arthur Andersen LLP.
24.1++ Powers of Attorney (included on the signature page).
27.1++ Financial Data Schedule.
</TABLE>
- --------
* Filed an exhibit to the Koll Management Services, Inc.'s Registration
Statement on Form S-1 (Registration No. 33-40948) on May 31, 1991 and
incorporated herein by reference.
** Filed as an exhibit to Koll Management Services, Inc.'s Form 8-K dated
January 1, 1992 and incorporated herein by reference.
*** Filed as an exhibit to Koll Management Services, Inc.'s Annual Report on
Form 10-K for the fiscal year ended March 31, 1993 and incorporated
herein by reference.
**** Filed as an exhibit to Koll Management Services, Inc.'s Schedule 13E-3
filed August 18, 1994 and incorporated herein by reference.
++Filed herewith.
++++To be filed by amendment.
<PAGE>
EXHIBIT 1.1
================================================================================
Koll Real Estate Services
(a Delaware corporation)
________ Shares of Common Stock
PURCHASE AGREEMENT
------------------
Dated: October __, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 1. Representations and Warranties........................................................ 2
(a) Representations and Warranties by the Company............................................ 2
(i) Compliance with Registration Requirements.................................. 2
(ii) Independent Accountants.................................................... 3
(iii) Financial Statements....................................................... 3
(iv) No Material Adverse Change in Business..................................... 4
(v) Good Standing of the Company............................................... 4
(vi) Good Standing of Subsidiaries.............................................. 4
(vii) Capitalization............................................................. 5
(viii) Authorization of Agreement................................................. 5
(ix) Authorization and Description of Securities................................ 5
(x) Absence of Defaults and Conflicts.......................................... 5
(xii) Absence of Proceedings..................................................... 6
(xiii) Accuracy of Exhibits....................................................... 6
(xiv) Possession of Intellectual Property........................................ 6
(xv) Absence of Further Requirements............................................ 7
(xvi) Possession of Licenses and Permits......................................... 7
(xvii) Title to Property.......................................................... 7
(xviii) Compliance with Cuba Act................................................... 7
(xix) Investment Company Act..................................................... 8
(xx) Environmental Laws......................................................... 8
(xxi) Registration Rights........................................................ 8
(xxiii) Affiliate Contracts........................................................ 8
(xxiv) Acquisitions............................................................... 8
(xxv) Internal Accounting Controls............................................... 9
(xxvi) Payment or Receipt of Funds................................................ 9
(xxvii) Tax Returns................................................................ 9
(xxviii) Insurance.................................................................. 9
(xxix) Finder's Fees.............................................................. 9
(xxx) Neither Broker or Dealer................................................... 9
(b) Representations and Warranties by the Selling Shareholders............................... 10
(i) Accurate Disclosure........................................................ 10
(ii) Authorization of Agreements................................................ 10
(iii) Good and Marketable Title.................................................. 10
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(iv) Due Execution of Power of Attorney and Custody Agreement................... 11
(v) Absence of Manipulation.................................................... 11
(vi) Absence of Further Requirements............................................ 11
(vii) Restriction on Sale of Securities.......................................... 11
(viii) Certificates Suitable for Transfer......................................... 11
(ix) No Association with NASD................................................... 12
(c) Officer's Certificates................................................................... 12
SECTION 2. Sale and Delivery to Underwriters: Closing............................................ 12
(a) Initial Securities....................................................................... 12
(b) Option Securities........................................................................ 12
(c) Payment.................................................................................. 13
(d) Denominations; Registration.............................................................. 13
SECTION 3. Covenants of the Company and KMS...................................................... 13
(a) Compliance with Securities Regulations and Commission Requests........................... 14
(b) Filing of Amendments..................................................................... 14
(c) Delivery of Registration Statements...................................................... 14
(d) Delivery of Prospectuses................................................................. 14
(e) Continued Compliance with Securities Laws................................................ 15
(f) Blue Sky Qualifications.................................................................. 15
(g) Rule 158................................................................................. 15
(h) Use of Proceeds.......................................................................... 15
(i) Listing.................................................................................. 15
(j) Restriction on Sale of Securities........................................................ 16
(k) Reporting Requirements................................................................... 16
(l) Compliance with Rule 463................................................................. 16
SECTION 4. Payment of Expenses................................................................... 16
(a) Expenses................................................................................. 16
(c) Expenses of the Selling Shareholders..................................................... 18
(c) Termination of Agreement................................................................. 18
SECTION 5. Conditions of Underwriters' Obligations............................................... 17
(a) Effectiveness of Registration Statement.................................................. 17
(b) Opinion of Counsel for Company........................................................... 17
(c) Opinion of Counsel for the Selling Shareholders.......................................... 18
(d) Opinion of Counsel for Underwriters...................................................... 18
(e)(1) Officers' Certificate of the Company..................................................... 18
(e)(2) Officers' Certificate of KMS............................................................. 18
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
(f) Certificate of Selling Shareholders...................................................... 19
(g) Accountants' Comfort Letter.............................................................. 19
(h) Bring-down Comfort Letter................................................................ 19
(i) Approval of Listing...................................................................... 19
(j) No Objection............................................................................. 19
(k) Lock-up Agreements....................................................................... 19
(l) Conditions to Purchase of Option Securities.............................................. 19
(i) Officers' Certificate...................................................... 19
(ii) Opinion of Counsel for Company............................................. 19
(iii) Opinion of Counsel for Underwriters........................................ 20
(iv) Bring-down Comfort Letter.................................................. 20
(m) Additional Documents..................................................................... 20
(n) Termination of Agreement................................................................. 20
SECTION 6. Indemnification....................................................................... 20
(a) Indemnification of Underwriters.......................................................... 20
(b) Indemnification of Company, Directors, Officers, KMS and Selling Shareholders............ 21
(c) Actions against Parties; Notification.................................................... 22
(d) Settlement without Consent if Failure to Reimburse....................................... 22
SECTION 7. Contribution.......................................................................... 22
SECTION 8. Representations Warranties and Agreements to Survive Delivery......................... 23
SECTION 9. Termination of Agreement.............................................................. 23
(a) Termination; General..................................................................... 23
(b) Liabilities.............................................................................. 24
SECTION 10. Default by One or More of the Underwriters............................................ 24
SECTION 11. Default by one or more of the Selling Shareholders or the Company..................... 25
SECTION 12. Notices............................................................................... 25
SECTION 13. Parties............................................................................... 26
SECTION 14. GOVERNING LAW AND TIME................................................................ 26
SECTION 15. Effect of Headings.................................................................... 26
</TABLE>
iii
<PAGE>
KOLL REAL ESTATE SERVICES
(a Delaware corporation)
______ Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
------------------
October __, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BT Securities Corporation
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Koll Real Estate Services, a Delaware corporation (the "Company"), Koll
Management Services, Inc., a Delaware corporation and a wholly owned subsidiary
of the Company ("KMS"), and the persons listed in Schedule B hereto (the
"Selling Shareholders"), confirm their respective agreements with Merrill Lynch
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
each of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch and BT
Securities Corporation are acting as representatives (in such capacity, the
"Representatives"), with respect to (i) the sale by the Company and the Selling
Shareholders, acting severally and not jointly, of the respective number of
shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") set forth in Schedules A and B hereto and (ii) the grant by the Company
to the Underwriters, acting severally and not jointly, of the option described
in Section 2(b) hereof to purchase all or any part of ________ additional shares
of Common Stock to cover over-allotments, if any. The aforesaid ________ shares
of Common Stock (the "Initial Securities") to be purchased by the Underwriters
and all or any part of the ________ shares of Common Stock subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities".
<PAGE>
The Company, KMS and the Selling Shareholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-____) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
The information included in such prospectus or in such Term Sheet, as the case
may be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto, if any, at the
time it became effective and including the Rule 430A Information and the Rule
434 Information, as applicable, is herein called the "Registration Statement."
Any registration statement filed pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final prospectus in the form first furnished
to the Underwriters for use in connection with the offering of the Securities is
herein called the "Prospectus." If Rule 434 is relied on, the term "Prospectus"
shall refer to the preliminary prospectus dated ______ 1996 together with the
Term Sheet and all references in this Agreement to the date of the Prospectus
shall mean the date of the Term Sheet. For purposes of this Agreement, all
references to the Registration Statement, any preliminary prospectus, the
Prospectus or any Term Sheet or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company and KMS. The Company
and KMS represent and warrant to each Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agree with each
Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are
2
<PAGE>
contemplated by the Commission, and any request on the part of the
Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. Neither the Prospectus nor any amendments or supplements
thereto, at the time the Prospectus or any such amendment or supplement was
issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434 is
used, the Company will comply with the requirements of Rule 434 and the
Prospectus shall not be "materially different," as such term is used in
Rule 434, from the prospectus included in the Registration Statement at the
time it became effective. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations, and each
preliminary prospectus and the Prospectus delivered to the Underwriters for
use in connection with this offering was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Registration
Statement for each of the Company, KMS prior to December 1, 1994 (the
"Predecessor Entity"), Karsten Realty Advisors, Midstates Management
Company, CBS Investment Realty, Inc., The Ross-Dove Company, Inc. and The
Shelard Group, are independent public accountants as required by the 1933
Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
--------------------
Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly the financial position of the Company,
the Predecessor Entity and their consolidated subsidiaries at the dates
indicated and the statement of operations, stockholders' equity and cash
flows of the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The financial statements included
in the Registration Statement and the Prospectus for each of
3
<PAGE>
Karsten Realty Advisors, Midstates Management Company, CBS Investment
Realty, Inc., The Ross-Dove Company, Inc. and The Shelard Group
(collectively, the "Audited Acquired Companies"), together with the related
schedules and notes, present fairly the financial position of the Audited
Acquired Companies at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Audited Acquired Companies for
the periods specified; said financial statements have been prepared in
conformity with GAAP applied on a consistent basis throughout the periods
involved. The supporting schedules, if any, included in the Registration
Statement present fairly in accordance with GAAP the information required
to be stated therein. The selected financial data and the summary financial
information included in the Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of the
audited financial statements included in the Registration Statement. The
pro forma financial statements and the related notes thereto included in
the Registration Statement and the Prospectus present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein,
and the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(iv) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(v) Good Standing of the Company. The Company has been duly organized
----------------------------
and is validly existing as a corporation in good standing under the laws of
the State of Delaware and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under this
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to
so qualify or to be in good standing would not result in a Material Adverse
Effect.
(vi) Good Standing of Subsidiaries. Each subsidiary of the Company
-----------------------------
(each a "Subsidiary" and, collectively, the "Subsidiaries") has been duly
organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has full power
(corporate or other) and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of
4
<PAGE>
property or the conduct of business, except where the failure to so qualify
or to be in good standing would not result in a Material Adverse Effect;
except as otherwise disclosed in the Registration Statement, all of the
issued and outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any Subsidiary
was issued in violation of the preemptive or similar rights of any
securityholder of such Subsidiary. The only subsidiaries of the Company are
the subsidiaries listed on Exhibit 21 to the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding capital
--------------
stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or
pursuant to the exercise of convertible securities or options referred to
in the Prospectus). The shares of issued and outstanding capital stock of
the Company have been duly authorized and validly issued and are fully paid
and non-assessable; none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights
of any securityholder of the Company.
(viii) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Securities have
-------------------------------------------
been duly authorized for issuance and sale to the Underwriters pursuant to
this Agreement and, when issued and delivered by the Company pursuant to
this Agreement against payment of the consideration set forth herein, will
be validly issued and fully paid and non-assessable; the Common Stock
conforms to all statements relating thereto contained in the Prospectus and
such description conforms to the rights set forth in the instruments
defining the same; no holder of the Securities will be subject to personal
liability by reason of being such a holder; and the issuance of the
Securities is not subject to the preemptive or other similar rights of any
securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor any of
---------------------------------
its subsidiaries is in violation of its charter or by-laws or in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein and
in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use of Proceeds") and
compliance by the Company with its obligations hereunder have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or
5
<PAGE>
constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to, the Agreements and Instruments (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or any
subsidiary or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any
subsidiary or any of their assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the employees of
------------------------
the Company or any subsidiary exists or, to the knowledge of the Company,
is imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or any subsidiary's principal
suppliers, manufacturers, customers or contractors, which, in either case,
may reasonably be expected to result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement or the
performance by the Company of its obligations hereunder; the aggregate of
all pending legal or governmental proceedings to which the Company or any
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material Adverse
Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
--------------------
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
-----------------------------------
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and neither the Company nor any of its subsidiaries
has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property
6
<PAGE>
invalid or inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as have been already obtained
or as may be required under the 1933 Act or the 1933 Act Regulations or
state securities laws.
(xvi) Possession of Licenses and Permits. The Company and its
----------------------------------
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and its
subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiaries have good
-----------------
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Prospectus or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company or any of
its subsidiaries; and all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as one enterprise,
and under which the Company or any of its subsidiaries holds properties
described in the Prospectus, are in full force and effect, and neither the
Company nor any subsidiary has any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the Company or
any subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary to
the continued possession of the leased or subleased premises under any such
lease or sublease.
(xviii) Compliance with Cuba Act. The Company has complied with, and
------------------------
is and will be in compliance with, the provisions of that certain Florida
act relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the rules and regulations thereunder
(collectively, the "Cuba Act") or is exempt therefrom.
7
<PAGE>
(xix) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as described in the Registration
------------------
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor any of its
subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof including any
judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements, (C)
there are no pending or threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of its subsidiaries and (D)
there are no events or circumstances that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an action, suit
or proceeding by any private party or governmental body or agency, against
or affecting the Company or any of its subsidiaries relating to Hazardous
Materials or any Environmental Laws.
(xxi) Registration Rights. Except as described in the Registration
-------------------
Statement, there are no persons with registration rights or other similar
rights to have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company under the 1933 Act.
(xxii) Affiliate Contracts. All descriptions of loan, guarantee,
-------------------
employment and other agreements and understandings among the Company, its
subsidiaries or investees and one or more of its affiliates described in
the Registration Statement or the Prospectus are accurate in all material
respects and present fairly the information required by the 1933 Act
Regulations with respect to such matters. The loan, guarantee, employment
and other contracts and agreements among the Company, its subsidiaries or
investees and one or more of its affiliates described in the Registration
Statement or the Prospectus have been duly and validly authorized, executed
and delivered by the parties thereto, and are valid and binding agreements
of such parties, enforceable in accordance with their terms.
(xxiii) Acquisitions. All descriptions of matters relating to
------------
companies or assets acquired or to be acquired by the Company, including
without limitation descriptions regarding (a) the following acquired
companies or assets: The Shelard Group, Inc.; the
8
<PAGE>
National Real Estate Index (from Liquidity Financial Group, L.P.); Koll-
Dove Global Disposition Services, L.L.C. (a 50% interest acquired from The
Ross-Dove Company, Inc.); CBS Investment Realty, Inc. and CBS Investment
Realty of New Mexico, Inc.; The Peregrine White Company, Inc.; Karsten
Realty Advisors; and Rubloff Inc., and (b) the following acquisition
candidates: Total Employee Relations, Inc.; Relocations, Inc.; and PT IPAC
Propertindo, or any of their respective affiliates, described in the
Registration Statement or the Prospectus are accurate in all material
respects and present fairly the information required by the 1933 Act
Regulations with respect to such matters.
(xxiv) Internal Accounting Controls. The Company maintains a system
----------------------------
of internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxv) Payment or Receipt of Funds. To the Company's knowledge,
---------------------------
neither the Company nor any of its subsidiaries nor any employee or agent
of the Company or any subsidiary has made any payment of funds of the
Company or any subsidiary or received or retained any funds in violation of
any law, rule or regulation, which payment, receipt or retention of funds
is of a character required to be disclosed in the Prospectus.
(xxvi) Tax Returns. The Company and each of its subsidiaries have
-----------
filed all tax returns required to be filed or obtained valid extensions on
a timely basis, which returns are complete and correct, and neither the
Company nor any subsidiary is in default in the payment of any taxes which
were payable pursuant to said returns or any assessments with respect
thereto.
(xxvii) Insurance. The Company and each of its subsidiaries are
---------
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are customary in the businesses in
which they are engaged or propose to engage; neither the Company nor any
subsidiary has been refused any insurance coverage sought or applied for;
and neither the Company nor any subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not
materially and adversely affect the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise.
(xxviii) Finder's Fees. Neither the Company nor any of its
-------------
subsidiaries has incurred any liability for finder's or broker's fees or
agent's commissions (other than those payable to the Underwriters) in
connection with the execution and delivery of this Agreement, the offer and
sale of the Securities or the transactions contemplated thereby.
(xxix) Neither Broker or Dealer. Neither the Company nor any of its
------------------------
subsidiaries is required to register as a "broker" or a "dealer" in
accordance with the provisions of the
9
<PAGE>
Securities Exchange Act of 1934 (the "1934 Act") or the rules and
regulations promulgated thereunder.
(b) Representations and Warranties by the Selling Shareholders. Each of
the Selling Shareholders severally represents and warrants to each Underwriter
as of the date hereof and as of the Closing Time, and agrees with each
Underwriter, as follows:
(i) Accurate Disclosure. To the best knowledge of such Selling
-------------------
Shareholder, the representations and warranties of the Company contained in
Section 1(a) hereof are true and correct; such Selling Shareholder has
reviewed and is familiar with the Registration Statement and the Prospectus
and the Prospectus does not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; such Selling Shareholder is not prompted to sell the Securities
to be sold by such Selling Shareholder hereunder by any information
concerning the Company or any subsidiary of the Company which is not set
forth in the Prospectus.
(ii) Authorization of Agreements. Each Selling Shareholder has the
---------------------------
full right, power and authority to enter into this Agreement and a Power of
Attorney and Custody Agreement (the "Power of Attorney and Custody
Agreement") and to sell, transfer and deliver the Securities to be sold by
such Selling Shareholder hereunder. The execution and delivery of this
Agreement and the Power of Attorney and Custody Agreement and the sale and
delivery of the Securities to be sold by such Selling Shareholder and the
consummation of the transactions contemplated herein and compliance by such
Selling Shareholder with its obligations hereunder have been duly
authorized by such Selling Shareholder and do not and will not, whether
with or without giving of notice or passage of time or both, conflict with
or constitute a breach of, or default under, or result in the creation or
imposition of any tax, lien, charge or encumbrance upon the Securities to
be sold by such Selling Shareholder or any property or assets of such
Selling Shareholder pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other agreement or
instrument to which such Selling Shareholder is a party or by which such
Selling Shareholder may be bound, or to which any of the property or assets
of such Selling Shareholder is subject, nor will such action result in any
violation of the provisions of the charter or by-laws or other
organizational instrument of such Selling Shareholder, if applicable, or
any applicable treaty, law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over such Selling Shareholder or
any of its properties.
(iii) Good and Marketable Title. Such Selling Shareholder has and
-------------------------
will at the Closing Time have good and marketable title to the Securities
to be sold by such Selling Shareholder hereunder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind, other than pursuant to this Agreement; and upon
delivery of such Securities and payment of the purchase price therefor as
herein contemplated, assuming each such Underwriter has no notice of any
adverse claim, each of the Underwriters will receive good and marketable
title to the Securities purchased by it from such Selling Shareholder, free
and clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind.
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<PAGE>
(iv) Due Execution of Power of Attorney and Custody Agreement. Such
--------------------------------------------------------
Selling Shareholder has duly executed and delivered, in the form heretofore
furnished to the Representatives, the Power of Attorney and Custody
Agreement with ___________ [and ____________, or any of them,] as
attorney[s]-in-fact (the "Attorney[s]-in-Fact") and ____________, as
custodian (the "Custodian"); the Custodian is authorized to deliver the
Securities to be sold by such Selling Shareholder hereunder and to accept
payment therefor, and [the] [each] Attorney-in-Fact is authorized to
execute and deliver this Agreement and the certificate referred to in
Section 5(f) or that may be required pursuant to Section 5(m) on behalf of
such Selling Shareholder, to sell, assign and transfer to the Underwriters
the Securities to be sold by such Selling Shareholder hereunder, to
determine the purchase price to be paid by the Underwriters to such Selling
Shareholder, as provided in Section 2(a) hereof, to authorize the delivery
of the Securities to be sold by such Selling Shareholder hereunder, to
accept payment therefor, and otherwise to act on behalf of such Selling
Shareholder in connection with this Agreement.
(v) Absence of Manipulation. Such Selling Shareholder has not taken,
-----------------------
and will not take, directly or indirectly, any action which is designed to
or which has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(vi) Absence of Further Requirements. No filing with, or consent,
-------------------------------
approval, authorization, order, registration, qualification or decree of,
any court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by each Selling Shareholder of
its obligations hereunder or in the Power of Attorney and Custody
Agreement, or in connection with the sale and delivery of the Securities
hereunder or the consummation of the transactions contemplated by this
Agreement, except such as may have previously been made or obtained or as
may be required under the 1933 Act or the 1933 Act Regulations or state
securities laws.
(vii) Restriction on Sale of Securities. During a period of [180]
---------------------------------
days from the date of the Prospectus, such Selling Shareholder will not,
without the prior written consent of Merrill Lynch, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
share of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under the
1933 Act with respect to any of the foregoing or (ii) enter into any swap
or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply
to the Securities to be sold hereunder.
(viii) Certificates Suitable for Transfer. Certificates for all of
----------------------------------
the Securities to be sold by such Selling Shareholder pursuant to this
Agreement, in suitable form for transfer by delivery or accompanied by duly
executed instruments of transfer or assignment in blank with signatures
guaranteed, have been placed in custody with the Custodian with irrevocable
11
<PAGE>
conditional instructions to deliver such Securities to the Underwriters
pursuant to this Agreement.
(ix) No Association with NASD. Neither such Selling Shareholder nor
------------------------
any of their respective affiliates directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, or has any other association with (within the meaning of
Article I, Section 1(m) of the By-laws of the National Association of
Securities Dealers, Inc.), any member firm of the National Association of
Securities Dealers, Inc.
(c) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Shareholders as such and
delivered to the Representatives or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by
such Selling Shareholder to the Underwriters as to matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters: Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and each Selling Shareholder, severally and not jointly, agree to sell
to each Underwriter, severally and not jointly, and each Underwriter, severally
and not jointly, agrees to purchase from the Company and each Selling
Shareholder, at the price per share set forth in Schedule C, that proportion of
the number of Initial Securities set forth in Schedule B opposite the name of
the Company or such Selling Shareholder, as the case may be, which the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof bears to the total number of Initial Securities, subject, in
each case, to such adjustments among the Underwriters as the Representatives in
their sole discretion shall make to eliminate any sales or purchases of
fractional securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional _______ shares of Common Stock
at the price per share set forth in Schedule C, less an amount per share equal
to any dividends or distributions declared by the Company and payable on the
Initial Securities but not payable on the Option Securities. The option hereby
granted will expire 30 days after the date hereof and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial Securities upon notice by the Representatives to the Company setting
forth the number of Option Securities as to which the several Underwriters are
then exercising the option and the time and date of payment and delivery for
such Option Securities. Any such time and date of delivery (a "Date of
Delivery") shall be determined by the Representatives, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Securities, each
12
<PAGE>
of the Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of Option Securities then being purchased which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter bears to the total number of Initial Securities, subject in
each case to such adjustments as the Representatives in their discretion shall
make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Gibson,
Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, California, or at such
other place as shall be agreed upon by the Representatives, the Company and the
Selling Shareholders, at 7:00 A.M. (California time) on the third (fourth, if
the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the Representatives, the Company and the Selling
Shareholders (such time and date of payment and delivery being herein called
"Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company.
Payment shall be made to the Company and the Selling Shareholders by wire
transfer of immediately available funds to bank accounts designated by the
Company and the Custodian pursuant to each Selling Shareholder's Power of
Attorney and Custody Agreement, as the case may be, against delivery to the
Representatives for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. It is understood that each
Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company and KMS. The Company and KMS covenant
--------------------------------
with each Underwriter as follows:
13
<PAGE>
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b), will comply with the requirements of
Rule 430A or Rule 434, as applicable, and will notify the Representatives
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus,
or of the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect the
filings necessary pursuant to Rule 424(b) and will take such steps as it
deems necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file such
Prospectus. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or
to the Prospectus, will furnish the Representatives with copies of any such
documents a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file or use any such document to which the
Representatives or counsel for the Underwriters shall object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters,
without charge, signed copies of the Registration Statement as originally
filed and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Representatives,
without charge, a conformed copy of the Registration Statement as
originally filed and of each amendment thereto (without exhibits) for each
of the Underwriters. The copies of the Registration Statement and each
amendment thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus
as such Underwriter reasonably requested, and the Company hereby consents
to the use of such copies for purposes permitted by the 1933 Act. The
Company will furnish to each Underwriter, without charge, during the period
when the Prospectus is required to be delivered under the 1933 Act or the
1934 Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request. The Prospectus
and any amendments or supplements thereto furnished to the Underwriters
will be identical to the
14
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electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters or
for the Company, to amend the Registration Statement or amend or supplement
the Prospectus in order that the Prospectus will not include any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to
amend the Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Company
will furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering
and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Representatives may designate
and to maintain such qualifications in effect for a period of not less than
one year from the later of the effective date of the Registration Statement
and any Rule 462(b) Registration Statement; provided, however, that the
Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Securities have
been so qualified, the Company will file such statements and reports as may
be required by the laws of such jurisdiction to continue such qualification
in effect for a period of not less than one year from the effective date of
the Registration Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market and
will file with the Nasdaq National Market all documents and notices
required by the Nasdaq National Market of
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companies that have securities that are traded in the over-the-counter
market and quotations for which are reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of [180/360]
days from the date of the Prospectus, the Company will not, without the
prior written consent of Merrill Lynch, (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
to purchase or otherwise transfer or dispose of any shares of Common Stock
or any securities convertible into or exercisable or exchangeable for
Common Stock or file any registration statement under the 1933 Act with
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the
Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of
a security outstanding on the date hereof and referred to in the Prospectus
or (C) any shares of Common Stock issued or options to purchase Common
Stock granted pursuant to the Company's Amended 1994 Nonqualified
Performance Stock Option Plan or Amended 1994 Employee Stock Subscription
Plan, each as referred to in the Prospectus.
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant
to the 1934 Act within the time periods required by the 1934 Act and the
rules and regulations of the Commission thereunder.
(1) Compliance with Rule 463. The Company will file with the
Commission such reports on Form SR as may be required pursuant to Rule 463
of the 1933 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. [The Company will pay]
-------------------
[The Company and the Selling Shareholders will each pay a pro rata share (based
on the number of Securities to be sold by each hereunder] [The Company and the
Selling Shareholders will pay or cause to be paid] all expenses incident to the
performance of [its] [their] obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of
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copies of each preliminary prospectus, any Term Sheets and of the Prospectus and
any amendments or supplements thereto, (vii) the preparation, printing and
delivery to the Underwriters of copies of the Blue Sky Survey and any supplement
thereto, (viii) the fees and expenses of any transfer agent or registrar for the
Securities, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review by
the National Association of Securities Dealers, Inc. (the "NASD") of the terms
of the sale of the Securities and (x) the fees and expenses incurred in
connection with the inclusion of the Securities in the Nasdaq National Market.
(b) Expenses of the Selling Shareholders. The Selling Shareholders,
jointly and not severally, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by, this Agreement, including (i) any stamp duties, capital duties
and stock transfer taxes, if any, payable upon the sale of the Securities to the
Underwriters, and their transfer between the Underwriters pursuant to an
agreement among such Underwriters, and (ii) the fees and disbursements of their
respective counsel and accountants.
(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company [and the Selling Shareholders] shall reimburse the
Underwriters for all of their out-of-pocket expenses, including the reasonable
fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
---------------------------------------
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company, KMS and the Selling Shareholders
contained in Section l hereof or in certificates of any officer of the Company,
KMS or any of their subsidiaries or on behalf of any Selling Shareholder
delivered pursuant to the provisions hereof, to the performance by the Company,
KMS and the Selling Shareholders of their respective covenants and other
obligations hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus containing the Rule 430A Information shall have
been filed with the Commission in accordance with Rule 424(b) (or a post-
effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if
the Company has elected to rely upon Rule 434, a Term Sheet shall have been
filed with the Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Riordan & McKinzie, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit A hereto and to such
further effect as counsel to the Underwriters may reasonably request.
17
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(c) Opinion of Counsel for the Selling Shareholders. At Closing Time,
the Representatives shall have received the favorable opinion, dated as of
Closing Time, of Riordan & McKinzie, counsel for the Selling Shareholders,
in form and substance satisfactory to counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the
other Underwriters to the effect set forth in Exhibit B hereto and to such
further effect as counsel to the Underwriters may reasonably request.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Gibson, Dunn & Crutcher LLP, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the
other Underwriters with respect to the matters set forth in clauses (i),
(ii), (v), (vi) (solely as to-preemptive or other similar rights arising by
operation of law or under the charter or by-laws of the Company), (viii)
through (x), inclusive, (xiv) (solely as to the information in the
Prospectus under "Description of Capital Stock--Common Stock") and the
penultimate paragraph of Exhibit A hereto. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions
other than the law of the State of New York, the federal law of the United
States and the General Corporation Law of the State of Delaware, upon the
opinions of counsel satisfactory to the Representatives. Such counsel may
also state that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon certificates of officers
of the Company and its subsidiaries and certificates of public officials.
(e)(1) Officers' Certificate of the Company. At Closing Time, there
shall not have been, since the date hereof or since the respective dates as
of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course
of business, and the Representatives shall have received a certificate of
the President or a Vice President of the Company and of the chief financial
or chief accounting officer of the Company dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
(e)(2) Officers' Certificate of KMS. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and
the Representatives shall have received a certificate of the President or a
Vice President of KMS and of the chief financial or chief accounting
officer of KMS dated as of Closing Time, to the effect that (i) there has
been no such material adverse change and (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force
and effect as though expressly made at and as of Closing Time.
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(f) Certificate of Selling Shareholders. At Closing Time, the
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Shareholder, dated as of Closing Time, to the effect
that (i) the representations and warranties of each Selling Shareholder
contained in Section 1(b) hereof are true and correct in all respects with
the same force and effect as though expressly made at and as of Closing
Time and (ii) each Selling Shareholder has complied in all material
respects with all agreements and all conditions on its part to be performed
under this Agreement at or prior to Closing Time.
(g) Accountants' Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter
for each of the other Underwriters containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(h) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from Ernst & Young LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (g) of this Section, except that the
specified date referred to shall be a date not more than three business
days prior to Closing Time.
(i) Approval of Listing. At the Closing Time the Securities shall have
been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.
(j) No Objection. The NASD shall not have raised any objection with
respect to the fairness and reasonableness of the underwriting terms and
arrangements.
(k) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form
of Exhibit C hereto signed by the persons listed in Schedule D hereto for
the period of time appearing next to such persons' name.
(l) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations
and warranties of the Company contained herein and the statements in any
certificates furnished by the Company and any subsidiary of the Company
shall be true and correct as of each Date of Delivery and, at the relevant
Date of Delivery, the Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(e) hereof remains true and correct as of such Date of
Delivery.
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(ii) Opinion of Counsel for Company. The favorable opinion of
Riordan & McKinzie, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(d) hereof.
(iii) Opinion of Counsel for Underwriters. The favorable opinion
of Gibson, Dunn & Crutcher LLP, counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(d) hereof.
(iv) Bring-down Comfort Letter. A letter from Ernst & Young LLP, in
form and substance satisfactory to the Representatives and dated such
Date of Delivery, substantially in the same form and substance as the
letter furnished to the Representatives pursuant to Section 5(g)
hereof, except that the "specified date" in the letter furnished
pursuant to this paragraph shall be a date not more than five days
prior to such Date of Delivery.
(m) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them
to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company and the Selling
Shareholders in connection with the issuance and sale of the Securities as
herein contemplated shall be satisfactory in form and substance to the
Representatives and counsel for the Underwriters.
(n) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery,
as the case may be, and such termination shall be without liability of any
party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in
full force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of Underwriters. The Company, KMS and the Selling
Shareholders, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto),
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including the Rule 430A Information and the Rule 434 Information, if
applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of
a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company, KMS
and the Selling Shareholders; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(b) Indemnification of Company, Directors, Officers, KMS and Selling
Shareholders. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, KMS, and each person, if any, who controls the Company within the
meaning of Section l5 of the 1933 Act or Section 20 of the 1934 Act, and each
Selling Shareholder, against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through Merrill
Lynch expressly for use in the Registration Statement (or any amendment thereto)
or such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
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(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by [the Company][the Selling
Shareholders]. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) The provisions of the Section shall not affect any agreement among the
Company, KMS and the Selling Shareholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section 6
------------
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, KMS and
the Selling Shareholders on the one hand and the Underwriters on the other hand
from the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative
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fault of the Company, KMS and the Selling Shareholders on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company, KMS and the Selling
Shareholders on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company, KMS and the Selling Shareholders and the
total underwriting discount received by the Underwriters, in each case as set
forth on the cover of the Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet, bear to the aggregate initial public offering price
of the Securities as set forth on such cover.
The relative fault of the Company, KMS and the Selling Shareholders on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company, KMS or the Selling Shareholders or by
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to
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this Section 7 are several in proportion to the number of Initial Securities set
forth opposite their respective names in Schedule A hereto and not joint.
The provisions of the Section shall not affect any agreement among the
Company, KMS and the Selling Shareholders with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company, KMS or the Selling Shareholders
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Company, KMS or the Selling
Shareholders, and shall survive delivery of the Securities to the Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Shareholders, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or limited by the Commission or the Nasdaq National Market, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq National Market has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority, or (iv) if a banking moratorium has been declared by
either Federal, New York or California authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6
and 7 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If one or more of
------------------------------------------
the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
24
<PAGE>
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-
defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of
all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of
the Underwriters to purchase and of the Company to sell the Option
Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the Representatives or the Company and any Selling
Shareholder shall have the right to postpone Closing Time or the relevant Date
of Delivery, as the case may be, for a period not exceeding seven days in order
to effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Default by one or more of the Selling Shareholders or the
---------------------------------------------------------
Company. (a) If any Selling Shareholder shall fail at Closing Time to sell and
- -------
deliver the number of Securities which such Selling Shareholder or Selling
Shareholders are obligated to sell hereunder, and the remaining Selling
Shareholders do not exercise the right granted hereby to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number to be sold by all Selling Shareholders as set forth in Schedule B hereto,
then the Underwriters may, at the option of the Representatives, by notice from
the Representatives to the Company and the non-defaulting Selling Shareholders,
either (i) terminate this Agreement without any liability on the fault of any
non-defaulting party except that the provisions of Sections 1, 4, 6 and 7 shall
remain in full force and effect or (ii) elect to purchase the Securities which
the non-defaulting Selling Shareholders have agreed to sell hereunder. No
action taken pursuant to this Section 11 shall relieve any Selling Shareholder
so defaulting from liability, if any, in respect of such default.
(b) If the Company shall fail at Closing Time or at the Date of Delivery
to sell the number of Securities that it is obligated to sell hereunder, then
this Agreement shall terminate without liability on the part of any non-
defaulting party; provided, however, that the provisions of Sections 4, 6 and 7
shall remain in full force and effect. No action taken pursuant to this Section
shall relieve the Company from liability, if any, in respect of such default.
SECTION 12. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at 10900 Wilshire
Boulevard, Suite 900, Los Angeles, California 90024, attention of [David L.
Knowles,
25
<PAGE>
Managing Director]; notices to the Company shall be directed to it at
4343 Von Karman, Newport Beach, California, Suite ___, attention of __________,
_______; and notices to the Selling Shareholders shall be directed to
_____________, attention of __________.
SECTION 13. Parties. This Agreement shall each inure to the benefit of
-------
and be binding upon the Underwriters, the Company, KMS and the Selling
Shareholders and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company, KMS and the Selling
Shareholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company, KMS and the Selling
Shareholders and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
26
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company and the Attorney-in-Fact for the Selling
Shareholders a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the Underwriters, the
Company, KMS and the Selling Shareholders in accordance with its terms.
Very truly yours,
KOLL REAL ESTATE SERVICES
By:
-------------------------------
Title:
----------------------------
KOLL MANAGEMENT SERVICES, INC.
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
As Attorney-in-Fact acting on behalf of the
Selling Shareholders named in Schedule B
hereto
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BT SECURITIES CORPORATION
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
----------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
27
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Initial
Name of Underwriter Securities
- ----------------------------------------------------- -----------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................
BT Securities Corporation..........................
----------------------
Total..............................................
======================
</TABLE>
Sch A - 1
<PAGE>
SCHEDULE B
SELLING SHAREHOLDERS
--------------------
<TABLE>
<CAPTION>
Number of Initial
Name of Selling Shareholder Securities
- ------------------------------------------------ ------------------------
<S> <C>
The Koll Holding Company/1/..................... 0
Raymond E. Wirta................................ 67,200
William S. Rothe, Jr. .......................... 24,100
------------------------
Total................................. 91,300
========================
</TABLE>
- -----------------------
/1/ Immediately prior to consummation of the Offering, Messrs. Wirta and Rothe
will exercise options granted to them by The Koll Holding Company to
purchase 67,200 and 24,100 shares of Common Stock, respectively. Messrs.
Wirta and Rothe will then sell such shares in the Offering.
Sch B - 1
<PAGE>
SCHEDULE C
[KOLL, INC.]
___________ Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $____.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $____, being an amount equal to the initial public
offering price set forth above less $____ per share; provided that the purchase
price per share for any Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial Securities but not payable on the Option Securities.
Sch C - 1
<PAGE>
[SCHEDULE D]
[LIST OF PERSONS AND ENTITIES SUBJECT TO LOCK-UP]
Freeman Spogli & Co. Incorporated [___ days]
FS Equity Partners III, L.P. [___ days]
FS Equity Partners International, L.P. [___ days]
The Koll Holding Company [___ days]
AP KMS Partners, L.P. [___ days]
Raymond E. Wirta [___ days]
William S. Rothe, Jr. [___ days]
Richard G. Wollack [___ days]
Richard S. Abraham [___ days]
[LIST OTHER KEY EMPLOYEES THAT OWN SHARES] [___ DAYS]
Sch D - 1
<PAGE>
EXHIBIT A
---------
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to the
Purchase Agreement or pursuant to reservations, agreements or employee benefit
plans referred to in the Prospectus or pursuant to the exercise of convertible
securities or options referred to in the Prospectus); the shares of issued and
outstanding capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; and none of the outstanding shares
of capital stock of the Company was issued in violation of the preemptive or
other similar rights of any securityholder of the Company.
(v) The Securities have been duly authorized for issuance and sale to the
Underwriters pursuant to the Purchase Agreement and, when issued and delivered
by the Company pursuant to the Purchase Agreement against payment of the
consideration set forth in the Purchase Agreement, will be validly issued and
fully paid and non-assessable and no holder of the Securities is or will be
subject to personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to preemptive or other
similar rights of any securityholder of the Company.
(vii) Each Subsidiary has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has full power (corporate or other) and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as otherwise
disclosed in the Registration Statement, all of the issued and outstanding
capital stock of each Subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and, to the best of our knowledge, is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of
Ex. A-1
<PAGE>
capital stock of any Subsidiary was issued in violation of the preemptive or
similar rights of any securityholder of such Subsidiary.
(viii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to the best of our knowledge, no
stop order suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or threatened
by the Commission.
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus and each amendment or supplement to the Registration
Statement and Prospectus as of their respective effective or issue dates (other
than the financial statements and supporting schedules included therein or
omitted therefrom, as to which we need express no opinion) complied as to form
in all material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(xi) If Rule 434 has been relied upon, the Prospectus was not "materially
different," as such term is used in Rule 434, from the prospectus included in
the Registration Statement at the time it became effective.
(xii) The form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company and the
requirements of the Nasdaq National Market.
(xiii) To the best of our knowledge, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Company or
any subsidiary is a party, or to which the property of the Company or any
subsidiary is subject, before or brought by any court or governmental agency or
body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the performance by the
Company of its obligations thereunder.
(xiv) The information in the Prospectus under "Description of Capital
Stock--Common Stock," "--Preferred Stock" and "--Certain Charter and Bylaw
Provisions," "Certain Transactions--Stockholders Agreement" and "--Registration
Rights Agreements", "Risk Factors--Risks Related to General Partner Status" and
"Business--Legal Proceedings", and in the Registration Statement under item 15,
to the extent that it constitutes matters of law, summaries of legal matters,
the Company's charter and bylaws or legal proceedings, or legal conclusions, has
been reviewed by such counsel and is correct in all material respects.
(xv) To the best of our knowledge, there are no statutes or regulations
that are required to be described in the Prospectus that are not described as
required.
Ex. A-2
<PAGE>
(xvi) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
and the descriptions thereof or references thereto are correct in all material
respects.
(xvii) To the best of our knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws and no default by the
Company or any subsidiary exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement.
(xviii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering, issuance
or sale of the Securities.
(xix) The execution, delivery and performance of the Purchase Agreement
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section l(a)(x) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to us, to which the Company or any subsidiary is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that would not
have a Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or any subsidiary, or
any applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any subsidiary or any of their
respective properties, assets or operations.
(xx) To the best of our knowledge, other than as set forth in the
Registration Statement, there are no persons with registration rights or other
similar rights to have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company under the 1933 Act.
(xxi) The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the 1940 Act.
Ex. A-3
<PAGE>
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable) (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact (but
not as to legal conclusions), to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. Such opinion shall
not state that it is to be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
Ex. A-4
<PAGE>
EXHIBIT B
---------
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) No filing with, or consent, approval, authorization, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than the issuance of the order of the
Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state securities
laws, as to which we need express no opinion) is necessary or required to be
obtained by the Selling Shareholders for the performance by each Selling
Shareholder of its obligations under the Purchase Agreement or in the Power of
Attorney and Custody Agreement, or in connection with the offer, sale or
delivery of the Securities.
(ii) Each Power of Attorney and Custody Agreement has been duly executed
and delivered by the respective Selling Shareholder named therein and
constitutes the valid and binding agreement of such Selling Shareholder in
accordance with its terms.
(iii) The Purchase Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Shareholder.
(iv) Each Attorney-in-Fact has been duly authorized by the Selling
Shareholders to deliver the Securities on behalf of the Selling Shareholders in
accordance with the terms of the Purchase Agreement.
(v) The execution, delivery and performance of the Purchase Agreement and
the Power of Attorney and Custody Agreement and the sale and delivery of the
Securities and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement and compliance by the Selling
Shareholders with their respective obligations under the Purchase Agreement have
been duly authorized by all necessary action on the part of the Selling
Shareholders and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of, or
default under or result in the creation or imposition of any tax, lien, charge
or encumbrance upon the Securities or any property or assets of the Selling
Shareholders pursuant to, any contract, indenture, mortgage, deed of trust, loan
or credit agreement, note, license, lease or other instrument or agreement to
which any Selling Shareholder is a party or by which they may be bound, or to
which any of the property or assets of the Selling Shareholders may be subject
nor will such action result in any violation of the provisions of the charter or
by-laws of the Selling Shareholders, if applicable, or any law, administrative
regulation, judgment or order of any governmental agency or body or any
administrative or court decree having jurisdiction over such Selling Shareholder
or any of its properties.
(vi) Each Selling Shareholder is, and immediately prior to Closing Time
will be, the sole registered owner of the Securities to be sold by such Selling
Shareholder; upon consummation of the sale of the Securities pursuant to the
Purchase Agreement, each of the Underwriters will be the registered owner of the
Securities purchased by it from such Selling Shareholder and, assuming the
Underwriters purchased the Securities for value in good faith and without notice
of any adverse claim, the Underwriters will have acquired all rights of such
Selling Shareholder in the Securities
Ex. B-1
<PAGE>
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity, and the owner of the Securities, if other than such Selling
Shareholder, is precluded from asserting against the Underwriters the
ineffectiveness of any unauthorized endorsement; and such Selling Shareholder
has the full right, power and authority (A) to enter into the Purchase Agreement
and the Power of Attorney and Custody Agreement and (B) to sell, transfer and
deliver the Securities to be sold by such Selling Shareholder under the Purchase
Agreement.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable) (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Ex. B-2
<PAGE>
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS AND OTHER STOCKHOLDERS PURSUANT TO
SECTION 5(K)]
EXHIBIT C
---------
_____ __, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BT Securities Corporation
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by Koll Real Estate Services
-----------------------------------------------------
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of Koll
Real Estate Services, a Delaware corporation (the "Company"), understands that
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and BT
Securities Corporation propose to enter into a Purchase Agreement (the "Purchase
Agreement") with the Company providing for the public offering of shares (the
"Securities") of the Company's common stock, par value $.01 per share (the
"Common Stock"). In recognition of the benefit that such an offering will confer
upon the undersigned as a stockholder [and an officer and/or director] of the
Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
underwriter to be named in the Purchase Agreement that, during a period of ___
days from the date of the Purchase Agreement, the undersigned will not, without
the prior written consent of Merrill Lynch, directly or indirectly, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of the Company's
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, or file any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing, or (ii) enter into any
swap or other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Common
Stock, whether any such swap or transaction is to be settled by delivery of
Common Stock or other securities, in cash or otherwise.
Very truly yours,
Signature:___________________________
Print Name:__________________________
Ex. C-1
<PAGE>
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
KOLL, INC.
The undersigned, Raymond E. Wirta, hereby certifies that:
1. He is the duly elected, qualified and acting Chief Executive
Officer of Koll, Inc. (the "Company").
2. The Company's original Certificate of Incorporation was filed
with the Secretary of State of Delaware on May 20, 1994, under the name "KMS
Holding Corporation."
3. Pursuant to Sections 242 and 245 of the General Corporation Law
of the State of Delaware, and having been duly adopted in accordance therewith,
this Restated Certificate of Incorporation restates and integrates and amends
the provisions of the Certificate of Incorporation of this Company, as it may
have heretofore been amended or supplemented.
4. The text of the Certificate of Incorporation of the Company, as
it may have heretofore been amended or supplemented, is hereby further amended
and restated to read in its entirety as follows:
ARTICLE I
---------
The name of the corporation is Koll Real Estate Services (the
"Company").
ARTICLE II
----------
The address of the registered office of the Company in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle 19801. The name and address of the Company's
registered agent in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle 19801.
<PAGE>
ARTICLE III
-----------
The purpose of the Company is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code.
ARTICLE IV
----------
The total number of shares of stock which the Company shall have
authority to issue is Thirty-Seven Million (37,000,000), to be divided into two
classes consisting of (i) Two Million (2,000,000) shares of preferred stock,
$0.01 par value per share, to be designated as "Preferred Stock," and (ii)
Thirty-Five Million (35,000,000) shares of common stock, $0.01 par value per
share, to be designated as "Common Stock."
The Board of Directors of the Company (the "Board") is expressly
authorized at any time, and from time to time, to provide for the issuance of
shares of Preferred Stock in one or more classes or series, with such voting
powers, full or limited, or without voting powers, and with such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board, and as are not stated and expressed in this Certificate of
Incorporation, or any amendment thereto, including (but without limiting the
generality of the foregoing) the following:
(a) the designation of and number of shares constituting such series;
(b) the dividend rate of such class or series, the conditions and
dates upon which such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on any other class or
series of the same class or of any other class or series of any class of capital
stock and whether such dividends shall be cumulative or noncumulative;
(c) whether the shares of such series shall be subject to redemption
by this Company, and, if made subject to such redemption, the times, prices, and
other terms and conditions of such redemption;
(d) the terms and amount of any sinking fund provided for the purchase
or redemption of the shares of such series;
(e) whether or not the shares of such class or series shall be
convertible into or exchangeable for shares of any other class or classes or of
any other series of any class or classes of capital stock of this Company, and,
if provision be made for conversion or
2
<PAGE>
exchange, the times, prices, rates, adjustments, and other terms and conditions
of such conversion or exchange;
(f) whether or not the shares of such class or series shall have
voting rights, in addition to the voting rights provided by law, and, if so, the
terms and conditions of such voting rights;
(g) the restrictions, if any, on the issue or reissue of any
additional Preferred Stock;
(h) the rights of the holders of the shares of such class or series
upon the dissolution of, or upon the distribution of assets of, this Company;
and
(i) such other powers, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations, and
restrictions thereof, as the Board shall determine.
ARTICLE V
---------
The business and affairs of the Company shall be managed by and under
the direction of the Board of Directors. The exact number of directors of the
Company shall be fixed by or in the manner provided in the Bylaws of the Company
(the "Bylaws").
ARTICLE VI
----------
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
(a) to adopt, repeal, rescind, alter or amend in any respect the
Bylaws, and to confer in the Bylaws powers and authorities upon the directors of
the Company in addition to the powers and authorities expressly conferred upon
them by statute;
(b) from time to time to set apart out of any funds or assets of the
Company available for dividends an amount or amounts to be reserved as working
capital or for any other lawful purpose and to abolish any reserve so created
and to determine whether any, and, if any, what part, of the surplus the Company
or its net profits applicable to dividends shall be declared in dividends and
paid to its stockholders, and all rights of the holders of stock of the Company
in respect to dividends shall be subject to the power of the Board of Directors
so to do;
(c) subject to the laws of the State of Delaware, from time to time to
sell, lease or otherwise dispose of any part or parts of the properties of the
Company and to cease
3
<PAGE>
to conduct the business connected therewith or again to resume the same, as it
may deem best; and
(d) in addition to the powers and authorities hereinbefore and by the
laws of the State of Delaware conferred upon the Board of Directors, to execute
all such powers and to do all acts and things as may be exercised or done by the
Company; subject, nevertheless, to the express provisions of said laws, of the
Certificate of Incorporation of the Company and its Bylaws.
ARTICLE VII
-----------
Meetings of stockholders of the Company may be held within or without
the State of Delaware, as the Bylaws may provide. The books of the Company may
be kept (subject to any provision of applicable law) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws.
ARTICLE VIII
------------
The Company reserves the right to adopt, repeal, rescind, alter or
amend in any respect any provision contained in this Restated Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
ARTICLE IX
----------
A Director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law, (iii) under Section 174 of the Delaware General Corporation Law, as the
same exists or hereafter may be amended or (iv) for any transaction from which
the director derived an improper benefit. If the Delaware General Corporation
Law hereafter is amended to authorize the further elimination or limitation of
the liability of directors, then the liability of a Director of the Company, in
addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the amended Delaware General
Corporation Law. No amendment to or repeal of this Article IX shall apply to or
have any affect on the liability or alleged liability of any director of the
Company for or with respect to any acts or omissions of such director occurring
prior to such amendment or repeal.
4
<PAGE>
5. The foregoing Restated Certificate of Incorporation has been
approved by the Company's Board of Directors by written consent in accordance
with Section 141(f) of the General Corporation Law of the State of Delaware.
6. The foregoing Restated Certificate of Incorporation has been
approved by the stockholders of the Company by written consent in accordance
with Section 228 of the General Corporation Law of the State of Delaware, and
written notice thereof has been given as provided in such Section 228.
IN WITNESS WHEREOF, the Company has caused this Restated Certificate
of Incorporation to be signed by Raymond E. Wirta, its Chief Executive Officer,
this 16th day of August 1996.
By: /s/ RAYMOND E. WIRTA
----------------------------
Raymond E. Wirta
Chief Executive Officer
114237.1
5
<PAGE>
KMS HOLDING CORPORATION
OFFICER'S CERTIFICATE
Reference is made to the desire of KMS Holding Corporation, a Delaware
corporation (the "Company"), to amend and restate its Certificate of
Incorporation to, among other things, change the name of the Company to "Koll
Real Estate Services." Reference is also made to Sections 102(a)(1) and 103 of
the Delaware General Corporation Law which permit the Delaware Division of
Corporations to waive the requirement that the name of the Company contain one
of the terms listed in Section 102(a)(1) that indicate the legal status of the
Company if the Company files a certificate stating that its total assets are not
less than ten (10) million dollars.
I, Raymond E. Wirta, on behalf of the Company, hereby certify as
follows:
1. I am the duly elected and acting Chief Executive Officer of the
Company.
2. The Company's "total assets," as that term is defined in Section
503(i) of the Delaware General Corporation Law, are not less than, and are
substantially in excess of, ten (10) million dollars.
IN WITNESS WHEREOF, this Certificate has been executed as of the 16th
day of August 1996.
/s/ Raymond E. Wirta
------------------------------------------
Raymond E. Wirta, Chief Executive Officer
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
KOLL REAL ESTATE SERVICES
ARTICLE I
Offices
-------
Section 1.1 Registered Office. The registered office of Koll Real
-----------------
Estate Services (the "Corporation") in the State of Delaware shall be at 1209
Orange Street, in the City of Wilmington, County of New Castle, and the name of
the registered agent at that address shall be The Corporation Trust Company.
Section 1.2 Principal Executive Office. The principal executive
--------------------------
office of the Corporation shall be located at such place within or outside of
the State of Delaware as the board of directors of the Corporation (the "Board
of Directors") from time to time shall designate.
Section 1.3 Other Offices. The Corporation may also have an office
-------------
or offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE II
Stockholders
------------
Section 2.1 Annual Meetings. An annual meeting of stockholders shall
---------------
be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by the Board of
Directors from time to time. In the absence of any such designation,
stockholders' meetings shall be at the principal executive office of the
Corporation. Any other proper business may be transacted at the annual meeting.
Section 2.2 Special Meetings. Special meetings of stockholders may
----------------
be called at any time by the Board of Directors, the Chairman of the Board, the
President or the holders of shares entitled to cast not less than 10% of the
votes at such meeting. Special meetings may not be called by any other person
or persons. Each special meeting shall be held at such date and time as is
requested by the person or persons calling the meeting, within the limits fixed
by law.
<PAGE>
Section 2.3 Notice of Meetings. Whenever stockholders are required
------------------
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the Corporation.
Section 2.4 Adjournments. Any meeting of stockholders, annual or
------------
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stock holder of record entitled to vote at the meeting.
Section 2.5 Quorum. At each meeting of stockholders, except where
------
otherwise provided by law, the Certificate of Incorporation or these Bylaws, the
holders of a majority of the outstanding shares of each class of stock entitled
to vote at the meeting, present in person or represented by proxy, shall
constitute a quorum. For purposes of the foregoing, two or more classes or
series of stock shall be considered a single class if the holders thereof are
entitled to vote together as a single class at the meeting. In the absence of a
quorum the stockholders so present may, by majority vote, adjourn the meeting
from time to time in the manner provided by Section 2.4 of these Bylaws until a
quorum shall attend. Shares of its own capital stock belonging on the record
date for the meeting to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including, but not limited to, its own stock, held by it in a fiduciary
capacity.
Section 2.6 Organization. Meetings of stockholders shall be presided
------------
over by the Chairman of the Board, if any, or in his absence, by the President,
or in his absence, by a Vice President, or in the absence of the foregoing
persons, by a chairman designated, by the Board of Directors, or in the absence
of such designation, by a chairman chosen at the meeting. The Secretary shall
act as secretary of the meeting, but in his absence the chairman of the meeting
may appoint any person to act as secretary of the meeting.
Section 2.7 Voting; Proxies. Unless otherwise provided in the
---------------
Certificate of Incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. If the Certificate of
Incorporation provides for more or less than one vote
2
<PAGE>
for any share on any matter, every reference in these Bylaws to a majority or
other proportion of stock shall refer to such majority or other proportion of
the votes of such stock. A stockholder may vote the shares owned of record by
him either in person or by proxy executed in writing (which shall include
writings sent by telex, telegraph, cable, facsimile transmission or other means
of electronic transmission) by the stockholder himself or his duly authorized
attorney-in-fact; provided, however, that any such telex, telegram, cablegram,
facsimile transmission or other means of electronic transmission must either set
forth or be submitted with information from which it can be determined that the
telex, telegram, cablegram, facsimile transmission or other means of electronic
transmission was authorized by the stockholder. If it is determined that such
telexes, telegrams, cablegrams, facsimile transmissions or other electronic
transmissions are valid, the inspectors or, if there are no inspectors, such
other persons making that determination shall specify the information upon which
they relied. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to the foregoing
sentences of this Section 2.7 may be substituted or used in lieu of the original
writing or transmission for any and all purposes for which the original writing
or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission. Execution of the proxy may be
accomplished by the stockholder or his authorized officer, director, employee or
agent signing such writing or causing his or her signature to be affixed to such
writing by any reasonable means including, but not limited to, by facsimile
signature. No such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A stockholder may revoke any proxy which is not irrevocable by attending
the meeting and voting in person or by filing an instrument in writing revoking
the proxy or another duly executed proxy bearing a later date with the Secretary
of the Corporation. Voting at meetings of stockholders need not be by written
ballot and need not be conducted by inspectors unless required by Section 2.10
of these Bylaws or unless the holders of a majority of the outstanding shares of
all classes of stock entitled to vote thereon present in person or by proxy at
such meeting shall so determine. At all meetings of stockholders for the
election of directors or otherwise, all elections and questions shall, unless
otherwise provided by law, by the Certificate of Incorporation or these Bylaws,
be decided by the vote of the holders of a majority of the outstanding shares of
all classes of stock entitled to vote thereon present in person or by proxy at
the meeting.
Section 2.8 Fixing Date for Determination of Stockholders of Record.
-------------------------------------------------------
In order that the Corporation may determine the stockholders entitled to notice
of, or to vote, at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other
3
<PAGE>
action. If no record date is fixed: (1) the record date for determining
stockholders entitled to notice of, or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; (2) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting (to the extent such action by the stockholders is
permitted by these Bylaws) when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 2.9 List of Stockholders Entitled to Vote. The Secretary
-------------------------------------
shall prepare and make, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder for any purpose germane to the meeting
during ordinary business hours for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
Section 2.10 Inspectors of Election. Before any meeting of
----------------------
stockholders, the Board of Directors may appoint any persons other than nominees
for office to act as inspectors of election at the meeting or its adjournment.
If the Corporation has a class of voting stock that is (1) listed on a national
securities exchange, (2) authorized for quotation on an inter-dealer quotation
system of a registered national securities exchange, or (3) held of record by
more than 2,000 stockholders, the Board of Directors shall, in advance of any
meeting of stockholders, appoint one or more inspectors other than nominees for
office to act at the meeting. If no inspectors of election are appointed, the
chairman of the meeting may, and on the request of any stockholder or his proxy
shall, appoint inspectors of election at the meeting. The number of inspectors
shall be either one or three. If inspectors are appointed at a meeting on the
request of one or more stockholders or proxies, the holders of a majority of
shares or other proxies present at the meeting shall determine whether one or
three inspectors are to be appointed. If any person appointed as inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment by the Board of Directors before the meeting, or by the meeting
chairman at the meeting. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability.
4
<PAGE>
The duties of these inspectors shall be as follows: (i) ascertain the
number of shares outstanding and the voting power of each; (ii) determine the
shares represented at a meeting and the validity of proxies and ballots; (iii)
count all votes and ballots; (iv) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors; and (v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
the meeting. No ballot, proxies or votes, nor any revocations thereof or
changes thereto shall be accepted by the inspectors after the closing of the
polls.
Except as otherwise required by applicable law, in determining the
validity and counting of proxies and ballots, the inspectors shall be limited to
an examination of the proxies, any envelopes submitted with those proxies, any
information provided in accordance with Section 2.7 hereof, ballots and the
regular books and records of the Corporation.
Section 2.11 Consent of Stockholders in Lieu of Meeting. Unless
------------------------------------------
otherwise provided in the Certificate of Incorporation, any action required by
law to be taken at any annual or special meeting of stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice or
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
Board of Directors
------------------
Section 3.1 Powers. The business and affairs of the Corporation
------
shall be managed by or under the direction of the Board of Directors, except as
may be otherwise provided by law or in the Certificate of Incorporation.
Section 3.2 Number of Directors. The number of directors shall be
-------------------
fixed from time to time by resolution of the Board of Directors. Directors need
not be stockholders.
5
<PAGE>
Section 3.3 Election and Term of Office. Each director shall hold
---------------------------
office until the annual meeting of stockholders next succeeding his election and
until his successor is elected and qualified. No decrease in the authorized
number of directors shall shorten the term of any incumbent directors.
Section 3.4 Election of Chairman of the Board. At the organizational
---------------------------------
meeting immediately following the annual meeting of stockholders, the directors
shall elect a Chairman of the Board from among the directors who shall hold
office until the correspond ing meeting of the Board of Directors in the next
year and until his successor shall have been elected or until his earlier
resignation or removal. Any vacancy in such office may be filled for the
unexpired portion of the term in the same manner by the Board of Directors at
any regular or special meeting.
Section 3.5 Vacancies and Additional Directorships. Subject to the
--------------------------------------
provisions of the Certificate of Incorporation, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled solely by the affirmative vote of a majority of
the remaining directors then in office, even though such majority is less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall, if elected to fill a vacancy, hold office for the
remainder of the full term of the departed director and, if elected to a newly
created directorship, hold office until the next annual meeting of stockholders,
and, in either case, until such director's successor shall have been elected and
qualified.
Section 3.6 Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine and, if
so determined, notice thereof need not be given.
Section 3.7 Special Meetings. Special meetings of the Board of
----------------
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by the President,
or by any director. Notice of the time or place of a special meeting shall be
(i) delivered personally, by facsimile or by telephone to each director at least
48 hours before the time of the holding of the meeting, (ii) delivered by
overnight courier service to each director at least 48 hours before the time of
the holding of the meeting addressed to that director's address as shown on the
records of the Corporation or (iii) deposited in the United States mail at least
four days before the date of the holding of the meeting addressed to that
director's address as shown on the records of the Corporation. Any oral notice
given personally or by telephone may be communicated either to the director or
to a person at the address of the director who the person giving notice has
reason to believe will promptly communicate it to the director. The notice need
not state the purpose of the meeting.
6
<PAGE>
Section 3.8 Telephonic Meetings Permitted. Members of the Board of
-----------------------------
Directors, or any committee thereof, as the case may be, may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communi cations equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Bylaw shall constitute presence in person at such meeting.
Section 3.9 Quorum; Vote Required for Action. At all meetings of the
--------------------------------
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business. The vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors unless the Certificate of Incorporation or these Bylaws
shall require a vote of a greater number. In case at any meeting of the Board
of Directors a quorum shall not be present, the members of the Board of
Directors present may adjourn the meeting from time to time until a quorum shall
attend.
Section 3.10 Organization. Meetings of the Board of Directors shall
------------
be presided over by the Chairman of the Board, if any, or in his absence by the
President, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.
Section 3.11 Action by Directors Without a Meeting. Unless otherwise
-------------------------------------
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or of such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 3.12 Compensation of Directors. The Board of Directors shall
-------------------------
have the authority to fix the compensation of directors.
Section 3.13 Removal. Subject to the provisions of the Certificate
-------
of Incorporation, any director may be removed from office at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
ARTICLE IV
Committees
----------
Section 4.1 Committees. The Board of Directors may, by resolution
----------
passed by a majority of the Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may
7
<PAGE>
designate one or more directors as alternate members of any committee who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqua lification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution, removing or
indemnifying directors or amending these Bylaws; and, unless the resolution
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
Section 4.2 Committee Rules. Unless the Board of Directors otherwise
---------------
provides, each committee designated by the Board of Directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of a provision
by the Board of Directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the trans action of business, the vote
of a majority of the members present at a meeting at the time of such vote if a
quorum is then present shall be the act of such committee, and in other respects
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article III of these Bylaws.
ARTICLE V
Officers
--------
Section 5.1 Officers; Election. As soon as practicable after the
------------------
annual meeting of stockholders in each year, the Board of Directors shall elect
a President and a Secretary, and it may, if it so determines, elect from among
its members a Chairman of the Board. The Board of Directors may also elect one
or more Executive Vice Presidents, one or more Vice Presidents, one or more
Assistant Secretaries, a Treasurer or Chief Financial Officer and one or more
Assistant Treasurers or Assistant Chief Financial Officers and may give any of
them such further designations or alternate titles as it considers desirable.
Any number of offices may be held by the same person.
Section 5.2 Term of Office; Resignation; Removal; Vacancies. Except
-----------------------------------------------
as otherwise provided in a resolution of the Board of Directors electing any
officer, each officer shall hold office until the first meeting of the Board of
Directors after the annual meeting of
8
<PAGE>
stockholders next succeeding his election, and until his successor is elected
and qualified or until his earlier death, resignation or removal. Any officer
may resign at any time upon written notice to the Board of Directors or to the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise specified therein no
acceptance of such resignation shall be necessary to make it effective. The
Board of Directors may remove any officer with or without cause at any time.
Any such removal shall be without prejudice to the contractual rights of such
officer, if any, with the Corporation, but the election of an officer shall not
of itself create contractual rights. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be filled for the
unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 5.3 Powers and Duties. The officers of the Corporation shall
-----------------
have such powers and duties in the management of the Corporation as shall be
stated in these Bylaws or in a resolution of the Board of Directors which is not
inconsistent with these Bylaws and, to the extent not so stated, as generally
pertain to their respective offices, subject to the control of the Board of
Directors. The Secretary shall have the duty to record the proceedings of the
meetings of stockholders, the Board of Directors and any committees in a book to
be kept for that purpose and shall have custody of the corporate seal of the
Corporation with the authority to affix such seal to any instrument requiring
it. The Board of Directors may require any officer, agent or employee to give
security for the faithful performance of his duties.
ARTICLE VI
Indemnification of Directors, Officers,
---------------------------------------
Employees and Other Corporate Agents
------------------------------------
Section 6.1 Actions, Suits or Proceedings Other Than Those by or in
-------------------------------------------------------
the Right of the Corporation. The Corporation may indemnify, in the manner and
- ----------------------------
to the full extent permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
9
<PAGE>
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
Section 6.2 Actions, Suits or Proceedings by or in the Right of the
-------------------------------------------------------
Corporation. The Corporation may indemnify any person who was or is a party or
- -----------
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving or has agreed to serve at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise or by reason
of any action alleged to have been taken or omitted in such capacity against
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection with the defense or settlement of
such action or suit and any appeal therefrom if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite adjudication of liability
but in view or all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
of the State of Delaware or such other court shall deem proper.
Section 6.3 Expenses Incurred. To the extent that a director,
-----------------
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 6.1 and 6.2 above, or in defense of any claim, issue or matter therein,
he may be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 6.4 Determination of Indemnification. Any indemnification
--------------------------------
provided under Sections 6.1 and 6.2 above (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct in Sections 6.1 and 6.2 above. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders of the
Corporation.
Section 6.5 Advance of Expenses. Costs and expenses (including
-------------------
attorneys' fees) incurred by or on behalf of a director, officer, employee or
agent in defending or investigating a civil or criminal action, suit, proceeding
or investigation may be paid by the Corporation in advance of the final
disposition of such matter, if such director, officer,
10
<PAGE>
employee or agent shall undertake in writing to repay any such advances in the
event that it is ultimately determined that he is not entitled to
indemnification.
Section 6.6 Non-exclusivity. The right of indemnity and advancement
---------------
of expenses provided herein shall not be deemed exclusive of any other rights to
which any person seeking indemnification or advancement of expenses from the
Corporation may be entitled under any agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. Any agreement
for indemnification of or advancement of expenses to any director, officer,
employee or agent or other person may provide rights of indemnification or
advancement of expenses which are broader or otherwise different from those set
forth herein.
Section 6.7 Insurance. The Corporation may purchase and maintain
---------
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise or as a member of any committee or
similar body against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article or applicable law.
Section 6.8 Inclusion of Constituent Corporation. For purposes of
------------------------------------
this Article VI, references to "the Corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, or agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VI with respect to the resulting or, surviving
corporation as he would have with respect to such con stituent corporation if
its separate existence had continued.
Section 6.9 Inclusion of Other Terms. For purposes of this Article
------------------------
VI, reference to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any services as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to any employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation," as referred to in
this Article VI.
11
<PAGE>
Section 6.10 Continuation of Indemnification. The indemnification
-------------------------------
and advancement of expenses provided by, or granted pursuant to, this Article VI
may, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and may inure
to the benefit of the heirs, executors and administrators of such a person.
ARTICLE VII
Stock
-----
Section 7.1 Certificates. Every holder of stock in the Corporation
------------
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman of the Board, if any, or the President, or a Vice
President, and by the Treasurer or Chief Financial Officer or an Assistant
Treasurer or Assistant Chief Financial Officer, if any, or the Secretary or an
Assistant Secretary, of the Corporation, certifying the number of shares owned
by him in the Corporation. Any or all signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 7.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of
---------------------------------------------------------
New Certificates. The Corporation may issue a new certificate of stock in the
- ----------------
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VIII
Miscellaneous
-------------
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
-----------
determined by the Board of Directors.
Section 8.2 Seal. The Corporation may have a corporate seal which
----
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
12
<PAGE>
Section 8.3 Waiver of Notice of Meetings of Stockholders, Directors
-------------------------------------------------------
and Committees. Whenever notice is required to be given by law or under any
- --------------
provision of the Certificate of Incorporation or these Bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice unless so required by the Certificate of Incorporation
or these Bylaws. Unless either proper notice of a meeting of the Board of
Directors, or any committee thereof, has been given or else the persons entitled
thereto have waived such notice (either in writing or by attendance as set forth
above), any business transacted at such meeting shall be null and void.
Section 8.4 Interested Directors; Quorum. No contract or transaction
----------------------------
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof which authorizes
the contract or transaction, or solely because his or their votes are counted
for such purpose, if: (1) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum, (2) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee thereof
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 8.5 Form of Records. Any records maintained by the
---------------
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 8.6 Amendment of Bylaws. These Bylaws may be amended or
-------------------
repealed, and new Bylaws adopted, by the Board of Directors, but the
stockholders entitled to
13
<PAGE>
vote may adopt additional Bylaws and may amend or repeal any Bylaw whether or
not adopted by them.
Section 8.7 Gender. Any reference to the masculine gender in these
------
Bylaws shall be construed to mean the feminine gender, as the situation may
demand.
DATE: August 6, 1996 16392.3
16392.3
14
<PAGE>
EXHIBIT 10.1
KOLL MANAGEMENT SERVICES, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of November 23, 1994 and entered into
by and among KOLL MANAGEMENT SERVICES, INC., a Delaware corporation ("COMPANY"),
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each
individually referred to herein as a "LENDER" and collectively as "LENDERS"),
and BANKERS TRUST COMPANY ("BANKERS"), as agent for Lenders (in such capacity,
"AGENT").
R E C I T A L S
- - - - - - - -
WHEREAS, Company desires that Lenders extend certain credit facilities
to Company for working capital and other general corporate purposes and for
making certain acquisitions;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders and Agent agree as
follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
---------------------
The following terms used in this Agreement shall have the following
meanings:
"ACQUISITION LETTER OF CREDIT" means a Standby Letter of Credit
described in clause (iv) of the definition thereof.
"ACQUISITION LETTER OF CREDIT USAGE" means, as at any date of
determination, the sum of (i) the maximum aggregate amount which is or at any
time thereafter may become available for drawing under all Acquisition Letters
of Credit then outstanding plus (ii) the aggregate amount of all drawings under
Acquisition Letters of Credit honored by Issuing Lenders and not theretofore
reimbursed by Company.
"ACQUISITION SUBLIMIT" has the meaning assigned to that term in
subsection 2.1A(i).
"ACQUISITION SUBLIMIT UTILIZATION" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all Revolving
Loans made on or prior to such date for the stated purpose of making Permitted
Acquisitions (other than Revolving Loans made, but not yet applied, for the
purpose of repaying any Refunded Swing Line
1
<PAGE>
Loans made for the stated purpose of making Permitted Acquisitions) plus (ii)
----
the aggregate principal amount of all Swing Line Loans made on or prior to such
date for the stated purpose of making Permitted Acquisitions plus (iii) the
----
Acquisition Letter of Credit Usage.
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination
Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per
annum obtained by dividing (i) the offered quotation (rounded upward to the
--------
nearest 1/16 of one percent) to first class banks in the interbank Eurodollar
market by Bankers for U.S. dollar deposits of amounts in same day funds
comparable to the principal amount of the Eurodollar Rate Loan of Bankers for
which the Adjusted Eurodollar Rate is then being determined with maturities
comparable to such Interest Period as of approximately 10:00 a.m. (New York
time) on such Interest Rate Determination Date by (ii) a percentage equal to
--
100% minus the stated maximum rate of all reserve requirements (including,
-----
without limitation, any marginal, emergency, supplemental, special or other
reserves) applicable on such Interest Rate Determination Date to any member bank
of the Federal Reserve System in respect of "Eurocurrency liabilities" as
defined in Regulation D (or any successor category of liabilities under
Regulation D).
"AFFECTED LENDER" has the meaning assigned to that term in subsection
2.6C.
"AFFILIATE", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person (other than a Subsidiary of that Person). For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through the ownership of voting securities or by contract or otherwise.
"AGENT" has the meaning assigned to that term in the introduction to
this Agreement and also means and includes any successor Agent appointed
pursuant to subsection 9.5A.
"AGREEMENT" means this Credit Agreement dated as of November 23, 1994,
as it may be amended, supplemented or otherwise modified from time to time.
"APPLICABLE BASE RATE MARGIN" means, as at any date of determination, a
percentage per annum determined by the Level in effect on such date as shown
below:
2
<PAGE>
<TABLE>
<CAPTION>
Level Applicable Base Rate Margin
----- ---------------------------
<S> <C>
Level I 0.750%
Level II 0.500%
Level III 0.250%
Level IV 0.000%
Level V 0.000%
</TABLE>
"APPLICABLE EURODOLLAR RATE MARGIN" means, as at any date of
determination, a percentage per annum determined by the Level in effect on such
date as shown below:
<TABLE>
<CAPTION>
Level Applicable Eurodollar Rate Margin
----- ---------------------------------
<S> <C>
Level I 1.750%
Level II 1.500%
Level III 1.250%
Level IV 1.000%
Level V 0.625%
</TABLE>
"ASSET SALE" means the sale by Company or any of its Subsidiaries to any
Person other than Company or any of its wholly-owned Subsidiaries of (i) any of
the stock of any of Company's Subsidiaries, (ii) substantially all of the assets
of any division or line of business of Company or any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of Company or any of its
Subsidiaries outside of the ordinary course of business excluding any such other
---------
assets to the extent that the aggregate value of such assets sold in any single
transaction or related series of transactions is equal to $500,000 or less.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially the
form of Exhibit IX annexed hereto.
----------
"AUDITOR'S LETTER" means a letter, substantially in the form of Exhibit X
---------
annexed hereto, acknowledged and agreed to by Company and Ernst & Young LLP and
delivered to Agent pursuant to subsection 4.1I.
"BANKERS" has the meaning assigned to that term in the introduction to
this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the higher of (x) the Prime Rate or (y)
the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
3
<PAGE>
"BASE RATE LOANS" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or California or is
a day on which banking institutions located in such state are authorized or
required by law or other governmental action to close.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"CASH PROCEEDS" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"CERTIFICATE RE NON-BANK STATUS" means a certificate substantially in the
form of Exhibit XI annexed hereto delivered by a Lender to Agent pursuant to
----------
subsection 2.7B(iii).
"CHANGE OF CONTROL" means any of (a) the failure at any time of Holding
to beneficially own and control 100% of the issued and outstanding shares of
capital stock of Company, (b) prior to a bona fide underwritten initial public
offering of Holding
4
<PAGE>
Common Stock, the failure at any time of FS and/or TKC or a wholly-owned
Subsidiary (collectively, the "Permitted Holders") to own and control at least a
majority of the issued and outstanding shares of capital stock of Holding
entitled (without regard to the occurrence of any contingency) to vote for the
election of members of the Board of Directors of Holding ("Holding Voting
Stock"), or (c) after a bona fide underwritten initial public offering of
Holding Common Stock, the acquisition, in one or more transactions, of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
by (i) any person or entity (other than any Permitted Holder) or (ii) any group
of persons or entities (excluding any Permitted Holders) who constitute a group
(within the meaning of Section 13(d)(3) of the Exchange Act), in either case, of
any Holding Voting Stock such that, as a result of such acquisition, such
person, entity or group beneficially owns (within the meaning of Rule 13d-3
under the Exchange Act), directly or indirectly, 30% of more of the Holding
Voting Stock then outstanding (but only to the extent that such beneficial
ownership is not shared with any Permitted Holder who has the power to direct
the vote thereof); provided, however, that no such Change of Control shall be
-------- -------
deemed to have occurred if (A) the Permitted Holders beneficially own, in the
aggregate, at such time, a greater percentage of Holding Voting Stock than such
other person, entity or group or (B) at the time of such acquisition, the
Permitted Holders (or any of them) possess the ability (by contract or
otherwise) to elect, or cause the election, of a majority of the members of the
Company's Board of Directors.
"CLOSING DATE" means the date on or before December 31, 1994, on which
the initial Loans are made.
"COLLATERAL" means any or all of the capital stock of Company and its
wholly-owned Subsidiaries and any or all intercompany Indebtedness of the
Company's Subsidiaries owing to Company subject to a Lien pursuant to the
Collateral Documents.
"COLLATERAL ACCOUNT" has the meaning assigned to that term in the
Collateral Account Agreement.
"COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account Agreement
executed and delivered by Company and Agent on the Closing Date, substantially
in the form of Exhibit XII annexed hereto, pursuant to which Company may pledge
-----------
cash to Agent to secure the obligations of Company to reimburse Issuing Lenders
for payments made under one or more Letters of Credit as provided in Section 8,
as such Collateral Account Agreement may hereafter be amended, supplemented or
otherwise modified from time to time.
"COLLATERAL DOCUMENTS" means all pledge agreements, assignments,
financing and continuation statements and all other instruments or documents
delivered by Company or Holding pursuant to this Agreement (including but not
limited to the Pledge Agreements) in order to grant to Agent on behalf of
Lenders, Liens on the capital stock of Company and its wholly-owned Subsidiaries
and on the intercompany Indebtedness of Company's Subsidiaries owing to Company,
and all amendments, modifications and supplements thereto.
5
<PAGE>
"COMMERCIAL LETTER OF CREDIT" means any letter of credit issued for the
purpose of providing the primary payment mechanism in connection with the
purchase of any materials, goods or services by Company or any of its
Subsidiaries in the ordinary course of business of Company or such Subsidiary.
"COMMITMENT FEE PERCENTAGE" means, as at any date of determination, a
percentage per annum determined by the Level in effect on such date as shown
below:
<TABLE>
<CAPTION>
Level Commitment Fee Percentage
----- -------------------------
<S> <C>
Level I, Level II or
Level III 0.375%
Level IV or Level V 0.250%
</TABLE>
"COMMITMENT TERMINATION DATE" means December 31, 1999 or such earlier
date, if any, on which the Revolving Loan Commitments are terminated.
"COMMITMENTS" means the commitments of Lenders to make Loans as set forth
in subsection 2.1A.
"COMPANY" has the meaning assigned to that term in the introduction to
this Agreement.
"COMPANY STOCKHOLDERS AGREEMENT" means the Stockholders Agreement by and
among Holding, FS, KHC and TKC, as such Stockholders Agreement may be amended or
modified in accordance with subsection 4.1D.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of
Exhibit VI annexed hereto delivered to Agent and Lenders by Company pursuant to
- ----------
subsection 6.1(iv).
"CONSOLIDATED ACQUISITION EBITDA" means, for any four-fiscal quarter
period, EBITDA attributable to all businesses acquired during such four-fiscal
quarter period by Company and its Subsidiaries.
"CONSOLIDATED BASE BUSINESS EBITDA" means, for any four-fiscal quarter
period set forth below, the correlative amount indicated:
<TABLE>
<CAPTION>
Four-Fiscal Consolidated Base
Quarter Period Ending Business EBITDA
--------------------- -----------------
<S> <C>
December 31, 1994 $ 5,920,000
March 31, 1995 7,197,000
June 30, 1995 7,482,000
September 30, 1995 7,766,000
December 31, 1995 8,051,000
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
March 31, 1996 8,336,000
June 30, 1996 8,398,000
September 30, 1996 8,461,000
December 31, 1996 8,523,000
March 31, 1997 8,586,000
June 30, 1997 8,833,000
September 30, 1997 9,080,000
December 31, 1997 9,327,000
March 31, 1998 9,574,000
June 30, 1998 9,741,000
September 30, 1998 9,908,000
December 31, 1998 10,076,000
March 31, 1999 10,243,000
June 30, 1999 10,256,000
September 30, 1999 10,269,000
December 31, 1999 10,282,000
March 31, 2000 and thereafter 10,295,000
</TABLE>
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Company and its Subsidiaries)
by Company and its Subsidiaries during that period that, in conformity with
GAAP, are included in "additions to property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Company and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
----
definition, the aggregate of all expenditures by Company and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or that portion of the purchase price of the
stock or other evidence of beneficial ownership of any Person attributable to
long-term assets that, as a result of such acquisition, becomes a Subsidiary of
Company; provided that "Consolidated Capital Expenditures" shall not include
-------- ----
expenditures for Permitted Acquisitions made in the year of the acquisition of a
business or the payment of any deferred purchase price for such Permitted
Acquisitions made in subsequent years.
"CONSOLIDATED EBITDA" means, for any four-fiscal quarter period, the sum
of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) reasonable costs
incurred in connection with the Transaction reducing Consolidated Net Income,
and (vii) other non-cash items reducing Consolidated Net Income less other non-
----
cash items increasing Consolidated Net Income, all of the foregoing as
determined on a consolidated basis for Company and its Subsidiaries in
conformity with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any four-fiscal quarter
period, total interest expense (including that portion attributable to Capital
Leases in accordance with GAAP and capitalized interest) of Company and its
Subsidiaries on a consolidated
7
<PAGE>
basis with respect to all outstanding Indebtedness of Company and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements, but
excluding, however, any amounts referred to in subsection 2.3 payable to Agent
and Lenders on or before the Closing Date.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or loss)
of Company and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
--------
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Company or is merged
into or consolidated with Company or any of its Subsidiaries or that Person's
assets are acquired by Company or any of its Subsidiaries, (iii) the income of
any Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute (other than statutes restricting
the making of dividends or distributions on stock generally), rule or
governmental regulation applicable to that Subsidiary, (iv) any after-tax gains
or losses attributable to Asset Sales or returned surplus assets of any Pension
Plan, and (v) (to the extent not included in clauses (i) through (iv) above) any
net extraordinary gains or net non-cash extraordinary losses.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the sum
of the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Company and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"CONSOLIDATED PRO FORMA ACQUISITION EBITDA" means, for any four-fiscal
quarter period, Pro Forma EBITDA attributable to all businesses acquired by
Company and its Subsidiaries during such four-fiscal quarter period as though
acquired as of the first day of such period.
"CONSOLIDATED PRO FORMA EBITDA" means, for any four-fiscal quarter
period, Consolidated EBITDA for such period less Consolidated Acquisition EBITDA
----
for such period plus Consolidated Pro Forma Acquisition EBITDA.
----
"CONSOLIDATED PRO RATED EBITDA" means, for any four-fiscal quarter
period, Consolidated EBITDA for such period less the portion of Consolidated
----
Acquisition EBITDA for such period that constitutes the EBITDA of all component
businesses acquired during such period from and after their respective dates of
acquisition by Company or any of its Subsidiaries plus the portion of
----
Consolidated Pro Forma Acquisition EBITDA for such period that constitutes the
Pro Forma EBITDA attributable
8
<PAGE>
to all component businesses acquired during such period from and after their
respective dates of acquisition by Company or any of its Subsidiaries.
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision
of any Security issued by that Person or of any material indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Company or any of its Subsidiaries
against fluctuations in currency values.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
9
<PAGE>
"DOLLARS" and the sign "$" mean the lawful money of the United States of
America.
"EBITDA" means, for any four-fiscal quarter period, for any business
acquired by Company and its Subsidiaries, "Consolidated EBITDA" substituting
references to such business acquired for "Company and its Subsidiaries" as used
in such definition and the defined terms used therein.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under the
laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
--------
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including, but not limited to, insurance companies, mutual
funds and lease financing companies, in each case (under clauses (i) through
(iv) above) that is reasonably acceptable to Agent; and (B) any Lender and any
Affiliate of any Lender; provided that no Affiliate of Company shall be an
--------
Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA, other than plans that are exempt from ERISA by reason of
the regulations promulgated thereunder and Multiemployer Plans, which is, or was
at any time, maintained or contributed to by Company or any of its ERISA
Affiliates.
"ENVIRONMENTAL CLAIM" means any notice of violation, claim, demand,
abatement order or other order or direction by any governmental authority or any
Person for any damage, including, without limitation, personal injury (including
sickness, disease or death), tangible or intangible property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, in each case relating to,
resulting from or in connection with Hazardous Materials and relating to
Company, any of its Subsidiaries, any of their respective Affiliates or any
Facility.
"ENVIRONMENTAL LAWS" means all federal, state or local statutes,
ordinances, orders, rules, regulations, plans or decrees and the like relating
to (i) environmental matters, including, without limitation, those relating to
fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the Release or threatened
Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, in any manner applicable to Company or any of its
Subsidiaries or any of their respective properties.
10
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE", as applied to any Person, means (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that Person is a member; and (iii)
any member of an affiliated service group within the meaning of Section 414(m)
or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard in a material amount of Section 412 of the Internal Revenue
Code with respect to any Pension Plan (whether or not waived in accordance with
Section 412(d) of the Internal Revenue Code) or the failure to make by its due
date a required installment in a material amount under Section 412(m) of the
Internal Revenue Code with respect to any Pension Plan or the failure to make
any required contribution in a material amount to a Multiemployer Plan; (iii)
the provision by the administrator of any Pension Plan pursuant to Section
4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the withdrawal by
Company or any of its ERISA Affiliates from any Pension Plan with two or more
contributing sponsors or the termination of any such Pension Plan resulting in a
material amount of liability pursuant to Sections 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which constitutes grounds under ERISA for
the termination of, or the appointment of a trustee to administer, any Pension
Plan; (vi) the imposition of a material amount of liability on Company or any of
its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason
of the application of Section 4212(c) of ERISA; (vii) the withdrawal by Company
or any of its ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if such
withdrawal would result in a material amount of liability to the Company or an
ERISA Affiliate, or the receipt by Company or any of its ERISA Affiliates of
notice from any Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or
has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an
act or omission which could give rise to the imposition on Company or any of its
ERISA Affiliates of a material amount of fines, penalties, taxes or related
charges under Chapter 43 of the Internal Revenue Code or under Section 409 or
502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit Plan;
(ix) the assertion of a claim (other than routine claims for benefits) that
could result in a material amount of liability against any Employee Benefit Plan
other than a Multiemployer Plan or the assets thereof, or against Company or any
of its ERISA Affiliates in connection with any such
11
<PAGE>
Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice
of the failure of any Pension Plan (or any other Employee Benefit Plan intended
to be qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any trust
forming part of any Pension Plan to qualify for exemption from taxation under
Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien
pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or
pursuant to ERISA with respect to any Pension Plan.
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates determined
by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A.
"EVENT OF DEFAULT" means each of the events set forth in Section 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"FACILITIES" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased or operated by Company or any of its
Subsidiaries; provided that any real property that is only managed but not
owned, leased or operated by such Person shall not constitute "Facilities".
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal funds brokers of recognized
standing selected by Agent.
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries
ending on March 31 of each calendar year. For purposes of this Agreement, any
particular Fiscal Year shall be designated by reference to the calendar year in
which such Fiscal Year ends.
"FS" means FS Equity Partners III, L.P., a Delaware limited partnership,
and FS Equity Partners International, L.P., a Delaware limited partnership.
"FUNDING AND PAYMENT OFFICE" means the office of Agent and Swing Line
Lender located at 1 BT Plaza, 130 Liberty Street, New York, New York.
"FUNDING DATE" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and
12
<PAGE>
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession, in each
case as the same are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"GUARANTY" or "GUARANTIES" means (i) the Guaranty executed and delivered
by Holding on or prior to the Closing Date, substantially in the form of Exhibit
XIV annexed hereto, and (ii) the Guaranties executed and delivered by Company's
Subsidiaries (other than non wholly-owned Subsidiaries) on or prior to the
Closing Date, each substantially in the form of Exhibit XV annexed hereto, as
----------
each Guaranty may hereafter be amended, supplemented or otherwise modified from
time to time.
"HAZARDOUS MATERIALS" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous waste",
"restricted hazardous waste", "infectious waste", "toxic substances" or any
other formulations intended to define, list or classify substances by reason of
deleterious properties under any applicable Environmental Laws or publications
promulgated pursuant thereto; (ii) any oil, petroleum, petroleum fraction or
petroleum derived substance; (iii) any drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; and (iv) any other chemical, material
or substance, exposure to which is prohibited, limited or regulated by any
governmental authority or which may or could pose a hazard to the health and
safety of the owners, occupants or any Persons in the vicinity of the
Facilities.
"HOLDING" means KMS Holding Corporation, a Delaware corporation, and its
successors or assigns.
"HOLDING COMMON STOCK" means the shares of Holding's Common Stock, par
value $.01 per share.
"HOLDING STOCK PURCHASE" means the purchase by FS and TKC of 5,044,704
shares of Holding Common Stock from Holding pursuant to the Holding Stock
Subscription Agreement.
"HOLDING STOCK SUBSCRIPTION AGREEMENT" means the Stock Subscription
Agreement by and among Holding, FS, KHC and TKC, as such Stock Subscription
Agreement may be amended or modified in accordance with subsection 4.1E.
"INDEBTEDNESS", as applied to any Person, means, without duplication, (i)
all indebtedness for borrowed money, (ii) that portion of obligations with
respect to
13
<PAGE>
Capital Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding obligations for further payments for businesses
acquired based solely upon future earnings or cash flow and any such obligations
incurred under ERISA), which purchase price is (a) due more than six months from
the date of incurrence of the obligation in respect thereof or (b) evidenced by
a note or similar written instrument, and (v) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person; provided in the case of a nonrecourse
obligation the amount of such indebtedness shall be limited to the value of the
property securing such indebtedness. Obligations under Interest Rate Agreements
and Currency Agreements constitute Contingent Obligations and not Indebtedness.
"INDEMNITEE" has the meaning assigned to that term in subsection 10.3.
"INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of Company and its Subsidiaries as currently conducted
that are material to the condition (financial or otherwise), business or
operations of Company and its Subsidiaries, taken as a whole.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate Loan,
each March 1, June 1, September 1 and December 1 of each year, commencing on the
first such date to occur after the Closing Date, and (ii) with respect to any
Eurodollar Rate Loan, the last day of each Interest Period applicable to such
Loan; provided that in the case of each Interest Period of six months "Interest
--------
Payment Date" shall also include the date that is three months after the
commencement of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in subsection
2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect Company or any of its Subsidiaries
against fluctuations in interest rates.
"INTEREST RATE DETERMINATION DATE" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (other than a Person that, prior
to such purchase or acquisition, was a
14
<PAGE>
Subsidiary of Company), or (ii) any direct or indirect loan, advance (other than
advances to employees for moving, entertainment and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business) or capital
contribution by Company or any of its Subsidiaries to any other Person other
than a wholly-owned Subsidiary of Company, including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales or the provision of services to that other Person in the
ordinary course of business. The amount of any Investment shall be the original
cost of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"ISSUING LENDER" means, with respect to any Letter of Credit, the Lender
which agrees or is otherwise obligated to issue such Letter of Credit,
determined as provided in subsection 3.1B(ii).
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
--------
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"KOLL/CC&F" means Koll/CC&F Management Services, a California general
partnership.
"LENDER" and "LENDERS" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
for the account of Company pursuant to subsection 3.1.
"LETTER OF CREDIT FEE PERCENTAGE" means, as at any date of determination,
a percentage per annum determined by the Level in effect on such date as shown
below:
<TABLE>
<CAPTION>
Level Letter of Credit Fee Percentage
----- -------------------------------
<S> <C>
Level I 1.750%
Level II 1.500%
Level III 1.250%
Level IV 1.000%
Level V 0.625%
</TABLE>
"LETTER OF CREDIT USAGE" means the sum of the Acquisition Letter of
Credit Usage plus the Non-Acquisition Letter of Credit Usage.
15
<PAGE>
"LEVEL" means Level I, Level II, Level III, Level IV or Level V, in
each case whichever is in effect on the date of determination. The applicable
Level for any date shall be determined by the most recent Level Determination
Certificate delivered pursuant to subsection 4.1N or 6.1(xv); provided that if a
--------
Level Determination Certificate is not delivered at the time required pursuant
to subsection 6.1(xv), Level I shall be applicable from such time until delivery
of a succeeding Level Determination Certificate; provided that if a Level
--------
Determination Certificate erroneously indicates a Level more favorable to
Company than should be afforded by the actual calculation of the Total Leverage
Ratio, Company shall promptly pay additional interest, commitment fees and
letter of credit fees to correct for such error.
"LEVEL I" means such periods during which none of Level II, Level III,
Level IV and Level V is applicable.
"LEVEL II" means such periods as the Total Leverage Ratio is greater
than or equal to 1.50:1.00 and less than 2.00:1.00.
---
"LEVEL III" means such periods as the Total Leverage Ratio is greater
than or equal to 1.00:1.00 and less than 1.50:1.00.
---
"LEVEL IV" means such periods as the Total Leverage Ratio is greater
than or equal to 0.50:1.00 and less than 1.00:1.00.
---
"LEVEL V" means such periods as the Total Leverage Ratio is less than
0.50:1.00.
"LEVEL DETERMINATION CERTIFICATE" means an Officers' Certificate of
Company delivered on the Closing Date and thereafter in accordance with
subsection 6.1(xv) setting forth in reasonable detail the Total Leverage Ratio
which is applicable pursuant to the definition thereof as at the date on which
such Officers' Certificate is delivered.
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest).
"LOAN" or "LOANS" means one or more of the Revolving Loans or Swing
Line Loans or any combination thereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Letters of
Credit (and any applications for, or reimbursement agreements or other documents
or certificates executed by Company in favor of an Issuing Lender relating to,
the Letters of Credit), the Collateral Account Agreement, the Guaranties, the
Pledge Agreements and the Collateral Documents.
16
<PAGE>
"LOAN EXPOSURE" means, with respect to any Lender as of any date of
determination (i) prior to the termination of the Revolving Loan Commitments,
that Lender's Revolving Loan Commitment and (ii) after the termination of the
Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal
amount of the Revolving Loans of that Lender plus (b) in the event that Lender
----
is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all
Letters of Credit issued by that Lender (in each case net of any participations
purchased by other Lenders in such Letters of Credit or any unreimbursed
drawings thereunder) plus (c) the aggregate amount of all participations
----
purchased by that Lender in any outstanding Letters of Credit or any
unreimbursed drawings under any Letters of Credit plus (d) in the case of Swing
----
Line Lender, the aggregate outstanding principal amount of all Swing Line Loans
(net of any participations therein purchased by other Lenders) plus (e) the
----
aggregate amount of all participations purchased by that Lender in any
outstanding Swing Line Loans.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company and its Subsidiaries, taken as a whole, or (ii) the
impairment of the ability of Company to perform, or of Agent or Lenders to
enforce, the Obligations.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which Company or any of its ERISA Affiliates is
contributing, or ever has contributed, or to which Company or any of its ERISA
Affiliates has, or ever has had, an obligation to contribute.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, Cash
Proceeds of such Asset Sale net of bona fide direct costs of sale including (i)
taxes reasonably estimated to be actually payable as a result of such Asset Sale
within two years of the date of such Asset Sale, (ii) payment of the outstanding
principal amount of, premium or penalty, if any, and interest on any
Indebtedness (other than the Loans) that is secured by a Lien on the stock or
assets in question and that is required to be repaid under the terms thereof as
a result of such Asset Sale, and (iii) reasonable reserves established in good
faith by Company to satisfy any indemnification obligations undertaken in
connection with such Asset Sale or to pay other retained liabilities associated
with assets or properties relating to such Asset Sale.
"NON-ACQUISITION LETTER OF CREDIT" means a Commercial Letter of Credit
or a Standby Letter of Credit which is not an Acquisition Letter of Credit.
"NON-ACQUISITION LETTER OF CREDIT USAGE" means, as at any date of
determination, the sum of (i) the maximum aggregate amount which is or at any
time thereafter may become available for drawing under all Non-Acquisition
Letters of Credit then outstanding plus (ii) the aggregate amount of all
----
drawings under Non-Acquisition Letters of Credit honored by Issuing Lenders and
not theretofore reimbursed by Company
17
<PAGE>
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B).
"NOTES" means one or more of the Revolving Notes or Swing Line Note or
any combination thereof.
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Company to Agent pursuant to subsection
- ---------
2.1B with respect to a proposed borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in
the form of Exhibit II annexed hereto delivered by Company to Agent pursuant to
----------
subsection 2.2D with respect to a proposed conversion or continuation of the
applicable basis for determining the interest rate with respect to the Loans
specified therein.
"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice substantially
in the form of Exhibit III annexed hereto delivered by Company to Agent pursuant
-----------
to subsection 3.1B(i) with respect to the proposed issuance of a Letter of
Credit.
"OBLIGATIONS" means all obligations of every nature of Company from
time to time owed to Agent, Lenders or any of them under the Loan Documents,
whether for principal, interest, reimbursement of amounts drawn under Letters of
Credit, fees, expenses, indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer; provided that every Officers' Certificate
--------
with respect to the compliance with a condition precedent to the making of any
Loans hereunder shall include (i) a statement that the officer or officers
making or giving such Officers' Certificate have read such condition and any
definitions or other provisions contained in this Agreement relating thereto,
(ii) a statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to enable
them to express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with.
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a
Capital Lease other than any such lease under which that Person is the lessor.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).
18
<PAGE>
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"PERMITTED ACQUISITION" or "PERMITTED ACQUISITIONS" means any
acquisitions by purchase or otherwise by Company or any of its wholly-owned
Subsidiaries of Investments in, or the property or fixed assets of, any business
substantially similar to any business engaged in by Company or any of its
Subsidiaries on the Closing Date; provided that (i) without the prior written
--------
consent of Requisite Lenders, no one acquisition or series of related
acquisitions shall require expenditures exceeding $10,000,000 (exclusive of that
portion of the expenditure paid in stock of Holding or from the proceeds from
the sale of equity of Holding) and (ii) the Pro Forma Total Leverage Ratio,
--- -----
after giving effect to any acquisition, shall not exceed 2.50:1.00.
"PERMITTED CONTINUING DEBT" means that certain revolving line of
credit in an aggregate principal amount not to exceed $250,000 provided by
NationsBank to Koll/Dawson Management Services and that certain revolving line
of credit in an aggregate principal amount not to exceed $100,000 provided by
Merrill Lynch & Co. (or one of its Affiliates) to Bonutto-Hofer Investments, as
each may be amended, supplemented or otherwise modified from time to time.
"PERMITTED ENCUMBRANCES" means the following types of Liens (other
than any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics and materialmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent or being contested
in good faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety, indemnity and appeal bonds, bids,
leases, government contracts, trade contracts, performance and return-of-
money bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
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(v) leases or subleases granted to others not interfering in any
material respect with the ordinary conduct of the business of Company or
any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries;
(vii) any (a) interest or title of a lessor or sublessor under any
lease not prohibited by this Agreement, (b) restriction or encumbrance
that the interest or title of such lessor or sublessor may be subject to,
or (c) subordination of the interest of the lessee or sublessee under such
lease to any restriction or encumbrance referred to in the preceding clause
(b);
(viii) Liens arising from filing of precautionary UCC financing
statements relating solely to leases not prohibited by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(x) Liens created for the benefit of Agent and Lenders pursuant to the
terms of this Agreement and the Collateral Documents; and
(xi) Liens approved by Requisite Lenders.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"PLEDGE AGREEMENT" or "PLEDGE AGREEMENTS" means the Pledge Agreement
executed and delivered by Company on or prior to the Closing Date and the Pledge
Agreement executed and delivered by Holding on or prior to the Closing Date,
each substantially in the form of Exhibit XIII annexed hereto, as each Pledge
------------
Agreement may hereafter be amended, supplemented or otherwise modified from time
to time.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"PRIME RATE" means the rate that Bankers announces from time to time
as its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers or any other Lender may make
commercial loans or other loans at rates of interest at, above or below the
Prime Rate.
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"PRO FORMA EBITDA" means, for any four-fiscal quarter period, for any
business acquired during such four-fiscal quarter period as though acquired as
of the first day of such period by Company and its Subsidiaries, EBITDA of such
business acquired (excluding any extraordinary revenues and extraordinary
expenses) as further adjusted by adding any reasonable synergies and overhead
------
savings expected to be realized and by subtracting any incremental expenses
-----------
projected by Company in its assessment of the operations of such business
acquired.
"PRO FORMA TOTAL LEVERAGE RATIO" means, as at any date of
determination, for any proposed Permitted Acquisition for which such ratio is
being calculated, the ratio of (i) Consolidated Total Debt plus any Indebtedness
being proposed to be incurred in connection with such Permitted Acquisition
(including any deferred purchase price obligation constituting Indebtedness) to
(ii) Consolidated Pro Forma EBITDA for the most recent four-fiscal quarter
period for which Consolidated EBITDA has been calculated giving effect to the
Pro Forma EBITDA of such Permitted Acquisition.
"PRO RATA SHARE" means, with respect to each Lender, the percentage
obtained by dividing (x) the Loan Exposure of that Lender by (y) the aggregate
-------- --
Loan Exposure of all Lenders, as such percentage may be adjusted by assignments
permitted pursuant to subsection 10.1. The initial Pro Rata Share of each
Lender is set forth opposite the name of that Lender in Schedule 2.1 annexed
------------
hereto.
"PRO RATED PROJECTED EBITDA" means, for any four-fiscal quarter
period, the portion of Pro Forma EBITDA for all businesses acquired subsequent
to the Closing Date as established pursuant to subsection 6.1(xiv)(e) that
constitutes EBITDA of all component businesses from and after the later of (X)
the first day of such period or (Y) their respective dates of acquisition by
Company or any of its Subsidiaries.
"REFERENCE UTILIZATION" has the meaning assigned to that term in
subsection 2.4A.
"REFUNDED SWING LINE LOANS" has the meaning assigned to that term in
subsection 2.1A(ii).
"REGISTER" has the meaning assigned to that term in subsection 2.1D.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REIMBURSEMENT DATE" has the meaning assigned to that term in
subsection 3.3B.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed
21
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receptacles containing any Hazardous Materials), or into or out of any Facility,
including the movement of any Hazardous Material through the air, soil, surface
water, groundwater or property.
"REQUISITE LENDERS" means Lenders having or holding 50.1% or more of
the aggregate Loan Exposure of all Lenders.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Company now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Company now or
hereafter outstanding and (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company now or hereafter outstanding.
"REVOLVING LOAN COMMITMENT" means the commitment of a Lender to make
Revolving Loans to Company pursuant to subsection 2.1A(i), and "REVOLVING LOAN
COMMITMENTS" means such commitments of all Lenders in the aggregate.
"REVOLVING LOANS" means the Loans made by Lenders to Company pursuant
to subsection 2.1A(i).
"REVOLVING NOTES" means any promissory notes of Company issued
pursuant to subsection 2.1E to evidence the Revolving Loans of any Lenders,
substantially in the form of Exhibit IV annexed hereto, as they may be amended,
----------
supplemented or otherwise modified from time to time.
"SECURITIES" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any profit-
sharing agreement or arrangement, options, warrants, bonds, debentures, notes,
or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"SIGNIFICANT SUBSIDIARY" means a Subsidiary of Company having assets
not less than 5% of the consolidated assets of Company and its Subsidiaries or
earnings not less than 5% of the consolidated earnings of Company and its
Subsidiaries.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such
22
<PAGE>
Person and (z) not less than the amount that will be required to pay the
probable liabilities on such Person's then existing debts as they become
absolute and matured considering all financing alternatives and potential asset
sales reasonably available to such Person; (ii) such Person's capital is not
unreasonably small in relation to its business or any contemplated or undertaken
transaction; and (iii) such Person does not intend to incur, or believe (nor
should it reasonably believe) that it will incur, debts beyond its ability to
pay such debts as they become due; and (B) such Person is "solvent" within the
meaning given that term and similar terms under applicable laws relating to
fraudulent transfers and conveyances. For purposes of this definition, the
amount of any contingent liability at any time shall be computed as the amount
that, in light of all of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"STANDBY LETTER OF CREDIT" means any standby letter of credit issued
for the purpose of supporting (i) workers' compensation liabilities of Company
or any of its Subsidiaries, (ii) the obligations of third party insurers of
Company or any of its Subsidiaries arising by virtue of the laws of any
jurisdiction requiring third party insurers, (iii) performance, payment, deposit
or surety obligations of Company or any of its Subsidiaries, in any case if
required by law or governmental rule or regulation or in accordance with custom
and practice in the industry; and (iv) deferred payment obligations of a
purchaser incurred in connection with Permitted Acquisitions; provided that
--------
Standby Letters of Credit may not be issued for the purpose of supporting (a)
trade payables or (b) any Indebtedness constituting "antecedent debt" (as that
term is used in Section 547 of the Bankruptcy Code).
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof; provided
--------
that "Subsidiary" shall include Company's investment in Koll/CC&F so long as
Company holds not less than 50% of the total voting power of ownership interests
therein.
"SWING LINE LENDER" means Bankers, or any Person serving as a
successor Agent hereunder, in its capacity as Swing Line Lender hereunder.
"SWING LINE LOAN COMMITMENT" means the commitment of Swing Line Lender
to make Swing Line Loans to Company pursuant to subsection 2.1A(ii).
"SWING LINE LOANS" means the Loans made by Swing Line Lender to
Company pursuant to subsection 2.1A(ii).
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<PAGE>
"SWING LINE NOTE" means any promissory note of Company issued pursuant
to subsection 2.1E to evidence the Swing Line Loans of Swing Line Lender,
substantially in the form of Exhibit V annexed hereto, as it may be amended,
---------
supplemented or otherwise modified from time to time.
"TAX" or "TAXES" means any present or future tax or government levy in
the nature of a tax; provided that "TAX ON THE OVERALL NET INCOME" of a Person
--------
shall be construed as a reference to a tax imposed by the jurisdiction in which
that Person's principal office (and/or, in the case of a Lender, its lending
office) is located or in which that Person is deemed to be doing business on all
or part of the net income, profits or gains of that Person (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise).
"TKC" means The Koll Company, a California corporation.
"TOTAL LEVERAGE RATIO" means, as at any date of determination, the
ratio of (i) Consolidated Total Debt to (ii) Consolidated EBITDA for the four-
fiscal quarter period ending as of the last day of the fiscal quarter
immediately preceding the fiscal quarter during which such date of determination
occurs; except that, if the date of determination is the last day of a fiscal
quarter, the four-fiscal quarter period tested shall include the preceding three
fiscal quarters and the fiscal quarter then ending.
"TOTAL UTILIZATION OF COMMITMENTS" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made for the purpose of repaying any
Refunded Swing Line Loans or reimbursing the applicable Issuing Lender for any
amount drawn under any Letter of Credit but not yet so applied) plus (ii) the
----
aggregate principal amount of all outstanding Swing Line Loans plus (iii) the
----
Letter of Credit Usage.
"TRANSACTION" means the merger of KMS Acquisition Corporation with and
into Company pursuant to an Agreement and Plan of Merger, dated as of July 26,
1994, by and among Company, Holding and KMS Acquisition Corporation, and any
transactions contemplated thereby or related thereto.
"WORKING CAPITAL UTILIZATION" means, as at any date of determination,
the sum of (i) the aggregate principal amount of all outstanding Revolving Loans
made for working capital and general corporate purposes (other than Revolving
Loans made for the purpose of repaying any Refunded Swing Line Loans or
reimbursing the applicable Issuing Lender for any amount drawn under any Letter
of Credit but not yet so applied) plus (ii) the aggregate amount of all
----
outstanding Swing Line Loans made for working capital and general corporate
purposes plus (iii) the Non-Acquisition Letter of Credit Usage.
----
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1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
------------------------------------------------------------------------
AGREEMENT; NO APB 16 OR 17 ADJUSTMENTS.
--------------------------------------
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (i), (ii),
(iii) and (xiii) of subsection 6.1 shall be prepared in accordance with GAAP as
in effect at the time of such preparation (and delivered together with the
reconciliation statements provided for in subsection 6.1(v)). Calculations in
connection with the definitions, covenants and other provisions of this
Agreement shall utilize accounting principles and policies in conformity with
those used to prepare the financial statements referred to in subsection 5.3(i)
and, except for purposes of Consolidated Net Worth calculations, shall not give
effect to adjustments in component amounts required or permitted by Accounting
Principles Board Opinions 16 and 17 as a result of the Transaction.
1.3 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; OPTIONAL NOTES.
----------------------------------------------------------
A. COMMITMENTS. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Company herein set
forth, each Lender hereby severally agrees to make the Loans described in
subsection 2.1A(i) and Swing Line Lender hereby agrees to make the Loans
described in subsection 2.1A(ii).
(i) Revolving Loans. Each Lender severally agrees, subject to the
---------------
limitations set forth below with respect to the maximum amount of Revolving
Loans permitted to be outstanding from time to time and the Acquisition
Sublimit (as hereinafter defined), to lend to Company from time to time
during the period from the Closing Date to but excluding the Commitment
Termination Date an aggregate amount not exceeding its Pro Rata Share of
the aggregate amount of the Revolving Loan Commitments to be used for the
purposes identified in subsection 2.5A. The original amount of each
Lender's Revolving Loan Commitment is set forth opposite its name on
Schedule 2.1 annexed hereto and the aggregate original amount of the
------------
Revolving Loan Commitments is $50,000,000; provided that the Revolving Loan
--------
Commitments of Lenders shall be adjusted to give effect to any assignments
of the Revolving Loan Commitments pursuant to subsection 10.1B; and
provided, further that the amount of the Revolving Loan Commitments shall
-------- -------
be
25
<PAGE>
reduced from time to time by the amount of any reductions thereto made
pursuant to subsections 2.4A, 2.4B(ii) and 2.4B(iii). A portion of the
aggregate Revolving Loan Commitments shall be used solely for making
Revolving Loans and Swing Line Loans for, and the issuance of Letters of
Credit in connection with, Permitted Acquisitions (the "ACQUISITION
SUBLIMIT"). The original amount of the Acquisition Sublimit is $35,000,000;
provided that the amount of the Acquisition Sublimit shall be reduced from
time to time by the amount of any reductions thereto made pursuant to
subsections 2.4A, 2.4B(ii) and 2.4B(iii). Each Lender's Revolving Loan
Commitment shall expire on the Commitment Termination Date and all
Revolving Loans and all other amounts owed hereunder with respect to the
Revolving Loans and the Revolving Loan Commitments shall be paid in full no
later than that date; provided that each Lender's Revolving Loan
--------
Commitment shall expire immediately and without further action on December
31, 1994 if the initial Revolving Loans are not made on or before that
date. Amounts borrowed under this subsection 2.1A(i) for purposes other
than making Permitted Acquisitions may be repaid and reborrowed to but
excluding the Commitment Termination Date. Amounts borrowed under this
subsection 2.1A(i) for the purpose of making Permitted Acquisitions may be
repaid but shall not be reborrowed.
Anything contained in this Agreement to the contrary notwithstanding,
the Revolving Loans and the Revolving Loan Commitments shall be subject to
the limitations that (a) in no event shall the Total Utilization of
Commitments at any time exceed the Revolving Loan Commitments then in
effect, (b) in no event shall the Acquisition Sublimit Utilization at any
time exceed the Acquisition Sublimit then in effect and (c) in no event
shall the Working Capital Utilization at any time exceed $15,000,000, as
such dollar amount shall be reduced from time to time pursuant to
subsections 2.4B(ii) and 2.4B(iii).
(ii) Swing Line Loans. Swing Line Lender hereby agrees, subject to
----------------
the limitations set forth below with respect to the maximum amount of Swing
Line Loans permitted to be outstanding from time to time, to make a portion
of the Revolving Loan Commitments available to Company from time to time
during the period from the Closing Date to but excluding the Commitment
Termination Date by making Swing Line Loans to Company in an aggregate
amount not exceeding the amount of the Swing Line Loan Commitment to be
used for the purposes identified in subsection 2.5A, notwithstanding the
fact that such Swing Line Loans, when aggregated with Swing Line Lender's
outstanding Revolving Loans and Swing Line Lender's Pro Rata Share of the
Letter of Credit Usage then in effect, may exceed Swing Line Lender's
Revolving Loan Commitment. The original amount of the Swing Line Loan
Commitment is $2,000,000; provided that any reduction of the Revolving Loan
--------
Commitments made pursuant to subsection 2.4A, 2.4B(ii) or 2.4B(iii) which
reduces the aggregate Revolving Loan Commitments to an amount less than the
then current amount of the Swing Line Loan Commitment shall result in an
automatic corresponding reduction of the Swing Line Loan Commitment to the
amount of the Revolving Loan Commitments, as so reduced, without any
further action on the part of Company, Agent or Swing Line Lender.
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<PAGE>
The Swing Line Loan Commitment shall expire on the Commitment Termination
Date and all Swing Line Loans and all other amounts owed hereunder with
respect to the Swing Line Loans shall be paid in full no later than that
date; provided that the Swing Line Loan Commitment shall expire immediately
--------
and without further action on December 31, 1994 if the initial Revolving
Loans are not made on or before that date. Amounts borrowed under this
subsection 2.1A(ii) for purposes other than making Permitted Acquisitions
may be repaid and reborrowed to but excluding the Commitment Termination
Date. Amounts borrowed under this subsection 2.1A(ii) for the purpose of
making Permitted Acquisitions may be repaid but shall not be reborrowed.
Anything contained in this Agreement to the contrary notwithstanding,
the Swing Line Loans and the Swing Line Loan Commitment shall be subject to
the limitation that in no event shall the Total Utilization of Commitments
at any time exceed the Revolving Loan Commitments then in effect.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Company pursuant to subsection 2.4B(i), Swing Line Lender may,
at any time in its sole and absolute discretion, deliver to Agent (with a
copy to Company), no later than five Business Days in advance of the
proposed Funding Date (which shall be a Business Day), a notice (which
shall be deemed to be a Notice of Borrowing given by Company) requesting
Lenders to make Revolving Loans that are Base Rate Loans not later than
12:00 Noon (New York time) on such Funding Date in an amount equal to the
amount of such Swing Line Loans (the "REFUNDED SWING LINE LOANS")
outstanding on the date such notice is given which Swing Line Lender
requests Lenders to prepay. Anything contained in this Agreement to the
contrary notwithstanding, (i) the proceeds of such Revolving Loans made by
Lenders other than Swing Line Lender shall be immediately delivered by
Agent to Swing Line Lender (and not to Company) and applied to repay a
corresponding portion of the Refunded Swing Line Loans and (ii) on the day
such Revolving Loans are made, Swing Line Lender's Pro Rata Share of the
Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a
Revolving Loan made by Swing Line Lender, and such portion of the Swing
Line Loans deemed to be so paid shall no longer be outstanding as Swing
Line Loans and shall no longer be due under the Swing Line Note, if any, of
Swing Line Lender but shall instead constitute part of Swing Line Lender's
outstanding Revolving Loans and shall be due under the Revolving Note, if
any, of Swing Line Lender. Company hereby authorizes Agent and Swing Line
Lender to charge Company's accounts with Agent and Swing Line Lender (up to
the amount available in each such account) in order to immediately pay
Swing Line Lender the amount of the Refunded Swing Line Loans to the extent
the proceeds of such Revolving Loans made by Lenders, including the
Revolving Loan deemed to be made by Swing Line Lender, are not sufficient
to repay in full the Refunded Swing Line Loans. If any portion of any such
amount paid (or deemed to be paid) to Swing Line Lender should be recovered
by or on behalf of Company from Swing Line Lender in bankruptcy, by
assignment for the benefit of creditors or otherwise,
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<PAGE>
the loss of the amount so recovered shall be ratably shared among all
Lenders in the manner contemplated by subsection 10.5.
If, as a result of any bankruptcy or similar proceeding with respect
to Company, Revolving Loans are not made pursuant to this subsection
2.1A(ii) in an amount sufficient to repay any amounts owed to Swing Line
Lender in respect of any outstanding Swing Line Loans, each Lender shall be
deemed to, and hereby agrees to, have purchased a participation in such
outstanding Swing Line Loans in an amount equal to its Pro Rata Share
(calculated without giving effect to clauses (d) and (e) of the definition
of Loan Exposure) of the unpaid amount together with accrued interest
thereon. Upon five Business Days' notice from Swing Line Lender, each
Lender shall deliver on the designated Business Day to Swing Line Lender an
amount equal to its respective participation in same day funds at the
Funding and Payment Office. In order to evidence such participation each
Lender agrees to enter into a participation agreement at the request of
Swing Line Lender in form and substance reasonably satisfactory to all
parties. In the event any Lender fails to make available to Swing Line
Lender the amount of such Lender's participation as provided in this
paragraph, Swing Line Lender shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the rate
customarily used by Swing Line Lender for the correction of errors among
banks for three Business Days and thereafter at the Base Rate. In the
event Swing Line Lender receives a payment of any amount in which other
Lenders have purchased participations as provided in this paragraph, Swing
Line Lender shall promptly distribute to each such other Lender its Pro
Rata Share of such payment.
Anything contained herein to the contrary notwithstanding, (i) each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and
each Lender's obligation to purchase a participation in any unpaid Swing
Line Loans pursuant to the immediately preceding paragraph shall be
absolute and unconditional and shall not be affected by any circumstance,
including without limitation (a) any set-off, counterclaim, recoupment,
defense or other right which such Lender may have against Swing Line
Lender, Company or any other Person for any reason whatsoever; (b) the
occurrence or continuation of an Event of Default or a Potential Event of
Default; (c) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any
of its Subsidiaries; (d) any breach of this Agreement or any other Loan
Document by any party thereto; or (e) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing; provided
--------
that such obligations of each Lender are subject to the condition that (X)
Swing Line Lender believed in good faith that all conditions under Section
4 to the making of the applicable Refunded Swing Line Loans or other unpaid
Swing Line Loans, as the case may be, were satisfied at the time such
Refunded Swing Line Loans or unpaid Swing Line Loans were made, (Y) such
Lender had actual knowledge, by receipt of any notices required to be
delivered to Lenders pursuant to subsection 6.1(ix) or otherwise, that any
such condition had not been satisfied and such Lender failed to
28
<PAGE>
notify Swing Line Lender and Agent in writing that it had no obligation to
make Revolving Loans until such condition was satisfied (any such notice to
be effective as of the date of receipt thereof by Swing Line Lender and
Agent), or (Z) the satisfaction of any such condition not satisfied had
been waived in accordance with subsection 10.6 prior to or at the time such
Refunded Swing Line Loans or other unpaid Swing Line Loans were made; and
(ii) Swing Line Lender shall not be obligated to make any Swing Line Loans
if it has elected not to do so after the occurrence and during the
continuation of a Potential Event of Default or Event of Default.
B. BORROWING MECHANICS. Revolving Loans made on any Funding Date (other
than Revolving Loans made pursuant to a request by Swing Line Lender pursuant to
subsection 2.1A(ii) for the purpose of repaying any Refunded Swing Line Loans or
Revolving Loans made pursuant to subsection 3.3B for the purpose of reimbursing
any Issuing Lender for the amount of a drawing under a Letter of Credit issued
by it) shall be in an aggregate minimum amount of $250,000 and integral
multiples of $100,000 in excess of that amount; provided that Revolving Loans
--------
made on any Funding Date as Eurodollar Rate Loans with a particular Interest
Period shall be in an aggregate minimum amount of $500,000 and integral
multiples of $100,000 in excess of that amount. Swing Line Loans made on any
Funding Date shall be in an aggregate minimum amount of $250,000 and integral
multiples of $100,000 in excess of that amount. Whenever Company desires that
Lenders make Revolving Loans it shall deliver to Agent a Notice of Borrowing no
later than 12:00 Noon (New York time) at least three Business Days in advance of
the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least
one Business Day in advance of the proposed Funding Date (in the case of a Base
Rate Loan). Whenever Company desires that Swing Line Lender make a Swing Line
Loan, it shall deliver to Agent a Notice of Borrowing no later than 12:00 Noon
(New York time) on the proposed Funding Date. The Notice of Borrowing shall
specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the
amount and type of Loans requested, (iii) in the case of Swing Line Loans and
any Revolving Loans made on the Closing Date, that such Loans shall be Base Rate
Loans, (iv) in the case of any Revolving Loans not made on the Closing Date,
whether such Loans shall be Base Rate Loans or Eurodollar Rate Loans, (v) in the
case of any Revolving Loans requested to be made as Eurodollar Rate Loans, the
initial Interest Period requested therefor, (vi) whether the Loans are requested
for a Permitted Acquisition and (vii) in the case of Loans requested for a
Permitted Acquisition, that the Pro Forma Total Leverage Ratio, after giving
--- -----
effect to such Permitted Acquisition, shall not exceed 2.50:1.00. Revolving
Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate
Loans in the manner provided in subsection 2.2D. In lieu of delivering the
above-described Notice of Borrowing, Company may give Agent telephonic notice
by the required time of any proposed borrowing under this subsection 2.1B;
provided that such notice shall be promptly confirmed in writing by delivery of
- --------
a Notice of Borrowing to Agent on or before the applicable Funding Date.
Neither Agent nor any Lender shall incur any liability to Company in
acting upon any telephonic notice referred to above that Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to borrow on behalf of
29
<PAGE>
Company or for otherwise acting in good faith under this subsection 2.1B, and
upon funding of Loans by Lenders in accordance with this Agreement pursuant to
any such telephonic notice Company shall have effected Loans hereunder.
Company shall notify Agent prior to the funding of any Loans in the
event that any of the matters to which Company is required to certify in the
applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in accordance
therewith.
C. DISBURSEMENT OF FUNDS. All Revolving Loans under this Agreement shall
be made by Lenders simultaneously and proportionately to their respective Pro
Rata Shares, it being understood that no Lender shall be responsible for any
default by any other Lender in that other Lender's obligation to make a
Revolving Loan requested hereunder nor shall the Revolving Loan Commitment of
any Lender be increased or decreased as a result of a default by any other
Lender in that other Lender's obligation to make a Revolving Loan requested
hereunder. Promptly after receipt by Agent of a Notice of Borrowing pursuant to
subsection 2.1B (or telephonic notice in lieu thereof), Agent shall notify each
Lender or Swing Line Lender, as the case may be, of the proposed borrowing.
Each Lender shall make the amount of its Loan available to Agent not later than
12:00 Noon (New York time) on the applicable Funding Date, in same day funds in
Dollars, at the Funding and Payment Office. Except as provided in subsection
2.1A(ii) or subsection 3.3B with respect to Revolving Loans used to repay
Refunded Swing Line Loans or to reimburse any Issuing Lender for the amount of a
drawing under a Letter of Credit issued by it, upon satisfaction or waiver of
the conditions precedent specified in subsections 4.1 (in the case of Loans made
on the Closing Date) and 4.2 (in the case of all Loans), Agent shall make the
proceeds of such Loans available to Company on the applicable Funding Date by
causing an amount of same day funds in Dollars equal to the proceeds of all such
Loans received by Agent from Lenders or Swing Line Lender, as the case may be,
to be credited to the account of Company at the Funding and Payment Office.
Unless Agent shall have been notified by any Lender prior to the
Funding Date for any Revolving Loans that such Lender does not intend to make
available to Agent the amount of such Lender's Revolving Loan requested on such
Funding Date, Agent may assume that such Lender has made such amount available
to Agent on such Funding Date and Agent may, in its sole discretion, but shall
not be obligated to, make available to Company a corresponding amount on such
Funding Date. If such corresponding amount is not in fact made available to
Agent by such Lender, Agent shall be entitled to recover such corresponding
amount on demand from such Lender together with interest thereon,
30
<PAGE>
for each day from such Funding Date until the date such amount is paid to Agent,
at the customary rate set by Agent for the correction of errors among banks for
three Business Days and thereafter at the Base Rate. If such Lender does not pay
such corresponding amount forthwith upon Agent's demand therefor, Agent shall
promptly notify Company and Company shall immediately pay such corresponding
amount to Agent together with interest thereon, for each day from such Funding
Date until the date such amount is paid to Agent, at the rate payable under this
Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed
to relieve any Lender from its obligation to fulfill its Revolving Loan
Commitment hereunder or to prejudice any rights that Company may have against
any Lender as a result of any default by such Lender hereunder.
D. THE REGISTER.
(i) Agent shall maintain, at its address referred to in subsection
10.8, a register for the recordation of the names and addresses of Lenders
and the Commitments and Loans of each Lender from time to time (the
"REGISTER"). The Register shall be available for inspection by Company or
any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(ii) Agent shall record in the Register the Revolving Loan Commitment
and the Revolving Loans from time to time of each Lender, the Swing Line
Loan Commitment and the Swing Line Loans from time to time of Swing Line
Lender, and each repayment or prepayment in respect of the principal amount
of the Revolving Loans of each Lender or the Swing Line Loans of Swing Line
Lender. Any such recordation shall be conclusive and binding on Company
and each Lender, absent manifest error; provided that failure to make any
--------
such recordation, or any error in such recordation, shall not affect
Company's Obligations in respect of the applicable Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation, any Notes held by such Lender) the amount of each
Revolving Loan made by it and each payment in respect thereof. Any such
recordation shall be conclusive and binding on Company, absent manifest
error; provided that failure to make any such recordation, or any error in
--------
such recordation, shall not affect Company's Obligations in respect of the
applicable Loans; and provided, further that in the event of any
-------- -------
inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern.
(iv) Company, Agent and Lenders shall deem and treat the Persons
listed as Lenders in the Register as the holders and owners of the
corresponding Commitments and Loans listed therein for all purposes hereof,
and no assignment or transfer of any such Commitment or Loan shall be
effective, in each case unless and until an Assignment Agreement effecting
the assignment or transfer thereof shall have been accepted by Agent and
recorded in the Register as provided in subsection 10.1B(ii). Prior to
such recordation, all amounts owed with respect to the applicable
Commitment or Loan shall be owed to the Lender listed in the
31
<PAGE>
Register as the owner thereof, and any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and
binding on any subsequent holder, assignee or transferee of the
corresponding Commitments or Loans.
(v) Company hereby designates Bankers to serve as Company's agent
solely for purposes of maintaining the Register as provided in this
subsection 2.1D, and Company hereby agrees that, to the extent Bankers
serves in such capacity, Bankers and its officers, directors, employees,
agents and affiliates shall constitute Indemnitees for all purposes under
subsection 10.3.
E. OPTIONAL NOTES. If so requested by any Lender by written notice to
Company (with a copy to Agent) at least two Business Days prior to the Closing
Date or at any time thereafter, Company shall execute and deliver to such Lender
(and/or, if applicable and if so specified in such notice, to any Person who is
an assignee of such Lender pursuant to subsection 10.1) on the Closing Date (or,
if such notice is delivered after the Closing Date, promptly after Company's
receipt of such notice) a promissory note or promissory notes to evidence such
Lender's Revolving Loans or Swing Line Loans, substantially in the form of
Exhibit IV or Exhibit V annexed hereto, respectively, with appropriate
- ---------- ---------
insertions.
2.2 INTEREST ON THE LOANS.
---------------------
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and
2.7, each Revolving Loan shall bear interest on the unpaid principal amount
thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate or the Adjusted
Eurodollar Rate, as the case may be. Subject to the provisions of subsection
2.7, each Swing Line Loan shall bear interest on the unpaid principal amount
thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate. The applicable
basis for determining the rate of interest with respect to any Loan shall be
selected by Company initially at the time a Notice of Borrowing is given with
respect to such Loan pursuant to subsection 2.1B. The basis for determining the
interest rate with respect to any Revolving Loan may be changed from time to
time pursuant to subsection 2.2D. If on any day a Revolving Loan is outstanding
with respect to which notice has not been delivered to Agent in accordance with
the terms of this Agreement specifying the applicable basis for determining the
rate of interest, then for that day that Loan shall bear interest determined by
reference to the Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the Revolving
Loans shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus the
----
Applicable Base Rate Margin; or
32
<PAGE>
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Eurodollar Rate Margin.
----
Subject to the provisions of subsections 2.2E and 2.7, the Swing Line
Loans shall bear interest through maturity at a rate equal to the Base Rate plus
----
the Applicable Base Rate Margin minus the Commitment Fee Percentage; provided
-----
that in no event shall the Swing Line Loans bear interest at a rate less than
the Base Rate.
Upon delivery of the Level Determination Certificate by Company to
Agent pursuant to subsection 6.1(xv), the Applicable Base Rate Margin,
Applicable Eurodollar Rate Margin and Commitment Fee Percentage shall
automatically be adjusted in accordance with the Level in effect as determined
by such Level Determination Certificate, such adjustment to become effective on
the next succeeding Business Day of the receipt by Agent of such Level
Determination Certificate; provided that on the Closing Date, the Applicable
--------
Base Rate Margin, Applicable Eurodollar Rate Margin and Commitment Fee
Percentage shall be determined in accordance with the Level in effect as
determined by the Level Determination Certificate delivered by Company to Agent
pursuant to subsection 4.1N.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three or six month period; provided
--------
that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on the date specified in the
applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods applicable
to a Eurodollar Rate Loan continued as such pursuant to a Notice of
Conversion/Continuation, each successive Interest Period shall commence on
the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the
33
<PAGE>
calendar month at the end of such Interest Period) shall, subject to clause
(v) of this subsection 2.2B, end on the last Business Day of a calendar
month;
(v) no Interest Period with respect to any portion of the Revolving
Loans shall extend beyond the Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Revolving
Loans shall extend beyond the date on which a permanent reduction of the
Revolving Loan Commitments is scheduled to occur unless the sum of (a) the
aggregate principal amount of Revolving Loans that are Base Rate Loans plus
----
(b) the aggregate principal amount of Revolving Loans that are Eurodollar
Rate Loans with Interest Periods expiring on or before such date plus (c)
----
the excess of the Revolving Loan Commitments then in effect over the
aggregate principal amount of Revolving Loans then outstanding equals or
exceeds the permanent reduction of the Revolving Loan Commitments that is
scheduled to occur on such date;
(vii) there shall be no more than 10 Interest Periods outstanding at
any time; and
(viii) in the event Company fails to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding Revolving Loans equal to $500,000 and integral multiples of
$100,000 in excess of that amount from Loans bearing interest at a rate
determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $500,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
-------- -------
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to Agent no
later than 12:00 Noon (New York time) at least one Business Day in advance of
the proposed conversion date (in the case of a conversion to a Base Rate Loan)
and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). A Notice of
34
<PAGE>
Conversion/Continuation shall specify (i) the proposed conversion/continuation
date (which shall be a Business Day), (ii) the amount and type of the Loan to be
converted/continued, (iii) the nature of the proposed conversion/continuation,
(iv) in the case of a conversion to, or a continuation of, a Eurodollar Rate
Loan, the requested Interest Period, and (v) in the case of a conversion to, or
a continuation of, a Eurodollar Rate Loan, that no Potential Event of Default or
Event of Default has occurred and is continuing. In lieu of delivering the
above-described Notice of Conversion/Continuation, Company may give Agent
telephonic notice by the required time of any proposed conversion/continuation
under this subsection 2.2D; provided that such notice shall be promptly
--------
confirmed in writing by delivery of a Notice of Conversion/Continuation to Agent
on or before the proposed conversion/continuation date.
Neither Agent nor any Lender shall incur any liability to Company in
acting upon any telephonic notice referred to above that Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to act on behalf of Company or for otherwise acting in good faith under this
subsection 2.2D, and upon conversion or continuation of the applicable basis for
determining the interest rate with respect to any Loans in accordance with this
Agreement pursuant to any such telephonic notice Company shall have effected a
conversion or continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Company shall be
bound to effect a conversion or continuation in accordance therewith.
E. DEFAULT RATE. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base Rate
Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration
--------
of the Interest Period in effect at the time any such increase in interest rate
is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans
and shall thereafter bear interest payable upon demand at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Agent or any Lender.
35
<PAGE>
F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed on
the basis of a 360-day year, in each case for the actual number of days elapsed
in the period during which it accrues. In computing interest on any Loan, the
date of the making of such Loan or the first day of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being converted
from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan
to such Base Rate Loan, as the case may be, shall be included, and the date of
payment of such Loan or the expiration date of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar
Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate
Loan, as the case may be, shall be excluded; provided that if a Loan is repaid
--------
on the same day on which it is made, one day's interest shall be paid on that
Loan.
2.3 FEES.
----
A. COMMITMENT FEES. Company agrees to pay to Agent, for distribution to
each Lender in proportion to that Lender's Pro Rata Share, commitment fees for
the period from and including the Closing Date to and excluding the Commitment
Termination Date equal to the average of the daily excess of the Revolving Loan
Commitments over the sum of (i) the aggregate principal amount of Revolving
Loans outstanding (but not any Swing Line Loans outstanding) plus (ii) the
----
Letter of Credit Usage multiplied by the Commitment Fee Percentage, such
-------------
commitment fees to be calculated on the basis of a 360-day year and the actual
number of days elapsed and to be payable quarterly in arrears on March 1, June
1, September 1 and December 1 of each year, commencing on the first such date to
occur after the Closing Date, and on the Commitment Termination Date.
B. OTHER FEES. Company agrees to pay to Agent such other fees in the
amounts and at the times separately agreed upon between Company and Agent.
2.4 PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS AND ACQUISITION
------------------------------------------------------------------------
SUBLIMIT; GENERAL PROVISIONS REGARDING PAYMENTS.
-----------------------------------------------
A. SCHEDULED PREPAYMENTS AND REDUCTIONS OF REVOLVING LOAN COMMITMENTS AND
ACQUISITION SUBLIMIT. On December 31, 1996, the Revolving Loan Commitments and
Acquisition Sublimit shall each be permanently reduced in an amount equal to the
amount by which the Acquisition Sublimit exceeds the Acquisition Sublimit
Utilization at that date. In addition, Company shall prepay first the Swing
-----
Line Loans made for Permitted Acquisitions to the full extent thereof and second
------
the Revolving Loans made for Permitted Acquisitions, and the Revolving Loan
Commitments and Acquisition Sublimit shall each be permanently reduced, on the
dates and in the amounts, expressed as a percentage of the Acquisition Sublimit
Utilization after giving effect to any permanent reduction made in accordance
with the immediately preceding sentence (the "REFERENCE UTILIZATION"), set forth
below:
36
<PAGE>
<TABLE>
<CAPTION>
Scheduled Prepayment and Reduction of
Date Revolving Loan Commitments and Acquisition Sublimit
- ------ ---------------------------------------------------
<S> <C>
June 30, 1997 12.5% of Reference Utilization
December 31, 1997 12.5% of Reference Utilization
June 30, 1998 17.5% of Reference Utilization
December 31, 1998 17.5% of Reference Utilization
June 30, 1999 20.0% of Reference Utilization
December 31, 1999 20.0% of Reference Utilization
</TABLE>
; provided that the scheduled reductions of the Revolving Loan Commitments
--------
and Acquisition Sublimit set forth above shall be reduced in connection with
any voluntary or mandatory reductions of the Revolving Loan Commitments and
Acquisition Sublimit, respectively, in accordance with subsection 2.4B(iv).
B. UNSCHEDULED PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS
AND ACQUISITION SUBLIMIT.
(i) Voluntary Prepayments. Company may, upon written or telephonic notice
---------------------
to Agent on or prior to 12:00 Noon (New York time) on the date of
prepayment, which notice, if telephonic, shall be promptly confirmed in
writing, at any time and from time to time prepay any Swing Line Loan on any
Business Day in whole or in part in an aggregate minimum amount of $100,000
and integral multiples of $100,000 in excess of that amount (or such lesser
amount representing payment in full). Company may, upon not less than one
Business Day prior written or telephonic notice in the case of Base Rate
Loans, or three Business Days' prior written or telephonic notice in the
case of Eurodollar Rate Loans, given to Agent and, if given by telephone,
promptly confirmed in writing to Agent (which original written or telephonic
notice Agent will promptly transmit by telefacsimile or telephone to each
Lender), at any time and from time to time prepay any Revolving Loans on any
Business Day in whole or in part in an aggregate minimum amount of $250,000
and integral multiples of $100,000 in excess of that amount (or such lesser
amount representing payment in full); provided, however, that a Eurodollar
-------- -------
Rate Loan may only be prepaid on the expiration of the Interest Period
applicable thereto. The notice shall specify whether the amounts prepaid
are to be applied to outstanding Loans made pursuant to the Acquisition
Sublimit. In the event that such notice does not so specify, it shall be
assumed that the Loans prepaid were not made pursuant to the Acquisition
Sublimit. Notice of prepayment having been given as aforesaid, the
principal amount of the Loans specified in such notice shall become due and
payable on the prepayment date specified therein. Any such voluntary
prepayment shall be applied as specified in subsection 2.4B(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments and Acquisition
------------------------------------------------------------------
Sublimit. Company may, upon not less than three Business Days' prior
--------
written or telephonic notice confirmed in writing to Agent (which original
written or telephonic notice Agent will promptly transmit by telefacsimile
or telephone to
37
<PAGE>
each Lender), at any time and from time to time terminate in whole or
permanently reduce in part, without premium or penalty, the Revolving Loan
Commitments in an amount up to the amount by which the Revolving Loan
Commitments exceed the Total Utilization of Commitments at the time of such
proposed termination or reduction; provided that any such partial reduction
--------
of the Revolving Loan Commitments shall be in an aggregate minimum amount of
$250,000 and integral multiples of $100,000 in excess of that amount;
provided, further, that, after giving effect to such reduction, the
Acquisition Sublimit shall not exceed the Revolving Loan Commitments then in
effect. On any proposed termination or reduction date, Company may also
terminate in whole or permanently reduce in part, without premium or
penalty, the Acquisition Sublimit in an amount up to the lesser of (a) the
amount by which the Revolving Loan Commitments shall be reduced and (b) the
amount by which the Acquisition Sublimit exceeds the Acquisition Sublimit
Utilization at the time of such proposed termination or reduction. Company's
notice to Agent shall designate the date (which shall be a Business Day) of
any termination or reduction, whether the Acquisition Sublimit shall be
terminated or reduced and the amount of any partial reduction, and any
termination or reduction shall be effective on the date specified in
Company's notice and shall reduce the Revolving Loan Commitment of each
Lender proportionately to its Pro Rata Share. Any such voluntary reduction
of the Revolving Loan Commitments and Acquisition Sublimit shall be applied
as specified in subsection 2.4B(iv).
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving Loan
----------------------------------------------------------------
Commitments and Acquisition Sublimit.
------------------------------------
(a) Prepayments and Reductions from Asset Sales. No later than
-------------------------------------------
the second Business Day following the date of receipt by Company or any
of its Subsidiaries of Cash Proceeds of any Asset Sale, Company shall
prepay first the Swing Line Loans made for Permitted Acquisitions to
-----
the full extent thereof and second the Revolving Loans made for
------
Permitted Acquisitions, and the Revolving Loan Commitments and
Acquisition Sublimit shall each be permanently reduced, in an amount
equal to the Net Cash Proceeds of such Asset Sale. Concurrently with
any prepayment of the Loans and/or reduction of the Revolving Loan
Commitments and Acquisition Sublimit pursuant to this subsection
2.4B(iii)(a), Company shall deliver to Agent an Officers' Certificate
demonstrating the derivation of the Net Cash Proceeds of the
correlative Asset Sale from the gross sales price thereof. In the
event that Company shall, at any time after receipt of Cash Proceeds of
any Asset Sale requiring a prepayment or a reduction of the Revolving
Loan Commitments and Acquisition Sublimit pursuant to this subsection
2.4B(iii)(a), determine that the prepayments and/or reductions of the
Revolving Loan Commitments and Acquisition Sublimit previously made in
respect of such Asset Sale were in an aggregate amount less than that
required by the terms of this subsection 2.4B(iii)(a), Company shall
promptly make an additional prepayment of the Swing Line Loans or
Revolving Loans made for Permitted Acquisitions, as the case may be
(and
38
<PAGE>
the Revolving Loan Commitments and Acquisition Sublimit shall be
permanently reduced), in the manner described above in an amount equal
to the amount of any such deficit, and Company shall concurrently
therewith deliver to Agent an Officers' Certificate demonstrating the
derivation of the additional Net Cash Proceeds resulting in such
deficit. Any mandatory prepayments or reductions of the Revolving Loan
Commitments and Acquisition Sublimit pursuant to this subsection
2.4B(iii)(a) shall be applied as specified in subsection 2.4B(iv).
(b) Prepayments and Reductions Due to Issuance of Securities. On
--------------------------------------------------------
the date of receipt by Company, any of its Subsidiaries or Holding of
the cash proceeds (net of underwriting discounts and commissions and
other reasonable costs associated therewith) from the issuance of any
Securities of such Person (excluding the proceeds of borrowings under
Permitted Continuing Debt), including without limitation additional
issuances of Holding Common Stock, Company shall prepay first the Swing
-----
Line Loans made for Permitted Acquisitions to the full extent thereof
and second the Revolving Loans made for Permitted Acquisitions, and the
------
Revolving Loan Commitments and Acquisition Sublimit shall each be
permanently reduced, in an amount equal to such net cash proceeds;
provided that no such proceeds shall be required to be applied to such
--------
prepayments to the extent (x) such Holding Common Stock is sold to
members of the management of Company, (y) such Holding Common Stock or
other forms of equity are issued after December 31, 1996 and Level III,
Level IV or Level V is applicable at the time of such issuance or (z)
such proceeds are applied to the purchase price of a Permitted
Acquisition. Any such mandatory prepayments or reductions of the
Revolving Loan Commitments and Acquisition Sublimit shall be applied as
specified in subsection 2.4B(iv).
(c) Prepayments Due to Reductions or Restrictions of Revolving Loan
---------------------------------------------------------------
Commitments and Acquisition Sublimit. Company shall from time to time
------------------------------------
prepay first the Swing Line Loans and second the Revolving Loans to the
----- ------
extent necessary so that the Total Utilization of Commitments shall not
at any time exceed the Revolving Loan Commitments then in effect.
Company shall from time to time prepay first the Swing Line Loans made
-----
for Permitted Acquisitions and second the Revolving Loans made for
------
Permitted Acquisitions to the extent necessary so that the Acquisition
Sublimit Utilization shall not at any time exceed the Acquisition
Sublimit then in effect. Any such mandatory prepayments shall be
applied as specified in subsection 2.4B(iv).
(d) Reductions of Revolving Loan Commitments and Acquisition
--------------------------------------------------------
Sublimit Due to Voluntary Prepayments. The Revolving Loan Commitments
-------------------------------------
and Acquisition Sublimit shall each be permanently reduced on each date
that Company shall voluntarily prepay Loans pursuant to subsection
2.4B(i) in an amount equal to the amount, if any, prepaid that is
applied to
39
<PAGE>
outstanding Revolving Loans or Swing Line Loans made pursuant to the
Acquisition Sublimit. Any such mandatory reductions of the Revolving
Loan Commitments and Acquisition Sublimit shall be applied as specified
in subsection 2.4B(iv).
(iv) Application of Prepayments and Unscheduled Reductions of Revolving Loan
-----------------------------------------------------------------------
Commitments and Acquisition Sublimit.
------------------------------------
(a) Application of Voluntary Prepayments by Type of Loans. Any
-----------------------------------------------------
voluntary prepayments pursuant to subsection 2.4B(i) shall be applied
as specified by Company in the applicable notice of prepayment;
provided that in the event Company fails to specify the Loans to which
--------
any such prepayment shall be applied, such prepayment shall be applied
first to repay outstanding Swing Line Loans made for the purpose
-----
specified, if any, to the full extent thereof and second to repay
------
outstanding Revolving Loans made for the purpose specified, if any, to
the full extent thereof.
(b) Application of Prepayments to Base Rate Loans and Eurodollar Rate
-----------------------------------------------------------------
Loans. Considering Revolving Loans being prepaid separately, any
-----
prepayment thereof shall be applied first to Base Rate Loans made for
the purpose specified, if any, to the full extent thereof before
application to Eurodollar Rate Loans, in each case in a manner which
minimizes the amount of any payments required to be made by Company
pursuant to subsection 2.6D.
(c) Application of Unscheduled Reductions of Revolving Loan
-------------------------------------------------------
Commitments and Acquisition Sublimit. Any mandatory reduction of the
------------------------------------
Revolving Loan Commitments and Acquisition Sublimit pursuant to
subsection 2.4B(iii)(d) shall be applied to reduce the scheduled
reductions of the Revolving Loan Commitments and Acquisition Sublimit,
respectively, set forth in subsection 2.4A in inverse chronological
order. Any voluntary or mandatory reduction of the Revolving Loan
Commitments and Acquisition Sublimit pursuant to subsection 2.4B(ii) or
subsection 2.4B(iii)(a) or 2.4B(iii)(b) shall be applied pro rata to
each scheduled reduction of the Revolving Loan Commitments and
Acquisition Sublimit, respectively, set forth in subsection 2.4A that
is remaining at the time of such mandatory reduction.
C. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of principal,
--------------------------
interest, fees and other Obligations hereunder and under the Notes shall be
made in Dollars in same day funds, without defense, setoff or counterclaim,
free of any restriction or condition, and delivered to Agent not later than
12:00 Noon (New York time) on the date due at the Funding and Payment Office
for the account of Lenders; funds received by Agent after that time on such
due date shall
40
<PAGE>
be deemed to have been paid by Company on the next succeeding Business Day.
Company hereby authorizes Agent to charge its accounts with Agent in order
to cause timely payment to be made to Agent of all principal, interest, fees
and expenses due hereunder (subject to sufficient funds being available in
its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. All payments in
-------------------------------------------------
respect of the principal amount of any Loan shall include payment of accrued
interest on the principal amount being repaid or prepaid, and all such
payments shall be applied to the payment of interest before application to
principal.
(iii) Apportionment of Payments. Aggregate principal and interest
-------------------------
payments in respect of the Revolving Loans shall be apportioned among all
outstanding Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Agent shall
promptly distribute to each Lender, at its primary address set forth below
its name on the appropriate signature page hereof or at such other address
as such Lender may request, its Pro Rata Share of all such payments received
by Agent and the commitment fees of such Lender when received by Agent
pursuant to subsection 2.3. Notwithstanding the foregoing provisions of
this subsection 2.4C(iii), if, pursuant to the provisions of subsection
2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected
Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro
Rata Share of any Eurodollar Rate Loans, Agent shall give effect thereto in
apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing of
-------------------
any Revolving Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Revolving Loans evidenced by that Revolving Note and all principal payments
previously made thereon and of the date to which interest thereon has been
paid; provided that the failure to make (or any error in the making of) a
--------
notation of any Revolving Loan made under such Revolving Note shall not
limit or otherwise affect the obligations of Company hereunder or under such
Revolving Note with respect to any Revolving Loan or any payments of
principal or interest on such Revolving Note.
2.5 USE OF PROCEEDS.
---------------
A. REVOLVING LOANS; SWING LINE LOANS. The proceeds of Revolving Loans
and Swing Line Loans shall be applied by Company for (i) working capital and
general
41
<PAGE>
corporate purposes, which may include (a) the payment of fees and expenses
related to the Transaction, and (b) the making of intercompany loans (y) to any
of Company's wholly-owned Subsidiaries or (z) in an aggregate amount not
exceeding $2,500,000 at any time, to Company's Subsidiaries which are not
wholly-owned, each in accordance with subsection 7.1(iv), for their own working
capital and general corporate purposes; provided that the Working Capital
-------- ----
Utilization shall not at any time exceed $15,000,000, as such dollar amount
shall be reduced from time to time pursuant to subsections 2.4B(ii) and
2.4B(iii), and (ii) Permitted Acquisitions; provided that the Acquisition
--------
Sublimit Utilization shall not at any time exceed the Acquisition Sublimit then
in effect.
B. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any manner
that might cause the borrowing or the application of such proceeds to violate
Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board or
to violate the Exchange Act, in each case as in effect on the date or dates of
such borrowing and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 10:00 A.M. (New York time) on each Interest Rate Determination Date, Agent
shall determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) the interest rate that shall apply to
the Eurodollar Rate Loans for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to Company and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Agent shall have determined (which determination shall be final and conclusive
and binding upon all parties hereto), on any Interest Rate Determination Date
with respect to any Eurodollar Rate Loans, that by reason of circumstances
affecting the interbank Eurodollar market adequate and fair means do not exist
for ascertaining the interest rate applicable to such Loans on the basis
provided for in the definition of Adjusted Eurodollar Rate, Agent shall on such
date give notice (by telefacsimile or by telephone confirmed in writing) to
Company and each Lender of such determination, whereupon (i) no Loans may be
made as, or converted to, Eurodollar Rate Loans until such time as Agent
notifies Company and Lenders that the circumstances giving rise to such notice
no longer exist and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to the Loans in respect of
which such determination was made shall be deemed to be rescinded by Company.
42
<PAGE>
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the event
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and Agent) that the making, maintaining or
continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of
compliance by such Lender in good faith with any law, treaty, governmental rule,
regulation, guideline or order (or would conflict with any such treaty,
governmental rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful) or (ii) has
become impracticable, or would cause such Lender material hardship, as a result
of contingencies occurring after the date of this Agreement which materially and
adversely affect the interbank Eurodollar market or the position of such Lender
in that market, then, and in any such event, such Lender shall be an "AFFECTED
LENDER" and it shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to Company and Agent of such determination (which notice
Agent shall promptly transmit to each other Lender). Thereafter (a) the
obligation of the Affected Lender to make Loans as, or to convert Loans to,
Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by
the Affected Lender, (b) to the extent such determination by the Affected Lender
relates to a Eurodollar Rate Loan then being requested by Company pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender
shall make such Loan as (or convert such Loan to, as the case may be) a Base
Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding
Eurodollar Rate Loans (the "AFFECTED LOANS") shall be terminated at the earlier
to occur of the expiration of the Interest Period then in effect with respect to
the Affected Loans or when required by law, and (d) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
Notwithstanding the foregoing, to the extent a determination by an Affected
Lender as described above relates to a Eurodollar Rate Loan then being requested
by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Company shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or
by telephone confirmed in writing) to Agent of such rescission on the date on
which the Affected Lender gives notice of its determination as described above
(which notice of rescission Agent shall promptly transmit to each other Lender).
Except as provided in the immediately preceding sentence, nothing in this
subsection 2.6C shall affect the obligation of any Lender other than an Affected
Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate
Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds) which
that Lender may sustain: (i) if for any reason (other than a default by that
Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing,
43
<PAGE>
or a conversion to or continuation of any Eurodollar Rate Loan does not occur on
a date specified therefor in a Notice of Conversion/Continuation or a telephonic
request for conversion or continuation (unless such borrowing or conversion does
not occur by reason of the inability to determine the applicable interest rate
as provided in subsection 2.6B and the illegality or impracticability to make
Eurodollar Rate Loans as provided in subsection 2.6C), (ii) if any prepayment or
other principal payment or any conversion of any of its Eurodollar Rate Loans
occurs on a date prior to the last day of an Interest Period applicable to that
Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on
any date specified in a notice of prepayment given by Company, or (iv) as a
consequence of any other default by Company in the repayment of its Eurodollar
Rate Loans when required by the terms of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
- -------- -------
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Loan be made or maintained as, or converted
to, a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
----------------------------------------
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions
of subsection 2.7B, in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or
44
<PAGE>
compliance by such Lender with any guideline, request or directive issued or
made after the date hereof by any central bank or other governmental or quasi-
governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such Lender)
with respect to this Agreement or any of its obligations hereunder or any
payments to such Lender (or its applicable lending office) of principal,
interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including without
limitation any marginal, emergency, supplemental, special or other reserve),
special deposit, compulsory loan, FDIC insurance or similar requirement
against assets held by, or deposits or other liabilities in or for the
account of, or advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Lender (other than any
such reserve or other requirements with respect to Eurodollar Rate Loans
that are reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Company shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Company (with a copy to Agent) a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Lender under this subsection 2.7A, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company under this
-----------------------------
Agreement and the other Loan Documents shall be paid free and clear of and
(except to the extent required by law) without any deduction or withholding
on account of any Tax (other than a Tax on the overall net income of any
Lender) imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the United
States of America or any other jurisdiction from or to which a payment is
made by or on behalf of Company
45
<PAGE>
or by any federation or organization of which the United States of America
or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If Company or any other Person is required
-----------------------
by law to make any deduction or withholding on account of any such Tax from
any sum paid or payable by Company to Agent or any Lender under any of the
Loan Documents:
(a) Company shall notify Agent of any such requirement or any change
in any such requirement as soon as Company becomes aware of it;
(b) Company shall pay any such Tax before the date on which penalties
attach thereto, such payment to be made (if the liability to pay is
imposed on Company) for its own account or (if that liability is
imposed on Agent or such Lender, as the case may be) on behalf of and
in the name of Agent or such Lender;
(c) the sum payable by Company in respect of which the relevant
deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction,
withholding or payment, Agent or such Lender, as the case may be,
receives on the due date a net sum equal to what it would have received
had no such deduction, withholding or payment been required or made
(but net of any tax credit realized by Agent or such Lender); and
(d) within 30 days after paying any sum from which it is required by
law to make any deduction or withholding, and within 30 days after the
due date of payment of any Tax which it is required by clause (b) above
to pay, Company shall deliver to Agent evidence satisfactory to the
other affected parties of such deduction, withholding or payment and of
the remittance thereof to the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to any
--------
Lender under clause (c) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages
hereof) or after the date of the Assignment Agreement pursuant to which such
Lender became a Lender (in the case of each other Lender) in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to
such Lender.
46
<PAGE>
(iii) Evidence of Exemption from U.S. Withholding Tax.
-----------------------------------------------
(a) Each Lender that is organized under the laws of any jurisdiction
other than the United States or any state or other political
subdivision thereof (for purposes of this subsection 2.7B(iii), a "NON-
US LENDER") shall deliver to Agent for transmission to Company, on or
prior to the Closing Date (in the case of each Lender listed on the
signature pages hereof) or on the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each other
Lender), and at such other times as may be necessary in the
determination of Company or Agent (each in the reasonable exercise of
its discretion), (1) two original copies of Internal Revenue Service
Form 1001 or 4224 (or any successor forms), properly completed and duly
executed by such Lender, together with any other certificate or
statement of exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is not
subject to deduction or withholding of United States federal income tax
with respect to any payments to such Lender of principal, interest,
fees or other amounts payable under any of the Loan Documents or (2) if
such Lender is not a "bank" or other Person described in Section
881(c)(3) of the Internal Revenue Code and cannot deliver either
Internal Revenue Service Form 1001 or 4224 pursuant to clause (1)
above, a Certificate re Non-Bank Status together with two original
copies of Internal Revenue Service Form W-8 (or any successor form),
properly completed and duly executed by such Lender, together with any
other certificate or statement of exemption required under the Internal
Revenue Code or the regulations issued thereunder to establish that
such Lender is not subject to deduction or withholding of United States
federal income tax with respect to any payments to such Lender of
interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or other
evidence with respect to United States federal income tax withholding
matters pursuant to subsection 2.7B(iii)(a) hereby agrees, from time to
time after the initial delivery by such Lender of such forms,
certificates or other evidence, whenever a lapse in time or change in
circumstances renders such forms, certificates or other evidence
obsolete or inaccurate in any material respect, such Lender shall (1)
deliver to Agent for transmission to Company two new original copies of
Internal Revenue Service Form 1001 or 4224, or a Certificate re Non-
Bank Status and two original copies of Internal Revenue Service Form W-
8, as the case may be, properly completed and duly executed by such
Lender, together with any other certificate or statement of exemption
required in order to confirm or establish that such Lender is not
subject to deduction or withholding of United States federal income tax
with respect to payments to such Lender under the Loan Documents or (2)
immediately notify Agent and Company of its inability to deliver any
such forms, certificates or other evidence.
47
<PAGE>
(c) Company shall not be required to pay any additional amount to any
Non-US Lender under clause (c) of subsection 2.7B(ii) if such Lender
shall have failed to satisfy the requirements of subsection
2.7B(iii)(a); provided that if such Lender shall have satisfied such
--------
requirements on the Closing Date (in the case of each Lender listed on
the signature pages hereof) or on the date of the Assignment Agreement
pursuant to which it became a Lender (in the case of each other
Lender), nothing in this subsection 2.7B(iii)(c) shall relieve Company
of its obligation to pay any additional amounts pursuant to clause (c)
of subsection 2.7B(ii) in the event that, as a result of any change in
any applicable law, treaty or governmental rule, regulation or order,
or any change in the interpretation, administration or application
thereof, such Lender is no longer properly entitled to deliver forms,
certificates or other evidence at a subsequent date establishing the
fact that such Lender is not subject to withholding as described in
subsection 2.7B(iii)(a).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans or Commitments or Letters of Credit or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within five Business Days after receipt by Company from
such Lender of the statement referred to in the next sentence, Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or such controlling corporation on an after-tax basis for such reduction. Such
Lender shall deliver to Company (with a copy to Agent) a written statement,
setting forth in reasonable detail the basis of the calculation of such
additional amounts, which statement shall be conclusive and binding upon all
parties hereto absent manifest error.
2.8 OBLIGATION OF LENDERS AND ISSUING LENDERS TO MITIGATE.
-----------------------------------------------------
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender under subsection 2.6C
or that would entitle such Lender or
48
<PAGE>
Issuing Lender to receive payments under subsection 2.7 or subsection 3.6, it
will, to the extent not inconsistent with the internal policies of such Lender
or Issuing Lender and any applicable legal or regulatory restrictions, use
reasonable efforts (i) to make, issue, fund or maintain the Commitments of such
Lender or the affected Loans or Letters of Credit of such Lender or Issuing
Lender through another lending or letter of credit office of such Lender or
Issuing Lender or Affiliate, or (ii) take such other measures as such Lender or
Issuing Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if, as determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other lending or letter of credit
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or Letters of
Credit or the interests of such Lender or Issuing Lender; provided that such
--------
Lender or Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless Company agrees to
pay all incremental expenses incurred by such Lender or Issuing Lender as a
result of utilizing such other lending or letter of credit office as described
in clause (i) above. A certificate as to the amount of any such expenses payable
by Company pursuant to this subsection 2.8 (setting forth in reasonable detail
the basis for requesting such amount) submitted by such Lender or Issuing Lender
to Company (with a copy to Agent) shall be conclusive absent manifest error.
2.9 SECURITY FOR THE LOANS.
----------------------
A. PLEDGE AGREEMENTS. As security for the payment and performance of the
Obligations, on or prior to the Closing Date, (i) Holding shall execute and
deliver to Agent a Pledge Agreement substantially in the form of Exhibit XIII
hereto pursuant to which Holding shall grant Agent a first priority perfected
security interest in, and lien upon, the capital stock of Company, and (ii)
Company shall execute and deliver to Agent a Pledge Agreement substantially in
the form of Exhibit XIII hereto pursuant to which Company shall grant Agent a
first priority perfected security interest in, and lien upon, the capital stock
of each of its wholly-owned Subsidiaries and the intercompany Indebtedness of
each of Company's Subsidiaries owing to Company.
B. FURTHER ASSURANCES. Company hereby agrees to execute and deliver, and
to cause to be executed and delivered, to Agent, at Company's sole cost and
expense, such guaranties, financing or continuation statements, third party
consents and such other amendments, agreements, documents, assignments,
statements or instruments as Agent may from time to time reasonably request to
evidence, perfect or otherwise implement the security for performance and
repayment of the Obligations and the obligations of Holding and Company's
Subsidiaries (other than non wholly-owned Subsidiaries) under the Guaranties.
All of the foregoing shall be reasonably satisfactory in form and substance to
Agent.
49
<PAGE>
SECTION 3. LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
---------------------------------------------------------------------
THEREIN.
-------
A. LETTERS OF CREDIT. In addition to Company requesting that Lenders
make Revolving Loans pursuant to subsection 2.1A(i) and that Swing Line Lender
make Swing Line Loans pursuant to subsection 2.1A(ii), Company may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Closing Date to but excluding the forty-fifth day prior to
Commitment Termination Date, that one or more Lenders issue Letters of Credit
for the account of Company for the purposes specified in the definitions of
Commercial Letters of Credit and Standby Letters of Credit. Subject to the
terms and conditions of this Agreement and in reliance upon the representations
and warranties of Company herein set forth, any one or more Lenders may, but
(except as provided in subsection 3.1B(ii)) shall not be obligated to, issue
such Letters of Credit in accordance with the provisions of this subsection 3.1;
provided that Company shall not request that any Lender issue (and no Lender
- --------
shall issue):
(i) any Letter of Credit if, after giving effect to such issuance, the
Total Utilization of Commitments would exceed the Revolving Loan Commitments
then in effect;
(ii) any Acquisition Letter of Credit if, after giving effect to such
issuance, the Acquisition Sublimit Utilization would exceed the Acquisition
Sublimit then in effect;
(iii) any Acquisition Letter of Credit after December 31, 1996 except to
extend the expiration date (subject to the limitations set forth in the
first paragraph of this subsection 3.1A and in clause (v) below) of an
expiring Acquisition Letter of Credit;
(iv) any Non-Acquisition Letter of Credit if, after giving effect to such
issuance, the Working Capital Utilization at any time would exceed
$15,000,000, as such dollar amount shall be reduced from time to time
pursuant to subsection 2.4B(ii) and 2.4B(iii);
(v) any Standby Letter of Credit having an expiration date later than the
earlier of (a) the forty-fifth day prior to the Commitment Termination Date
and (b) the date which is one year from the date of issuance of such Standby
Letter of Credit; provided that the immediately preceding clause (b) shall
--------
not prevent any Issuing Lender from agreeing that a Standby Letter of Credit
will automatically be extended for one or more successive periods not to
exceed one year each unless such Issuing Lender elects not to extend for any
such additional period; provided, further that such Issuing Lender shall
-------- -------
deliver a written notice to Agent setting forth the last day on which such
Issuing Lender may give notice that it will not extend such Standby Letter
of Credit (the "NOTIFICATION DATE" with respect to such Standby Letter of
Credit) at least ten Business Days prior to such Notification Date;
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and provided, further that, unless Requisite Lenders otherwise consent, such
-------- -------
Issuing Lender shall give notice that it will not extend such Standby Letter
of Credit if it has knowledge that an Event of Default has occurred and is
continuing on such Notification Date;
(vi) any Commercial Letter of Credit having an expiration date (a) later
than the earlier of (X) the forty-fifth day prior to the Commitment
Termination Date and (Y) the date which is 180 days from the date of
issuance of such Commercial Letter of Credit or (b) that is otherwise
unacceptable to the applicable Issuing Lender in its reasonable discretion;
or
(vii) any Letter of Credit denominated in a currency other than Dollars.
B. MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever Company desires the issuance of a Letter
------------------
of Credit, it shall deliver to Agent, for its approval, a Notice of Issuance
of Letter of Credit substantially in the form of Exhibit III annexed hereto
-----------
no later than 1:00 P.M. (New York time) at least five Business Days, or such
shorter period as may be agreed to by the Issuing Lender in any particular
instance, in advance of the proposed date of issuance. The Notice of
Issuance of Letter of Credit shall specify (a) the proposed date of issuance
(which shall be a Business Day), (b) the face amount of the Letter of
Credit, (c) the expiration date of the Letter of Credit, (d) the name and
address of the beneficiary, (e) the verbatim text of the proposed Letter of
Credit or the proposed terms and conditions thereof, including a precise
description of any documents and the verbatim text of any certificates to be
presented by the beneficiary which, if presented by the beneficiary prior to
the expiration date of the Letter of Credit, would require the Issuing
Lender to make payment under the Letter of Credit; provided that the Issuing
--------
Lender, in its reasonable discretion, may require changes in the text of the
proposed Letter of Credit or any such documents or certificates, and (f)
whether the Letter of Credit is an Acquisition Letter of Credit or a Non-
Acquisition Letter of Credit.
Company shall notify the applicable Issuing Lender (and Agent, if
Agent is not such Issuing Lender) prior to the issuance of any Letter of
Credit in the event that any of the matters to which Company is required to
certify in the applicable Notice of Issuance of Letter of Credit is no
longer true and correct as of the proposed date of issuance of such Letter
of Credit, and upon the issuance of any Letter of Credit Company shall be
deemed to have re-certified, as of the date of such issuance, as to the
matters to which Company is required to certify in the applicable Notice of
Issuance of Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt and approval by Agent
-------------------------------
of a Notice of Issuance of Letter of Credit pursuant to subsection 3.1B(i)
requesting the issuance of a Letter of Credit, in the event Agent elects to
issue such Letter of Credit, Agent shall promptly so notify Company, and
Agent shall be the
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Issuing Lender with respect thereto. In the event that Agent, in its sole
discretion, elects not to issue such Letter of Credit, Agent shall promptly
so notify Company, whereupon Company may request any other Lender to issue
such Letter of Credit by delivering to such Lender a copy of the applicable
Notice of Issuance of Letter of Credit. Any Lender so requested to issue
such Letter of Credit shall promptly notify Company and Agent whether or
not, in its sole discretion, it has elected to issue such Letter of Credit,
and any such Lender which so elects to issue such Letter of Credit shall be
the Issuing Lender with respect thereto. In the event that all other Lenders
shall have declined to issue such Letter of Credit, notwithstanding the
prior election of Agent not to issue such Letter of Credit, Agent shall be
obligated to issue such Letter of Credit and shall be the Issuing Lender
with respect thereto, notwithstanding the fact that the Letter of Credit
Usage with respect to such Letter of Credit and with respect to all other
Letters of Credit issued by Agent, when aggregated with Agent's outstanding
Revolving Loans and Swing Line Loans, may exceed Agent's Revolving Loan
Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
----------------------------
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, the Issuing Lender shall issue the requested Letter of Credit in
accordance with the Issuing Lender's standard operating procedures.
(iv) Notification to Lenders. Upon the issuance of any Letter of Credit
-----------------------
the applicable Issuing Lender shall promptly notify Agent and each other
Lender of such issuance. Promptly after receipt of such notice, Agent shall
notify each Lender of the amount of such Lender's respective participation
in such Letter of Credit, determined in accordance with subsection 3.1C.
(v) Reports to Lenders. Within 30 days after the end of each calendar
------------------
quarter ending after the Closing Date, so long as any Letter of Credit shall
have been outstanding during such calendar quarter, each Issuing Lender
shall deliver to Agent a report setting forth for such calendar quarter the
daily maximum amount available to be drawn under the Letters of Credit
issued by such Issuing Lender that were outstanding during such calendar
quarter.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT. Immediately
upon the issuance of each Letter of Credit, each Lender shall be deemed to, and
hereby agrees to, have irrevocably purchased from the Issuing Lender a
participation in such Letter of Credit and drawings thereunder in an amount
equal to such Lender's Pro Rata Share of the maximum amount which is or at any
time may become available to be drawn thereunder.
3.2 LETTER OF CREDIT FEES.
---------------------
Company agrees to pay the following amounts to each Issuing Lender
with respect to Letters of Credit issued by it:
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(i) with respect to each Standby Letter of Credit, (a) an issuance fee
equal to the greater of (Y) $500 or (Z) 0.25% per annum of the daily maximum
amount available to be drawn under such Standby Letter of Credit and (b) a
letter of credit fee equal to the product of (X) the Letter of Credit Fee
Percentage multiplied by (Y) the daily maximum amount available to be drawn
---------- --
under such Standby Letter of Credit, in each case payable in arrears on and
to (but excluding) each March 1, June 1, September 1 and December 1 of each
year and computed on the basis of a 360-day year for the actual number of
days elapsed;
(ii) with respect to each Commercial Letter of Credit, (a) an issuance
fee equal to $500 per annum and (b) a letter of credit fee equal to such
rate per annum of the daily maximum amount available to be drawn under such
Commercial Letter of Credit as shall be agreed to by Company and Issuing
Lender, in each case payable in arrears on and to (but excluding) each March
1, June 1, September 1, and December 1 of each year and computed on the
basis of a 360-day year for the actual number of days elapsed; and
(iii) with respect to the issuance, amendment or transfer of each Letter
of Credit and each drawing made thereunder (without duplication of the fees
payable under clauses (i) and (ii) above), documentary and processing
charges in accordance with such Issuing Lender's standard schedule for such
charges in effect at the time of such issuance, amendment, transfer or
drawing, as the case may be.
Promptly upon receipt by such Issuing Lender of any amount described in clause
(i)(b) or (ii)(b) of this subsection 3.2, such Issuing Lender shall deliver such
amount to Agent for distribution by Agent to each Lender of its Pro Rata Share
of such amount.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
-------------------------------------------------------------------
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to determine
that the documents and certificates required to be delivered under such Letter
of Credit have been delivered and that they comply on their face with the
requirements of such Letter of Credit.
B. REIMBURSEMENT BY COMPANY OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. In
the event an Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, such Issuing Lender shall immediately notify Company and
Agent, and Company shall reimburse such Issuing Lender on the date on which such
drawing is honored (the "REIMBURSEMENT DATE") in an amount in Dollars and in
same day funds equal to the amount of such drawing; provided that, anything
--------
contained in this Agreement to the contrary notwithstanding, (i) unless Company
shall have notified Agent and such Issuing Lender prior to 11:00 A.M. (New York
time) on the Business Day immediately prior to the date of such drawing that
Company intends to reimburse such Issuing Lender for the amount of such drawing
with funds other than the proceeds of Revolving Loans, Company shall be deemed
to have given a timely Notice of Borrowing to Agent requesting
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Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement
Date in an amount in Dollars equal to the amount of such drawing and (ii)
subject to satisfaction or waiver of the conditions specified in subsection
4.2B, Lenders shall, on the Reimbursement Date, make Revolving Loans that are
Base Rate Loans in the amount of such drawing, the proceeds of which shall be
applied directly by Agent to reimburse such Issuing Lender for the amount of
such drawing; and provided, further that if for any reason proceeds of Revolving
-------- -------
Loans are not received by such Issuing Lender on the Reimbursement Date in an
amount equal to the amount of such drawing, Company shall reimburse such Issuing
Lender, on demand, in an amount in same day funds equal to the excess of the
amount of such drawing and any production fees incurred over the aggregate
amount of such Revolving Loans, if any, which are so received. Nothing in this
subsection 3.3B shall be deemed to relieve any Lender from its obligation to
make Revolving Loans on the terms and conditions set forth in this Agreement,
and Company shall retain any and all rights it may have against any Lender
resulting from the failure of such Lender to make such Revolving Loans under
this subsection 3.3B.
C. PAYMENT BY LENDERS OF UNREIMBURSED DRAWINGS UNDER LETTERS OF CREDIT.
(i) Payment by Lenders. In the event that Company shall fail for any
------------------
reason to reimburse any Issuing Lender as provided in subsection 3.3B in an
amount equal to the amount of any drawing honored by such Issuing Lender
under a Letter of Credit issued by it, such Issuing Lender shall promptly
notify Agent of the unreimbursed amount of such drawing and Agent shall
notify each other Lender of its respective participation therein based on
such Lender's Pro Rata Share. Each Lender shall make available to such
Issuing Lender an amount equal to its respective participation, in Dollars
and in same day funds, at the office of such Issuing Lender specified in
such notice, not later than 1:00 P.M. (New York time) on the first business
day (under the laws of the jurisdiction in which such office of such Issuing
Lender is located) after the date Agent was notified by such Issuing Lender.
In the event that any Lender fails to make available to such Issuing Lender
on such business day the amount of such Lender's participation in such
Letter of Credit as provided in this subsection 3.3C, such Issuing Lender
shall be entitled to recover such amount on demand from such Lender together
with interest thereon at the rate customarily used by such Issuing Lender
for the correction of errors among banks for three Business Days and
thereafter at the Base Rate. Nothing in this subsection 3.3C shall be
deemed to prejudice the right of any Lender to recover from any Issuing
Lender any amounts made available by such Lender to such Issuing Lender
pursuant to this subsection 3.3C in the event that it is determined by the
final judgment of a court of competent jurisdiction that the payment with
respect to a Letter of Credit by such Issuing Lender in respect of which
payment was made by such Lender constituted gross negligence or willful
misconduct on the part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From Company. In
---------------------------------------------------------------
the event any Issuing Lender shall have been reimbursed by other Lenders
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<PAGE>
pursuant to subsection 3.3C(i) for all or any portion of any drawing honored
by such Issuing Lender under a Letter of Credit issued by it, such Issuing
Lender shall distribute to each other Lender which has paid all amounts
payable by it under subsection 3.3C(i) with respect to such drawing such
other Lender's Pro Rata Share of all payments subsequently received by such
Issuing Lender from Company in reimbursement of such drawing when such
payments are received. Any such distribution shall be made to a Lender at
its primary address set forth below its name on the appropriate signature
page hereof or at such other address as such Lender may request.
D. INTEREST ON AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Company. Company agrees to pay to each Issuing
------------------------------
Lender, with respect to drawings made under any Letters of Credit issued by
it, interest on the amount paid by such Issuing Lender in respect of each
such drawing from the date of such drawing to but excluding the date such
amount is reimbursed by Company (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate equal to
(a) for the period from the date of such drawing to but excluding the
Reimbursement Date, the rate then in effect under this Agreement with
respect to Revolving Loans that are Base Rate Loans and (b) thereafter, a
rate which is 2% per annum in excess of the rate of interest otherwise
payable under this Agreement with respect to Revolving Loans that are Base
Rate Loans. Interest payable pursuant to this subsection 3.3D(i) shall be
computed on the basis of a 360-day year for the actual number of days
elapsed in the period during which it accrues and shall be payable on demand
or, if no demand is made, on the date on which the related drawing under a
Letter of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly upon
---------------------------------------------------
receipt by any Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing under a Letter of Credit issued
by it, (a) such Issuing Lender shall distribute to each other Lender, out of
the interest received by such Issuing Lender in respect of the period from
the date of such drawing to but excluding the date on which such Issuing
Lender is reimbursed for the amount of such drawing (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection
3.3B), the amount that such other Lender would have been entitled to receive
in respect of the letter of credit fee that would have been payable in
respect of such Letter of Credit for such period pursuant to subsection
3.2 if no drawing had been made under such Letter of Credit, and (b) in the
event such Issuing Lender shall have been reimbursed by other Lenders
pursuant to subsection 3.3C(i) for all or any portion of such drawing, such
Issuing Lender shall distribute to each other Lender which has paid all
amounts payable by it under subsection 3.3C(i) with respect to such drawing
such other Lender's Pro Rata Share of any interest received by such Issuing
Lender in respect of that portion of such drawing so reimbursed by other
Lenders for the period from the date on which such Issuing Lender was so
reimbursed by other Lenders to and including the date on
55
<PAGE>
which such portion of such drawing is reimbursed by Company. Any such
distribution shall be made to a Lender at its primary address set forth
below its name on the appropriate signature page hereof or at such other
address as such Lender may request.
3.4 OBLIGATIONS ABSOLUTE.
--------------------
The obligation of Company to reimburse each Issuing Lender for
drawings made under the Letters of Credit issued by it and to repay any
Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations
of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which Company or any Lender may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against Company, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Company or one of
its Subsidiaries and the beneficiary for which any Letter of Credit was
procured);
(iii) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter of
Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any of
its Subsidiaries ;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
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provided, in each case, that payment by the applicable Issuing Lender under the
- --------
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.
--------------------------------------------------
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"GOVERNMENTAL ACTS").
B. NATURE OF ISSUING LENDERS' DUTIES. As between Company and any Issuing
Lender, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by such Issuing Lender by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of such Issuing Lender, including without limitation any Governmental
Acts, and none of the above shall affect or impair, or prevent the vesting of,
any of such Issuing Lender's rights or powers hereunder.
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In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Company.
Notwithstanding anything to the contrary contained in this subsection
3.5, Company shall retain any and all rights it may have against any Issuing
Lender for any liability arising solely out of the gross negligence or willful
misconduct of such Issuing Lender, as determined by a final judgment of a court
of competent jurisdiction.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
-------------------------------------------------------
In the event that any Issuing Lender or Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by any Issuing Lender or Lender with any guideline,
request or directive issued or made after the date hereof by any central bank or
other governmental or quasi-governmental authority (whether or not having the
force of law):
(i) subjects such Issuing Lender or Lender (or its applicable lending or
letter of credit office) to any additional Tax (other than any Tax on the
overall net income of such Issuing Lender or Lender) with respect to the
issuing or maintaining of any Letters of Credit or the purchasing or
maintaining of any participations therein or any other obligations under
this Section 3, whether directly or by such being imposed on or suffered by
any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including without
limitation any marginal, emergency, supplemental, special or other reserve),
special deposit, compulsory loan, FDIC insurance or similar requirement in
respect of any Letters of Credit issued by any Issuing Lender or
participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Issuing Lender or Lender (or its applicable
lending or letter of credit office) regarding this Section 3 or any Letter
of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to
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such Issuing Lender or Lender, upon receipt of the statement referred to in the
next sentence, such additional amount or amounts as may be necessary to
compensate such Issuing Lender or Lender for any such increased cost or
reduction in amounts received or receivable hereunder. Such Issuing Lender or
Lender shall deliver to Company a written statement, setting forth in reasonable
detail the basis for calculating the additional amounts owed to such Issuing
Lender or Lender under this subsection 3.6, which statement shall be conclusive
and binding upon all parties hereto absent manifest error.
SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters
of Credit hereunder are subject to the satisfaction of the following conditions.
4.1 CONDITIONS TO INITIAL REVOLVING LOANS AND SWING LINE LOANS.
----------------------------------------------------------
The obligations of Lenders to make any Revolving Loans and Swing Line
Loans to be made on the Closing Date are, in addition to the conditions
precedent specified in subsection 4.2, subject to prior or concurrent
satisfaction of the following conditions:
A. COMPANY DOCUMENTS. On or before the Closing Date, Company shall
deliver or cause to be delivered to Lenders (or to Agent for Lenders with
sufficient originally executed copies, where appropriate, for each Lender and
its counsel) the following, each, unless otherwise noted, dated the Closing
Date:
(i) Certified copies of its Certificate of Incorporation, together with
a good standing certificate from the Secretary of State of the State of
Delaware and each other state in which it is qualified as a foreign
corporation to do business and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing authority
of each of such states, each dated a recent date prior to the Closing Date;
(ii) Copies of its Bylaws, certified as of the Closing Date by its
corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and authorizing the
execution, delivery and performance of this Agreement and the other Loan
Documents, certified as of the Closing Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification
or amendment;
(iv) Signature and incumbency certificates of its officers executing this
Agreement and the other Loan Documents;
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(v) Executed originals of this Agreement, the Notes (duly executed in
accordance with subsection 2.1E, drawn to the order of each Lender and Swing
Line Lender and with appropriate insertions) and the other Loan Documents;
and
(vi) Such other documents as Agent may reasonably request.
B. HOLDING AND COMPANY'S SUBSIDIARIES DOCUMENTS. On or before the
Closing Date, Company shall deliver or cause to be delivered to Lenders (or to
Agent for Lenders with sufficient originally executed copies, where appropriate,
for each Lender and its counsel) the following with respect to each of Company's
Subsidiaries and Holding, each, unless otherwise noted, dated the Closing Date:
(i) Certified copies of its charter, together with a good standing
certificate from its jurisdiction of incorporation and of its principal
place of business, dated a recent date prior to the Closing Date;
(ii) Copies of its Bylaws, certified as of the Closing Date by its
corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and authorizing the
execution, delivery and performance of the Guaranty and the Collateral
Documents, if any, to which it is a party, certified as of the Closing Date
by its corporate secretary or an assistant secretary as being in full force
and effect without modification or amendment; and
(iv) Signature and incumbency certificates of its officers executing the
Guaranty and the Collateral Documents, if any, to which it is a party.
C. TRANSACTION. KMS Acquisition Corporation shall have been merged with
and into Company pursuant to the laws of the State of Delaware, with Company
surviving such merger and Agent and Lenders shall have received evidence of the
filing of the certificates of merger (or other appropriate instruments) with the
Secretary of State of the State of Delaware and each other jurisdiction in which
it is necessary or advisable to make such filing.
D. COMPANY STOCKHOLDERS AGREEMENT. The Company Stockholders Agreement
shall be in full force and effect and shall not have been amended or modified
without the consent of Agent and Requisite Lenders.
E. HOLDING STOCK PURCHASE. The Holding Stock Purchase shall have
occurred and each of the following conditions shall be satisfied:
(i) Conditions Under the Holding Stock Subscription Agreement. (a) The
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Holding Stock Subscription Agreement shall be in full force and effect and
shall not have been amended or modified without the consent of Agent and
Requisite Lenders and (b) all conditions to the Holding Stock Purchase set
forth in
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Section 3 of the Holding Stock Subscription Agreement shall have been
satisfied or the fulfillment of any such conditions shall have been waived
by Agent and Requisite Lenders;
(ii) Confirmation of Closing Conditions. Holding, TKC and FS shall have
----------------------------------
delivered to Agent a certificate in form and substance satisfactory to Agent
to the effect that the conditions set forth in Section 3 of the Holding
Stock Subscription Agreement have been satisfied except to the extent waived
in writing by Holding, TKC or FS, as appropriate, and attaching copies of
any such written waivers; and
(iii) TKC shall have contributed 1,576,470 shares of Company Common Stock
to Holding and FS shall have made equity contributions to Holding in an
amount of not less than $25,223,520. Upon consummation of the Transaction,
all shares of the capital stock of Company shall be owned by Holding, and
the ownership of Holding shall be as set forth in Schedule 4.1 annexed
------------
hereto (except for those shares held by the management of Company).
F. REPAYMENT OF EXISTING DEBT. Any commitments to lend to Company and
any of its Subsidiaries (other than Permitted Continuing Debt) shall have been
terminated, all security interests created to secure the obligations arising in
connection therewith shall have been terminated and Company shall have delivered
to Agent UCC-3 termination statements (or comparable forms) and any and all
other instruments of release, satisfaction and/or reconveyance (or evidence of
the filing thereof) as may be necessary or advisable to terminate all such
security interests and all other security interests and Liens with respect to
any property or asset of such Person.
G. OPINIONS OF COUNSEL FOR COMPANY, HOLDING AND COMPANY'S SUBSIDIARIES.
Lenders and their respective counsel shall have received (i) originally executed
copies of one or more favorable written opinions of Riordan & McKinzie, counsel
for Company, Holding and Company's Subsidiaries, in form and substance
reasonably satisfactory to Agent and its counsel, dated as of the Closing Date
and setting forth substantially the matters in the opinions designated in
Exhibit VII annexed hereto and as to such other matters as Agent acting on
- -----------
behalf of Lenders may reasonably request and (ii) evidence satisfactory to Agent
that Company has requested such counsel to deliver such opinions to Lenders.
H. OPINIONS OF AGENT'S COUNSEL. Lenders shall have received originally
executed copies of one or more favorable written opinions of O'Melveny & Myers,
counsel to Agent, dated as of the Closing Date, substantially in the form of
Exhibit VIII annexed hereto and as to such other matters as Agent acting on
- ------------
behalf of Lenders may reasonably request.
I. AUDITOR'S LETTER. Agent shall have received an executed Auditor's
Letter.
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J. FEES. Company shall have paid to Agent, for distribution (as
appropriate) to Agent and Lenders, the fees payable on the Closing Date referred
to in subsection 2.3.
K. NO MATERIAL ADVERSE EFFECT. Since September 30, 1994, no Material
Adverse Effect (in the sole opinion of Agent) shall have occurred.
L. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company
shall have delivered to Agent an Officers' Certificate, in form and substance
satisfactory to Agent, to the effect that the representations and warranties in
Section 5 hereof are true, correct and complete in all material respects on and
as of the Closing Date to the same extent as though made on and as of that date
and that Company shall have performed in all material respects all agreements
and satisfied all conditions which this Agreement provides shall be performed or
satisfied by it on or before the Closing Date except as otherwise disclosed to
and agreed to in writing by Agent and Requisite Lenders.
M. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Agent, acting on
behalf of Lenders, and its counsel shall be satisfactory in form and substance
to Agent and such counsel, and Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as Agent may
reasonably request.
N. DELIVERY OF LEVEL DETERMINATION CERTIFICATE. On the Closing Date,
Company shall deliver a Level Determination Certificate calculated utilizing the
financial statements referred to in subsection 5.3.
O. GUARANTIES. On or before the Closing Date, Holding shall have
executed and delivered to Agent a Guaranty, substantially in the form of Exhibit
XIV annexed hereto, and Company's Subsidiaries (other than non wholly-owned
Subsidiaries) shall each have executed and delivered to Agent a Guaranty,
substantially in the form of Exhibit XV annexed hereto, each Guaranty covering
such other matters requested by Agent.
P. COLLATERAL DOCUMENTS. On or before the Closing Date, Agent shall have
received the Pledge Agreements from Holding and Company and the Collateral
Account Agreement from Company, in substantially the forms of Exhibits XIII and
XII annexed hereto, respectively. Company shall have taken or caused to be
taken such actions in such a manner so that Agent has a valid and perfected
first priority security interest in the entire Collateral (subject to Liens
consented to in writing by Agent and Requisite Lenders with respect to such
Collateral and other Liens permitted by subsection 7.2) granted by the
Collateral Documents. Such actions shall include, without limitation, the
delivery pursuant to the applicable Collateral Documents of such certificates
(which certificates shall be registered in the name of Agent or properly
endorsed in blank for transfer or accompanied by irrevocable undated stock
powers duly endorsed in blank, all in form and substance satisfactory to Agent)
representing all of the shares of capital stock required to be pledged and such
notes representing all of the intercompany Indebtedness required to be pledged
pursuant to the Collateral Documents.
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4.2 CONDITIONS TO ALL LOANS.
-----------------------
The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. Agent shall have received before that Funding Date, in accordance
with the provisions of subsection 2.1B, an originally executed Notice of
Borrowing, in each case signed by the chief executive officer, the chief
financial officer or the treasurer of Company or by any executive officer of
Company designated by any of the above-described officers on behalf of Company
in a writing delivered to Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made on
and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and complete in
all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result from
the consummation of the borrowing contemplated by such Notice of Borrowing
that would constitute an Event of Default or a Potential Event of Default;
(iii) Company shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement provides shall
be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall not
violate any law including, without limitation, Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System; and
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by Company in writing pursuant to subsection 5.6 or 6.1(x) prior to the
making of the last preceding Loans (or, in the case of the initial Loans,
prior to the execution of this Agreement), and there shall have occurred no
development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in either
event, in the opinion of Agent or of Requisite Lenders, would be
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expected to have a Material Adverse Effect; and no injunction or other
restraining order shall have been issued and no hearing to cause an
injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of, the transactions contemplated by this Agreement or
the making of Loans hereunder.
4.3 CONDITIONS TO LETTERS OF CREDIT.
-------------------------------
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit, Agent
shall have received, in accordance with the provisions of subsection 3.1B(i), an
originally executed Notice of Issuance of Letter of Credit, in each case signed
by the chief executive officer, the chief financial officer or the treasurer of
Company or by any executive officer of Company designated by any of the above-
described officers on behalf of Company in a writing delivered to Agent,
together with all other information specified in subsection 3.1B(i) and such
other documents or information as the applicable Issuing Lender may reasonably
require in connection with the issuance of such Letter of Credit.
C. On the date of issuance of such Letter of Credit:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true, correct and complete in all material
respects on and as of that date to the same extent as though made on and as
of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall have been true, correct and complete in all material
respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result from
the consummation of the issuance contemplated by such Notice of Issuance of
Letter of Credit that would constitute an Event of Default or a Potential
Event of Default;
(iii) Company shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement provides shall
be performed or satisfied by it on or before that date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain the applicable
Issuing Lender from issuing the Letter of Credit to be issued by it on that
date;
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(v) The issuance of the Letters of Credit requested on such date shall
not violate any law ; and
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by Company in writing pursuant to subsection 5.6 or 6.1(x) prior to the
issuance of the last preceding Letter of Credit (or, in the case of the
initial Letters of Credit, prior to the execution of this Agreement), and
there shall have occurred no development not so disclosed in any such
action, suit, proceeding, governmental investigation or arbitration so
disclosed, that, in either event, in the opinion of Agent or of Requisite
Lenders, would be expected to have a Material Adverse Effect; and no
injunction or other restraining order shall have been issued and no hearing
to cause an injunction or other restraining order to be issued shall be
pending or noticed with respect to any action, suit or proceeding seeking to
enjoin or otherwise prevent the consummation of, or to recover any damages
or obtain relief as a result of, the transactions contemplated by this
Agreement or the issuance of Letters of Credit hereunder.
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make
the Loans, to induce Issuing Lenders to issue Letters of Credit and to
induce other Lenders to purchase participations therein, Company represents
and warrants to each Lender, on the date of this Agreement, on each Funding
Date and on the date of issuance of each Letter of Credit, that the
following statements are true, correct and complete:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
----------------------------------------------------------------
SUBSIDIARIES.
------------
A. ORGANIZATION AND POWERS. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Company has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and to carry out the transactions
contemplated thereby.
B. QUALIFICATION AND GOOD STANDING. Company is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.13.
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D. SUBSIDIARIES. All of the Subsidiaries of Company are identified in
Schedule 5.1 annexed hereto, as said Schedule 5.1 may be supplemented from time
- ------------ ------------
to time pursuant to the provisions of subsection 6.1(xvii). The capital stock
or partnership interests of each of the Subsidiaries of Company identified in
Schedule 5.1 annexed hereto (as so supplemented) is duly authorized, validly
- ------------
issued, fully paid and nonassessable, as applicable, and none of such capital
stock constitutes Margin Stock. Each of the Subsidiaries of Company identified
in Schedule 5.1 annexed hereto (as so supplemented) is a corporation duly
------------
organized, or a general partnership or limited partnership duly formed, and is
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation or formation set forth therein, has all requisite
corporate or partnership power and authority to own and operate its properties
and to carry on its business as now conducted and as proposed to be conducted,
and is qualified to do business and in good standing in every jurisdiction where
its assets are located and wherever necessary to carry out its business and
operations, in each case except where failure to be so qualified or in good
standing or a lack of such corporate or partnership power and authority has not
had and will not have a Material Adverse Effect. Schedule 5.1 annexed hereto
------------
(as so supplemented) correctly sets forth the ownership interest of Company and
each of its Subsidiaries in each of the Subsidiaries of Company identified
therein.
5.2 AUTHORIZATION OF BORROWING, ETC.
--------------------------------
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents have been duly authorized by all necessary corporate
action on the part of Company.
B. NO CONFLICT. The execution, delivery and performance by Company of
the Loan Documents and the consummation of the transactions contemplated by the
Loan Documents do not and will not (i) except as would not have a Material
Adverse Effect, violate any provision of any law or any governmental rule or
regulation applicable to Company or any of its Subsidiaries, the Certificate or
Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) except as would not have a Material
Adverse Effect, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
Company or any of its Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of Company or any of
its Subsidiaries (other than any Liens created under any of the Loan Documents
in favor of Agent on behalf of Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Company or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Closing Date and disclosed in
writing to Lenders.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Company of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not require any registration
with, consent or
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approval of, or notice to, or other action to, with or by, any federal, state or
other governmental authority or regulatory body except for customary UCC
filings.
D. BINDING OBLIGATION. Each of the Loan Documents has been duly executed
and delivered by Company and is the legally valid and binding obligation of
Company, enforceable against Company in accordance with its respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
E. VALID ISSUANCE OF COMPANY COMMON STOCK. The Company Common Stock to
be outstanding after giving effect to the Transaction will be duly and validly
issued, fully paid and nonassessable. No stockholder of Company has or will
have any preemptive rights to subscribe for any additional equity Securities of
Company. The issuance and sale of such Company Common Stock, upon such issuance
and sale, will either (a) have been registered or qualified under applicable
federal and state securities laws or (b) be exempt therefrom.
5.3 FINANCIAL CONDITION.
-------------------
Company has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: (i) the audited consolidated
balance sheet of Company and its Subsidiaries as at March 31, 1994 and the
related consolidated statement of income, stockholders' equity and cash flows of
Company and its Subsidiaries for the Fiscal Year then ended and (ii) the
unaudited consolidated and consolidating balance sheets of Company and its
Subsidiaries as at September 30, 1994 and the related unaudited consolidated and
consolidating statements of income, stockholders' equity and cash flows of
Company and its Subsidiaries for the six months then ended. All such statements
were prepared in conformity with GAAP and fairly present the financial position
(on a consolidated and, where applicable, consolidating basis) of the entities
described in such financial statements as at the respective dates thereof and
the results of operations and cash flows (on a consolidated and, where
applicable, consolidating basis) of the entities described therein for each of
the periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments and
the absence of full footnotes. As of September 30, 1994, Company does not (and
will not following the funding of the initial Loans) have any Contingent
Obligation, contingent liability or liability for taxes, long-term lease or
unusual forward or long-term commitment that is not reflected in the foregoing
financial statements described in clauses (i) and (ii) above or the notes
thereto or in the Company's periodic reports filed with the Securities and
Exchange Commission and which in any such case is material in relation to the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company or any of its Subsidiaries.
5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
---------------------------------------------------------
Since September 30, 1994, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Neither
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Company nor any of its Subsidiaries has directly or indirectly declared,
ordered, paid or made, or set apart any sum or property for, any Restricted
Junior Payment or agreed to do so except as permitted by subsection 7.5.
5.5 TITLE TO PROPERTIES; LIENS.
--------------------------
Company and its Subsidiaries have (i) good, sufficient and legal title
to (in the case of fee interests in real property), (ii) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
or (iii) good title to (in the case of all other personal property), all of
their respective properties and assets reflected in the financial statements
referred to in subsection 5.3 or in the most recent financial statements
delivered pursuant to subsection 6.1, in each case except for assets disposed of
since the date of such financial statements in the ordinary course of business
or as otherwise permitted under subsection 7.7. Except as permitted by this
Agreement, all such properties and assets are free and clear of Liens.
5.6 LITIGATION; ADVERSE FACTS.
-------------------------
Except as set forth in Schedule 5.6 annexed hereto, there are no
------------
actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of Company or any of its Subsidiaries) at
law or in equity or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, pending or, to the knowledge of Company, threatened against
or affecting Company or any of its Subsidiaries or any property of Company or
any of its Subsidiaries that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect. Neither Company nor any of
its Subsidiaries is (i) in violation of any applicable laws that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect or (ii) subject to or in default with respect to any final
judgments, writs, injunctions, decrees, rules or regulations of any court or any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, that, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect.
5.7 PAYMENT OF TAXES.
----------------
Except to the extent permitted by subsection 6.3, all tax returns and
reports of Company and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Company and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable, and Company knows of no proposed tax assessment
against Company or any of its Subsidiaries, in each case which is not being
actively contested by Company or such Subsidiary in good faith and by
appropriate proceedings; provided that such reserves or other appropriate
--------
provisions, if any, as shall be required in conformity with GAAP shall have been
made or provided therefor.
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5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.
--------------------------------------------------------
A. Neither Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
5.9 GOVERNMENTAL REGULATION.
-----------------------
Neither Company nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 SECURITIES ACTIVITIES.
---------------------
A. Neither Company nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than
25% of the value of the assets (either of Company only or of Company and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
7.2 or 7.7 or subject to any restriction contained in any agreement or
instrument, between Company and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
5.11 EMPLOYEE BENEFIT PLANS.
----------------------
A. Company and each of its ERISA Affiliates are in compliance in all
material respects with all applicable provisions and requirements of ERISA and
the regulations and published interpretations thereunder with respect to each
Employee Benefit Plan, and have performed all their obligations in all material
respects under each Employee Benefit Plan.
B. No ERISA Event has occurred or is reasonably expected to occur.
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C. Except to the extent required under Section 4980B of the Internal
Revenue Code or state law conversion right or except as set forth in Schedule
--------
5.11 annexed hereto, no Employee Benefit Plan provides health or welfare
- ----
benefits (through the purchase of insurance or otherwise) for any retired or
former employees of Company or any of its ERISA Affiliates.
D. As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed $1,000,000.
5.12 CERTAIN FEES.
------------
No broker's or finder's fee or commission will be payable with respect
to this Agreement or any of the transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
5.13 ENVIRONMENTAL PROTECTION.
------------------------
Except as set forth in Schedule 5.13 annexed hereto:
-------------
(i) the operations of Company and each of its Subsidiaries
(including, without limitation, all operations and conditions at or in the
Facilities) comply in all material respects with all Environmental Laws;
(ii) none of the operations of Company or any of its Subsidiaries is
subject to any judicial or administrative proceeding alleging the violation
of or liability under any Environmental Laws which if adversely determined
could reasonably be expected to have a Material Adverse Effect; and
(iii) neither Company nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written
order or agreement with any governmental authority or private party relating
to (a) prior administrative or judicial proceedings relating to the
violation by Company or such Subsidiary of any Environmental Laws or (b) any
Environmental Claims.
5.14 EMPLOYEE MATTERS.
----------------
There is no strike or work stoppage in existence or threatened
involving Company or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
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5.15 SOLVENCY.
--------
Company and each of its Significant Subsidiaries is and, upon the
incurrence of any Obligations by Company on any date on which this
representation is made, will be, Solvent.
5.16 DISCLOSURE.
----------
No representation or warranty of Company or any of its Subsidiaries
contained in any Loan Document or in any other document, certificate or written
statement furnished to Lenders by or on behalf of Company or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact (known to Company, in the case of any document not furnished by
it) necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Company to be
reasonable at the time made, it being recognized by Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. There are no facts known (or which should upon the
reasonable exercise of diligence be known) to Company (other than matters of a
general economic nature) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect and that have not
been disclosed herein or in such other documents, certificates and statements
furnished to Lenders for use in connection with the transactions contemplated
hereby.
5.17 SECURITY INTERESTS.
------------------
The Liens granted to Agent on behalf of Lenders by Company and Holding
pursuant to the Collateral Documents are perfected first priority Liens (except
for Liens provided for in clauses (i) through (ix) of the definition of
"Permitted Encumbrances") in the Collateral described therein including the
proceeds and products thereof.
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
--------------------------------------
Company will maintain, and cause each of its Subsidiaries to maintain,
a system of accounting established and administered in accordance with sound
business
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practices sufficient to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Agent and Lenders:
(i) Monthly Financials: as soon as available and in any event within 30
------------------
days after the end of each month ending after the Closing Date (except June,
September and December of each year), (a) the consolidated statement of
income of Company and its Subsidiaries and the statement of income for each
business division for such month and for the period from the beginning of
the then current Fiscal Year to the end of such month, setting forth in each
case in comparative form the corresponding figures from the financial plan
for the current Fiscal Year delivered pursuant to subsection 6.1(xiii), to
the extent prepared on a monthly basis, all in reasonable detail and
certified by the chief financial officer of Company that they fairly present
the results of operations of Company and its Subsidiaries for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (b) a narrative report describing the operations of Company
and its Subsidiaries in the form prepared for presentation to senior
management for such month and for the period from the beginning of the then
current Fiscal Year to the end of such month;
(ii) Quarterly Financials: as soon as available and in any event within
--------------------
45 days after the end of each of the first three fiscal quarters of each
Fiscal Year, (a) the consolidated and consolidating balance sheets of
Company and its Subsidiaries as at the end of such fiscal quarter and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such fiscal
quarter and for the period from the beginning of the then current Fiscal
Year to the end of such fiscal quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding periods of
the previous Fiscal Year and the corresponding figures from the financial
plan for the current Fiscal Year delivered pursuant to subsection 6.1(xiii),
all in reasonable detail and certified by the chief financial officer of
Company that they fairly present the financial condition of Company and its
Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated, subject to changes resulting
from audit and normal year-end adjustments, and (b) a narrative report
describing the operations of Company and its Subsidiaries in the form
prepared for presentation to senior management for such fiscal quarter and
for the period from the beginning of the then current Fiscal Year to the end
of such fiscal quarter;
(iii) Year-End Financials: as soon as available and in any event within
-------------------
90 days after the end of each Fiscal Year, (a) the consolidated and
consolidating balance sheets of Company and its Subsidiaries as at the end
of such Fiscal Year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Company and its
Subsidiaries for such Fiscal Year, setting forth in each case in comparative
form the corresponding figures for the previous Fiscal Year, all in
reasonable detail and certified by the chief financial officer of Company
that they fairly present the financial condition of Company and its
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Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated, (b) a narrative report
describing the operations of Company and its Subsidiaries in the form
prepared for presentation to senior management for such Fiscal Year, and (c)
in the case of such consolidated financial statements, a report thereon of
Ernst & Young LLP or other independent certified public accountants of
recognized national standing selected by Company which report shall be
unqualified, shall express no doubts about the ability of Company and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present, in all material respects,
the consolidated financial position of Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash flows
for the periods indicated in conformity with GAAP (except as otherwise
disclosed in such financial statements) and that the audit by such
accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards;
(iv) Officers' and Compliance Certificates: together with each delivery
-------------------------------------
of financial statements of Company and its Subsidiaries pursuant to
subdivisions (i), (ii) and (iii) above, (a) an Officers' Certificate of
Company stating that the signers have reviewed the terms of this Agreement
and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or at
the end of such accounting period, and that the signers do not have
knowledge of the existence as at the date of such Officers' Certificate, of
any condition or event that constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
Company has taken, is taking and proposes to take with respect thereto; and
(b) a Compliance Certificate demonstrating in reasonable detail compliance
during and at the end of the applicable accounting periods with the
restrictions contained in Section 7;
(v) Reconciliation Statements: if, as a result of any change in
-------------------------
accounting principles and policies from those used in the preparation of the
audited financial statements referred to in subsection 5.3, the consolidated
financial statements of Company and its Subsidiaries delivered pursuant to
subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1 will differ
in any material respect from the consolidated financial statements that
would have been delivered pursuant to such subdivisions had no such change
in accounting principles and policies been made, then (a) together with the
first delivery of financial statements pursuant to subdivision (i), (ii),
(iii) or (xiii) of this subsection 6.1 following such change, consolidated
financial statements of Company and its Subsidiaries for (y) the current
Fiscal Year to the effective date of such change and (z) the two full Fiscal
Years immediately preceding the Fiscal Year in which such change is made, in
each case prepared on a pro forma basis as if such change had been in effect
during such periods, and (b) together with each delivery of financial
statements pursuant to subdivision (i),
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(ii), (iii) or (xiii) of this subsection 6.1 following such change, a
written statement of the chief accounting officer or chief financial officer
of Company setting forth the differences which would have resulted if such
financial statements had been prepared without giving effect to such change;
(vi) Accountants' Certification: together with each delivery of
--------------------------
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
has included a review of the terms of this Agreement and the other Loan
Documents as they relate to accounting matters, (b) stating whether, in
connection with their audit, any condition or event that constitutes an
Event of Default or Potential Event of Default has come to their attention
and, if such a condition or event has come to their attention, specifying
the nature and period of existence thereof; provided that such accountants
--------
shall not be liable by reason of any failure to obtain knowledge of any such
Event of Default or Potential Event of Default that would not be disclosed
in the course of their audit, and (c) stating that based on their audit
nothing has come to their attention that causes them to believe either or
both that the information contained in the certificates delivered therewith
pursuant to subdivision (iv) above is not correct or that the matters set
forth in the Compliance Certificates delivered therewith pursuant to clause
(b) of subdivision (iv) above for the applicable Fiscal Year are not stated
in accordance with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
--------------------
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
------------------------------
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its security
holders or by any Subsidiary of Company to its security holders other than
Company or another Subsidiary of Company, (b) all regular and periodic
reports and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by Company or any of its Subsidiaries
with any securities exchange or with the Securities and Exchange Commission
or any governmental or private regulatory authority, and (c) all press
releases and other statements made available generally by Company or any of
its Subsidiaries to the public concerning material developments in the
business of Company or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of Company
-----------------------
obtaining knowledge (a) of any condition or event that constitutes an Event
of Default or Potential Event of Default, or becoming aware that any Lender
has given
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any notice (other than to Agent) or taken any other action with respect to a
claimed Event of Default or Potential Event of Default, (b) that any Person
has given any notice to Company or any of its Subsidiaries or taken any
other action with respect to a claimed default or event or condition of the
type referred to in subsection 8.2, (c) of any condition or event that would
be required to be disclosed in a current report filed by Company with the
Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of
such Form as in effect on the date hereof) if Company were required to file
such reports under the Exchange Act, or (d) of the occurrence of any event
or change that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect, an Officers' Certificate specifying
the nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
default, event or condition, and what action Company has taken, is taking
and proposes to take with respect thereto;
(x) Litigation or Other Proceedings: promptly upon any officer of
-------------------------------
Company obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration against or affecting
Company or any of its Subsidiaries or any property of Company or any of its
Subsidiaries (collectively, "PROCEEDINGS") not previously disclosed in
writing by Company to Lenders or (Y) any material development in any
Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of giving
rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or to
recover any damages or obtain relief as a result of, the transactions
contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters, and promptly after request by Agent such other
information as may be reasonably requested by Agent to enable Agent and its
counsel to evaluate any of such Proceedings;
(xi) ERISA Events: promptly upon becoming aware of the occurrence of or
------------
forthcoming occurrence of any ERISA Event, a written notice specifying the
nature thereof, what action Company or any of its ERISA Affiliates has
taken, is taking or proposes to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) each
-------------
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by Company or any of its ERISA Affiliates with the Internal Revenue
Service with
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respect to each Pension Plan; (b) all notices received by Company or any of
its ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA
Event; and (c) such other documents or governmental reports or filings
relating to any Employee Benefit Plan as Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any event no later
---------------
than 30 days after to the beginning of each Fiscal Year, a financial plan
for such Fiscal Year, including without limitation (a) a forecasted
consolidated balance sheet and forecasted consolidated statements of income
and cash flows of Company and its Subsidiaries for such Fiscal Year,
together with pro forma Compliance Certificates for such Fiscal Year, (b)
--- -----
forecasted consolidated statement of income of Company and its Subsidiaries
and forecasted statement of income for each business division for each month
and each quarter of such Fiscal Year, together with an explanation of the
assumptions on which such forecasts are based, and (c) such other
information and projections as Agent may reasonably request;
(xiv) Permitted Acquisitions: as soon as available (a) to the extent
----------------------
reasonably available, the consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows of
any entity subject to a Permitted Acquisition and its Subsidiaries as at the
end of the three prior fiscal years, (b) the pro forma consolidated balance
--- -----
sheets and the related consolidated statements of income, stockholders'
equity and cash flows of the Company and its Subsidiaries for the Fiscal
Year in which any Permitted Acquisition shall be made, giving effect to such
Permitted Acquisition, (c) a consolidated plan and financial forecast, on an
operating basis, for the Fiscal Year next succeeding the Fiscal Year in
which any Permitted Acquisition is made, (d) a calculation of the Pro Forma
Total Leverage Ratio giving effect to such Permitted Acquisition and (e) the
projected Pro Forma EBITDA (which shall be an annualized projected amount
which once established for an acquired business shall not change in
subsequent fiscal periods except as otherwise provided herein), each such
projected amount to be deemed acceptable to Requisite Lenders in the absence
of written objection thereto by Requisite Lenders on or before 30 days
following receipt of notice of such projected amount and may be subsequently
revised with the consent of Requisite Lenders from time to time;
(xv) Level Determination Certificate: not later than concurrently with
-------------------------------
the delivery of the financial statements required under subsections 6.1(ii)
and 6.1(iii), Company shall deliver a Level Determination Certificate
relating to the fiscal quarter most recently ended;
(xvi) Board of Directors: with reasonable promptness, written notice of
------------------
any change in the Board of Directors of Company;
(xvii) Subsidiaries: promptly upon any Person becoming a Subsidiary of
------------
Company, a written notice setting forth with respect to such Person (a) the
date on which such Person became a Subsidiary of Company and (b) all of the
data
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required to be set forth in Schedule 5.1 annexed hereto with respect to
------------
all Subsidiaries of Company (it being understood that such written notice
shall be deemed to supplement Schedule 5.1 annexed hereto for all purposes
------------
of this Agreement); and
(xviii) Other Information: with reasonable promptness, such other
-----------------
information and data with respect to Company or any of its Subsidiaries as
from time to time may be reasonably requested by any Lender.
6.2 CORPORATE EXISTENCE, ETC.
-------------------------
Except as permitted under subsection 7.7, Company will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect its corporate existence and all rights and franchises material to its
business.
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
----------------------------------------------
A. Company will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such charge or claim
--------
need be paid if being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person (other than Holding and Company or any of its Subsidiaries).
6.4 MAINTENANCE OF PROPERTIES; INSURANCE.
------------------------------------
Company will, and will cause each of its Subsidiaries to, maintain or
cause to be maintained in good repair, working order and condition, ordinary
wear and tear excepted, all material properties used in the business of Company
and its Subsidiaries (including, without limitation, Intellectual Property) and
from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof. Company will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and businesses of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses.
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6.5 INSPECTION; LENDER MEETING.
--------------------------
Company shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by any Lender to visit and inspect any of
the properties of Company or any of its Subsidiaries, including its and their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that Company
may, if it so chooses, be present at or participate in any such discussion), all
upon reasonable notice and at such reasonable times during normal business hours
and as often as may be reasonably requested. Without in any way limiting the
foregoing, Company will, upon the request of Agent or Requisite Lenders,
participate in a meeting of Agent and Lenders once during each Fiscal Year to be
held at Company's corporate offices (or such other location as may be agreed to
by Company and Agent) at such time as may be agreed to by Company and Agent.
6.6 COMPLIANCE WITH LAWS, ETC.
--------------------------
Company shall, and shall cause each of its Subsidiaries to, comply
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority, noncompliance with which could reasonably be
expected to cause a Material Adverse Effect. Company may in good faith contest
any alleged non-compliance with such laws so long as no Material Adverse Effect
shall be caused by reason of such contest.
6.7 ENVIRONMENTAL DISCLOSURE AND INSPECTION.
---------------------------------------
A. Company shall, and shall cause each of its Subsidiaries to,
exercise all due diligence to comply and cause (i) all tenants under any leases
or occupancy agreements affecting any portion of the Facilities and (ii) all
other Persons on or occupying such property, to comply with all Environmental
Laws.
B. Company agrees that Agent may, from time to time and in its sole
and absolute discretion, retain, at Company's expense, an independent
professional consultant to review any report relating to Hazardous Materials
prepared by or for Company. Company and Agent hereby acknowledge and agree that
any report of any investigation conducted at the request of Agent will be
obtained and shall be used by Agent and Lenders for the purposes of Lenders'
internal credit decisions, to monitor and police the Loans and to protect
Lenders' security interests, if any, created by the Loan Documents. Agent agrees
to deliver a copy of any such report to Company with the understanding that
Company acknowledges and agrees that (i) it will indemnify and hold harmless
Agent and each Lender from any costs, losses or liabilities relating to
Company's use of or reliance on such report, (ii) neither Agent nor any Lender
makes any representation or warranty with respect to such report, and (iii) by
delivering such report to Company, neither Agent nor any Lender is requiring or
recommending the implementation of any suggestions or recommendations contained
in such report.
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<PAGE>
C. Company shall promptly advise Lenders in writing and in
reasonable detail of (i) any remedial action taken by Company or any other
Person in response to (x) any Hazardous Materials on, under or about any
Facility, the existence of which has a reasonable possibility of resulting in an
Environmental Claim having a Material Adverse Effect, or (y) any Environmental
Claim that could have a Material Adverse Effect and (ii) any request for
information from any governmental agency that suggests such agency is
investigating whether Company or any of its Subsidiaries may be potentially
responsible for a Release of Hazardous Materials.
D. Company shall promptly notify Lenders of (i) any proposed
acquisition of stock, assets, or property by Company or any of its Subsidiaries
that could reasonably be expected to expose Company or any of its Subsidiaries
to, or result in, Environmental Claims that could have a Material Adverse Effect
or that could reasonably be expected to have a material adverse effect on any
Governmental Authorization then held by Company or any of its Subsidiaries and
(ii) any proposed action to be taken by Company or any of its Subsidiaries to
commence manufacturing, industrial or other operations that could reasonably be
expected to subject Company or any of its Subsidiaries to additional laws, rules
or regulations, including, without limitation, laws, rules and regulations
requiring additional environmental permits or licenses.
E. Company shall, at its own expense, provide copies of such
documents or information as Agent may reasonably request in relation to any
matters disclosed pursuant to this subsection 6.7.
6.8 COMPANY'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.
-------------------------------------------------------
Company shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any Facility in order to comply with all applicable
Environmental Laws and Governmental Authorizations except when, and only to the
extent that, Company's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials
is being contested in good faith by Company or such Subsidiary. In the event
Company or any of its Subsidiaries undertakes any remedial action with respect
to any Hazardous Materials on, under or about any Facility, Company or such
Subsidiary shall conduct and complete such remedial action in compliance with
all applicable Environmental Laws, and in accordance with the policies, orders
and directives of all federal, state and local governmental authorities except
when, and only to the extent that, Company's or such Subsidiary's liability for
such presence, storage, use, disposal, transportation or discharge of any
Hazardous Materials is being contested in good faith by Company or such
Subsidiary.
6.9 COLLATERAL DOCUMENTS; FURTHER ASSURANCES.
----------------------------------------
Company from time to time shall or shall cause Holding to execute,
deliver and file all such notices, statements and other documents and take such
other steps,
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<PAGE>
including but not limited to the amendment of the Collateral Documents and any
financing statements prepared thereunder, as may be reasonably necessary or
advisable, or that Agent may reasonably request, to render fully valid and
enforceable under all applicable laws, the rights, liens and priorities of Agent
on behalf of Lenders with respect to all security from time to time furnished
under this Agreement or the Collateral Documents or intended to be so furnished
in each case in such form and at such times as shall be reasonably satisfactory
to Agent.
6.10 NEW SUBSIDIARIES.
----------------
Company will notify Lenders promptly if it hereafter acquires or forms
a new Subsidiary and will pledge or cause to be pledged all of the capital stock
of each such Subsidiary (if wholly-owned) pursuant to Company's Pledge
Agreement. Company will also cause each such wholly-owned Subsidiary to
guaranty the Obligations of Company hereunder, pursuant to documentation in form
and substance satisfactory to Agent.
SECTION 7. COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.
7.1 INDEBTEDNESS.
------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness representing the deferred purchase price of
Permitted Acquisitions;
(iv) Company may become and remain liable with respect to
Indebtedness to any of its Subsidiaries, and any Subsidiary of Company may
become and remain liable with respect to Indebtedness to Company or any
other Subsidiary of
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Company; provided that the aggregate amount of such intercompany
--------
Indebtedness owed to Company by Subsidiaries which are not wholly-owned
shall not at any time exceed $3,000,000; provided further that (a) all such
--------
intercompany Indebtedness shall be evidenced by promissory notes, (b) all
such intercompany Indebtedness owed by Company to any of its Subsidiaries
shall be subordinated in right of payment to the payment in full of the
Obligations pursuant to the terms of the applicable promissory notes or an
intercompany subordination agreement, and (c) any payment by any Subsidiary
of Company under any guaranty of the Obligations shall result in a pro tanto
--- -----
reduction of the amount of any intercompany Indebtedness owed by such
Subsidiary to Company or to any of its Subsidiaries for whose benefit such
payment is made;
(v) Company and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7.1 annexed hereto; and
------------
(vi) Company and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to exceed
$2,500,000 at any time outstanding.
7.2 LIENS AND RELATED MATTERS.
-------------------------
A. PROHIBITION ON LIENS. Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
permit to exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances; and
(ii) Liens described in Schedule 7.2 annexed hereto.
------------
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
--------
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
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<PAGE>
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale, neither Company nor any
of its Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Except as provided herein or described on Schedule 7.2, Company
------------
will not, and will not permit any of its Subsidiaries to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any such Subsidiary to (i) pay
dividends or make any other distributions on any of such Subsidiary's capital
stock owned by Company or any other Subsidiary of Company, (ii) repay or prepay
any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of
Company, (iii) make loans or advances to Company or any other Subsidiary of
Company, or (iv) transfer any of its property or assets to Company or any other
Subsidiary of Company.
7.3 INVESTMENTS; JOINT VENTURES.
---------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Company and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries of
Company;
(iii) Company and its Subsidiaries may make intercompany loans to the
extent permitted under subsection 7.1(iv) and Company may make loans to
joint ventures not constituting Subsidiaries in an aggregate amount not
exceeding $2,500,000 at any time;
(iv) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted by subsection 7.8;
(v) Company and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7.3 annexed hereto;
------------
(vi) Company and its Subsidiaries may own Investments consisting of
incentive or appreciation rights under management contracts;
(vii) Company and its Subsidiaries may make Permitted Acquisitions;
and
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(viii) Company and its Subsidiaries may make and own other Investments
in an aggregate amount not to exceed at any time $2,000,000.
7.4 CONTINGENT OBLIGATIONS.
----------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Company may become and remain liable with respect to Contingent
Obligations in respect of Letters of Credit and Company and its Subsidiaries
may become and remain liable with respect to Contingent Obligations in
respect of other Commercial Letters of Credit in an aggregate amount not to
exceed at any time $250,000 and Contingent Obligations in respect of other
Standby Letters of Credit in an aggregate amount not to exceed at any time
$250,000;
(ii) Company may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements entered into for the purpose of
hedging against fluctuations of floating interests rates on Indebtedness of
Company and its Subsidiaries;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets;
(iv) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of any Indebtedness of Company
or any of its Subsidiaries permitted by subsection 7.1 and in respect of any
Investments of Company or any of its Subsidiaries permitted by subsection
7.3;
(v) Company and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7.4 annexed
hereto; ------------
(vi) Company may guaranty the obligations (other than obligations
constituting Indebtedness) of its Subsidiaries incurred in the ordinary
course of business;
(vii) Each of Company's Subsidiaries (other than non wholly-owned
Subsidiaries) may become and remain liable with respect to Contingent
Obligations under its Guaranty;
(viii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under any agreements related to the
Transaction; and
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(ix) Company and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum aggregate
liability, contingent or otherwise, of Company and its Subsidiaries in
respect of all such Contingent Obligations shall at no time exceed $500,000.
7.5 RESTRICTED JUNIOR PAYMENTS.
--------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that so long as no Event of Default or
--------
Potential Event of Default shall exist or be caused thereby (i) Company may make
Restricted Junior Payments not exceeding $50,000 per annum to enable Holding to
pay its administrative expenses; (ii) Company may make Restricted Junior
Payments not exceeding $750,000 in the aggregate (plus the proceeds of any
Holding Common Stock sold to management after the Closing Date) to enable
Holding to purchase Holding Common Stock from management of Company pursuant to
the terms of subscription agreements requiring or permitting such purchase;
(iii) Company may make Restricted Junior Payments not exceeding $600,000 in the
aggregate in settlement of certain stockholder litigation referred to in
Company's Proxy Statement relating to the Transaction; and (iv) Company may make
Restricted Junior Payments in an amount up to $16.50 per share to Company
stockholders dissenting from the approval of the Transaction.
7.6 FINANCIAL COVENANTS.
-------------------
A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the ratio
of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense for any four-
fiscal quarter period ending as of the last day of any fiscal quarter (or in the
case of fiscal quarters ending prior to December 31, 1995, for the period from
January 1, 1995 through the end of such fiscal quarter) to be less than
4.00:1.00.
B. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
<TABLE>
<CAPTION>
MINIMUM
PERIOD CONSOLIDATED NET WORTH
------------------------------- ----------------------
<S> <C>
Closing Date - March 30, 1995 $22,100,000
March 31, 1995 - March 30, 1996 23,700,000
March 31, 1996 - March 30, 1997 26,300,000
March 31, 1997 - March 30, 1998 29,400,000
March 31, 1998 - March 30, 1999 33,100,000
March 31, 1999 and thereafter 37,400,000
</TABLE>
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<PAGE>
C. MAXIMUM LEVERAGE RATIO. Company shall not permit the ratio of (i)
Consolidated Total Debt to (ii) Consolidated Pro Forma EBITDA to exceed 3.0 to
1.0 at any time.
D. MINIMUM CONSOLIDATED PRO RATED EBITDA. Company shall not permit
Consolidated Pro Rated EBITDA for any four-fiscal quarter period to be less than
the sum of the Consolidated Base Business EBITDA plus 80% of the Pro Rated
Projected EBITDA.
7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
----------------------------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
enter into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or substantially all the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(i) any Subsidiary of Company may be merged with or into Company or
any wholly-owned Subsidiary of Company, or be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to Company or any wholly-owned
Subsidiary of Company; provided that, in the case of such a merger, Company
--------
or such wholly-owned Subsidiary shall be the continuing or surviving
corporation;
(ii) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted under subsection 7.8;
(iii) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that the
--------
consideration received for such assets shall be in an amount at least equal
to the fair market value thereof;
(iv) subject to subsection 7.12, Company and its Subsidiaries may
make Asset Sales of assets having a fair market value not in excess of
$2,000,000; provided that (x) the consideration received for such assets
--------
shall be in an amount at least equal to the fair market value thereof; (y)
the sole consideration received shall be cash; and (z) the proceeds of such
Asset Sales shall be applied as required by subsection 2.4B(iii)(a);
(v) pursuant to the exercise of rights of first refusal in favor of
Koll/CC&F regarding participation in certain acquisitions made by Company
and its
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<PAGE>
Subsidiaries within a defined geographical area as specified in existing
documentation thereto; and
(vi) Company and its Subsidiaries may engage in Permitted
Acquisitions.
7.8 CONSOLIDATED CAPITAL EXPENDITURES.
---------------------------------
Company shall not, and shall not permit its Subsidiaries to, make or
incur Consolidated Capital Expenditures, in any Fiscal Year indicated below, in
an aggregate amount in excess of the corresponding amount (the "MAXIMUM
CONSOLIDATED CAPITAL EXPENDITURES AMOUNT") set forth below opposite such Fiscal
Year:
<TABLE>
<CAPTION>
MAXIMUM CONSOLIDATED
FISCAL YEAR ENDING CAPITAL EXPENDITURES
------------------ --------------------
<S> <C>
1995 $2,200,000
1996 2,200,000
1997 2,500,000
1998 2,500,000
1999 2,500,000
2000 and thereafter 2,500,000
</TABLE>
7.9 SALES AND LEASE-BACKS.
---------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection with
such lease.
7.10 SALE OR DISCOUNT OF RECEIVABLES.
-------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable.
7.11 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
---------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the
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<PAGE>
purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of equity Securities of
Company or with any Affiliate of Company or of any such holder, on terms that
are less favorable to Company or that Subsidiary, as the case may be, than those
that might be obtained at the time from Persons who are not such a holder or
Affiliate; provided that the foregoing restriction shall not apply to (i) any
--------
transaction between Company and any of its wholly-owned Subsidiaries or between
any of its wholly-owned Subsidiaries, (ii) reasonable and customary fees paid to
members of the Boards of Directors of Company and its Subsidiaries, (iii)
Restricted Junior Payments permitted by subsection 7.5, (iv) a fee not exceeding
$1,000,000 payable to Freeman Spogli & Co. in connection with its services in
the Transaction, and (v) arrangements described in the Section entitled "Certain
Transactions" (beginning at page 44) in Company's Proxy Statement relating to
the Transaction and the Section entitled "Employment Matters" (beginning at page
47 thereof).
7.12 DISPOSAL OF SUBSIDIARY STOCK.
----------------------------
Except for any sale of 100% of the capital stock or other equity
Securities of any of its Subsidiaries in compliance with the provisions of
subsections 7.7(iii) and 7.7(iv) and, except as permitted pursuant to the
Collateral Documents, Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Company, another Subsidiary of Company, or to qualify
directors if required by applicable law.
7.13 CONDUCT OF BUSINESS.
-------------------
From and after the Closing Date, Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than (i) the
businesses engaged in by Company and its Subsidiaries on the Closing Date and
similar or related businesses and (ii) such other lines of business as may be
consented to by Requisite Lenders.
SECTION 8. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
---------------------------------
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by
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mandatory prepayment or otherwise; failure by Company to pay when due any amount
payable to an Issuing Lender in reimbursement of any drawing under a Letter of
Credit; or failure by Company to pay any interest on any Loan or any fee or any
other amount due under this Agreement within five days after the date due; or
8.2 DEFAULT IN OTHER AGREEMENTS.
---------------------------
(i) Failure of Company or any of its Subsidiaries to pay when due (a)
any principal of or interest on any Indebtedness (other than Indebtedness
referred to in subsection 8.1) in an individual principal amount of $1,000,000
or more or any items of Indebtedness with an aggregate principal amount of
$1,000,000 or more or (b) any Contingent Obligation in an individual principal
amount of $1,000,000 or more or any Contingent Obligations with an aggregate
principal amount of $1,000,000 or more, in each case beyond the end of any grace
period provided therefor; or (ii) breach or default by Company or any of its
Subsidiaries beyond the end of any grace period provided therefor with respect
to any other material term of (a) any evidence of any Indebtedness in an
individual principal amount of $1,000,000 or more or any items of Indebtedness
with an aggregate principal amount of $1,000,000 or more or any Contingent
Obligation in an individual principal amount of $1,000,000 or more or any
Contingent Obligations with an aggregate principal amount of $1,000,000 or more
or (b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach or
default is to cause, or to permit the holder or holders of that Indebtedness or
Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to
cause, that Indebtedness or Contingent Obligation(s) to become or be declared
due and payable prior to its stated maturity or the stated maturity of any
underlying obligation, as the case may be (upon the giving or receiving of
notice, lapse of time, both, or otherwise); or
8.3 BREACH OF CERTAIN COVENANTS.
---------------------------
Failure of Company to perform or comply with any term or condition
contained in subsection 2.5 or 6.2 or Section 7 of this Agreement; or
8.4 BREACH OF WARRANTY.
------------------
Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
-----------------------------------
Company shall default in the performance of or compliance with any term
contained in this Agreement or any of the other Loan Documents, other than any
such term referred to in any other subsection of this Section 8, and such
default shall not have
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<PAGE>
been remedied or waived within 30 days after the earlier of (i) an officer of
Company becoming aware of such default or (ii) receipt by Company of notice from
Agent or any Lender of such default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
-----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter a decree
or order for relief in respect of Company or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Company or any of its Subsidiaries under the Bankruptcy Code or under
any other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Company or any of its Subsidiaries, or
over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of Company or any of its Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Company or any of its Subsidiaries, and any such event described in
this clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
---------------------------------------------------
(i) Company or any of its Subsidiaries shall have an order for relief
entered with respect to it or commence a voluntary case under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or Company or any of its Subsidiaries shall make any
assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries shall be unable, or shall fail generally, or shall admit in writing
its inability, to pay its debts as such debts become due; or the Board of
Directors of Company or any of its Subsidiaries (or any committee thereof) shall
adopt any resolution or otherwise authorize any action to approve any of the
actions referred to in clause (i) above or this clause (ii); or
8.8 JUDGMENTS AND ATTACHMENTS.
-------------------------
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $1,000,000 or (ii)
in the aggregate at any time an amount in excess of $1,000,000 (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
Company or any of its Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded
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<PAGE>
or unstayed for a period of 60 days (or in any event later than five days prior
to the date of any proposed sale thereunder); or
8.9 DISSOLUTION.
-----------
Any order, judgment or decree shall be entered against Company or any
of its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 EMPLOYEE BENEFIT PLANS.
----------------------
There shall occur one or more ERISA Events which individually or in the
aggregate results in or might reasonably be expected to result in liability of
Company or any of its ERISA Affiliates in excess of $1,000,000 during the term
of this Agreement; or there shall exist an amount of unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation any
Pension Plans with respect to which assets exceed benefit liabilities), which
exceeds $1,000,000; or
8.11 CHANGE IN CONTROL.
-----------------
A Change of Control shall have occurred.
8.12 INVALIDITY OF GUARANTY.
----------------------
Any Guaranty of this Agreement for any reason, other than the
satisfaction in full of all Obligations, is declared by a court of competent
jurisdiction to be null and void, or Holding or any Subsidiary of Company denies
that it has any further liability, including without limitation with respect to
future advances by Lenders, under its Guaranty or gives notice to such effect;
or
8.13 FAILURE OF SECURITY.
-------------------
From and after the execution, acknowledgement and filing of any
Collateral Document by Company or Holding, any such Collateral Document shall be
revoked by Company or Holding or shall be declared by a court of competent
jurisdiction to be null and void or shall cease to be in full force and effect
as a result of any change in law; or Company or Holding shall default in any
material respect in the performance or observance of any material term,
covenant, condition or agreement on its part to be performed or observed under
such Collateral Document beyond any applicable grace period; or Lenders shall
fail to have a valid, perfected and enforceable first priority Lien (subject to
the Liens permitted by subsection 7.2) on Company's or Holding's right, title
and interest in all or any material portion of the capital stock described
therein as a result of any change in law, the expiration of any required filings
or recordations with respect thereto, the declaration by a court of competent
jurisdiction that such Lien is null and void or the imposition of any "super
Lien" under applicable state or federal law; or Company or
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<PAGE>
Holding shall contest in any manner that such Collateral Document constitutes
its valid and enforceable agreement or shall assert in any manner that it has no
further obligation or liability under such Collateral Documents:
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Agent to issue any Letter of Credit and the right of any Lender to
issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon
the occurrence and during the continuation of any other Event of Default, Agent
shall, upon the written request or with the written consent of Requisite
Lenders, by written notice to Company, declare all or any portion of the amounts
described in clauses (a) through (c) above to be, and the same shall forthwith
become, immediately due and payable, and the obligation of each Lender to make
any Loan, the obligation of Agent to issue any Letter of Credit and the right of
any Lender to issue any Letter of Credit hereunder shall thereupon terminate;
provided that the foregoing shall not affect in any way the obligations of
- --------
Lenders under subsection 3.3C(i) or the obligations of Lenders to purchase
participations in any unpaid Swing Line Loans as provided in subsection
2.1A(ii).
Any amounts described in clause (b) above, when received by Agent,
shall be held by Agent pursuant to the terms of the Collateral Account Agreement
and shall be applied as therein provided.
Notwithstanding anything contained in the second preceding paragraph,
if at any time within 60 days after an acceleration of the Loans pursuant to
such paragraph Company shall pay all arrears of interest and all payments on
account of principal which shall have become due otherwise than as a result of
such acceleration (with interest on principal and, to the extent permitted by
law, on overdue interest, at the rates specified in this Agreement) and all
Events of Default and Potential Events of Default (other than non-payment of the
principal of and accrued interest on the Loans, in each case which is due and
payable solely by virtue of acceleration) shall be remedied or waived pursuant
to subsection 10.6, then Requisite Lenders, by written notice to Company, may at
their option rescind and annul such acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential Event of
Default or impair any right consequent thereon. The provisions of this paragraph
are intended merely to bind Lenders to a decision which may be made at the
election of Requisite Lenders and are not intended to benefit Company and do not
grant Company the right to require Lenders to rescind or annul any acceleration
hereunder, even if the conditions set forth herein are met.
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<PAGE>
SECTION 9. AGENT
9.1 APPOINTMENT.
-----------
Bankers is hereby appointed Agent hereunder and under the other Loan
Documents and each Lender hereby authorizes Agent to act as its agent in
accordance with the terms of this Agreement and the other Loan Documents. Agent
agrees to act upon the express conditions contained in this Agreement and the
other Loan Documents, as applicable. The provisions of this Section 9 are
solely for the benefit of Agent and Lenders and Company shall have no rights as
a third party beneficiary of any of the provisions thereof. In performing its
functions and duties under this Agreement, Agent shall act solely as an agent of
Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Company or any
of its Subsidiaries.
9.2 POWERS; GENERAL IMMUNITY.
------------------------
A. DUTIES SPECIFIED. Each Lender irrevocably authorizes Agent to take
such action on such Lender's behalf and to exercise such powers hereunder and
under the other Loan Documents as are specifically delegated to Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto. Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents and it may
perform such duties by or through its agents or employees. Agent shall not
have, by reason of this Agreement or any of the other Loan Documents, a
fiduciary relationship in respect of any Lender; and nothing in this Agreement
or any of the other Loan Documents, expressed or implied, is intended to or
shall be so construed as to impose upon Agent any obligations in respect of this
Agreement or any of the other Loan Documents except as expressly set forth
herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Agent shall not be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished or made by Agent to Lenders or by or on behalf of Company to
Agent or any Lender in connection with the Loan Documents and the transactions
contemplated thereby or for the financial condition or business affairs of
Company or any other Person liable for the payment of any Obligations, nor shall
Agent be required to ascertain or inquire as to the performance or observance of
any of the terms, conditions, provisions, covenants or agreements contained in
any of the Loan Documents or as to the use of the proceeds of the Loans or the
use of the Letters of Credit or as to the existence or possible existence of any
Event of Default or Potential Event of Default. Anything contained in this
Agreement to the contrary notwithstanding, Agent shall not have any liability
arising from confirmations of the amount of outstanding Loans or the Letter of
Credit Usage or the component amounts thereof.
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<PAGE>
C. EXCULPATORY PROVISIONS. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to Lenders for any action taken
or omitted by Agent under or in connection with any of the Loan Documents except
to the extent caused by Agent's gross negligence or willful misconduct. If
Agent shall request instructions from Lenders with respect to any act or action
(including the failure to take an action) in connection with this Agreement or
any of the other Loan Documents, Agent shall be entitled to refrain from such
act or taking such action unless and until Agent shall have received
instructions from Requisite Lenders. Without prejudice to the generality of the
foregoing, (i) Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Company and its
Subsidiaries), accountants, experts and other professional advisors selected by
it; and (ii) no Lender shall have any right of action whatsoever against Agent
as a result of Agent acting or (where so instructed) refraining from acting
under this Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders. Agent shall be entitled to refrain from
exercising any power, discretion or authority vested in it under this Agreement
or any of the other Loan Documents unless and until it has obtained the
instructions of Requisite Lenders.
D. AGENT ENTITLED TO ACT AS LENDER. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, Agent in its individual capacity as a Lender hereunder. With
respect to its participation in the Loans and the Letters of Credit, Agent shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not performing the duties and functions delegated to
it hereunder, and the term "Lender" or "Lenders" or any similar term shall,
unless the context clearly otherwise indicates, include Agent in its individual
capacity. Agent and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial advisory or other
business with Company or any of its Affiliates as if it were not performing the
duties specified herein, and may accept fees and other consideration from
Company for services in connection with this Agreement and otherwise without
having to account for the same to Lenders.
9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
------------------------------------------------------------------
CREDITWORTHINESS.
----------------
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. Agent
shall not have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
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<PAGE>
any time or times thereafter, and Agent shall not have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
9.4 RIGHT TO INDEMNITY.
------------------
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Agent, to the extent that Agent shall not have been reimbursed by
Company, for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against Agent
in performing its duties hereunder or under the other Loan Documents or
otherwise in its capacity as Agent in any way relating to or arising out of this
Agreement or the other Loan Documents; provided that no Lender shall be liable
--------
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Agent's gross negligence or willful misconduct. If any indemnity furnished to
Agent for any purpose shall, in the opinion of Agent, be insufficient or become
impaired, Agent may call for additional indemnity and cease, or not commence, to
do the acts indemnified against until such additional indemnity is furnished.
9.5 SUCCESSOR AGENT AND SWING LINE LENDER.
-------------------------------------
A. SUCCESSOR AGENT. Agent may resign at any time by giving 30 days'
prior written notice thereof to Lenders and Company, and Agent may be removed at
any time with or without cause by an instrument or concurrent instruments in
writing delivered to Company and Agent and signed by Requisite Lenders. Upon
any such notice of resignation or any such removal, Requisite Lenders shall have
the right, upon five Business Days' notice to Company, to appoint a successor
Agent. Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, that successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed Agent
and the retiring or removed Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Agent's
resignation or removal hereunder as Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
B. SUCCESSOR SWING LINE LENDER. Any resignation or removal of Agent
pursuant to subsection 9.5A shall also constitute the resignation or removal of
Bankers or its successor as Swing Line Lender, and any successor Agent appointed
pursuant to subsection 9.5A shall, upon its acceptance of such appointment,
become the successor Swing Line Lender for all purposes hereunder. In such
event (i) Company shall prepay any outstanding Swing Line Loans made by the
retiring or removed Agent in its capacity as Swing Line Lender, (ii) upon such
prepayment, the retiring or removed Agent and Swing Line Lender shall surrender
the Swing Line Note held by it to Company for cancellation, and (iii) Company
shall issue a new Swing Line Note to the successor Agent and Swing Line Lender
substantially in the form of Exhibit V annexed hereto, in the
---------
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<PAGE>
principal amount of the Swing Line Loan Commitment then in effect and with other
appropriate insertions.
9.6 COLLATERAL ACCOUNT AGREEMENT.
----------------------------
Each Lender hereby further authorizes Agent to enter into the
Collateral Account Agreement as secured party on behalf of and for the benefit
of Lenders and agrees to be bound by the terms of the Collateral Account
Agreement; provided that Agent shall not enter into or consent to any amendment,
--------
modification, termination or waiver of any provision contained in the Collateral
Account Agreement without the prior consent of Requisite Lenders. Anything
contained in any of the Loan Documents to the contrary notwithstanding, each
Lender agrees that no Lender shall have any right individually to realize upon
any of the collateral under the Collateral Account Agreement, it being
understood and agreed that all rights and remedies under the Collateral Account
Agreement may be exercised solely by Agent for the benefit of Lenders in
accordance with the terms thereof.
9.7 COLLATERAL DOCUMENTS.
--------------------
Each Lender hereby further authorizes Agent to enter into the
Collateral Documents as secured party on behalf of and for the benefit of
Lenders and agrees to be bound by the terms of the Collateral Documents;
provided that Agent shall not enter into or consent to any amendment,
- --------
modification, termination or waiver of any provision contained in the Collateral
Documents without the prior consent of Requisite Lenders. Agent may release
Collateral with the consent of Requisite Lenders. Each Lender agrees that no
Lender shall have any right individually to realize upon any of the collateral
under the Collateral Documents, it being understood and agreed that all rights
and remedies under the Collateral Documents may be exercised solely by Agent for
the benefit of Lenders in accordance with the terms thereof. Agent hereby
agrees to hold all collateral under the Collateral Documents executed and
delivered prior to the Closing Date for the benefit of itself and Lenders.
SECTION 10. MISCELLANEOUS
10.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.
-------------------------------------------------------------
A. GENERAL. Each Lender shall have the right at any time to (i) sell,
assign or transfer to any Eligible Assignee, or (ii) sell participations to any
Person in, all or any part of its Commitments or any Loan or Loans made by it or
its Letters of Credit or participations therein or any other interest herein or
in any other Obligations owed to it; provided that no such sale, assignment,
--------
transfer or participation shall, without the consent of Company, require Company
to file a registration statement with the Securities and Exchange Commission or
apply to qualify such sale, assignment, transfer or participation under the
securities laws of any state; provided, further that no such sale, assignment or
-------- -------
transfer described in clause (i) above shall be effective unless and until an
Assignment Agreement effecting such sale, assignment or transfer shall have been
accepted by Agent
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<PAGE>
and recorded in the Register as provided in subsection 10.1B(ii); provided,
--------
further that no such sale, assignment, transfer or participation of any Letter
- -------
of Credit or any participation therein may be made separately from a sale,
assignment, transfer or participation of a corresponding interest in the
Revolving Loan Commitment and the Revolving Loans of the Lender effecting such
sale, assignment, transfer or participation; and provided, further that,
-------- -------
anything contained herein to the contrary notwithstanding, the Swing Line Loan
Commitment and the Swing Line Loans of Swing Line Lender may not be sold,
assigned or transferred as described in clause (i) above to any Person other
than a successor Agent and Swing Line Lender to the extent contemplated by
subsection 9.5. Except as otherwise provided in this subsection 10.1, no Lender
shall, as between Company and such Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment or transfer of, or any granting of
participations in, all or any part of its Commitments or the Loans, the Letters
of Credit or participations therein, or the other Obligations owed to such
Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Revolving Loan
--------------------------------
Commitment, Revolving Loan, Letter of Credit or participation therein, or
other Obligation may (a) be assigned to another Lender, or to an Affiliate
of the assigning Lender or another Lender, with the giving of notice to
Company and Agent or (b) be assigned in an aggregate amount of not less than
$5,000,000 to any other Eligible Assignee with the giving of notice to
Company and with the consent of Agent (which consent of Agent shall not be
unreasonably withheld). To the extent of any such assignment in accordance
with either clause (a) or (b) above, the assigning Lender shall be relieved
of its obligations with respect to its Revolving Loan Commitment, Revolving
Loans, Letters of Credit or participations therein, or other Obligations or
the portion thereof so assigned. The parties to each such assignment shall
execute and deliver to Agent, for its acceptance and recording in the
Register, an Assignment Agreement, together with a processing and
recordation fee of $1,500, in the case of an assignment in accordance with
clause (a) above, or in the case of an assignment in accordance with clause
(b) above, $3,500, and such forms, certificates or other evidence, if any,
with respect to United States federal income tax withholding matters as the
assignee under such Assignment Agreement may be required to deliver to Agent
pursuant to subsection 2.7B(iii)(a). Upon such execution, delivery,
acceptance and recordation, from and after the effective date specified in
such Assignment Agreement, (y) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment Agreement, shall have the rights
and obligations of a Lender hereunder and (z) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment Agreement, relinquish its
rights and be released from its obligations under this Agreement (and, in
the case of an Assignment Agreement covering all or the remaining portion of
an assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto). The Revolving Loan Commitments
hereunder shall be modified to reflect the
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<PAGE>
Revolving Loan Commitment of such assignee and any remaining Revolving Loan
Commitment of such assigning Lender and, if any such assignment occurs after
the issuance of any Revolving Notes hereunder, the assigning Lender shall,
upon the effectiveness of such assignment or as promptly thereafter as
practicable, surrender its Revolving Note, if any, to Agent for
cancellation, and thereupon new Revolving Notes shall, if so requested by
the assignee and/or the assigning Lender in accordance with subsection 2.1E,
be issued to the assignee and/or to the assigning Lender, substantially in
the form of Exhibit IV annexed hereto with appropriate insertions, to
----------
reflect the new Revolving Loan Commitments of the assignee and/or the
assigning Lender.
(ii) Acceptance by Agent; Recordation in Register. Upon its receipt
--------------------------------------------
of an Assignment Agreement executed by an assigning Lender and an assignee
representing that it is an Eligible Assignee, together with the processing
and recordation fee referred to in subsection 10.1B(i) and any forms,
certificates or other evidence with respect to United States federal income
tax withholding matters that such assignee may be required to deliver to
Agent pursuant to subsection 2.7B(iii)(a), Agent shall, if such Assignment
Agreement has been completed and is in substantially the form of Exhibit IX
----------
hereto and if Agent has consented to the assignment evidenced thereby (to
the extent such consent is required pursuant to subsection 10.1B(i)), (a)
accept such Assignment Agreement by executing a counterpart thereof as
provided therein (which acceptance shall evidence any required consent of
Agent to such assignment), (b) record the information contained therein in
the Register, and (c) give prompt notice thereof to Company. Agent shall
maintain a copy of each Assignment Agreement delivered to and accepted by it
as provided in this subsection 10.1B(ii).
C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the regularly scheduled maturity of any
portion of the principal amount of or interest on any Loan allocated to such
participation or (ii) a reduction of the principal amount of or the rate of
interest payable on any Loan allocated to such participation, and all amounts
payable by Company hereunder (including without limitation amounts payable to
such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if
such Lender had not sold such participation. Company and each Lender hereby
acknowledge and agree that, solely for purposes of subsections 10.4 and 10.5,
(a) any participation will give rise to a direct obligation of Company to the
participant and (b) the participant shall be considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall,
--------
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<PAGE>
as between Company and such Lender, be relieved of any of its obligations
hereunder as a result of any such assignment and pledge and (ii) in no event
shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to
require the assigning Lender to take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.19.
10.2 EXPENSES.
--------
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents; (ii) all the costs of
furnishing all opinions by counsel for Company (including without limitation any
opinions requested by Lenders as to any legal matters arising hereunder) and of
Company's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including, without limitation, with respect to confirming
compliance with environmental and insurance requirements; (iii) the reasonable
fees, expenses and disbursements of counsel to Agent (including allocated costs
of internal counsel) in connection with the negotiation, preparation, execution
and administration of the Loan Documents and the Loans and any consents,
amendments, waivers or other modifications hereto or thereto and any other
documents or matters requested by Company; (iv) all other actual and reasonable
costs and expenses incurred by Agent in connection with the syndication of the
Commitments and the negotiation, preparation and execution of the Loan Documents
and the transactions contemplated hereby and thereby; and (v) after the
occurrence of an Event of Default, all costs and expenses, including reasonable
attorneys' fees (including allocated costs of internal counsel) and costs of
settlement, incurred by Agent and Lenders in enforcing any Obligations of or in
collecting any payments due from Company hereunder or under the other Loan
Documents by reason of such Event of Default or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings.
10.3 INDEMNITY.
---------
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend, indemnify, pay and hold harmless Agent and Lenders,
and the officers, directors, employees, agents and affiliates of Agent and
Lenders (collectively called the "INDEMNITEES") from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including without limitation the reasonable fees and disbursements
of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened by any Person,
whether or not any such
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<PAGE>
Indemnitee shall be designated as a party or a potential party thereto), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including without limitation
securities and commercial laws, statutes, rules or regulations and Environmental
Laws), on common law or equitable cause or on contract or otherwise, that may be
imposed on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby (including without limitation
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds of any of the Loans or the issuance of Letters of Credit hereunder or
the use or intended use of any of the Letters of Credit) or the statements
contained in the commitment letter delivered by any Lender to Company with
respect thereto (collectively called the "INDEMNIFIED LIABILITIES"); provided
--------
that Company shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise solely from the gross negligence or willful misconduct of that
Indemnitee as determined by a final judgment of a court of competent
jurisdiction. To the extent that the undertaking to defend, indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Company shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
10.4 SET-OFF; SECURITY INTEREST IN DEPOSIT ACCOUNTS.
----------------------------------------------
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Company at any time or from
time to time, without notice to Company or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts) and any other Indebtedness at any time held or
owing by that Lender to or for the credit or the account of Company against and
on account of the obligations and liabilities of Company to that Lender under
this Agreement, the Letters of Credit and participations therein and the other
Loan Documents, including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Company hereby further grants to
Agent and each Lender a security interest in all deposits and accounts
maintained with Agent or such Lender as security for the Obligations.
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<PAGE>
10.5 RATABLE SHARING.
---------------
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment, by realization upon security, through the exercise
of any right of set-off or banker's lien, by counterclaim or cross action or by
the enforcement of any right under the Loan Documents or otherwise, or as
adequate protection of a deposit treated as cash collateral under the Bankruptcy
Code, receive payment or reduction of a proportion of the aggregate amount of
principal, interest, amounts payable in respect of Letters of Credit, fees and
other amounts then due and owing to that Lender hereunder or under the other
Loan Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) which
is greater than the proportion received by any other Lender in respect of the
Aggregate Amounts Due to such other Lender, then the Lender receiving such
proportionately greater payment shall (i) notify Agent and each other Lender of
the receipt of such payment and (ii) apply a portion of such payment to purchase
participations (which it shall be deemed to have purchased from each seller of a
participation simultaneously upon the receipt by such seller of its portion of
such payment) in the Aggregate Amounts Due to the other Lenders so that all such
recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion
to the Aggregate Amounts Due to them; provided that if all or part of such
--------
proportionately greater payment received by such purchasing Lender is thereafter
recovered from such Lender upon the bankruptcy or reorganization of Company or
otherwise, those purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to such purchasing Lender ratably to the
extent of such recovery, but without interest. Company expressly consents to
the foregoing arrangement and agrees that any holder of a participation so
purchased may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by Company to that holder
with respect thereto as fully as if that holder were owed the amount of the
participation held by that holder.
10.6 AMENDMENTS AND WAIVERS.
----------------------
No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, or consent to any departure by Company
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any such amendment, modification, termination,
--------
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; changes any Lender's Pro Rata
Share; changes in any manner the definition of "Requisite Lenders"; changes in
any manner any provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of all Lenders; postpones the scheduled
final maturity date of any of the Loans; postpones the date or reduces the
amount of any scheduled reduction of the Revolving Loan Commitments; postpones
the date on which any interest or any fees are payable; decreases the interest
rate borne by any of the Loans or the amount of any fees payable hereunder;
increases the maximum duration of Interest Periods permitted hereunder; reduces
the amount or postpones the due date of any amount payable in respect of, or
extends the required expiration date of, any Letter of Credit; changes in any
manner the obligations of Lenders relating to the purchase of participations in
Letters of Credit; or changes in any manner the provisions contained in
subsection 8.1
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<PAGE>
or this subsection 10.6 shall be effective only if evidenced by a writing signed
by or on behalf of all Lenders. In addition, (i) any amendment, modification,
termination or waiver of any of the provisions contained in Section 4 shall be
effective only if evidenced by a writing signed by or on behalf of Agent and
Requisite Lenders, (ii) no amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written concurrence of the
Lender which is the holder of that Note, (iii) no amendment, modification,
termination or waiver of any provision of subsection 2.1A(ii) or any other
provision of this Agreement relating to the Swing Line Loan Commitment or the
Swing Line Loans shall be effective without the written concurrence of Swing
Line Lender, and (iv) no amendment, modification, termination or waiver of any
provision of Section 9 or of any other provision of this Agreement which, by its
terms, expressly requires the approval or concurrence of Agent shall be
effective without the written concurrence of Agent. Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of that Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Company in any case
shall entitle Company to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 10.6 shall be binding upon each
Lender at the time outstanding, each future Lender and, if signed by Company, on
Company.
10.7 INDEPENDENCE OF COVENANTS.
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 NOTICES.
-------
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Agent shall not be effective
--------
until received. For the purposes hereof, the address of each party hereto shall
be as set forth under such party's name on the signature pages hereof or (i) as
to Company and Agent, such other address as shall be designated by such Person
in a written notice delivered to the other parties hereto and (ii) as to each
other party, such other address as shall be designated by such party in a
written notice delivered to Agent.
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10.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
------------------------------------------------------
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of Company set forth in subsections 2.6D, 2.7,
3.5A, 3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in
subsections 9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn thereunder, and the termination of this Agreement.
10.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Agent or any Lender in the exercise
of any power, right or privilege hereunder or under any other Loan Document
shall impair such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other power, right or privilege. All rights and remedies existing under
this Agreement and the other Loan Documents are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
10.11 MARSHALLING; PAYMENTS SET ASIDE.
-------------------------------
Neither Agent nor any Lender shall be under any obligation to marshal
any assets in favor of Company or any other party or against or in payment of
any or all of the Obligations. To the extent that Company makes a payment or
payments to Agent or Lenders (or to Agent for the benefit of Lenders), or Agent
or Lenders enforce any security interests or exercise their rights of setoff,
and such payment or payments or the proceeds of such enforcement or setoff or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law, common
law or any equitable cause, then, to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor or related thereto, shall be revived and continued in full
force and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
10.12 SEVERABILITY.
------------
In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
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10.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
----------------------------------------------------------
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 HEADINGS.
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
10.15 APPLICABLE LAW.
--------------
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.16 SUCCESSORS AND ASSIGNS.
----------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither
Company's rights or obligations hereunder nor any interest therein may be
assigned or delegated by Company without the prior written consent of all
Lenders.
10.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM
NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH
OBLIGATION.
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Company hereby agrees that service of all process in any such proceeding in any
such court may be made by registered or certified mail, return receipt
requested, to Company at its address provided in subsection 10.8, such service
being hereby acknowledged by Company to be sufficient for personal jurisdiction
in any action against Company in any such court and to be otherwise effective
and binding service in every respect. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
any Lender to bring proceedings against Company in the courts of any other
jurisdiction.
10.18 WAIVER OF JURY TRIAL.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty claims
and all other common law and statutory claims. Each party hereto acknowledges
that this waiver is a material inducement to enter into a business relationship,
that each has already relied on this waiver in entering into this Agreement, and
that each will continue to rely on this waiver in their related future dealings.
Each party hereto further warrants and represents that it has reviewed this
waiver with its legal counsel and that it knowingly and voluntarily waives its
jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.
10.19 CONFIDENTIALITY.
---------------
Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and agreed by Company that in any event a
Lender may make disclosures reasonably required by (y) any bona fide assignee,
transferee or participant in connection with the contemplated assignment or
transfer by such Lender of any Loans or any participation therein so long as
such Lender informs such assignee, transferee or participant of the confidential
nature of such non-public information or (z) as required or requested by any
governmental agency or representative thereof or pursuant to legal process;
provided that,
- --------
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unless specifically prohibited by applicable law or court order, each Lender
shall notify Company of any request by any governmental agency or representative
thereof (other than any such request in connection with any examination of the
financial condition of such Lender by such governmental agency) for disclosure
of any such non-public information prior to disclosure of such information; and
provided, further that in no event shall any Lender be obligated or required to
- -------- -------
return any materials furnished by Company or any of its Subsidiaries.
10.20 COUNTERPARTS; EFFECTIVENESS.
---------------------------
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Agent of written or telephonic notification of such execution and authorization
of delivery thereof.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
KOLL MANAGEMENT SERVICES, INC.
By:
------------------------------
Title:
---------------------------
Notice Address:
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: President
LENDERS:
BANKERS TRUST COMPANY,
individually and as Agent
By:
------------------------------
Title:
---------------------------
Notice Address:
Bankers Trust Company
1 BT Plaza
130 Liberty Street, 23rd Floor
New York, New York 10006
Attn: Mary Jo Jolly
With a copy to:
Bankers Trust Company
300 South Grand Avenue, 41st Floor
Los Angeles, California 90071
Attn: Cristie Sheffield
S-1
<PAGE>
BERLINER HANDELS- UND
FRANKFURTER BANK
By:
------------------------------
Title:
---------------------------
By:
------------------------------
Title:
---------------------------
Notice Address:
55 East 59th Street, 8th Floor
New York, New York 10022
Attn:
<PAGE>
EXHIBIT 10.2
KOLL MANAGEMENT SERVICES, INC.
FIRST AMENDMENT
TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated
as of January 16, 1995 and entered into by and among KOLL MANAGEMENT SERVICES,
INC., a Delaware corporation ("Company"), THE LENDERS LISTED ON THE SIGNATURE
PAGES HEREOF ("Lenders") and BANKERS TRUST COMPANY, as agent ("Agent"), and is
made with reference to that certain Credit Agreement dated as of November 23,
1994 by and among Company, Lenders and Agent (the "Credit Agreement").
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company, Lenders and Agent have entered into the Credit
Agreement;
WHEREAS, Company proposes to modify and amend certain of the terms and
provisions of the Credit Agreement and, in response to Company's proposals,
Lenders are willing to agree to only such amendments as are set forth herein,
upon the terms and conditions set forth herein;
NOW, THEREFORE, subject to the terms and conditions herein contained,
the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
Section 7.4 of the Credit Agreement is hereby amended by:
(i) deleting the term "and" from the end of clause (viii) thereof;
(ii) replacing the period at the end of clause (ix) thereof with ";
and"; and
(iii) adding thereto the following clause in the appropriate numerical
order:
"(x) Company and its Subsidiaries may become and remain liable
with respect to that certain lease guaranty dated as of January 12,
1995 by Company, with respect to that certain lease dated as of
November 15, 1994 between Koll Corporate Associates, as lessor, and
The Koll Company, as lessee."
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<PAGE>
SECTION 2. COMPANY'S REPRESENTATIONS, WARRANTIES
AND COVENANTS
In order to induce Lenders and Agent to enter into this Amendment and
to amend the Credit Agreement in the manner provided herein, Company represents,
warrants and covenants to Lenders and Agent that the following statements are
and will be, after giving effect to this Amendment, true, correct and complete
on and as of the date hereof and, to the extent provided below, any subsequent
dates specified below:
A. ORGANIZATION AND POWERS. Company has all requisite corporate
power and authority to enter into this Amendment and to carry out the
transactions contemplated hereby and to perform its obligations under the Credit
Agreement as amended by this Amendment (the "Amended Agreement").
B. AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action by Company. This Amendment has been duly
executed and delivered by Company.
C. NO CONFLICT. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not (i) except as would not have a Material Adverse Effect, violate any
provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the Certificate or Articles of Incorporation
or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree
of any court or other agency of government binding on Company or any of its
Subsidiaries, (ii) except as would not have a Material Adverse Effect, conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contractual Obligation of Company or any of its
Subsidiaries, (iii) result in or require the creation or imposition of any Lien
upon any of the properties or assets of Company or any of its Subsidiaries, or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries.
D. CONSENTS. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body or other Person.
E. BINDING OBLIGATION. This Amendment and the Amended Agreement are
the legally valid and binding obligations of Company, enforceable against it in
accordance
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<PAGE>
with their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the date hereof, to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and
warranties were true, correct and complete in all material respects on and as of
such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
SECTION 3. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(i) On and after the date hereof, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference in the Notes and the other Loan Documents to the
Credit Agreement, shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended or waived by this Amendment, the
terms, conditions and provisions of the Credit Agreement and the Notes and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, (x) constitute a waiver or
modification of any provision of, or operate as a waiver of any right, power or
remedy of Lenders or Agent under, the Credit Agreement or any of the Notes or
other Loan Documents or (y) prejudice any right or remedy that Lenders or Agent
may now have or may have in the future under or in connection with the Credit
Agreement or any instrument or agreement referred to therein.
B. EXECUTION IN COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by
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<PAGE>
the different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together shall constitute but one and the same instrument. This Amendment
shall become effective as of the date hereof upon the execution of counterparts
hereof by Company and Requisite Lenders and the delivery of such executed
counterparts (or telecopy facsimiles of such executed counterparts) to Agent.
C. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
[Remainder of Page Intentionally Left Blank]
4
<PAGE>
WITNESS the due execution of this Amendment by the respective duly
authorized officers of the undersigned as of the date first above written.
KOLL MANAGEMENT SERVICES, INC.
By __________________________
Title _______________________
BANKERS TRUST COMPANY,
individually and as Agent
By __________________________
Title _______________________
BERLINER HANDELS- UND
FRANKFURTER BANK
By __________________________
Title _______________________
By __________________________
Title _______________________
S-1
<PAGE>
EXHIBIT 10.3
KOLL MANAGEMENT SERVICES, INC.
SECOND AMENDMENT AND WAIVER
TO CREDIT AGREEMENT
This SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this "Amendment
and Waiver") is dated as of May 8, 1995 and entered into by and among KOLL
MANAGEMENT SERVICES, INC., a Delaware corporation ("Company"), THE LENDERS
LISTED ON THE SIGNATURE PAGES HEREOF ("Lenders") and BANKERS TRUST COMPANY, as
agent ("Agent"), and, for purposes of subsection 5E hereof, THE GUARANTORS
LISTED ON THE SIGNATURE PAGES HEREOF ("Guarantors"), and is made with reference
to that certain Credit Agreement dated as of November 23, 1994 by and among
Company, Lenders and Agent, as amended by that certain First Amendment to Credit
Agreement dated as of January 16, 1995 (as so amended, the "Credit Agreement").
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company, Lenders and Agent have entered into the Credit
Agreement and in connection therewith, Guarantors have entered into Guaranties;
WHEREAS, Company proposes to modify and amend certain of the terms and
provisions of the Credit Agreement and requests that Lenders waive certain of
the terms and provisions of the Credit Agreement and, in response to Company's
proposals and requests, Lenders are willing to agree to only such amendments and
waivers as are set forth herein, upon the terms and conditions set forth herein;
NOW, THEREFORE, subject to the terms and conditions herein contained,
the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
A. AMENDMENTS TO SECTION 1: DEFINITIONS. Subsection 1.1 of the
Credit Agreement is hereby amended by:
(i) replacing the amounts of Consolidated Base Business EBITDA
corresponding to the four-fiscal quarter periods ending March 31, 1995,
June 30, 1995, September 30, 1995, December 31, 1995 and March 31, 1996 in
the table set forth in the definition of "Consolidated Base Business
EBITDA" with the amounts
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<PAGE>
"7,000,000", "7,197,000", "7,482,000", "7,766,000" and "8,051,000",
respectively; and
(ii) replacing the ratio "2.50:1.00" in clause (ii) of the proviso
set forth in the definition of "Permitted Acquisition" or "Permitted
Acquisitions" with the ratio "3.00:1.00".
B. AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND
LOANS. Subsection 2.1B of the Credit Agreement is hereby amended by replacing
the ratio "2.50:1.00" in clause (vii) of the fifth sentence thereof with the
ratio "3.00:1.00".
C. AMENDMENTS TO SECTION 7: COMPANY'S NEGATIVE COVENANTS.
(i) Subsection 7.6C of the Credit Agreement is hereby amended by
replacing the phrase "3.0 to 1.0 at any time" immediately before the period
at the end of such subsection with the following phrase:
"(x) 3.25 to 1.00 at any time during the period beginning with the
fiscal quarter ending March 31, 1995 through and including the fiscal
quarter ending March 31, 1996, and (y) 3.00 to 1.00 at any other
time"; and
(ii) Subsection 7.8 of the Credit Agreement is hereby amended by
replacing the Maximum Consolidated Capital Expenditures Amount
corresponding to Fiscal Year ending 1995 in the table set forth therein
with the amount "$2,900,000".
D. AMENDMENTS TO EXHIBIT I: FORM OF NOTICE OF BORROWING. Exhibit I
to the Credit Agreement is hereby amended by replacing the ratio "2.50:1.00" in
clause (iv) thereof with the ratio "3.00:1.00".
SECTION 2. LIMITED WAIVER
Subject to the terms and conditions set forth herein and in reliance
on the representations and warranties of Company herein contained, Lenders
hereby waive compliance prior to the date hereof with the provisions of
subsection 7.8 of the Credit Agreement and the restrictions on the Pro Forma
--- -----
Total Leverage Ratio set forth in the Credit Agreement to the extent, and only
to the extent, necessary to permit (a) Company and its Subsidiaries to have made
or incurred Consolidated Capital Expenditures in an aggregate amount up to
$2,900,000 for Fiscal Year ended 1995, and (b) acquisitions made by Company and
its wholly-owned Subsidiaries prior to the date hereof to constitute Permitted
Acquisitions for purposes of the Credit Agreement
2
<PAGE>
notwithstanding that, after giving effect to each acquisition, the Pro Forma
--- -----
Total Leverage Ratio equalled up to 3.00 to 1.00.
Without limiting the generality of the provisions of subsection 10.6
of the Credit Agreement, the waiver set forth above shall be limited precisely
as written and relates solely to the noncompliance by Company with the
provisions of subsection 7.8 of the Credit Agreement and the restrictions on the
Pro Forma Total Leverage Ratio set forth in the Credit Agreement in the manner
- --- -----
and to the extent described above, and nothing in this Section 2 shall be deemed
to:
(a) constitute a waiver of compliance by Company with respect to (i)
subsection 7.8 of the Credit Agreement and the restrictions on the Pro
---
Forma Total Leverage Ratio set forth in the Credit Agreement in any other
-----
instance or (ii) any other term, provision or condition of the Credit
Agreement or any other instrument or agreement referred to therein; or
(b) prejudice any right or remedy that Agent or any Lender may now
have (except to the extent such right or remedy was based upon existing
defaults that will not exist after giving effect to this Section 2) or may
have in the future under or in connection with the Credit Agreement or any
other instrument or agreement referred to therein.
SECTION 3. CONDITIONS TO EFFECTIVENESS
This Amendment and Waiver shall be binding as to each party upon its
execution of a counterpart hereof, but the amendments to, and waiver of the
provisions of, the Credit Agreement set forth herein shall become effective only
in the event that the following conditions shall have been satisfied (whereupon
this Amendment and Waiver shall become effective as of the date hereof):
(a) Company, Guarantors and Requisite Lenders shall have executed
counterparts hereof and delivered such executed counterparts (or telecopy
facsimiles of such executed counterparts) to Agent.
(b) Agent shall have received payment from Company of consent fees
for the account of each Lender executing and delivering a counterpart of
this Amendment and Waiver, in an amount equal to one-sixteenth of one
percent of such Lender's Commitments.
3
<PAGE>
SECTION 4. COMPANY'S REPRESENTATIONS, WARRANTIES
AND COVENANTS
In order to induce Lenders and Agent to enter into this Amendment and
Waiver and to amend the Credit Agreement and to waive certain terms and
provisions thereof in the manner provided herein, Company represents, warrants
and covenants to Lenders and Agent that, after giving effect to this Amendment
and Waiver, the following statements are and will be true, correct and complete
on and as of the date hereof and, to the extent provided below, any subsequent
dates specified below:
A. ORGANIZATION AND POWERS. Company has all requisite corporate
power and authority to enter into this Amendment and Waiver and to carry out the
transactions contemplated hereby and to perform its obligations under the Credit
Agreement as amended by this Amendment and Waiver (the "Amended Agreement").
B. AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Amendment and Waiver and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action by Company. This Amendment and
Waiver has been duly executed and delivered by Company.
C. NO CONFLICT. The execution and delivery by Company of this
Amendment and Waiver and the performance by Company of the Amended Agreement do
not and will not (i) except as would not have a Material Adverse Effect, violate
any provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the Certificate or Articles of Incorporation
or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree
of any court or other agency of government binding on Company or any of its
Subsidiaries, (ii) except as would not have a Material Adverse Effect, conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contractual Obligation of Company or any of its
Subsidiaries, (iii) result in or require the creation or imposition of any Lien
upon any of the properties or assets of Company or any of its Subsidiaries, or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries.
D. CONSENTS. The execution and delivery by Company of this
Amendment and Waiver and the performance by Company of the Amended Agreement do
not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body or other Person.
4
<PAGE>
E. BINDING OBLIGATION. This Amendment and Waiver and the Amended
Agreement are the legally valid and binding obligations of Company, enforceable
against it in accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the date hereof, to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and
warranties were true, correct and complete in all material respects on and as of
such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment and Waiver that would constitute an Event of Default or a Potential
Event of Default.
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(i) On and after the date hereof, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference in the Notes and the other Loan Documents to the
Credit Agreement, shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended or waived by this Amendment and
Waiver, the terms, conditions and provisions of the Credit Agreement and the
Notes and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment and
Waiver shall not, except as expressly provided herein, (x) constitute a waiver
or modification of any provision of, or operate as a waiver of any right, power
or remedy of Lenders or Agent under, the Credit Agreement or any of the Notes or
other Loan Documents or (y) prejudice any right or remedy that Lenders or Agent
may now have or may have in the future under or in connection with the Credit
Agreement or any instrument or agreement referred to therein.
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<PAGE>
B. EXECUTION IN COUNTERPARTS. This Amendment and Waiver may be
executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
but one and the same instrument.
C. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. HEADINGS. Section and subsection headings in this Amendment and
Waiver are included herein for convenience of reference only and shall not
constitute a part of this Amendment and Waiver for any other purpose or be given
any substantive effect.
E. ACKNOWLEDGEMENT AND CONSENT BY GUARANTORS.
Each Guarantor hereby acknowledges that it has read this Amendment and
Waiver and consents to the terms hereof and further hereby confirms and agrees
that, notwithstanding the effectiveness of this Amendment and Waiver, its
obligations under its Guaranty shall not be impaired or affected and such
Guaranty is, and shall continue to be, in full force and effect and is hereby
confirmed and ratified in all respects.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
WITNESS the due execution of this Amendment and Waiver by the
respective duly authorized officers of the undersigned as of the date first
above written.
COMPANY:
KOLL MANAGEMENT SERVICES, INC.
By __________________________
Title _______________________
LENDERS:
BANKERS TRUST COMPANY,
individually and as Agent
By __________________________
Title _______________________
BERLINER HANDELS- UND
FRANKFURTER BANK
By __________________________
Title _______________________
By __________________________
Title _______________________
GUARANTORS:
BONUTTO-HOFER INVESTMENTS
By __________________________
Title _______________________
S-1
<PAGE>
D.A. MANAGEMENT, INC.
By __________________________
Title _______________________
KMS HOLDING CORPORATION
By __________________________
Title _______________________
KOLL ASSET MANAGEMENT COMPANY
By __________________________
Title _______________________
KOLL CAPITAL MARKETS GROUP, INC.
By __________________________
Title _______________________
KOLL FACILITIES SERVICES, INC
By __________________________
Title _______________________
S-2
<PAGE>
KOLL INVESTMENT MANAGEMENT, INC.
By __________________________
Title _______________________
KOLL MANAGEMENT SERVICE
CORPORATION
By __________________________
Title _______________________
KOLL PARTNERSHIPS I, INC.
By __________________________
Title _______________________
KOLL PARTNERSHIPS II, INC.
By __________________________
Title _______________________
RENAISSANCE CENTER MANAGEMENT
COMPANY
By __________________________
Title _______________________
S-3
<PAGE>
EXHIBIT 10.4
KOLL MANAGEMENT SERVICES, INC.
THIRD AMENDMENT AND WAIVER
TO CREDIT AGREEMENT
This THIRD AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this "Amendment and
Waiver") is dated January 12, 1996 and entered into by and among KOLL MANAGEMENT
SERVICES, INC., a Delaware corporation ("Company"), THE LENDERS LISTED ON THE
SIGNATURE PAGES HEREOF ("Lenders") and BANKERS TRUST COMPANY, as agent
("Agent"), and, for purposes of subsection 6E hereof, THE GUARANTORS LISTED ON
THE SIGNATURE PAGES HEREOF ("Guarantors"), and is made with reference to that
certain Credit Agreement dated as of November 23, 1994 by and among Company,
Lenders and Agent, as amended by that certain First Amendment to Credit
Agreement dated as of January 16, 1995 and that Second Amendment to Credit
Agreement dated as of May 8, 1995 (as so amended, the "Credit Agreement").
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company, Lenders and Agent have entered into the Credit Agreement
and in connection therewith, Guarantors have entered into Guaranties;
WHEREAS, Company proposes to decrease the Acquisition Sublimit to
$29,850,000 and to increase the scheduled amounts for the repayment of Loans
made under the Acquisition Sublimit;
WHEREAS, Company proposes to decrease the amount of the Revolving Loan
Commitments but to increase the limit on the maximum Working Capital Utilization
at any time; and
WHEREAS, Company proposes to modify and amend certain of the other terms
and provisions of the Credit Agreement and requests that Lenders waive certain
of the terms and provisions of the Credit Agreement and, in response to
Company's proposals and requests, Lenders are willing to agree to only such
amendments and waivers as are set forth herein, upon the terms and conditions
set forth herein;
NOW, THEREFORE, subject to the terms and conditions herein contained, the
parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
A. AMENDMENTS TO SECTION 1: DEFINITIONS. Subsection 1.1 of the Credit
Agreement is hereby amended by adding the following definitions in the
appropriate alphabetical order:
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<PAGE>
""Third Amendment and Waiver" means the Third Amendment and Waiver to
Credit Agreement dated January 12, 1996 among Company, Lenders and Agent.
"Third Amendment and Waiver Effective Date" means the date on which
the Third Amendment and Waiver becomes effective in accordance with its
terms."
B. AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND
LOANS. Section 2 of the Credit Agreement is amended as follows:
(i) Decrease in the Revolving Loan Commitments. Effective as of the
------------------------------------------
Third Amendment and Waiver Effective Date the aggregate amount of the
Revolving Loan Commitments is reduced to $48,850,000 and subsection 2.1A(i)
is amended to change the number "$50,000,000" appearing in the second
sentence thereof to "$48,850,000".
(ii) Early Termination of Availability Under the Acquisition Sublimit.
----------------------------------------------------------------
Effective as of the Third Amendment and Waiver Effective Date no further
utilization of Acquisition Sublimit may be made and all Loans then
outstanding made under such Acquisition Sublimit shall be repaid in
accordance with subsection 2.4A (as amended on the Third Amendment and
Waiver Effective Date by Section 1B(iv) of this Third Amendment and Waiver
below).
(iii) Increase in Maximum Amount of Working Capital Utilization.
---------------------------------------------------------
Effective as of the Third Amendment and Waiver Effective Date the limit on
the maximum amount of the Working Capital Utilization shall be increased so
as to not exceed $19,000,000 at any time and subsection 2.1A(i) shall be
amended so that the amount "$15,000,000 appearing in the second paragraph
thereof shall be changed to "$19,000,000".
(iv) Increase in Scheduled Prepayments and Reductions of Revolving
-------------------------------------------------------------
Loan Commitments and Acquisition Sublimit. Effective as of the Third
-----------------------------------------
Amendment and Waiver Effective Date subsection 2.4A is hereby amended to
read in its entirety as follows:
"A. SCHEDULED PREPAYMENTS AND REDUCTIONS OF REVOLVING LOAN
COMMITMENTS AND ACQUISITION SUBLIMIT. On the Third Amendment and
Waiver Effective Date, the Revolving Loan Commitments and Acquisition
Sublimit shall each be permanently reduced to $48,850,000 and
$29,850,000, respectively. In addition, Company shall prepay Loans,
and the Revolving Loan Commitments and Acquisition Sublimit shall each
be permanently reduced, on the dates and in the amounts set forth
below:
<TABLE>
<CAPTION>
Scheduled Prepayment and Reduction of Revolving
Date Loan Commitments and Acquisition Sublimit
---- -----------------------------------------------
<S> <C>
December 31, 1996 $1,850,000
March 31, 1997 3,000,000
June 30, 1997 5,000,000
December 31, 1997 5,000,000
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
June 30, 1998 7,500,000
December 31, 1998 7,500,000
</TABLE>
In addition, Company shall prepay the Loans and the Revolving
Loan Commitments shall be permanently reduced by $7,000,000 on June
30, 1999 and by $12,000,000 on December 31, 1999; provided still
-------- -----
further that the scheduled reductions of the Revolving Loan
-------
Commitments and Acquisition Sublimit set forth above shall be reduced
in connection with any voluntary or mandatory reductions of the
Revolving Loan Commitments and Acquisition Sublimit, respectively, in
accordance with subsection 2.4B(iv)."
C. AMENDMENTS TO SECTION 7: COMPANY'S NEGATIVE COVENANTS.
Subsection 7.6A of the Credit Agreement is hereby amended to read in its
entirety as follows:
"A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit
the ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest
Expense for any four-fiscal quarter period ending as of the last day
of any fiscal quarter (x) for periods ending after December 31, 1995
but before March 31, 1997, to be less than 3.70 to 1.00 and (y) for
periods ending on or after March 31, 1997, to be less than 4.00 to
1.00."
SECTION 2. RELEASE OF GUARANTY AND STOCK PLEDGE OF RENAISSANCE
CENTER MANAGEMENT COMPANY
Requisite Banks hereby consent to the release of the pledge of the stock of
Renaissance Center Management Company ("RCMC") and the release of the guaranty
of RCMC and hereby authorize Agent to execute such releases.
SECTION 3. LIMITED WAIVER
Subject to the terms and conditions set forth herein and in reliance
on the representations and warranties of Company herein contained, and with
respect only to any potential transaction regarding Koll Applied Management
Engineering, Inc. ("KAME"), Lenders hereby waive compliance with the provisions
of (i) subsection 7.7(iv) (y) of the Credit Agreement to the extent such
subsection 7.7(iv)(y) would require that consideration received in respect to
KAME solely be cash and (ii) Section 7.12 of the Credit Agreement to the extent
that such Section 7.12 would, in the event of the disposition of the capital
stock of KAME, require Company to dispose of 100% of the capital stock of KAME;
provided, however, that such waiver shall be effective only upon consent of
Agent.
Without limiting the generality of the provisions of subsection 10.6
of the Credit Agreement, the waiver set forth above shall be limited precisely
as written and relates solely to the noncompliance by Company with the
provisions of subsection 7.7(iv)(y) and of Section 7.12 of the Credit Agreement
as it relates to any potential transaction regarding KAME and nothing in this
Section 2 shall be deemed to:
(a) constitute a waiver of compliance by Company with respect to
(i) subsection 7.7(iv)(y) or Section 7.12 of the Credit Agreement in any
other instance
3
<PAGE>
or (ii) any other term, provision or condition of the Credit Agreement or
any other instrument or agreement referred to therein; or
(b) prejudice any right or remedy that Agent or any Lender may
now have (except to the extent such right or remedy was based upon existing
defaults that will not exist after giving effect to this Section 2) or may
have in the future under or in connection with the Credit Agreement or any
other instrument or agreement referred to therein.
SECTION 4. CONDITIONS TO EFFECTIVENESS
This Amendment and Waiver shall be binding as to each party upon its
execution of a counterpart hereof, but the amendments to the Credit Agreement
set forth herein shall become effective only in the event that the following
conditions shall have been satisfied (whereupon this Amendment and Waiver shall
become effective as of the date hereof):
(a) Company, Guarantors and Requisite Lenders shall have executed
counterparts hereof and delivered such executed counterparts (or telecopy
facsimiles of such executed counterparts) to Agent.
(b) Agent shall have received payment from Company of consent fees for
the account of each Lender executing and delivering a counterpart of this
Amendment and Waiver, in an amount equal to one-eighth of one percent of
such Lender's Commitments.
SECTION 5. COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS,
In order to induce Lenders and Agent to enter into this Amendment and
Waiver and to amend the Credit Agreement in the manner provided herein, Company
represents, warrants and covenants to Lenders and Agent that, after giving
effect to this Amendment and Waiver, the following statements are and will be
true, correct and complete on and as of the date hereof and, to the extent
provided below, any subsequent dates specified below:
A. ORGANIZATION AND POWERS. Company has all requisite corporate
power and authority to enter into this Amendment and Waiver and to carry out the
transactions contemplated hereby and to perform its obligations under the Credit
Agreement as amended by this Amendment and Waiver (the "Amended Agreement").
B. AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Amendment and Waiver and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action by Company. This Amendment and
Waiver has been duly executed and delivered by Company.
C. NO CONFLICT. The execution and delivery by Company of this
Amendment and Waiver and the performance by Company of the Amended Agreement do
not and will not (i) except as would not have a Material Adverse Effect, violate
any provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the Certificate or Articles of Incorporation
or Bylaws of Company or any of its
4
<PAGE>
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Company or any of its Subsidiaries, (ii)
except as would not have a Material Adverse Effect, conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of Company or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Company or any of its Subsidiaries, or (iv) require any
approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of Company or any of its Subsidiaries.
D. CONSENTS. The execution and delivery by Company of this
Amendment and Waiver and the performance by Company of the Amended Agreement do
not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body or other Person.
E. BINDING OBLIGATION. This Amendment and Waiver and the Amended
Agreement are the legally valid and binding obligations of Company, enforceable
against it in accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 and
Section 6.10 of the Credit Agreement are and will be true, correct and complete
in all material respects on and as of the date hereof, to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case such
representations and warranties were true, correct and complete in all material
respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment and Waiver that would constitute an Event of Default or a Potential
Event of Default. Without limiting the generality of the foregoing, Company
represents and warrants it is in compliance with subsection 6.10 with respect to
all Subsidiaries.
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(i) On and after the date hereof, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference in the Notes and the other Loan Documents to the
Credit Agreement, shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended or waived by this Amendment and
Waiver, the terms, conditions and provisions of the Credit Agreement and the
Notes and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
5
<PAGE>
(iii) The execution, delivery and performance of this Amendment and
Waiver shall not, except as expressly provided herein, (x) constitute a waiver
or modification of any provision of, or operate as a waiver of any right, power
or remedy of Lenders or Agent under, the Credit Agreement or any of the Notes or
other Loan Documents or (y) prejudice any right or remedy that Lenders or Agent
may now have or may have in the future under or in connection with the Credit
Agreement or any instrument or agreement referred to therein.
B. EXECUTION IN COUNTERPARTS. This Amendment and Waiver may be
executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
but one and the same instrument.
C. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. HEADINGS. Section and subsection headings in this Amendment and
Waiver are included herein for convenience of reference only and shall not
constitute a part of this Amendment and Waiver for any other purpose or be given
any substantive effect.
E. ACKNOWLEDGEMENT AND CONSENT BY GUARANTORS.
Each Guarantor hereby acknowledges that it has read this Amendment and
Waiver and consents to the terms hereof and further hereby confirms and agrees
that, notwithstanding the effectiveness of this Amendment and Waiver, its
obligations under its Guaranty shall not be impaired or affected and such
Guaranty is, and shall continue to be, in full force and effect and is hereby
confirmed and ratified in all respects.
[Remainder of Page Intentionally Left Blank]
6
<PAGE>
WITNESS the due execution of this Amendment and Waiver by the
respective duly authorized officers of the undersigned as of the date first
above written.
COMPANY:
KOLL MANAGEMENT SERVICES, INC.
By __________________________
Title _______________________
LENDERS:
BANKERS TRUST COMPANY,
individually and as Agent
By __________________________
Title _______________________
BERLINER HANDELS- UND
FRANKFURTER BANK
By __________________________
Title _______________________
By __________________________
Title _______________________
GUARANTORS:
BONUTTO-HOFER INVESTMENTS
By __________________________
Title _______________________
S-1
<PAGE>
D.A. MANAGEMENT, INC.
By __________________________
Title _______________________
KMS HOLDING CORPORATION
By __________________________
Title _______________________
KOLL ASSET MANAGEMENT COMPANY
By __________________________
Title _______________________
KOLL CAPITAL MARKETS GROUP
By __________________________
Title _______________________
KOLL FACILITIES SERVICES, INC
By __________________________
Title _______________________
S-2
<PAGE>
KOLL INVESTMENT MANAGEMENT, INC.
By __________________________
Title _______________________
KOLL MANAGEMENT SERVICE CORPORATION
By __________________________
Title _______________________
KOLL PARTNERSHIPS I, INC.
By __________________________
Title _______________________
KOLL PARTNERSHIPS II, INC.
By __________________________
Title _______________________
RENAISSANCE CENTER MANAGEMENT COMPANY
By __________________________
Title _______________________
K/B REALTY ADVISORS, INC.
By __________________________
Title _______________________
S-3
<PAGE>
KOLL REAL ESTATE SECURITIES ADVISORS, INC.
By __________________________
Title _______________________
CBS INVESTMENT REALTY OF NEW MEXICO, INC.
By __________________________
Title _______________________
CBS INVESTMENT REALTY, INC.
By __________________________
Title _______________________
KOLL MEDICAL SERVICES, INC.
By __________________________
Title _______________________
KOLL TENDER CORPORATION I
By __________________________
Title _______________________
KOLL TENDER CORPORATION II
By __________________________
Title _______________________
S-4
<PAGE>
KOLL TENDER CORPORATION III
By __________________________
Title _______________________
KOLL HOLDINGS INTERNATIONAL, INC.
By __________________________
Title _______________________
KOLL ASIA PACIFIC-HAWAII, INC.
By __________________________
Title _______________________
KMS CONSTRUCTION CO.
By __________________________
Title _______________________
KOLL APPLIED MANAGEMENT
ENGINEERING, INC.
By __________________________
Title _______________________
S-5
<PAGE>
EXHIBIT 10.5
KOLL MANAGEMENT SERVICES, INC.
FOURTH AMENDMENT
TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of
August 14, 1996 and entered into by and among KOLL MANAGEMENT SERVICES, INC., a
Delaware corporation ("Company"), THE LENDERS LISTED ON THE SIGNATURE PAGES
HEREOF ("Lenders") and BANKERS TRUST COMPANY, as agent for the Lenders
("Agent"), and, for purposes of Section 4 hereof, THE GUARANTORS LISTED ON THE
SIGNATURE PAGES HEREOF ("Guarantors"), and is made with reference to that
certain Credit Agreement dated as of November 23, 1994 by and among Company,
Lenders and Agent, as amended by that certain First Amendment to Credit
Agreement dated as of January 16, 1995, that Second Amendment to Credit
Agreement dated as of May 8, 1995, and that certain Third Amendment and Waiver
dated as of January 12, 1996 (as so amended, the "Credit Agreement").
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company, Lenders and Agent have entered into the Credit Agreement
and in connection therewith, Guarantors have entered into Guaranties;
WHEREAS, Company, Lenders and Agent wish to amend the Credit Agreement for
the purposes of, among other things, (i) increasing the Revolving Commitments by
$15,000,000 to $63,675,000, (ii) increasing the Acquisition Sublimit by
$6,000,000 to $35,675,000, (iii) increasing the limit on the maximum Working
Capital Utilization at any time by $9,000,000 to $28,000,000, (iv) modifying the
schedule of mandatory reductions in the Revolving Commitments and the
Acquisition Sublimit and (v) providing that amendments and waivers of subsection
7.6 of the Credit Agreement require approval of all Lenders until such date that
the Revolving Commitments have been permanently reduced to $47,000,000 and the
Total Utilization of Commitments does not exceed $47,000,000;
WHEREAS, Company, Lenders and Agent wish to further amend the Credit
Agreement for the purposes of, among other things, adding two new Levels for
determining the applicable interest rates, commitment fees and letter of credit
fees; and
WHEREAS, Company proposes to modify and amend certain of the other terms
and provisions of the Credit Agreement and, in response to Company's proposals
and requests, Lenders are willing to agree to only such amendments as are set
forth herein, upon the terms and conditions set forth herein;
NOW, THEREFORE, subject to the terms and conditions herein contained, the
parties hereto hereby agree as follows:
1
<PAGE>
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: DEFINITIONS.
A. New Definitions. Subsection 1.1 of the Credit Agreement is hereby
----------------
amended by adding the following definitions thereto, which shall be inserted in
alphabetical order:
"'FOURTH AMENDMENT' means the Fourth Amendment to Credit Agreement dated as
of August 14, 1996 among Company, Lenders and Agent."
"'FOURTH AMENDMENT EFFECTIVE DATE' means the date on which the Fourth
Amendment becomes effective in accordance with its terms."
"'INCREMENTAL COMMITMENT PRO RATA SHARE' means (x) with respect to Bankers
Trust Company 66-2/3% and (y) with respect to BHF-Bank Aktiengesellschaft,
33-1/3%."
B. Revised Definitions. Subsection 1.1 of the Credit Agreement is hereby
-------------------
further amended by deleting therefrom the definitions of "Applicable Base Rate
Margin," "Applicable Eurodollar Rate Margin," "Commitment Fee Percentage,"
"Letter of Credit Fee Percentage," "Level," "Level I," "Level II," "Level III,"
"Level IV," and "Level V" and substituting therefor the following definitions,
which shall be inserted in alphabetical order:
"APPLICABLE BASE RATE MARGIN" means, as at any date of determination, a
percentage per annum determined by the Level in effect on such date as
shown below;
<TABLE>
<CAPTION>
Level Applicable Base Rate Margin
----- ---------------------------
<S> <C>
Level I 1.250%
Level II 1.000%
Level III 0.750%
Level IV 0.500%
Level V 0.250%
Level VI 0.000%
Level VII 0.000%
</TABLE>
2
<PAGE>
"APPLICABLE EURODOLLAR RATE MARGIN" means, as at any date of determination,
a percentage per annum determined by the Level in effect on such date as shown
below:
<TABLE>
<CAPTION>
Level Applicable Eurodollar Rate Margin
----- ---------------------------------
<S> <C>
Level I 2.250%
Level II 2.000%
Level III 1.750%
Level IV 1.500%
Level V 1.250%
Level VI 1.000%
Level VII 0.625%
</TABLE>
"COMMITMENT FEE PERCENTAGE" means, as at any date of determination, a
percentage per annum determined by the Level in effect on such date as
shown below:
<TABLE>
<CAPTION>
Level Commitment Fee Percentage
----- -------------------------
<S> <C>
Level I or Level II 0.500%
Level III, Level IV or Level V 0.375%
Level VI or Level VII 0.250%
</TABLE>
"LETTER OF CREDIT FEE PERCENTAGE" means, as at any date of determination, a
percentage per annum determined by the Level in effect on such date as
shown below:
<TABLE>
<CAPTION>
Level Letter of Credit Fee Percentage
----- -------------------------------
<S> <C>
Level I 2.250%
Level II 2.000%
Level III 1.750%
Level IV 1.500%
Level V 1.250%
Level VI 1.000%
Level VII 0.625%
</TABLE>
"LEVEL" means Level I, Level II, Level III, Level IV, Level V, Level VI or
Level VII, in each case whichever is in effect on the date of
determination. The applicable Level for any date shall be determined by
the most recent Level Determination Certificate delivered pursuant to
subsection 4.1N or 6.1(xv); provided that if a Level Determination
--------
Certificate is not delivered at the time required pursuant to subsection
6.1(xv), Level I shall be applicable from such time until delivery of a
succeeding Level Determination Certificate; provided that if a Level
--------
Determination Certificate erroneously indicates a Level more favorable to
Company than should be afforded by the actual calculation of the Total
Leverage Ratio, Company shall promptly pay additional interest, commitment
fees and letter of credit fees to correct for such error.
3
<PAGE>
"'LEVEL I' means such periods during which none of Level II, Level III,
Level IV, Level V, Level VI or Level VII is applicable."
"'LEVEL II' means such periods as the Total Leverage Ratio is greater than
or equal to 2.50:1.00 and less than 3.00:1.00."
---
"'LEVEL III' means such periods as the Total Leverage Ratio is greater than
or equal to 2.00:1.00 and less than 2.50:1.00."
---
"'LEVEL IV' means such periods as the Total Leverage Ratio is greater than
or equal to 1.50:1.00 and less than 2.00:1.00."
---
"'LEVEL V' means such periods as the Total Leverage Ratio is greater than
or equal to 1.00:1.00 and less than 1.50:1.00."
---
"'LEVEL VI' means such periods as the Total Leverage Ratio is greater than
or equal to 0.50:1.00 and less than 1.00:1.00."
---
"'LEVEL VII' means such periods as the Total Leverage Ratio is less than
0.50:1.00."
1.2 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.
A. Increase in Revolving Commitments. Subsection 2.1A(i) of the Credit
---------------------------------
Agreement is hereby amended by deleting the second sentence therefrom and
substituting the following therefor:
"On the Fourth Amendment Effective Date, the Revolving Loan Commitment of
Bankers Trust Company shall be increased to $48,940,000, the Revolving Loan
Commitment of BHF-Bank Aktiengesellschaft shall be increased to $14,735,000
and the aggregate amount of the Revolving Loan Commitments shall be
increased to $63,675,000; provided that the Revolving Loan Commitments of
---------
Lenders shall be adjusted to give effect to any assignments of the
Revolving Loan Commitments pursuant to subsection 10.1B; and provided
--------
further that the amount of the Revolving Loan Commitments shall be reduced
-------
from time to time by the amount of any reductions thereto made pursuant to
subsections 2.4A, 2.4B(ii) and 2.4B(iii)."
B. Increase in Acquisition Sublimit. Subsection 2.1A(i) of the Credit
---------------------------------
Agreement is hereby further amended by deleting the fourth sentence therefrom
and substituting the following two sentences therefor:
"On the Fourth Amendment Effective Date, the Acquisition Sublimit shall be
increased to $35,675,000; provided that the Acquisition Sublimit shall be
--------
reduced from time to time by the amount of any reductions thereto made
pursuant to subsections 2.4A, 2.4B(ii) and 2.4B(iii). Notwithstanding
anything to the contrary contained in Section 1B(ii) of the Third Amendment
and Waiver, Company may use Revolving Loans in accordance with the terms of
this Agreement for Permitted Acquisitions in an amount not to exceed the
Acquisition Sublimit."
4
<PAGE>
C. Increase in Working Capital Utilization limit. Subsection 2.1A(i) of
----------------------------------------------
the Credit Agreement is hereby further amended by deleting the reference to the
number "$19,000,000" appearing in the second paragraph thereof and substituting
therefor the number "$28,000,000".
D. Additional Fees. Subsection 2.3 is hereby amended by adding thereto a
----------------
new subsection 2.3C as follows:
"C. INCREMENTAL FACILITY FEES. Company agrees to pay to Agent, for
distribution to each Lender in proportion to that Lender's Incremental
Commitment Pro Rata Share, a fee of $75,000.00 on January 31, 1997 unless
the Revolving Commitments have been permanently reduced to $47,000,000 on
or before that date and the Total Utilization of Commitments does not
exceed $47,000,000 on that date. Company further agrees to pay to Agent
for its own account all fees set forth in that certain Letter Agreement
between Company and Agent dated August 14, 1996 in accordance with the
terms thereof."
E. Modification of Revolving Commitment Reduction Schedule and Acquisition
-----------------------------------------------------------------------
Sublimit Reduction Schedule. Subsection 2.4A is hereby amended to read in its
- ---------------------------
entirety as follows:
"A. SCHEDULED PREPAYMENTS AND REDUCTIONS OF REVOLVING LOAN COMMITMENTS AND
ACQUISITION SUBLIMIT.
(i) On March 31, 1997, the Acquisition Sublimit shall be permanently
reduced by an amount equal to the amount by which the Acquisition
Sublimit exceeds the Acquisition Sublimit Utilization on that date.
The amount of such reduction shall be applied against the scheduled
reductions of the Acquisition Sublimit set forth in clause (ii) of
this subsection 2.4A in inverse chronological order.
(ii) In addition to the reductions required by the other clauses of this
subsection 2.4A, Company shall prepay Loans, and the Revolving Loan
Commitments and Acquisition Sublimit shall each be permanently
reduced, on the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
Scheduled Prepayment and Reduction of Revolving
Date Loan Commitments and Acquisition Sublimit
---- -----------------------------------------------
<S> <C>
December 31, 1996 $1,850,000
March 31, 1997 3,500,000
June 30, 1997 5,700,000
December 31, 1997 5,700,000
June 30, 1998 9,500,000
December 31, 1998 9,425,000
</TABLE>
(iii) In addition to the reductions required by the other
clauses of this subsection 2.4A, Company shall prepay the Loans and
the Revolving Loan Commitments shall be permanently reduced by
$400,000 on December 31,
5
<PAGE>
1998 (in addition to the reduction on that date required by clause
(ii) above). Company shall also prepay the Loans and the Revolving
Loan Commitments shall be permanently reduced by $10,000,000 on June
30, 1999 and by $17,600,000 on December 31, 1999; provided that the
--------
scheduled reductions of the Revolving Loan Commitments and Acquisition
Sublimit set forth above shall be reduced in connection with any
voluntary or mandatory reductions of the Revolving Loan Commitments
and Acquisition Sublimit, respectively, in accordance with subsection
2.4B(iv)."
F. Modification of Use of Proceeds Sublimits. Subsection 2.5A of the
-------------------------------------------
Credit Agreement is hereby amended by deleting the reference to the number
"$15,000,000" therefrom and substituting therefor a reference to the number
"$28,000,000."
1.3 AMENDMENT TO SECTION 10: MISCELLANEOUS.
A. Amendments and Waivers. Subsection 10.6 of the Credit Agreement is
-----------------------
hereby amended by adding the following immediately after the first sentence
thereof:
"In addition, no amendment, modification, termination or waiver of any
provision of subsection 7.6 shall be effective unless evidenced by a
writing signed by all Lenders; provided that on and after such date that
--------
the Revolving Commitments have been permanently reduced to $47,000,000 and
the Total Utilization of Commitments does not exceed $47,000,000, no
amendment, modification, termination or waiver of any provision of
subsection 7.6 shall be effective unless evidenced by a writing signed by
Requisite Lenders."
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FOURTH
AMENDMENT EFFECTIVE DATE"):
A. On or before the Fourth Amendment Effective Date, Company shall
deliver to Lenders (or to Agent for Lenders with sufficient originally executed
copies, where appropriate, for each Lender and its counsel) the following, each,
unless otherwise noted, dated the Fourth Amendment Effective Date:
1. Certified copies of its Certificate of Incorporation,
together with a good standing certificate from the Secretary of State of
the State of Delaware, each dated a recent date prior to the Fourth
Amendment Effective Date;
2. Copies of its Bylaws, certified as of the Fourth Amendment
Effective Date by its corporate secretary or an assistant secretary;
3. Resolutions of its Board of Directors approving and
authorizing the execution, delivery, and performance of this Amendment and
the Allonges to Revolving Commitment Notes substantially in the form of
Annex I hereto (the "Allonges") and approving and authorizing the payment
of the Revolving Notes as
6
<PAGE>
amended by such Allonges, certified as of the Fourth Amendment Effective
Date by its corporate secretary or an assistant secretary as being in full
force and effect without modification or amendment;
4. Signature and incumbency certificates of its officers
executing this Amendment and the Allonges; and
5. Executed copies of this Amendment and an Allonge
substantially in the form of Annex I to this Amendment, drawn to the order
-------
of each Lender and with appropriate insertions.
B. Lenders and their respective counsel shall have received
originally executed copies of one or more favorable written opinions of Riordan
& McKinzie counsel for Company (together with a back-up opinion regarding New
York law) in form and substance reasonably satisfactory to Agent and its
counsel, dated as of the Fourth Amendment Effective Date and setting forth
substantially the matters in the opinions designated in Annex II to this
--------
Amendment and as to such other matters as Agent acting on behalf of Lenders may
reasonably request.
C. Agent shall have received payment from Company of consent fees for
the account of each Lender in proportion to such Lender's Incremental Commitment
Pro Rata Share in an amount equal to $150,000.
D. On the Fourth Amendment Effective Date, contemporaneously with the
effectiveness of Section 1 hereof, Company shall repay all principal and
interest owed by Company under that certain Line of Credit Agreement dated July
31, 1996 between Company and Bankers Trust Company (the "Line of Credit
Agreement") and the Line of Credit Note executed and delivered by Company in
connection therewith, which shall thereupon be cancelled.
E. On or before the Fourth Amendment Effective Date, all corporate
and other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Agent and such counsel, and Agent and such
counsel shall have received all such counterpart originals or certified copies
of such documents as Agent may reasonably request.
SECTION 3. COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS
In order to induce Lenders and Agent to enter into this Amendment and
to amend the Credit Agreement and the Revolving Notes in the manner provided
herein, Company represents, warrants and covenants to Lenders and Agent that,
after giving effect to this Amendment, the following statements are and will be
true, correct and complete on and as of the date hereof and, to the extent
provided below, any subsequent dates specified below:
A. ORGANIZATION AND POWERS. Company has all requisite corporate
power and authority to enter into this Amendment, to issue the Allonges and to
carry out the
7
<PAGE>
transactions contemplated hereby and to perform its obligations under the Credit
Agreement as amended by this Amendment (the "Amended Agreement") and the
Revolving Notes as amended by the Allonges (the "Amended Notes" and, together
with the Amended Agreement, the "Amended Documents.")
B. AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Amendment and the Allonges and the performance of the Amended Documents have
been duly authorized by all necessary corporate action by Company. This
Amendment and the Allonges have been duly executed and delivered by Company.
C. NO CONFLICT. The execution and delivery by Company of this
Amendment and the Allonges and the performance by Company of the Amended
Documents do not and will not (i) except as would not have a Material Adverse
Effect, violate any provision of any law or any governmental rule or regulation
applicable to Company or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on Company
or any of its Subsidiaries, (ii) except as would not have a Material Adverse
Effect, conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any Contractual Obligation of Company or
any of its Subsidiaries, (iii) result in or require the creation or imposition
of any Lien upon any of the properties or assets of Company or any of its
Subsidiaries, or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Company or any of its
Subsidiaries.
D. CONSENTS. The execution and delivery by Company of this Amendment
and the Allonges and the performance by Company of the Amended Documents do not
and will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other governmental
authority or regulatory body or other Person.
E. BINDING OBLIGATION. This Amendment and the Amended Documents are
the legally valid and binding obligations of Company, enforceable against it in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 and
Section 6.10 of the Credit Agreement are and will be true, correct and complete
in all material respects on and as of the date hereof, to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case such
representations and warranties were true, correct and complete in all material
respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default. Without limiting the generality of the foregoing, Company represents
and warrants it is in compliance with subsection 6.10 with respect to all
Subsidiaries.
8
<PAGE>
SECTION 4. ACKNOWLEDGEMENT AND CONSENT
Company is a party to a Pledge Agreement, as amended through the
Fourth Amendment Effective Date, pursuant to which Company has created Liens in
favor of Agent on certain Collateral to secure the Obligations. Holdings is a
party to a Pledge Agreement, as amended through the Fourth Amendment Effective
Date, pursuant to which Holdings has created Liens in favor of Agent on certain
Collateral to secure the Obligations. The Guarantors listed on the signature
pages hereof are parties to the Guaranties, in each case as amended through the
Fourth Amendment Effective Date, pursuant to which each such Guarantor has
guarantied the Obligations. Company, Holdings and the Guarantors are
collectively referred to herein as the "CREDIT SUPPORT PARTIES", and the
Guaranties and Pledge Agreements referred to above are collectively referred to
herein as the "CREDIT SUPPORT DOCUMENTs".
Each Credit Support Party hereby acknowledges that it has reviewed the
terms and provisions of the Credit Agreement and this Amendment and consents to
the amendment of the Credit Agreement effected pursuant to this Amendment. Each
Credit Support Party hereby confirms that each Credit Support Document to which
it is a party or otherwise bound and all Collateral encumbered thereby will
continue to guaranty or secure, as the case may be, to the fullest extent
possible the payment and performance of all "Guarantied Obligations" and
"Secured Obligations," as the case may be (in each case as such terms are
defined in the applicable Credit Support Document), including without limitation
the payment and performance of all such "Guarantied Obligations" or "Secured
Obligations," as the case may be, in respect of the Obligations of Company now
or hereafter existing under or in respect of the Amended Agreement and the Notes
defined therein. Without limiting the generality of the foregoing, each Credit
Support Party hereby acknowledges and confirms the understanding and intent of
such party that, upon the effectiveness of this Amendment, and as a result
thereof, the definition of "Obligations" contained in the Amended Agreement
includes the obligations of Company under the Amended Notes.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the Fourth Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party is not required by the terms of the Credit Agreement
or any other Loan Document to consent to the amendments to the Credit Agreement
effected pursuant to this Amendment and (ii) nothing in the Credit Agreement,
this Amendment or any other Loan Document shall be deemed to require the consent
of such Credit Support Party to any future amendments to the Credit Agreement.
9
<PAGE>
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(i) On and after the date hereof, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference in the Notes and the other Loan Documents to the
Credit Agreement, shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended or waived by this Amendment , the
terms, conditions and provisions of the Credit Agreement and the Notes and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, (x) constitute a waiver or
modification of any provision of, or operate as a waiver of any right, power or
remedy of Lenders or Agent under, the Credit Agreement or any of the Notes or
other Loan Documents or (y) prejudice any right or remedy that Lenders or Agent
may now have or may have in the future under or in connection with the Credit
Agreement or any instrument or agreement referred to therein.
B. EXECUTION IN COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
but one and the same instrument. This Amendment (other than the provisions of
Section 1 hereof, the effectiveness of which is governed by Section 2 hereof)
shall become effective upon the execution of a counterpart hereof by Company,
Lenders and each of the Credit Support Parties (other than K/B Realty Advisors,
Inc. and Koll Real Estate Securities Advisors, Inc.) and receipt by Company and
Agent of written or telephonic notification of such execution and authorization
of delivery thereof. Company covenants and agrees to cause K/B Realty Advisors,
Inc. and Koll Real Estate Securities Advisors, Inc., to execute and deliver a
counterpart hereof to Agent within 10 Business Days of the date hereof. Breach
of the foregoing covenant shall constitute an Event of Default under the Credit
Agreement.
C. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive
effect.
10
<PAGE>
WITNESS the due execution of this Amendment by the respective duly
authorized officers of the undersigned as of the date first above written.
COMPANY:
KOLL MANAGEMENT SERVICES, INC.
By __________________________
Title _______________________
LENDERS:
BANKERS TRUST COMPANY,
individually and as Agent
By __________________________
Title _______________________
BHF-BANK AKTIENGESELLSCHAFT, formerly known
as Berliner Handels- und Frankfurter Bank
By __________________________
Title _______________________
By __________________________
Title _______________________
GUARANTORS:
BONUTTO-HOFER INVESTMENTS
By __________________________
Title _______________________
S-1
<PAGE>
D.A. MANAGEMENT, INC.
By __________________________
Title _______________________
KMS HOLDING CORPORATION
By __________________________
Title _______________________
KOLL ASSET MANAGEMENT COMPANY
By __________________________
Title _______________________
KOLL CAPITAL MARKETS GROUP
By __________________________
Title _______________________
KOLL CORPORATE SERVICES, INC
By __________________________
Title _______________________
S-2
<PAGE>
KOLL INVESTMENT MANAGEMENT, INC.
By __________________________
Title _______________________
KOLL MANAGEMENT SERVICE CORPORATION
By __________________________
Title _______________________
KOLL PARTNERSHIPS I, INC.
By __________________________
Title _______________________
KOLL PARTNERSHIPS II, INC.
By __________________________
Title _______________________
K/B REALTY ADVISORS, INC.
By __________________________
Title _______________________
KOLL REAL ESTATE SECURITIES ADVISORS, INC.
By __________________________
Title _______________________
S-3
<PAGE>
CBS INVESTMENT REALTY OF NEW MEXICO, INC.
By __________________________
Title _______________________
CBS INVESTMENT REALTY, INC.
By __________________________
Title _______________________
KOLL MEDICAL SERVICES, INC.
By __________________________
Title _______________________
KOLL TENDER CORPORATION I
By __________________________
Title _______________________
KOLL TENDER CORPORATION II
By __________________________
Title _______________________
KOLL TENDER CORPORATION III
By __________________________
Title _______________________
S-4
<PAGE>
KOLL HOLDINGS INTERNATIONAL, INC.
By __________________________
Title _______________________
KOLL ASIA PACIFIC-HAWAII, INC.
By __________________________
Title _______________________
KMS CONSTRUCTION CO.
By __________________________
Title _______________________
S-5
<PAGE>
ANNEX I
FORM OF ALLONGE TO REVOLVING COMMITMENT NOTE
By this Allonge to Revolving Commitment Note (this "ALLONGE") the
undersigned, KOLL MANAGEMENT SERVICES, INC., a Delaware corporation ("COMPANY"),
agrees that pursuant to that certain Fourth Amendment to Credit Agreement dated
as of August 14, 1996 by and among Company, the Lenders listed on the signature
pages thereof and Bankers Trust Company, as Agent, the first sentence of the
within Revolving Note of Company dated November 23 1994, payable to the order of
[Payee] (the "Note"), is amended in its entirety to read as follows:
"FOR VALUE RECEIVED, KOLL MANAGEMENT SERVICES, INC., a Delaware
corporation ("COMPANY"), promises to pay to the order of___________
______________ [Insert name of Lender] ("PAYEE") or its registered assigns,
on or before December 31, 1999, the lesser of (x) __________ [Insert
Lender's Pro Rata Share of $63,675,000 in Words] ($________ ) [Insert
Lender's Pro Rata Share of $63,675,000 in Numbers]) or (y) the unpaid
principal amount of all advances made by Payee to Company as Revolving
Loans under the Credit Agreement referred to below."
The Company further agrees that the reference in the within Note to
"$50,000,000" is hereby amended to be a reference to "$63,675,000."
Date __________________ KOLL MANAGEMENT SERVICES, INC.
By: ___________________________
Title: ________________________
I-1
<PAGE>
ANNEX II
[FORM OF OPINION OF COUNSEL TO COMPANY]
[Fourth Amendment Effective Date]
Bankers Trust Company,
as Agent
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
and
The Lenders Listed on
Schedule A Hereto
Re: Fourth Amendment dated as of August 14, 1996 to Credit Agreement dated
as of November 24, 1994, by and among Koll Management Services, Inc.,
the financial institutions listed therein as Lenders, and Bankers
Trust Company, as Agent
-----------------------
Ladies and Gentlemen:
We have acted as counsel to Koll Management Services, Inc., a Delaware
corporation ("Company") in connection with that certain Fourth Amendment dated
as of August __, 1996 by and among Company, the financial institutions listed
therein as Lenders ("Lenders"), and Bankers Trust Company, as Agent ("Agent")
(the "AMENDMENT") to that certain Credit Agreement dated as of November 24, 1994
(as amended to the date hereof, the "Credit Agreement"). This opinion is
delivered to you in compliance with subsection 2B of the Amendment and pursuant
to the request of the Company. The Credit Agreement as amended by the Amendment
is referred to herein as the "AMENDED CREDIT AGREEMENT". Capitalized terms used
herein without definition have the same meanings as in the Amended Credit
Agreement.
In connection with this opinion, we have examined originals, or copies
identified to our satisfaction as being true copies, of such records, documents
or other instruments as we have deemed necessary as the basis for the opinions
hereinafter set forth. These records, documents and instruments included the
following:
(a) The Certificate of Incorporation of Company, as amended to date;
(b) The Bylaws of Company, as amended to date;
II-1
<PAGE>
Bankers Trust Company,
as Agent, and
The Lenders Listed on
Schedule A
[Date] - Page 2
(c) Records of certain actions and proceedings of the Boards of
Directors of Company, which have been certified to us as constituting all of the
actions relating to the Amendment and the transactions contemplated thereby;
(d) The Amendment; and
(e) The Allonges.
We have been furnished with, and with your consent have relied upon, a
certificate of an officer of Company with respect to certain factual matters,
including a listing of the material agreements, instruments, orders, writs,
judgments or decrees binding on or affecting Company (each, a "Material
Document"), a copy of which has been delivered to Lenders (the "Certificates").
In addition, we have obtained and relied upon such certificates and assurances
from public officials as we have deemed necessary, copies of which have been
delivered to Lenders. In all such examinations, we have assumed the
authenticity of all documents submitted to us as original or certified
documents, the genuineness of all signatures on original or certified documents
(other than the signatures of the officers of Company), the conformity to
original documents of all documents submitted to us as copies thereof and the
correctness and accuracy of all facts not independently established by us set
forth in all certificates and reports identified in this opinion.
We have investigated such questions of law for the purpose of
rendering this opinion as we have deemed necessary. We are opining herein as to
the effect on the subject transactions of only United States Federal law, the
General Corporation Law of the State of Delaware, the laws of the State of
California and the laws of the State of New York. As to matters governed by the
laws of the State of New York, we are relying exclusively on the opinion of
Messrs. Richards & O'Neil of even date herewith, subject to all of the
assumptions, qualifications, limitations and exceptions set forth in such
opinion, a copy of which is attached hereto. We are not opining on, and we
assume no responsibility as to, the applicability to or effect on any of the
matters covered herein of the laws of any other jurisdiction. In addition,
except as expressly covered in this opinion, we are not expressing any opinion
as the effect of compliance by Lenders with any state or federal laws or
regulations applicable to the transactions because of the nature of any of their
businesses. We express no opinion with respect to state securities or "blue
sky" laws or state or federal antifraud, antitrust or environmental laws.
To the extent that the obligations of Company may be dependent upon
such matters, we have assumed for purposes of this opinion, other than with
respect to Company, that each additional party to the agreements and contracts
referred to herein is duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of
II-2
<PAGE>
Bankers Trust Company,
as Agent, and
The Lenders Listed on
Schedule A
[Date] - Page 3
incorporation; that each such other party has the requisite corporate or other
organizational power and authority to perform its obligations under such
agreements and contracts, as applicable; and that such agreements and contracts
have been duly authorized, executed and delivered by, and each of them
constitutes the legally valid and binding obligation of, such other parties, as
applicable, enforceable against such other parties in accordance with their
respective terms.
On the basis of the foregoing, and in reliance thereon, and subject to
the limitations, qualifications and exceptions set forth below, we are of the
following opinions:
1. Company is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware and has the corporate power and
corporate authority to own and operate its properties and to carry on its
business as now conducted.
2. Company has the corporate power and corporate authority to execute
and deliver the Amendment and the Allonges, to perform the Amended Credit
Agreement, to pay the Revolving Notes as amended by the Allonges (the "Amended
Notes") and to carry out the transactions contemplated thereby.
3. The execution and delivery of the Amendment and the Allonges, the
performance of the Amended Credit Agreement and the payment of the Amended Notes
have been duly authorized by all necessary corporate action on the part of
Company. The Amendment and the Allonges have been duly executed and delivered
by Company and the Amendment, the Amended Credit Agreement, and the Amended
Notes constitute the legally valid and binding obligations of Company,
enforceable under the laws of the State of New York against Company in
accordance with their respective terms.
4. None of the execution and delivery of the Amendment and the
Allonges, the performance of the Amended Credit Agreement or the payment of the
Amended Notes by Company nor the consummation of the transactions contemplated
by the Amended Credit Agreement and the Amended Notes nor the compliance with
the terms and conditions thereof by Company (A) conflicts with, results in a
breach or violation of, or constitutes a default under, any of the terms,
conditions or provisions of (x) the Certificate of Incorporation or Bylaws of
Company, (y) any term of any Material Document identified in a Certificate or
(z) any present federal, California, Delaware corporation or New York statute,
rule or regulation binding on Company, or (B) results in the creation of any
Lien upon any of the properties or assets of Company under any Material Document
referred to in clause (y) above.
5. No consents or approvals of, authorizations by, or registrations,
declarations or filings with, any federal, California, Delaware or New York
governmental
II-3
<PAGE>
Bankers Trust Company,
as Agent, and
The Lenders Listed on
Schedule A
[Date] - Page 4
authority are required by Company in connection with the execution and delivery
by Company of the Amendment or the Allonges or the extensions of credit under
the Amended Credit Agreement or the payment of the Amended Notes.
6. A California court, in a properly litigated action, would enforce
the provisions of the Amended Credit Agreement and the Amended Notes, providing
that such agreements and instruments shall be governed by, and shall be
construed and enforced in accordance with, the internal laws of the State of New
York (without regard to conflicts of laws principles).
7. To the best of our knowledge, there in no injunction, stay, decree
or order of any governmental body, or any action, suit or proceeding pending or
threatened against or affecting the Company or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision, which in any case
could have a Material Adverse Effect or which in any manner draws into question
the validity of any Loan Document.
8. The making of the Loans and the application of the proceeds
thereof as provided in the Amended Credit Agreement do not violate Regulations
G, T, U or X of the Board of Governors of the Federal Reserve System.
9. It is not necessary in connection with the execution and delivery
of the Allonges to Lenders to register the Amended Notes or the Loans under the
Securities Act of 1933, as amended, or to qualify any indenture in respect
thereof under the Trust Indenture Act of 1939, as amended.
Our opinions in paragraphs 4 and 5 above as to compliance with certain
statutes, rules and regulations and as to the lack of any required consents or
approvals of, authorizations by, or registrations, declarations or filings with
certain governmental authorities are based upon a review of those statutes,
rules and regulations which, in our experience, are normally applicable to
transactions of the type contemplated by the Amended Credit Agreement.
For purposes of our opinion expressed in paragraph 9, we have assumed,
with you consent, that each Lender is taking the Amended Notes payable to it for
its own account in the ordinary course of its commercial banking business and
not with a view to or for sale in connection with any distribution of the
Amended Notes.
II-4
<PAGE>
Bankers Trust Company,
as Agent, and
The Lenders Listed on
Schedule A
[Date] - Page 5
As used in this opinion, the phrase "to the best of our knowledge"
means to the best of our actual knowledge, which knowledge is based solely on
inquiry within our firm and of the Company, without other inquiry or
investigation.
We advise you that certain members of this firm own limited
partnership interests in a partnership that owns interests in Holding.
This opinion is rendered only to Agent and Lenders and is solely for
their benefit in connection with the above transactions. This opinion may not
be relied upon by Agents or Lenders for any other purpose, or quoted to or
relied upon by any other person, firm or corporation for any purpose without our
prior written consent.
Very truly yours,
[Riordan & McKinzie]
II-5
<PAGE>
EXHIBIT 10.6
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "AGREEMENT") is dated as of November 23,
1994 and entered into by and between KOLL MANAGEMENT SERVICES, INC., a Delaware
corporation ("PLEDGOR"), and BANKERS TRUST COMPANY, as agent for and
representative of (in such capacity herein called "SECURED PARTY") the financial
institutions ("LENDERS") party to the Credit Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of the shares of stock
(the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto and
----------
issued by the corporations named therein and (ii) the indebtedness (the "PLEDGED
DEBT") described in Part B of said Schedule I and issued by the obligors named
----------
therein.
B. Secured Party and Lenders have entered into a Credit Agreement
dated as of November 23, 1994 (said Credit Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with Pledgor pursuant to which Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Pledgor.
C. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to
------------------
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and
<PAGE>
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the Pledge Debt,
and all interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights;
(d) all additional indebtedness from time to time owed to Pledgor by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such shares,
and all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares, securities, warrants,
options or other rights;
(f) all indebtedness from time to time owed to Pledgor by any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct or indirect Subsidiary of Pledgor, and all interest, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this
2.
<PAGE>
Agreement, the term "PROCEEDS" includes whatever is receivable or received when
Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes,
without limitation, proceeds of any indemnity or guaranty payable to Pledgor or
Secured Party from time to time with respect to any of the Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and
liabilities of every nature of Pledgor now or hereafter existing under or
arising out of or in connection with the Credit Agreement and the other Loan
Documents and all extensions or renewals thereof, whether for principal,
interest (including without limitation interest that, but for the filing of a
petition in bankruptcy with respect to Pledgor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Secured Party
or any Lender as a preference, fraudulent transfer or otherwise (all such
obligations and liabilities being the "UNDERLYING DEBT"), and all obligations of
every nature of Pledgor now or hereafter existing under this Agreement (all such
obligations of Pledgor, together with the Underlying Debt, being the "SECURED
OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Secured Party shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
------------------------------
warrants as follows:
3.
<PAGE>
(a) Due Authorization, etc. of Pledged Collateral. All of the
---------------------------------------------
Pledged Shares have been duly authorized and validly issued and are fully paid
and non-assessable. All of the Pledged Debt has been duly authorized,
authenticated or issued, and delivered and is the legal, valid and binding
obligation of the issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares constitute
---------------------------------
all of the issued and outstanding shares of stock of each issuer thereof and
there are no outstanding warrants, options or other rights to purchase, or other
agreements outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged Shares.
The Pledged Debt constitutes all of the issued and outstanding intercompany
indebtedness evidenced by a promissory note of the respective issuers thereof
owing to Pledgor.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record
-------------------------------
and beneficial owner of the Pledged Collateral free and clear of any Lien except
for the security interest created by this Agreement and Permitted Encumbrances.
(d) Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the exercise by Secured Party of the voting or
other rights, or the remedies in respect of the Pledged Collateral, provided for
in this Agreement (except as may be required in connection with a disposition of
Pledged Collateral by laws affecting the offering and sale of securities
generally).
(e) Perfection. The pledge of the Pledged Collateral pursuant to
----------
this Agreement creates a valid and perfected first priority security interest in
the Pledged Collateral, securing the payment of the Secured Obligations.
(f) Margin Regulations. The pledge of the Pledged Collateral
------------------
to this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
(g) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Secured Party by or on behalf of Pledgor with respect to
the Pledged Collateral is accurate and complete in all material respects.
SECTION 5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
---------------------------------------------------------
ETC. Pledgor shall:
- ----
4.
<PAGE>
(a) not, except as expressly permitted by the Credit Agreement, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation; provided that in the event Pledgor makes an Asset Sale permitted by
--------
the Credit Agreement and the assets subject to such Asset Sale are Pledged
Shares, Secured Party shall release the Pledged Shares that are the subject of
such Asset Sale to Pledgor free and clear of the lien and security interest
under this Agreement concurrently with the consummation of such Asset Sale;
provided, further that, as a condition precedent to such release, Secured Party
- -------- -------
shall have received evidence satisfactory to it that arrangements satisfactory
to it have been made for delivery to Secured Party of the Net Cash Proceeds of
such Asset Sale; provided, still further that if any such sale of Pledged Shares
-------- -------------
shall not constitute an "Asset Sale" by reason of the $500,000 threshold
contained in such definition, such Pledged Shares may be sold in a bona fide
transaction without the application of the sales proceeds thereof;
(b) (i) cause each issuer of Pledged Shares not to issue any stock or
other securities in addition to or in substitution for the Pledged Shares issued
by such issuer, except to Pledgor, (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional shares of
stock or other securities of each wholly-owned issuer of Pledged Shares, and
(iii) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all shares of stock of any Person that, after the
date of this Agreement, becomes, as a result of any occurrence, a direct wholly-
owned Subsidiary of Pledgor;
(c) (i) pledge hereunder, immediately upon their issuance, any and
all instruments or other evidences of additional indebtedness from time to time
owed to Pledgor by any obligor on the Pledged Debt, and (ii) pledge hereunder,
immediately upon their issuance, any and all instruments or other evidences of
indebtedness from time to time owed to Pledgor by any Person that after the date
of this Agreement becomes, as a result of any occurrence, a direct or indirect
Subsidiary of Pledgor;
(d) promptly notify Secured Party of any event of which Pledgor
becomes aware causing loss of the Pledged Collateral;
(e) promptly deliver to Secured Party all written notices received by
it with respect to the Pledged Collateral; and
(f) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to
5.
<PAGE>
the extent the validity thereof is being contested in good faith; provided that
--------
Pledgor shall in any event pay such taxes, assessments, charges, levies or
claims not later than five days prior to the date of any proposed sale under any
judgement, writ or warrant of attachment entered or filed against Pledgor or any
of the Pledged Collateral as a result of the failure to make such payment.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor will:
(i) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby and (ii) at Secured
Party's request, appear in and defend any action or proceeding that may affect
Pledgor's title to or Secured Party's security interest in all or any part of
the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in Section 5(b) or (c), promptly (and in any event within five
Business Days) deliver to Secured Party a Pledge Amendment, duly executed by
Pledgor, in substantially the form of Schedule II annexed hereto (a "PLEDGE
-----------
AMENDMENT"), in respect of the additional Pledged Shares or Pledged Debt to be
pledged pursuant to this Agreement. Pledgor hereby authorizes Secured Party to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares or Pledged Debt listed on any Pledge Amendment delivered to Secured Party
shall for all purposes hereunder be considered Pledged Collateral; provided that
--------
the failure of Pledgor to execute a Pledge Amendment with respect to any
additional Pledged Shares or Pledged Debt pledged pursuant to this Agreement
shall not impair the security interest of Secured Party therein or otherwise
adversely affect the rights and remedies of Secured Party hereunder with respect
thereto.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement or
the Credit Agreement; provided, however, that Pledgor shall not exercise or
-------- -------
refrain from exercising any
6.
<PAGE>
such right if Secured Party shall have notified Pledgor that, in Secured
Party's judgment, such action would have a material adverse effect on the
value of the Pledged Collateral or any part thereof; and provided, further,
-------- -------
that Pledgor shall give Secured Party at least five Business Days' prior
written notice of the manner in which it intends to exercise, or the reasons
for refraining from exercising, any such right. It is understood, however,
that neither (A) the voting by Pledgor of any Pledged Shares for or
Pledgor's consent to the election of directors at a regularly scheduled
annual or other meeting of stockholders or with respect to incidental
matters at any such meeting nor (B) Pledgor's consent to or approval of any
action otherwise permitted under this Agreement and the Credit Agreement
shall be deemed inconsistent with the terms of this Agreement or the Credit
Agreement within the meaning of this Section 7(a)(i), and no notice of any
such voting or consent need be given to Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends and
interest paid in respect of the Pledged Collateral; provided, however, that
-------- -------
any and all
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as Pledged
Collateral in the same form as so received (with all necessary
endorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and other
consensual rights which it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends, principal or interest payments which it
is authorized to receive and retain pursuant to paragraph (ii) above.
7.
<PAGE>
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Secured Party to Pledgor, all rights
of Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease,
and all such rights shall thereupon become vested in Secured Party who shall
thereupon have the sole right to exercise such voting and other consensual
rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Pledgor and shall forthwith be paid
over to Secured Party as Pledged Collateral in the same form as so received
(with any necessary endorsements).
(c) In order to permit Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
7(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment orders and other instruments as
Secured Party may from time to time reasonably request and (ii) without limiting
the effect of the immediately preceding clause (i), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including, without limitation, giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the indefeasible payment in full of the Secured Obligations.
SECTION 8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
----------------------------------------
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any
8.
<PAGE>
instrument that Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including without limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Pledged Collateral.
SECTION 9. SECURED PARTY MAY PERFORM. If Pledgor fails to perform
-------------------------
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 14(b).
SECTION 10. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Secured Party shall have no duty as to any Pledged Collateral, it being
understood that Secured Party shall have no responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relating to any Pledged Collateral, whether or not
Secured Party has or is deemed to have knowledge of such matters, (b) taking any
necessary steps (other than steps taken in accordance with the standard of care
set forth above to maintain possession of the Pledged Collateral) to preserve
rights against any parties with respect to any Pledged Collateral, (c) taking
any necessary steps to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Pledged Collateral, or
(d) initiating any action to protect the Pledged Collateral against the
possibility of a decline in market value. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Pledged Collateral
in its possession if
9.
<PAGE>
such Pledged Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property consisting of negotiable securities.
SECTION 11. REMEDIES.
---------
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE") (whether
or not the Code applies to the affected Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Secured Party
may deem commercially reasonable, irrespective of the impact of any such sales
on the market price of the Pledged Collateral. Secured Party or any Lender may,
to the extent permitted by law, be the purchaser of any or all of the Pledged
Collateral at any such sale and Secured Party, as agent for and representative
of Lenders (but not any Lender or Lenders in its or their respective individual
capacities unless Requisite Lenders shall otherwise agree in writing), shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral sold at any such
public sale, to use and apply any of the Secured Obligations as a credit on
account of the purchase price for any Pledged Collateral payable by Secured
Party at such sale. Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of Pledgor, and Pledgor
hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Pledgor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if Secured
Party accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Pledged Collateral conducted in accordance with applicable
law are insufficient to pay all the Secured Obligations, Pledgor shall be liable
for the deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency.
10.
<PAGE>
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Pledgor acknowledges that any such private
sales may be at prices and on terms less favorable than those obtainable through
a public sale without such restrictions (including, without limitation, a public
offering made pursuant to a registration statement under the Securities Act)
and, notwithstanding such circumstances, Pledgor agrees that any such private
sale shall not be deemed to have not been made in a commercially reasonable
manner solely by reason of such sale being conducted in a private manner and
that Secured Party shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Secured Party all such information as Secured Party may request in
order to determine the number of shares and other instruments included in the
Pledged Collateral which may be sold by Secured Party in exempt transactions
under the Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
SECTION 12. APPLICATION OF PROCEEDS. Except as expressly provided
-----------------------
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Pledged Collateral may, in the discretion of Secured Party, be held by
Secured Party as Pledged Collateral for, and/or then, or at any time thereafter,
applied in full or in part by Secured Party against, the Secured Obligations in
the following order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by Secured Party in connection
therewith, and all amounts for which Secured Party is entitled to
indemnification hereunder and all advances made by Secured Party hereunder
for the account of Pledgor, and to the payment of all costs and expenses
paid or incurred by Secured Party in connection with the exercise of any
right or remedy hereunder, all in accordance with Section 13;
11.
<PAGE>
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof); and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 13. INDEMNITY AND EXPENSES.
-----------------------
(a) Pledgor agrees to indemnify Secured Party and each Lender from
and against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result
solely from Secured Party's or such Lender's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (iv) the failure by Pledgor to perform or
observe any of the provisions hereof.
SECTION 14. SURETYSHIP WAIVERS BY PLEDGOR, ETC.
-----------------------------------
(a) Pledgor agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or
surety other than indefeasible payment in full of the Underlying Debt. In
furtherance of the foregoing and without limiting the generality thereof,
Pledgor agrees as follows: (i) Secured Party or any Lender may from time to
time, without notice or demand and without affecting the validity or
enforceability of this Agreement or giving rise to any limitation, impairment or
discharge of Pledgor's liability hereunder, (A) renew, extend, accelerate or
otherwise change the time, place, manner or terms of payment of the Underlying
Debt, (B) settle, compromise, release or discharge, or accept or refuse any
offer of performance with respect to, or substitutions for, the Underlying Debt
or any agreement relating thereto and/or subordinate the payment of the same to
the payment of any other obligations, (C) request and accept guaranties of the
Underlying Debt and take and hold other security for the payment of the
Underlying Debt, (D) release, exchange, compromise, subordinate or modify, with
or without consideration, any other security for payment of the Underlying Debt,
any guaranties of the Underlying Debt, or any other obligation of any Person
with respect to the Underlying Debt, (E) enforce and apply any other security
now or hereafter
12.
<PAGE>
held by or for the benefit of Secured Party or any Lender in respect of the
Underlying Debt and direct the order or manner of sale thereof, or exercise any
other right or remedy that Secured Party or Lenders, or any of them, may have
against any such security, as Secured Party in its discretion may determine
consistent with the Credit Agreement and any applicable security agreement,
including foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable, and even though such action operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of Pledgor
against any security for the Underlying Debt (and Pledgor expressly acknowledges
that such exercise of a right or remedy that impairs or extinguishes Pledgor's
right of reimbursement or subrogation would create a possible defense by Pledgor
against any liability hereunder, but Pledgor expressly and knowingly waives any
such defense), and (F) exercise any other rights available to Secured Party or
Lenders, or any of them, under the Loan Documents, at law or in equity; and (ii)
this Agreement and the obligations of Pledgor hereunder shall be valid and
enforceable and shall not be subject to any limitation, impairment or discharge
for any reason (other than indefeasible payment in full of the Underlying Debt),
including without limitation the occurrence of any of the following, whether or
not Pledgor shall have had notice or knowledge of any of them: (A) any failure
to assert or enforce or agreement not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the exercise
or enforcement of, any claim or demand or any right, power or remedy with
respect to the Underlying Debt or any agreement relating thereto, or with
respect to any guaranty of or other security for the payment of the Underlying
Debt, (B) any waiver, amendment or modification of, or any consent to departure
from, any of the terms or provisions (including without limitation provisions
relating to events of default) of the Credit Agreement, any of the other Loan
Documents or any agreement or instrument executed pursuant thereto, or of any
guaranty or other security for the Underlying Debt, (C) the Underlying Debt, or
any agreement relating thereto, at any time being found to be illegal, invalid
or unenforceable in any respect, (D) the application of payments received from
any source to the payment of indebtedness other than the Underlying Debt, even
though Secured Party or Lenders, or any of them, might have elected to apply
such payment to any part or all of the Underlying Debt, (E) any failure to
perfect or continue perfection of a security interest in any other collateral
which secures any of the Underlying Debt, (F) any defenses, set-offs or
counterclaims which Pledgor may allege or assert against Secured Party or any
Lender in respect of the Underlying Debt, including but not limited to failure
of consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury, and (G) any other act or thing
or omission, or delay to do any other act or thing, which may or might in any
manner or to any extent vary the risk of Pledgor as an obligor in respect of the
Underlying Debt.
(b) Pledgor hereby waives, for the benefit of Lenders and Secured
Party: (i) any right to require Secured Party or Lenders, as a condition of
payment or performance by Pledgor, to (A) proceed against any guarantor of the
Underlying Debt or
13
<PAGE>
any other Person, (B) proceed against or exhaust any other security held from
any guarantor of the Underlying Debt or any other Person, (C) proceed against or
have resort to any balance of any deposit account or credit on the books of
Secured Party or any Lender in favor of any other Person, or (D) pursue any
other remedy in the power of Secured Party or any Lender whatsoever; (ii) any
defense arising by reason of the incapacity, lack of authority or any disability
or other defense of Pledgor including, without limitation, any defense based on
or arising out of the lack of validity or the unenforceability of the Underlying
Debt or any agreement or instrument relating thereto or by reason of the
cessation of the liability of Pledgor from any cause other than indefeasible
payment in full of the Underlying Debt; (iii) any defense based upon any statute
or rule of law which provides that the obligation of a surety must be neither
larger in amount nor in other respects more burdensome than that of the
principal; (iv) any defense based upon Secured Party's or any Lender's errors or
omissions in the administration of the Underlying Debt, except behavior which
amounts to bad faith or gross negligence; (v) (A) any principles or provisions
of law, statutory or otherwise, which are or might be in conflict with the terms
of this Agreement and any legal or equitable discharge of Pledgor's obligations
hereunder, (B) the benefit of any statute of limitations affecting Pledgor's
liability hereunder or the enforcement hereof, (C) any rights to set-offs,
recoupments and counterclaims, and (D) promptness, diligence and any requirement
that Secured Party or any Lender protect, secure, perfect or insure any other
security interest or lien or any property subject thereto; (vi) notices,
demands, presentments, protests, notices of protest, notices of dishonor and
notices of any action or inaction, notices of default under the Credit Agreement
or any agreement or instrument related thereto, notices of any renewal,
extension or modification of the Underlying Debt or any agreement related
thereto, notices of any extension of credit to Pledgor and notices of any of the
matters referred to in the preceding paragraph and any right to consent to any
thereof; and (vii) to the fullest extent permitted by law, any defenses or
benefits that may be derived from or afforded by law which limit the liability
of or exonerate guarantors or sureties, or which may conflict with the terms of
this Agreement.
(c) Lenders and Secured Party shall have no obligation to disclose or
discuss with Pledgor their assessment, or Pledgor's assessment, of the financial
condition of Pledgor.
SECTION 15. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the indefeasible payment in
full of all Secured Obligations (other than indemnities and reimbursement
obligations not then due and payable), the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Pledgor, its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
14.
<PAGE>
subsection 10.1 of the Credit Agreement, any Lender may assign or otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders herein or otherwise. Upon the indefeasible payment in full of all
Secured Obligations (other than indemnities and reimbursement obligations not
then due and payable), the cancellation or termination of the Commitments and
the cancellation or expiration of all outstanding Letters of Credit, the
security interest granted hereby shall terminate and all rights to the Pledged
Collateral shall revert to Pledgor. Upon any such termination Secured Party
will, at Pledgor's expense, execute and deliver to Pledgor such documents as
Pledgor shall reasonably request to evidence such termination and Pledgor shall
be entitled to the return, upon its request and at its expense, against receipt
and without recourse to Secured Party, of such of the Pledged Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 16. SECURED PARTY AS AGENT.
----------------------
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Pledged Collateral), solely
in accordance with this Agreement and the Credit Agreement.
(b) Secured Party shall at all times be the same Person that is Agent
under the Credit Agreement. Written notice of resignation by Agent pursuant to
subsection 9.5 of the Credit Agreement shall also constitute notice of
resignation as Secured Party under this Agreement; removal of Agent pursuant to
subsection 9.5 of the Credit Agreement shall also constitute removal as Secured
Party under this Agreement; and appointment of a successor Agent pursuant to
subsection 9.5 of the Credit Agreement shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Agent under subsection 9.5 of the Credit Agreement by a successor
Agent, that successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed Secured
Party under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Agent's resignation or removal
hereunder as Secured Party, the
15.
<PAGE>
provisions of this Agreement shall inure to its benefit as to any actions taken
or omitted to be taken by it under this Agreement while it was Secured Party
hereunder.
SECTION 17. AMENDMENTS; ETC. No amendment or waiver of any provision
---------------
of this Agreement, or consent to any departure by Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 18. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or, as to
either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 19. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 20. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 21. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 22. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
--------------------
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR
16.
<PAGE>
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the
Credit Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code
in the State of New York are used herein as therein defined.
SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES
ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor hereby
agrees that service of all process in any such proceeding in any such court may
be made by registered or certified mail, return receipt requested, to Pledgor at
its address provided in Section 18, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
in any such court and to be otherwise effective and binding service in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of Secured Party to bring
proceedings against Pledgor in the courts of any other jurisdiction.
SECTION 24. WAIVER OF JURY TRIAL. PLEDGOR AND SECURED PARTY HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Pledgor and Secured Party each
acknowledge that this waiver is a material inducement for Pledgor and Secured
Party to enter into a business relationship, that Pledgor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Pledgor and
Secured Party further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
17.
<PAGE>
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
SECTION 25. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
18
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
KOLL MANAGEMENT SERVICES, INC.
By: __________________________
Title:
Notice Address:
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: President
BANKERS TRUST COMPANY
By: __________________________
Title:
Notice Address:
Bankers Trust Company
1 BT Plaza
130 Liberty Street, 23rd Floor
New York, New York 10006
Attn: Mary Jo Jolly
With a copy to:
Bankers Trust Company
300 South Grand Avenue, 41st Floor
Los Angeles, California 90071
Attn: Cristie Sheffield
S-1.
<PAGE>
SCHEDULE I
Attached to and forming a part of the Pledge Agreement dated as of
November 23, 1994 between Koll Management Services, Inc., as Pledgor, and
Bankers Trust Company, as Secured Party.
Part A
Class of Stock Certi- Par Number of
Stock Issuer Stock ficate Nos. Value Shares
- ------------ -------- ------------ ----- ---------
Part B
Debt Issuer Amount of Indebtedness
- ----------- ----------------------
I-1.
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, 19__, is delivered pursuant
to Section 6(b) of the Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Pledge Agreement
dated November 23, 1994, between the undersigned and Bankers Trust Company, as
Secured Party (the "PLEDGE AGREEMENT," capitalized terms defined therein being
used herein as therein defined), and that the [Pledged Shares] [Pledged Debt]
listed on this Pledge Amendment shall be deemed to be part of the [Pledged
Shares] [Pledged Debt] and shall become part of the Pledged Collateral and shall
secure all Secured Obligations.
KOLL MANAGEMENT SERVICES, INC.
By: ___________________________
Title:
Class of Stock Certi- Par Number of
[Stock Issuer Stock ficate Nos. Value Shares]
------------ -------- ------------ ----- ---------
[Debt Issuer Amount of Indebtedness]
----------- ----------------------
II-1.
<PAGE>
EXHIBIT 10.7
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "AGREEMENT") is dated as of November 23,
1994 and entered into by and between KMS HOLDING CORPORATION, a Delaware
corporation ("PLEDGOR"), and BANKERS TRUST COMPANY, as agent for and
representative of (in such capacity herein called "SECURED PARTY") the financial
institutions ("LENDERS") party to the Credit Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of the shares of stock
(the "PLEDGED SHARES") described in Schedule I annexed hereto and issued
----------
by the corporations named therein.
B. Secured Party and Lenders have entered into a Credit Agreement
dated as of November 23, 1994 (said Credit Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with Koll Management Services, Inc., a Delaware
corporation ("COMPANY"), pursuant to which Lenders have made certain
commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
C. Pledgor has executed and delivered a Guaranty dated as of November
23, 1994 (said Guaranty, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "GUARANTY") in favor of Secured
Party for the benefit of Lenders, pursuant to which Pledgor has guarantied the
prompt payment and performance when due of all obligations of Company under the
Credit Agreement.
D. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Pledgor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to
------------------
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
<PAGE>
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights;
(c) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such shares,
and all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares, securities, warrants,
options or other rights; and
(d) to the extent not covered by clauses (a) through (c) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or received
when Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes,
without limitation, proceeds of any indemnity or guaranty payable to Pledgor or
Secured Party from time to time with respect to any of the Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and
liabilities of every nature of Company now or hereafter existing under or
arising out of or in connection with the Credit Agreement and the other Loan
Documents and all extensions or renewals thereof, whether for principal,
interest (including without limitation interest that, but for the filing of a
petition in bankruptcy with respect to Company, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or
2
<PAGE>
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender as a preference, fraudulent transfer
or otherwise (all such obligations and liabilities being the "UNDERLYING DEBT"),
and all obligations of every nature of Pledgor now or hereafter existing under
this Agreement (all such obligations of Pledgor, together with the Underlying
Debt, being the "SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Secured Party shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
------------------------------
warrants as follows:
(a) Organization and Powers. Pledgor is a corporation duly organized,
-----------------------
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted and to enter into this Agreement and carry out the transactions
contemplated hereby.
(b) Good Standing. Pledgor is qualified to do business and in good
-------------
standing wherever necessary to carry on its present business and operations,
except in jurisdictions in which the failure to be so qualified or in good
standing has not had and will not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise)
of Pledgor and its subsidiaries, taken as a whole.
(c) Authorization. The execution, delivery and performance of this
-------------
Agreement have been duly authorized by all necessary corporate action by
Pledgor.
(d) No Conflict. The execution, delivery and performance by Pledgor
-----------
of this Agreement will not (i) except as would not have a Material Adverse
Effect, violate the Certificate of Incorporation or Bylaws of Pledgor, (ii)
violate any provision of law applicable to Pledgor, or any order, judgment or
decree of any court or other agency of
3
<PAGE>
government binding on Pledgor, (iii) except as would not have a Material Adverse
Effect, be in conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
Pledgor, (iv) result in or require the creation or imposition of any Lien upon
any of its properties or assets, or (v) require the approval of stockholders or
any approval or consent of any Person under any Contractual Obligation of
Pledgor.
(e) Binding Obligation. This Agreement is the legally valid and
------------------
binding obligation of Pledgor, enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors' rights generally.
(f) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and non-
assessable.
(g) Description of Pledged Collateral. The Pledged Shares constitute
---------------------------------
all of the issued and outstanding shares of stock of each issuer thereof and
there are no outstanding warrants, options or other rights to purchase, or other
agreements outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged Shares.
(h) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except for
the security interest created by this Agreement and Permitted Encumbrances.
(i) Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the exercise by Secured Party of the voting or
other rights, or the remedies in respect of the Pledged Collateral, provided for
in this Agreement (except as may be required in connection with a disposition of
Pledged Collateral by laws affecting the offering and sale of securities
generally).
(j) Perfection. The pledge of the Pledged Collateral pursuant to this
----------
Agreement creates a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Secured Obligations.
(k) Margin Regulations. The pledge of the Pledged Collateral pursuant
------------------
to this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
4
<PAGE>
(l) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Secured Party by or on behalf of Pledgor with respect to
the Pledged Collateral is accurate and complete in all material respects.
SECTION 5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
---------------------------------------------------------
ETC. Pledgor shall:
- ----
(a) not, except as expressly permitted by the Credit Agreement, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation; provided that in the event Pledgor makes an Asset Sale permitted by
--------
the Credit Agreement and the assets subject to such Asset Sale are Pledged
Shares, Secured Party shall release the Pledged Shares that are the subject of
such Asset Sale to Pledgor free and clear of the lien and security interest
under this Agreement concurrently with the consummation of such Asset Sale;
provided, further that, as a condition precedent to such release, Secured Party
- -------- -------
shall have received evidence satisfactory to it that arrangements satisfactory
to it have been made for delivery to Secured Party of the Net Cash Proceeds of
such Asset Sale; provided, still further that if any such sale of Pledged Shares
-------- -------------
shall not constitute an "Asset Sale" by reason of the $500,000 threshold
contained in such definition, such Pledged Shares may be sold in a bona fide
transaction without the application of the sales proceeds thereof;
(b) (i) cause each issuer of Pledged Shares not to issue any stock or
other securities in addition to or in substitution for the Pledged Shares issued
by such issuer, except to Pledgor, (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional shares of
stock or other securities of each wholly-owned issuer of Pledged Shares, and
(iii) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all shares of stock of any Person that, after the
date of this Agreement, becomes, as a result of any occurrence, a direct wholly-
owned Subsidiary of Pledgor;
(c) promptly notify Secured Party of any event of which Pledgor
becomes aware causing loss of the Pledged Collateral;
(d) promptly deliver to Secured Party all written notices received by
it with respect to the Pledged Collateral; and
(e) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor shall
- --------
5
<PAGE>
in any event pay such taxes, assessments, charges, levies or claims not later
than five days prior to the date of any proposed sale under any judgement, writ
or warrant of attachment entered or filed against Pledgor or any of the Pledged
Collateral as a result of the failure to make such payment.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor will:
(i) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby and (ii) at Secured
Party's request, appear in and defend any action or proceeding that may affect
Pledgor's title to or Secured Party's security interest in all or any part of
the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other securities required to be pledged hereunder as provided
in Section 5(b) promptly (and in any event within five Business Days) deliver to
Secured Party a Pledge Amendment, duly executed by Pledgor, in substantially the
form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in respect of the
-----------
additional Pledged Shares to be pledged pursuant to this Agreement. Pledgor
hereby authorizes Secured Party to attach each Pledge Amendment to this
Agreement and agrees that all Pledged Shares listed on any Pledge Amendment
delivered to Secured Party shall for all purposes hereunder be considered
Pledged Collateral; provided that the failure of Pledgor to execute a Pledge
--------
Amendment with respect to any additional Pledged Shares pledged pursuant to this
Agreement shall not impair the security interest of Secured Party therein or
otherwise adversely affect the rights and remedies of Secured Party hereunder
with respect thereto.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement or the
Credit Agreement; provided, however, that Pledgor shall not exercise or
-------- -------
refrain from exercising any such right if Secured Party shall have notified
Pledgor that, in Secured Party's judgment, such action would have a material
adverse effect on the value of the Pledged Collateral or any part thereof;
and provided, further, that Pledgor shall give Secured
-------- -------
6
<PAGE>
Party at least five Business Days' prior written notice of the manner in
which it intends to exercise, or the reasons for refraining from exercising,
any such right. It is understood, however, that neither (A) the voting by
Pledgor of any Pledged Shares for or Pledgor's consent to the election of
directors at a regularly scheduled annual or other meeting of stockholders
or with respect to incidental matters at any such meeting nor (B) Pledgor's
consent to or approval of any action otherwise permitted under this
Agreement and the Credit Agreement shall be deemed inconsistent with the
terms of this Agreement or the Credit Agreement within the meaning of this
Section 7(a)(i), and no notice of any such voting or consent need be given
to Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends and
interest paid in respect of the Pledged Collateral; provided, however, that
-------- -------
any and all
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as Pledged
Collateral in the same form as so received (with all necessary
endorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and other
consensual rights which it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends, principal or interest payments which it
is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
7
<PAGE>
(i) upon written notice from Secured Party to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease,
and all such rights shall thereupon become vested in Secured Party who shall
thereupon have the sole right to exercise such voting and other consensual
rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Pledgor and shall forthwith be paid
over to Secured Party as Pledged Collateral in the same form as so received
(with any necessary endorsements).
(c) In order to permit Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
7(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment orders and other instruments as
Secured Party may from time to time reasonably request and (ii) without limiting
the effect of the immediately preceding clause (i), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including, without limitation, giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the indefeasible payment in full of the Secured Obligations.
SECTION 8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
----------------------------------------
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
8
<PAGE>
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any proceedings
that Secured Party may deem necessary or desirable for the collection of any of
the Pledged Collateral or otherwise to enforce the rights of Secured Party with
respect to any of the Pledged Collateral.
SECTION 9. SECURED PARTY MAY PERFORM. If Pledgor fails to perform
-------------------------
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 14(b).
SECTION 10. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Secured Party shall have no duty as to any Pledged Collateral, it being
understood that Secured Party shall have no responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relating to any Pledged Collateral, whether or not
Secured Party has or is deemed to have knowledge of such matters, (b) taking any
necessary steps (other than steps taken in accordance with the standard of care
set forth above to maintain possession of the Pledged Collateral) to preserve
rights against any parties with respect to any Pledged Collateral, (c) taking
any necessary steps to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Pledged Collateral, or
(d) initiating any action to protect the Pledged Collateral against the
possibility of a decline in market value. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Pledged Collateral
in its possession if such Pledged Collateral is accorded treatment substantially
equal to that which Secured Party accords its own property consisting of
negotiable securities.
9
<PAGE>
SECTION 11. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE") (whether
or not the Code applies to the affected Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Secured Party
may deem commercially reasonable, irrespective of the impact of any such sales
on the market price of the Pledged Collateral. Secured Party or any Lender may,
to the extent permitted by law, be the purchaser of any or all of the Pledged
Collateral at any such sale and Secured Party, as agent for and representative
of Lenders (but not any Lender or Lenders in its or their respective individual
capacities unless Requisite Lenders shall otherwise agree in writing), shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral sold at any such
public sale, to use and apply any of the Secured Obligations as a credit on
account of the purchase price for any Pledged Collateral payable by Secured
Party at such sale. Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of Pledgor, and Pledgor
hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Pledgor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if Secured
Party accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Pledged Collateral conducted in accordance with applicable
law are insufficient to pay all the Secured Obligations, Pledgor shall be liable
for the deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without
10
<PAGE>
prior registration or qualification of such Pledged Collateral under the
Securities Act and/or such state securities laws, to limit purchasers to those
who will agree, among other things, to acquire the Pledged Collateral for their
own account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that any such private sales may be at prices and
on terms less favorable than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act) and, notwithstanding such
circumstances, Pledgor agrees that any such private sale shall not be deemed to
have not been made in a commercially reasonable manner solely by reason of such
sale being conducted in a private manner and that Secured Party shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Pledged Collateral for the period of time necessary to permit the issuer thereof
to register it for a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even if such issuer
would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Secured Party all such information as Secured Party may request in
order to determine the number of shares and other instruments included in the
Pledged Collateral which may be sold by Secured Party in exempt transactions
under the Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
SECTION 12. APPLICATION OF PROCEEDS. Except as expressly provided
-----------------------
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Pledged Collateral may, in the discretion of Secured Party, be held by
Secured Party as Pledged Collateral for, and/or then, or at any time thereafter,
applied in full or in part by Secured Party against, the Secured Obligations in
the following order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by Secured Party in connection
therewith, and all amounts for which Secured Party is entitled to
indemnification hereunder and all advances made by Secured Party hereunder
for the account of Pledgor, and to the payment of all costs and expenses
paid or incurred by Secured Party in connection with the exercise of any
right or remedy hereunder, all in accordance with Section 13;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof); and
11
<PAGE>
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 13. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Secured Party and each Lender from and
against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result
solely from Secured Party's or such Lender's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (iv) the failure by Pledgor to perform or
observe any of the provisions hereof.
SECTION 14. SURETYSHIP WAIVERS BY PLEDGOR, ETC.
-----------------------------------
(a) Pledgor agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or
surety other than indefeasible payment in full of the Underlying Debt. In
furtherance of the foregoing and without limiting the generality thereof,
Pledgor agrees as follows: (i) Secured Party or any Lender may from time to
time, without notice or demand and without affecting the validity or
enforceability of this Agreement or giving rise to any limitation, impairment or
discharge of Pledgor's liability hereunder, (A) renew, extend, accelerate or
otherwise change the time, place, manner or terms of payment of the Underlying
Debt, (B) settle, compromise, release or discharge, or accept or refuse any
offer of performance with respect to, or substitutions for, the Underlying Debt
or any agreement relating thereto and/or subordinate the payment of the same to
the payment of any other obligations, (C) request and accept guaranties of the
Underlying Debt and take and hold other security for the payment of the
Underlying Debt, (D) release, exchange, compromise, subordinate or modify, with
or without consideration, any other security for payment of the Underlying Debt,
any guaranties of the Underlying Debt, or any other obligation of any Person
with respect to the Underlying Debt, (E) enforce and apply any other security
now or hereafter held by or for the benefit of Secured Party or any Lender in
respect of the Underlying Debt and direct the order or manner of sale thereof,
or exercise any other right or remedy that Secured Party or Lenders, or any of
them, may have against any such security, as Secured Party in its discretion may
determine consistent with the Credit Agreement and
12
<PAGE>
any applicable security agreement, including foreclosure on any such security
pursuant to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and even though such action
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of Pledgor against Company or any other security for the
Underlying Debt (and Pledgor expressly acknowledges that such exercise of a
right or remedy that impairs or extinguishes Pledgor's right of reimbursement or
subrogation would create a possible defense by Pledgor against any liability
hereunder, but Pledgor expressly and knowingly waives any such defense), and (F)
exercise any other rights available to Secured Party or Lenders, or any of them,
under the Loan Documents, at law or in equity; and (ii) this Agreement and the
obligations of Pledgor hereunder shall be valid and enforceable and shall not be
subject to any limitation, impairment or discharge for any reason (other than
indefeasible payment in full of the Underlying Debt), including without
limitation the occurrence of any of the following, whether or not Pledgor shall
have had notice or knowledge of any of them: (A) any failure to assert or
enforce or agreement not to assert or enforce, or the stay or enjoining, by
order of court, by operation of law or otherwise, of the exercise or enforcement
of, any claim or demand or any right, power or remedy with respect to the
Underlying Debt or any agreement relating thereto, or with respect to any
guaranty of or other security for the payment of the Underlying Debt, (B) any
waiver, amendment or modification of, or any consent to departure from, any of
the terms or provisions (including without limitation provisions relating to
events of default) of the Credit Agreement, any of the other Loan Documents or
any agreement or instrument executed pursuant thereto, or of any guaranty or
other security for the Underlying Debt, (C) the Underlying Debt, or any
agreement relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect, (D) the application of payments received from any
source to the payment of indebtedness other than the Underlying Debt, even
though Secured Party or Lenders, or any of them, might have elected to apply
such payment to any part or all of the Underlying Debt, (E) any failure to
perfect or continue perfection of a security interest in any other collateral
which secures any of the Underlying Debt, (F) any defenses, set-offs or
counterclaims which Company may allege or assert against Secured Party or any
Lender in respect of the Underlying Debt, including but not limited to failure
of consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury, and (G) any other act or thing
or omission, or delay to do any other act or thing, which may or might in any
manner or to any extent vary the risk of Pledgor as an obligor in respect of the
Underlying Debt.
(b) Pledgor hereby waives, for the benefit of Lenders and Secured
Party: (i) any right to require Secured Party or Lenders, as a condition of
payment or performance by Pledgor, to (A) proceed against Company, any guarantor
of the Underlying Debt or any other Person, (B) proceed against or exhaust any
other security held from Company, any guarantor of the Underlying Debt or any
other Person, (C) proceed against or have resort to any balance of any deposit
account or credit on the books of Secured Party or any Lender in favor of
Company or any other Person, or (D) pursue any other remedy in the power of
Secured Party or any Lender whatsoever; (ii) any defense arising
13
<PAGE>
by reason of the incapacity, lack of authority or any disability or other
defense of Company including, without limitation, any defense based on or
arising out of the lack of validity or the unenforceability of the Underlying
Debt or any agreement or instrument relating thereto or by reason of the
cessation of the liability of Company from any cause other than indefeasible
payment in full of the Underlying Debt; (iii) any defense based upon any statute
or rule of law which provides that the obligation of a surety must be neither
larger in amount nor in other respects more burdensome than that of the
principal; (iv) any defense based upon Secured Party's or any Lender's errors or
omissions in the administration of the Underlying Debt, except behavior which
amounts to bad faith or gross negligence; (v) (A) any principles or provisions
of law, statutory or otherwise, which are or might be in conflict with the terms
of this Agreement and any legal or equitable discharge of Pledgor's obligations
hereunder, (B) the benefit of any statute of limitations affecting Pledgor's
liability hereunder or the enforcement hereof, (C) any rights to set-offs,
recoupments and counterclaims, and (D) promptness, diligence and any requirement
that Secured Party or any Lender protect, secure, perfect or insure any other
security interest or lien or any property subject thereto; (vi) notices,
demands, presentments, protests, notices of protest, notices of dishonor and
notices of any action or inaction, notices of default under the Credit Agreement
or any agreement or instrument related thereto, notices of any renewal,
extension or modification of the Underlying Debt or any agreement related
thereto, notices of any extension of credit to Company and notices of any of the
matters referred to in the preceding paragraph and any right to consent to any
thereof; and (vii) to the fullest extent permitted by law, any defenses or
benefits that may be derived from or afforded by law which limit the liability
of or exonerate guarantors or sureties, or which may conflict with the terms of
this Agreement.
(c) Until the Underlying Debt shall have been indefeasibly paid in
full and the Commitments shall have terminated and all Letters of Credit shall
have expired or been cancelled, Pledgor hereby further waives any claim, right
or remedy, direct or indirect, that Pledgor now has or may hereafter have
against Company or any of its assets in connection with this Agreement or the
performance by Pledgor of its obligations hereunder, in each case whether such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise and including without limitation (i) any right of
subrogation, reimbursement or indemnification that Pledgor now has or may
hereafter have against Company, (ii) any right to enforce, or to participate in,
any claim, right or remedy that Secured Party or any Lender now has or may
hereafter have against Company, and (iii) any benefit of, and any right to
participate in, any other collateral or security now or hereafter held by
Secured Party or any Lender. In addition, until the Underlying Debt shall have
been indefeasibly paid in full and the Commitments shall have terminated and all
Letters of Credit shall have expired or been cancelled, Pledgor shall withhold
exercise of any right of contribution Pledgor may have against any guarantor of
the Underlying Debt. Pledgor further agrees that, to the extent the waiver of
its rights of subrogation, reimbursement, indemnification and contribution as
set forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification Pledgor may have against
14
<PAGE>
Company or against any other collateral or security, and any rights of
contribution Pledgor may have against any such guarantor, shall be junior and
subordinate to any rights Secured Party or Lenders may have against Company, to
all right, title and interest Secured Party or Lenders may have in any such
other collateral or security, and to any right Secured Party or Lenders may have
against any such guarantor.
(d) Lenders and Secured Party shall have no obligation to disclose or
discuss with Pledgor their assessment, or Pledgor's assessment, of the financial
condition of Company. Pledgor has adequate means to obtain information from
Company on a continuing basis concerning the financial condition of Company and
its ability to perform its obligations under the Loan Documents, and Pledgor
assumes the responsibility for being and keeping informed of the financial
condition of Company and of all circumstances bearing upon the risk of
nonpayment of the Underlying Debt. Pledgor hereby waives and relinquishes any
duty on the part of Secured Party or any Lender to disclose any matter, fact or
thing relating to the business, operations or condition of Company now known or
hereafter known by Secured Party or any Lender.
SECTION 15. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the indefeasible payment in
full of all Secured Obligations (other than indemnities and reimbursement
obligations not then due and payable), the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Pledgor, its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement, any Lender may assign or otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders herein or otherwise. Upon the indefeasible payment in full of all
Secured Obligations (other than indemnities and reimbursement obligations not
then due and payable), the cancellation or termination of the Commitments and
the cancellation or expiration of all outstanding Letters of Credit, the
security interest granted hereby shall terminate and all rights to the Pledged
Collateral shall revert to Pledgor. Upon any such termination Secured Party
will, at Pledgor's expense, execute and deliver to Pledgor such documents as
Pledgor shall reasonably request to evidence such termination and Pledgor shall
be entitled to the return, upon its request and at its expense, against receipt
and without recourse to Secured Party, of such of the Pledged Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 16. SECURED PARTY AS AGENT.
----------------------
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders. Secured Party shall be obligated, and shall have the right
hereunder, to make
15
<PAGE>
demands, to give notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking any action (including, without limitation, the
release or substitution of Pledged Collateral), solely in accordance with this
Agreement and the Credit Agreement.
(b) Secured Party shall at all times be the same Person that is Agent
under the Credit Agreement. Written notice of resignation by Agent pursuant to
subsection 9.5 of the Credit Agreement shall also constitute notice of
resignation as Secured Party under this Agreement; removal of Agent pursuant to
subsection 9.5 of the Credit Agreement shall also constitute removal as Secured
Party under this Agreement; and appointment of a successor Agent pursuant to
subsection 9.5 of the Credit Agreement shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Agent under subsection 9.5 of the Credit Agreement by a successor
Agent, that successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed Secured
Party under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Agent's resignation or removal
hereunder as Secured Party, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
SECTION 17. AMENDMENTS; ETC. No amendment or waiver of any provision
---------------
of this Agreement, or consent to any departure by Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 18. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or, as to either
party, such other address as shall be designated by such party in a written
notice delivered to the other party hereto.
16
<PAGE>
SECTION 19. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 20. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 21. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 22. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
--------------------
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of
New York are used herein as therein defined.
SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES
ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor hereby
agrees that service of all process in any such proceeding in any such court may
be made by registered or certified mail, return receipt requested, to Pledgor at
its address provided in Section 18, such service being hereby acknowledged by
17
<PAGE>
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
in any such court and to be otherwise effective and binding service in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of Secured Party to bring
proceedings against Pledgor in the courts of any other jurisdiction.
SECTION 24. WAIVER OF JURY TRIAL. PLEDGOR AND SECURED PARTY HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Pledgor and Secured Party each
acknowledge that this waiver is a material inducement for Pledgor and Secured
Party to enter into a business relationship, that Pledgor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Pledgor and
Secured Party further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
SECTION 25. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
18
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
KMS HOLDING CORPORATION
By: __________________________
Title:
Notice Address:
__________________________
__________________________
__________________________
BANKERS TRUST COMPANY
By: __________________________
Title:
Notice Address:
Bankers Trust Company
1 BT Plaza
130 Liberty Street, 23rd Floor
New York, New York 10006
Attn: Mary Jo Jolly
With a copy to:
Bankers Trust Company
300 South Grand Avenue, 41st Floor
Los Angeles, California 90071
Attn: Cristie Sheffield
19
<PAGE>
EXHIBIT 10.8
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is made and entered
into as of November 23, 1994, by and between KMS Holding Corporation, a Delaware
corporation (the "Company"), and FS Equity Partners III, L.P., a Delaware
limited partnership ("FSEP III"), and FS Equity Partners International, L.P., a
Delaware limited partnership ("FS International," and collectively with FSEP
III, "FS").
This Agreement is made pursuant to the Stock Subscription Agreement, dated
as of November 23, 1994 (the "Subscription Agreement"), among the Company, FS
and The Koll Holding Company, a California corporation ("KHC"). In order to
induce FS to enter into the Subscription Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement. This Agreement
shall be effective as of the Closing (as defined in the Subscription Agreement).
The parties hereby agree as follows:
1. Definitions
-----------
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Subscription Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See the last paragraph of Section 4 hereof.
------
Common Stock: The common stock, par value $.01 per share, of the Company.
------------
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations of the SEC promulgated thereunder.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
other entity.
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act)
in the form contained in such Registration Statement at the time it became
effective, except that if the final prospectus for use in connection with
an offering of Restricted Securities differs from the form of prospectus
included as part of the Registration Statement at the time it was declared
effective, then such final prospectus, as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Restricted Securities covered by such Registration Statement
and all other amendments and supplements to the Prospectus, including post-
effective amendments and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
<PAGE>
Registration Expenses: See Section 5 hereof.
---------------------
Registration Statement: Any registration statement of the Company which
----------------------
covers any of the Restricted Securities pursuant to the provisions of this
Agreement, including the Prospectus, any amendments and supplements to such
registration statement, including post-effective amendments, all exhibits,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
Restricted Securities: Any and all shares of Common Stock, upon original
---------------------
issuance thereof and at all times subsequent thereto, which were issued to
FS pursuant to the Subscription Agreement.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules and
--------------
regulations promulgated by the SEC thereunder.
Special Counsel: Such law firm, if any, as may be designated by FS.
---------------
Stockholders Agreement: The Stockholders Agreement dated November 23, 1994
----------------------
among the Company, FS and KHC.
2. Securities Subject to this Agreement
------------------------------------
(a) Restricted Securities. The securities entitled to the benefits of this
---------------------
Agreement are the Restricted Securities.
3. Demand Registration
-------------------
(a) After (i) the consummation of an Initial Public Offering (as defined in
the Stockholders Agreement), (ii) the rejection by KHC of an offer to purchase
an FS Offered Asset (as defined in the Stockholders Agreement) pursuant to
Section 4.3 of the Stockholders Agreement and (iii) FS has attempted in good
faith for a reasonable period of time to sell the FS Offered Asset at the FS
Target Price (as defined in the Stockholders Agreement), then upon the written
request of FS, the Company shall be obligated, on no more than one occasion, to
effect the registration under the Act of the Restricted Securities, all in
accordance with the following provisions of this Agreement; provided, however,
-------- -------
that the obligation of the Company to effect such registration shall not be
deemed to have been satisfied until the Registration Statement with respect
thereto has become effective under the Act and it has remained effective as long
as required to allow FS to effect the disposition of the Restricted Securities
registered (but in no event longer than nine months from the effective date of
the Registration Statement) and only so long as no stop order suspending the
effectiveness of the registration statement or the qualification or registration
of any of the Restricted Securities for sale in any jurisdiction in which the
Company shall be required pursuant to Section 4(i) to register or qualify such
2.
<PAGE>
Restricted Securities shall not have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC or any similar state
agency.
(b) Whenever the Company shall be requested pursuant to Section 3(a) to
effect the registration of Restricted Securities under the Act, the Company
shall, as provided in Section 4, effect the registration under the Act of the
Restricted Securities which the Company has been requested to register pursuant
to Section 3(a), all to the extent requisite to permit the disposition by FS of
the Restricted Securities so registered.
(c) If FS advises the Company that it intends to publicly offer or
distribute Restricted Securities to be covered by the Registration Statement
pursuant to a firm commitment underwriting with an investment banking firm or
firms selected by FS and approved by the Company, such approval not to be
unreasonably withheld, the Company shall enter into the same underwriting
agreement with such underwriter or underwriters as shall such holders,
containing representations, warranties and agreements not substantially
different from those customarily made by an issuer in underwriting agreements
with respect to similar distributions.
(d) Neither the Company nor any holder of securities other than Restricted
Securities shall have the right to participate in any registration requested
under Section 3(a).
4. Registration Procedures
-----------------------
In connection with the registration obligations of the Company pursuant to
and in accordance with the provisions of Section 3 of this Agreement, the
Company shall effect such registration to permit the sale of such Restricted
Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company shall as expeditiously as is
reasonably possible:
(a) prepare and file with the SEC, as soon as practicable, a Registration
Statement or Registration Statements on any appropriate form under the
Securities Act, which form shall be available for the sale of the Restricted
Securities by FS in accordance with the intended method or methods of
distribution thereof, and use its best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
--------
however, that before filing a Registration Statement or Prospectus or any
- -------
amendments or supplements thereto, including documents incorporated or deemed to
be incorporated therein by reference, the Company shall furnish to Special
Counsel and to FS, copies of all such documents proposed to be filed (excluding
exhibits unless otherwise requested), which documents will be subject to the
review of Special Counsel and FS, and the Company shall not file any such
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto (including such documents which, upon filing, would be incorporated or
deemed to be incorporated by reference therein) to which FS shall reasonably
object on a timely basis; provided, however, that the Company shall be entitled
-------- -------
in all events to take such actions which, in the opinion of counsel for the
Company are required to comply with applicable law;
3.
<PAGE>
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period; cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by FS set forth in such Registration Statement
as so amended or to such Prospectus as so supplemented;
(c) notify FS and its Special Counsel, promptly, and (if requested by any
such Person) confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment related to such Restricted
Securities has been filed, and, with respect to a Registration Statement or any
post-effective amendment related to such Restricted Securities, when the same
has become effective, (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Restricted Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event which makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue or which requires the making of any
changes in a Registration Statement or related Prospectus so that such documents
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or, in the case of a Prospectus,
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (vi) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate;
(d) use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Restricted Securities for sale in any jurisdiction, at the earliest possible
moment;
(e) if requested by FS, as promptly as practicable (i) incorporate in a
Prospectus supplement or post-effective amendment such information as FS agrees
should be included therein as may be required by applicable law, (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as promptly as is reasonably practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to any
Registration Statement if requested by FS; provided, however, that the Company
-------- -------
shall not be required to take any actions in this Section 4(e) which are not, in
the opinion of counsel for the Company, in compliance with applicable law;
4.
<PAGE>
(f) upon request of FS, furnish to FS, without charge, a copy of the
Registration Statement or Registration Statements and any post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference), at the earliest practicable time under the circumstances before
the filing of such documents with the SEC;
(g) furnish to FS and its Special Counsel, without charge, at least one
conformed copy of the Registration Statement or Registration Statements and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference or deemed incorporated therein
by reference and all exhibits, if requested (including those previously
furnished or incorporated by reference), at the earliest practicable time under
the circumstances after the filing of such documents with the SEC;
(h) deliver to FS and its Special Counsel, without charge, as many copies
of the Prospectus or Prospectuses (including each preliminary prospectus) and
any amendment or supplement thereto as FS may reasonably request; the Company
consents to the use of such Prospectus or any amendment or supplement thereto by
FS in connection with the offering and sale of the Restricted Securities covered
by such Prospectus or any amendment or supplement thereto;
(i) prior to any offering of Restricted Securities, to register or qualify
or cooperate with FS, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Restricted Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as any seller or
underwriter reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Restricted Securities covered by the applicable
Registration Statement; provided, however, that the Company will not be required
-------- -------
to (a) qualify generally to do business in any jurisdiction where it is not then
so qualified or (b) take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(j) cooperate with FS to facilitate the timely preparation and delivery of
certificates representing Restricted Securities after the same have been sold
pursuant to a Registration Statement, which certificates shall not bear any
restrictive legends;
(k) upon the occurrence of any event contemplated by paragraph 4(c)(v) or
4(c)(vi) above, prepare a supplement or post-effective amendment to the
applicable Registration Statement or a supplement to the related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Restricted
Securities being sold thereunder, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated
5.
<PAGE>
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(l) use its best efforts to cause all Restricted Securities covered by such
Registration Statement to be (i) listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed, or (ii)
authorized to be quoted on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") or the National Market of Nasdaq if the
securities so qualify;
(m) provide a CUSIP number for each of the Restricted Securities not later
than the effective date of a Registration Statement; and
(n) use its best efforts to comply with all applicable rules and
regulations of the SEC and make generally available to its security holders
earning statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
The Company may require FS to furnish to the Company such information
regarding the distribution of such Restricted Securities as the Company may from
time to time reasonably request in writing and the Company may exclude from such
registration the Restricted Securities if FS fails to furnish such information
within a reasonable time after receiving such request.
FS agrees by acquisition of such Restricted Securities that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in Section 4(c)(ii)-(vi) hereof, FS will forthwith discontinue
disposition of such Restricted Securities covered by such Registration Statement
or Prospectus until FS's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(k) hereof, or until FS is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated or deemed to be incorporated by reference in such
Prospectus.
5. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Company including, without limitation, (i) all
registration and filing fees, including fees and expenses incurred in connection
with compliance with securities or Blue Sky laws and determination of the
eligibility of the Restricted Securities for investment under the laws of such
jurisdictions, in each case, as FS may designate, subject to the limitations set
forth herein, (ii) printing expenses (including expenses of printing
certificates for the Restricted Securities and of printing prospectuses), (iii)
messenger, telephone and delivery expenses,
6.
<PAGE>
(iv) fees and disbursements of counsel for the Company and one Special Counsel
for FS, and (v) fees and expenses of all other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
by the Company whether or not any of the Registration Statements becomes
effective. The Company shall, in any event, pay the expense of any annual audit,
the fees and expenses incurred in connection with the listing of the Restricted
Securities pursuant to Section 4(l) hereof and the fees and expenses of any
Person, including special experts, retained by the Company.
6. Indemnification
---------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless FS and each Person who controls FS (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) against any losses,
claims, damages, liabilities or expenses, joint or several, to which FS or such
controlling person may become subject under the Securities Act, the Exchange Act
or other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, or arise out
of or are based in whole or in part on any failure of the Company to perform its
obligations hereunder or under law; and will reimburse, to the extent and
subject to the limitations and conditions set forth below, FS and each such
controlling person for any legal and other expenses as such expenses are
reasonably incurred by FS or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the Company will
-------- -------
not be liable in any such case (i) to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company in writing by FS expressly for use therein,
or (ii) if the Company has advised FS of an event described in Section 4(c)(v)
or (vi) and such loss, claim, damage, liability or expense is caused solely by
FS having sold Restricted Securities more than 12 hours after receipt of such
notice and prior to receipt of a supplement or amended prospectus pursuant to
Section 4(k) and the omission or misstatement was caused by such event and
corrected in the supplement or amended prospectus; provided further, however,
-------- ------- -------
that the Company shall not be liable in any such case to the extent that any
such losses, claims, damages, liabilities or expenses arise out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any preliminary prospectus if (i) FS failed to send or deliver
a copy of the Prospectus with or prior to the delivery of written confirmation
of the sale of Restricted Securities to the person asserting such loss who
purchased such Restricted Securities which are the subject thereof and (ii) the
7.
<PAGE>
Prospectus would have corrected such untrue statement or omission or alleged
untrue statement or alleged omission. In addition to its other obligations
under this Section 6(a), the Company agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, or failure to perform its obligations hereunder, all as described
in this Section 6(a), they will reimburse FS (and, to the extent applicable,
each controlling person) on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse FS (and, to the extent applicable, each
controlling person) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement payment is so held to have
been improper, FS (and, to the extent applicable, each controlling person) shall
promptly return it to the Company together with interest, compounded daily,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by Bank of
America NT&SA, San Francisco, California (the "Prime Rate"). Any such interim
reimbursement payments which are not made to FS (and, to the extent applicable,
each controlling person) within 30 days of a request for reimbursement, shall
bear interest at the Prime Rate from the date of such request. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have. The Company shall also indemnify underwriters, dealer managers and similar
securities industry professionals participating in the distribution and each
Person who controls such Persons (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent as provided
above, and subject to the same obligation to repay the Company as provided
above, with respect to the indemnification of the holders of Restricted
Securities. The Company shall in no event be liable for any losses, damages,
costs or expenses relating to or arising out of any settlement effected without
the Company's written consent (which shall not be unreasonably withheld).
(b) Indemnification by FS. In connection with any Registration Statement
----------------------
in which FS is participating, FS shall furnish to the Company in writing such
information as the Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees to indemnify the Company, each
of its directors, each of its officers who signed the Registration Statement and
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), against any losses, claims,
damages, liabilities or expenses to which the Company or any such director,
officer or controlling person may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of FS), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as contemplated
below) arise out of or are based upon any untrue or alleged untrue statement of
any material fact contained in the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated
8.
<PAGE>
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with the information
furnished to the Company in writing by FS expressly for use therein; and will
reimburse the Company, or any such director, officer or controlling person for
any legal and other expense reasonably incurred by the Company or any such
director, officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. In addition to its other obligations under this
Section 6(b), FS agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in this Section 6(b) which relates to information furnished to the
Company in writing by FS expressly for use therein, it will reimburse the
Company (and, to the extent applicable, each officer, director or controlling
person) on a quarterly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of FS's obligation
to reimburse the Company (and, to the extent applicable, each officer, director
or controlling person) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement payment is so held to have
been improper, the Company (and, to the extent applicable, each officer,
director or controlling person) shall promptly return it to FS together with
interest, compounded daily, determined on the basis of the Prime Rate. Any such
interim reimbursement payments which are not made to the Company (and, to the
extent applicable, each officer, director or controlling person) within 30 days
of a request for reimbursement, shall bear interest at the Prime Rate from the
date of such request. This indemnity agreement will be in addition to any
liability which FS may otherwise have. In no event shall the liability of FS
hereunder be greater in amount than the dollar amount of the proceeds (net of
payment of all expenses) received by FS upon the sale of the Restricted
Securities giving rise to such indemnification obligation. The Company (and, to
the extent applicable, each officer, director or controlling person) shall be
entitled to receive indemnities from underwriters, dealer managers and similar
securities industry professionals participating in the distribution to the same
extent as provided above with respect to information so furnished in writing by
such Persons expressly for use in any Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. Promptly after receipt by an
--------------------------------------
indemnified party under this Section of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section, notify the indemnifying party
in writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party for contribution or otherwise than under the indemnity
agreement contained in this Section or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought against
any indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the
9.
<PAGE>
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
--------- -------
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by legal counsel that there may be a
conflict between the positions of the indemnifying party and the indemnified
party in conducting the defense of any such action or that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel
representing the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the fees
and expenses of counsel to the indemnified party shall be at the expense of the
indemnifying party.
(d) Contribution. If the indemnification provided for in this Section 6 is
------------
required by its terms but is for any reason (other than as provided above) held
to be unavailable to or otherwise insufficient to hold harmless an indemnified
party under subsections (a), (b) or (c) in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each applicable
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of any losses, claims, damages, liabilities or
expenses referred to herein in such proportion as is appropriate to reflect the
relative fault of the Company and FS in connection with the statements or
omissions or inaccuracies which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company and FS shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or FS and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in subsection (c) of
this Section 6, any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim. The
provisions set forth in subsection (c) of this Section 6 with respect to notice
of commencement of any action shall apply if a claim for contribution is to be
made under this subsection (d); provided, however, that no additional notice
-------- -------
shall be required with respect to any action for which notice has been given
under subsection
10.
<PAGE>
(c) for purposes of indemnification. The Company and FS agree that it would not
be just and equitable if contribution pursuant to this Section 6 were determined
solely by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in this subsection.
Notwithstanding the provisions of this subsection (d), FS shall not be required
to contribute any amount in excess of the amount by which the total price at
which the Restricted Securities sold by FS and distributed to the public were
offered to the public exceeds the amount of any damages which FS has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
7. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company of any of its
--------
obligations under this Agreement, FS, in addition to being entitled to exercise
all rights granted by law, will be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(b) Actions Affecting Restricted Securities. The Company agrees to act in
---------------------------------------
good faith with respect to its obligations hereunder and the Company shall not
take any action, or fail to take such action which has the primary effect of
materially adversely affecting the rights of holders of Restricted Securities
hereunder.
(c) Amendments. Any amendment of this Agreement or waiver of compliance
----------
with any provisions hereof shall be in writing and shall require the written
approval of the party to be charged. Any such amendment or waiver so approved
in writing shall be binding upon all of the parties hereto and their respective
permitted successors and permitted assigns.
(d) Notices. All notices, requests and other communications hereunder
-------
shall be in writing and, if by personal delivery, shall be deemed to have been
validly served, given or delivered upon actual delivery, and, if by facsimile
transmission, shall be deemed to have been validly served, given or delivered
upon transmission and acknowledgement of receipt thereof, in each case addressed
to the party or parties to be notified, at the following addresses (or such
other address(es) as a party may designate for itself by like notice):
11.
<PAGE>
If to Company: KMS Holding Corporation
c/o Freeman Spogli & Co.
Incorporated
11100 Santa Monica Boulevard
Suite 1900
Los Angeles, California 90025
Facsimile: (310) 444-1870
Attention: William M. Wardlaw
If to FS: FS Equity Partners III, L.P.
FS Equity Partners
International, L.P.
c/o Freeman Spogli & Co.
Incorporated
11100 Santa Monica Boulevard
Suite 1900
Los Angeles, California 90025
Facsimile: (310) 444-1870
Attention: William M. Wardlaw
(e) No Assignment. This Agreement shall be binding upon and inure to the
-------------
benefit of the parties and their respective permitted successors and permitted
assigns. This Agreement shall not be assignable without the express written
consent of each of the parties hereto.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(g) Headings. Introductory headings at the beginning of each Section and
--------
paragraph of this Agreement are solely for the convenience of the parties and
shall not be deemed to be a limitation upon or description of the contents of
this Agreement.
(h) Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of Delaware, without regard
to conflicts of law principles thereof.
(i) Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would
12.
<PAGE>
have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid, void or
unenforceable.
(j) Disputes. In the event of any dispute among the parties arising out of
--------
this Agreement, the prevailing party shall be entitled to recover from the non-
prevailing party the reasonable expenses of the prevailing party, including,
without limitation, reasonable attorneys' fees and expenses.
13.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"COMPANY"
KMS HOLDING CORPORATION
By: /s/ William M. Wardlaw
_________________________________
Name: William M. Wardlaw
Title: Vice President and Secretary
"FS"
FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: /s/ William M. Wardlaw
__________________________
Name: William M. Wardlaw
Title: Vice President
and Secretary
FS EQUITY PARTNERS INTERNATIONAL, L.P.
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By: /s/ William M. Wardlaw
______________________________
Name: William M. Wardlaw
Title: Vice President
14.
<PAGE>
EXHIBIT 10.9
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of October 18, 1995, by and among KMS
Holding Corporation, a Delaware corporation (the "Company"), FS Equity Partners
III, L.P., a Delaware limited partnership ("FSEP III"), and FS Equity Partners
International, L.P., a Delaware limited partnership ("FS International," and
collectively with FSEP III, "FS").
R E C I T A L S
A. Unless otherwise defined herein, all capitalized terms used
herein have the meanings given to such terms in the Registration Agreement (as
hereinafter defined).
B. Pursuant to the terms of that certain Registration Rights
Agreement, dated as of November 23, 1994, by and between the Company and FS (the
"Registration Agreement"), the Company granted to FS certain registration
rights.
C. In connection with that certain Stock Purchase Agreement, dated
as of the date hereof, by and among KHC, TKC and AP KMS Partners, L.P., a
Delaware limited partnership, the Company and FS desire to amend the
Registration Agreement as set forth herein.
A G R E E M E N T
NOW THEREFORE, taking into account the foregoing Recitals, and in
consideration of the mutual covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and FS hereby agree as follows:
1. AMENDMENT TO REGISTRATION AGREEMENT.
------------------------------------
a. The definition of "Restricted Securities" as provided in Section
1 of the Registration Agreement is hereby amended and restated in its entirety
to read as follows:
"`Restricted Securities': Any and all shares of Common Stock
---------------------
acquired by FS or its Affiliates. As to any proposed offer or sale of
Restricted Securities, such securities shall cease to be Restricted
Securities with respect to such offer and sale when (i) a Registration
Statement with respect to the sale of such securities shall have
become effective under the
<PAGE>
Securities Act and such securities shall have been disposed of in
accordance with such Registration Statement or (ii) such securities
shall have been otherwise transferred pursuant to an applicable
exemption under the Securities Act, new certificates for such
securities not bearing a legend restricting further transfer shall
have been delivered by the Company and such securities shall be freely
transferable to the public without registration under the Securities
Act."
b. FS hereby consents to the Company entering into the Registration
Rights Agreement, dated the date hereof (the "Apollo Registration Rights
Agreement") between the Company and AP KMS Partners, L.P. ("Apollo") and to the
grant of incidental registration rights, as set forth in the Apollo Registration
Rights Agreement, subject to the limitations set forth in the Apollo
Registration Rights Agreement.
c. Section 3(d) of the Registration Agreement is hereby amended and
restated in its entirety to read as follows:
"(d) Except as provided for in the Apollo Registration Rights
Agreement, neither the Company nor any holder of Common Stock other than
Restricted Securities shall have the right to participate in any
registration requested under Section 3(a)."
d. Section 3 is hereby amended to add the following subsection (e):
"(e) If the managing underwriter(s) of an underwritten initial public
offering of the Company's Common Stock requests that FS refrain from
selling or otherwise transferring any of its Restricted Securities during a
reasonable period of time after such initial public offering, then FS shall
agree to comply with such request."
2. EFFECT OF AMENDMENT.
-------------------
Except as specifically amended pursuant to the terms of this
Agreement, the terms and conditions of the Registration Agreement shall remain
unmodified and in full force and effect.
3. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
2
<PAGE>
4. THIRD PARTY BENEFICIARY.
-----------------------
Any holder of Restricted Securities (as such term is defined in the
Apollo Registration Rights Agreement) shall be deemed a third party beneficiary
of this Agreement.
5. COUNTERPARTS.
------------
This Agreement may be executed and acknowledged in counterparts, all
of which executed and acknowledged counterparts shall together constitute a
single document. Signature and acknowledgment pages may be detached from the
counterparts and attached to a single copy of this document to physically form
one document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
3
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT]
"COMPANY"
KMS HOLDING CORPORATION
By:
----------------------------------
Name: Raymond E. Wirta
Title: Chief Executive Officer
4
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT]
"FS"
FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners L.P.
Its: General partner
By: FS Holdings, Inc.
Its: General Partner
By:
----------------------------
William M. Wardlaw
Vice President and Secretary
FS EQUITY PARTNERS INTERNATIONAL, L.P.
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By:
----------------------------
William M. Wardlaw
Vice President
5
<PAGE>
EXHIBIT 10.10
SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of April 1, 1996, by and among KMS
Holding Corporation, a Delaware corporation (the "Company"), FS Equity Partners
III, L.P., a Delaware limited partnership ("FSEP III"), and FS Equity Partners
International, L.P., a Delaware limited partnership ("FS International," and
collectively with FSEP III, "FS").
R E C I T A L S
A. Unless otherwise defined herein, all capitalized terms used
herein have the meanings given to such terms in the Registration Agreement (as
hereinafter defined).
B. Pursuant to the terms of that certain Registration Rights
Agreement, dated as of November 23, 1994, by and between the Company and FS, as
amended pursuant to that certain First Amendment to Registration Rights
Agreement dated as of October 18, 1995, by and between the Company and FS
(collectively, the "Registration Agreement"), the Company granted to FS certain
registration rights.
C. In connection with that certain FS Stock Purchase Agreement,
dated as of March 29, 1996, by and among FS, KHC and TKC, the Company and FS
desire to amend the Registration Agreement as set forth herein.
A G R E E M E N T
NOW THEREFORE, taking into account the foregoing Recitals, and in
consideration of the mutual covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and FS hereby agree as follows:
1. AMENDMENT TO REGISTRATION AGREEMENT. Paragraph (a) of Section 3
------------------------------------
of the Registration Agreement is hereby amended and restated in its entirety to
read as follows:
"(a) After six months from the consummation of an Initial Public
Offering (as defined in the Stockholders Agreement), then upon the
written request of FS, the Company shall be obligated, on no more than
one occasion, to effect the registration under the Act of the
Restricted Securities, all in accordance with the following provisions
of this Agreement; provided, however, that the obligation of the
-------- -------
Company to
<PAGE>
effect such registration shall not be deemed to have been satisfied
until the Registration Statement with respect thereto has become
effective under the Act and it has remained effective as long as
required to allow FS to effect the disposition of the Restricted
Securities registered (but in no event longer than nine months from
the effective date of the Registration Statement) and only so long as
no stop order suspending the effectiveness of the registration
statement or the qualification or registration of any of the
Restricted Securities for sale in any jurisdiction in which the
Company shall be required pursuant to Section 4(i) to register or
qualify such Restricted Securities shall not have been issued and no
proceedings for that purpose shall have been initiated or threatened
by the SEC or any similar state agency."
2. EFFECT OF AMENDMENT.
-------------------
Except as specifically amended pursuant to the terms of this
Agreement, the terms and conditions of the Registration Agreement shall remain
unmodified and in full force and effect.
3. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
4. COUNTERPARTS.
------------
This Agreement may be executed and acknowledged in counterparts, all
of which executed and acknowledged counterparts shall together constitute a
single document. Signature and acknowledgment pages may be detached from the
counterparts and attached to a single copy of this document to physically form
one document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
2
<PAGE>
[SIGNATURE PAGE TO SECOND AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT]
"COMPANY"
KMS HOLDING CORPORATION
By:
----------------------------------
Name: Raymond E. Wirta
Title: Chief Executive Officer
3
<PAGE>
[SIGNATURE PAGE TO SECOND AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT]
"FS"
FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners L.P.
Its: General partner
By: FS Holdings, Inc.
Its: General Partner
By:
------------------------------
William M. Wardlaw
Vice President and Secretary
FS EQUITY PARTNERS INTERNATIONAL, L.P.
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By:
------------------------------
William M. Wardlaw
Vice President
4
<PAGE>
EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is made and entered
into as of November 23, 1994, by and between KMS Holding Corporation, a Delaware
corporation (the "Company"), and The Koll Holding Company, a California
corporation ("KHC"), which is a wholly-owned subsidiary of The Koll Company, a
California corporation ("TKC"), and TKC.
This Agreement is made pursuant to the Stock Subscription Agreement, dated
as of November 23, 1994 (the "Subscription Agreement"), among the Company, FS
Equity Partners III, L.P., a Delaware limited partnership ("FSEP III"), and FS
Equity Partners International, L.P., a Delaware limited partnership ("FS
International," and collectively with FSEP III, "FS"), KHC and TKC. In order to
induce TKC and KHC to enter into the Subscription Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement. This
Agreement shall be effective as of the Closing (as defined in the Subscription
Agreement). TKC intends to transfer its Restricted Securities (as defined
below) to KHC. The term KHC in this Agreement, unless the context otherwise
requires, shall be understood to refer to TKC prior to such transfer and, after
such transfer, to KHC.
The parties hereby agree as follows:
1. Definitions
-----------
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Subscription Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See the last paragraph of Section 4 hereof.
------
Common Stock: The common stock, par value $.01 per share, of the Company.
------------
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations of the SEC promulgated thereunder.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
other entity.
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act)
in the form contained in such Registration Statement at the time it became
effective, except that if the final prospectus for use in connection with
an offering of Restricted Securities differs from the form of prospectus
included as part of the Registration Statement at the time it was declared
effective, then such final prospectus, as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Restricted Securities covered by such
<PAGE>
Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
Registration Expenses: See Section 5 hereof.
---------------------
Registration Statement: Any registration statement of the Company which
----------------------
covers any of the Restricted Securities pursuant to the provisions of this
Agreement, including the Prospectus, any amendments and supplements to such
registration statement, including post-effective amendments, all exhibits,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
Restricted Securities: Any and all shares of Common Stock, upon original
---------------------
issuance thereof and at all times subsequent thereto, which were issued to
TKC pursuant to the Subscription Agreement, which may after such issuance
be transferred to KHC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules and
--------------
regulations promulgated by the SEC thereunder.
Special Counsel: Such law firm, if any, as may be designated by KHC.
---------------
Stockholders Agreement: The Stockholders Agreement dated November 23, 1994
----------------------
among the Company, FS, KHC and TKC.
2. Securities Subject to this Agreement
------------------------------------
(a) Restricted Securities. The securities entitled to the benefits of
---------------------
this Agreement are the Restricted Securities.
3. Demand Registration
-------------------
(a) After (i) the consummation of an Initial Public Offering (as defined in
the Stockholders Agreement), (ii) the rejection by FS of an offer to purchase a
KHC Offered Asset (as defined in the Stockholders Agreement) pursuant to Section
5.3 of the Stockholders Agreement and (iii) KHC has attempted in good faith for
a reasonable period of time to sell the KHC Offered Asset at the KHC Target
Price (as defined in the Stockholders Agreement), then upon the written request
of KHC, the Company shall be obligated, on no more than one occasion, to effect
the registration under the Act of the Restricted Securities, all in accordance
with the following provisions of this Agreement; provided, however, that the
-------- -------
obligation of the Company to effect such registration shall not be deemed to
have been satisfied until the Registration Statement with respect thereto has
become effective under the Act and it has remained effective as long as required
to allow KHC to effect the disposition of the Restricted Securities registered
(but in no event longer than nine months from the effective date of the
2
<PAGE>
Registration Statement) and only so long as no stop order suspending the
effectiveness of the registration statement or the qualification or registration
of any of the Restricted Securities for sale in any jurisdiction in which the
Company shall be required pursuant to Section 4(i) to register or qualify such
Restricted Securities shall not have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC or any similar state
agency.
(b) Whenever the Company shall be requested pursuant to Section 3(a) to
effect the registration of Restricted Securities under the Act, the Company
shall, as provided in Section 4, effect the registration under the Act of the
Restricted Securities which the Company has been requested to register pursuant
to Section 3(a), all to the extent requisite to permit the disposition by KHC of
the Restricted Securities so registered.
(c) If KHC advises the Company that it intends to publicly offer or
distribute Restricted Securities to be covered by the Registration Statement
pursuant to a firm commitment underwriting with an investment banking firm or
firms selected by KHC and approved by the Company, such approval not to be
unreasonably withheld, the Company shall enter into the same underwriting
agreement with such underwriter or underwriters as shall such holders,
containing representations, warranties and agreements not substantially
different from those customarily made by an issuer in underwriting agreements
with respect to similar distributions.
(d) Neither the Company nor any holder of securities other than Restricted
Securities shall have the right to participate in any registration requested
under Section 3(a).
4. Registration Procedures
-----------------------
In connection with the registration obligations of the Company pursuant to
and in accordance with the provisions of Section 3 of this Agreement, the
Company shall effect such registration to permit the sale of such Restricted
Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company shall as expeditiously as is
reasonably possible:
(a) prepare and file with the SEC, as soon as practicable, a Registration
Statement or Registration Statements on any appropriate form under the
Securities Act, which form shall be available for the sale of the Restricted
Securities by KHC in accordance with the intended method or methods of
distribution thereof, and use its best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
--------
however, that before filing a Registration Statement or Prospectus or any
- -------
amendments or supplements thereto, including documents incorporated or deemed to
be incorporated therein by reference, the Company shall furnish to Special
Counsel and to KHC, copies of all such documents proposed to be filed (excluding
exhibits unless otherwise requested), which documents will be subject to the
review of Special Counsel and KHC, and the Company shall not file any such
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto (including such documents which, upon filing, would be incorporated or
deemed to be incorporated by reference therein) to which KHC shall reasonably
object on a timely basis;
3
<PAGE>
provided, however, that the Company shall be entitled in all events to take
- -------- -------
such actions which, in the opinion of counsel for the Company are required to
comply with applicable law;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period; cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by KHC set forth in such Registration Statement
as so amended or to such Prospectus as so supplemented;
(c) notify KHC and its Special Counsel, promptly, and (if requested by any
such Person) confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment related to such Restricted
Securities has been filed, and, with respect to a Registration Statement or any
post-effective amendment related to such Restricted Securities, when the same
has become effective, (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Restricted Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event which makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue or which requires the making of any
changes in a Registration Statement or related Prospectus so that such documents
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or, in the case of a Prospectus,
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (vi) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate;
(d) use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Restricted Securities for sale in any jurisdiction, at the earliest possible
moment;
(e) if requested by KHC, as promptly as practicable (i) incorporate in a
Prospectus supplement or post-effective amendment such information as KHC agrees
should be included therein as may be required by applicable law, (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as promptly as is reasonably practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to any
Registration Statement if requested by KHC; provided, however, that the Company
-------- -------
shall not be
4
<PAGE>
required to take any actions in this Section 4(e) which are not, in the opinion
of counsel for the Company, in compliance with applicable law;
(f) upon request of KHC, furnish to KHC, without charge, a copy of the
Registration Statement or Registration Statements and any post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference), at the earliest practicable time under the circumstances before
the filing of such documents with the SEC;
(g) furnish to KHC and its Special Counsel, without charge, at least one
conformed copy of the Registration Statement or Registration Statements and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference or deemed incorporated therein
by reference and all exhibits, if requested (including those previously
furnished or incorporated by reference), at the earliest practicable time under
the circumstances after the filing of such documents with the SEC;
(h) deliver to KHC and its Special Counsel, without charge, as many copies
of the Prospectus or Prospectuses (including each preliminary prospectus) and
any amendment or supplement thereto as KHC may reasonably request; the Company
consents to the use of such Prospectus or any amendment or supplement thereto by
KHC in connection with the offering and sale of the Restricted Securities
covered by such Prospectus or any amendment or supplement thereto;
(i) prior to any offering of Restricted Securities, to register or qualify
or cooperate with KHC, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Restricted Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as any seller or
underwriter reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Restricted Securities covered by the applicable
Registration Statement; provided, however, that the Company will not be required
-------- -------
to (a) qualify generally to do business in any jurisdiction where it is not then
so qualified or (b) take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(j) cooperate with KHC to facilitate the timely preparation and delivery of
certificates representing Restricted Securities after the same have been sold
pursuant to a Registration Statement, which certificates shall not bear any
restrictive legends;
(k) upon the occurrence of any event contemplated by paragraph 4(c)(v) or
4(c)(vi) above, prepare a supplement or post-effective amendment to the
applicable Registration Statement or a supplement to the related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Restricted
Securities being sold thereunder, such Prospectus will not contain
5
<PAGE>
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(l) use its best efforts to cause all Restricted Securities covered by such
Registration Statement to be (i) listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed, or (ii)
authorized to be quoted on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") or the National Market of Nasdaq if the
securities so qualify;
(m) provide a CUSIP number for each of the Restricted Securities not later
than the effective date of a Registration Statement; and
(n) use its best efforts to comply with all applicable rules and
regulations of the SEC and make generally available to its security holders
earning statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
The Company may require KHC to furnish to the Company such information
regarding the distribution of such Restricted Securities as the Company may from
time to time reasonably request in writing and the Company may exclude from such
registration the Restricted Securities if KHC fails to furnish such information
within a reasonable time after receiving such request.
KHC agrees by acquisition of such Restricted Securities that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in Section 4(c)(ii)-(vi) hereof, KHC will forthwith discontinue
disposition of such Restricted Securities covered by such Registration Statement
or Prospectus until KHC's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(k) hereof, or until KHC is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated or deemed to be incorporated by reference in such
Prospectus.
5. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Company including, without limitation, (i) all
registration and filing fees, including fees and expenses incurred in connection
with compliance with securities or Blue Sky laws and determination of the
eligibility of the Restricted Securities for investment under the laws of such
jurisdictions, in each case, as KHC may designate, subject to the limitations
set forth herein, (ii) printing expenses (including expenses of printing
certificates for the Restricted Securities and of printing prospectuses), (iii)
messenger, telephone and delivery
6
<PAGE>
expenses, (iv) fees and disbursements of counsel for the Company and one Special
Counsel for KHC, and (v) fees and expenses of all other Persons retained by the
Company (all such expenses being herein called "Registration Expenses"), shall
be borne by the Company whether or not any of the Registration Statements
becomes effective. The Company shall, in any event, pay the expense of any
annual audit, the fees and expenses incurred in connection with the listing of
the Restricted Securities pursuant to Section 4(l) hereof and the fees and
expenses of any Person, including special experts, retained by the Company.
6. Indemnification
---------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless KHC and each Person who controls KHC (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) against any
losses, claims, damages, liabilities or expenses, joint or several, to which KHC
or such controlling person may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, or arise out
of or are based in whole or in part on any failure of the Company to perform its
obligations hereunder or under law; and will reimburse, to the extent and
subject to the limitations and conditions set forth below, KHC and each such
controlling person for any legal and other expenses as such expenses are
reasonably incurred by KHC or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the Company will
-------- -------
not be liable in any such case (i) to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company in writing by KHC expressly for use
therein, or (ii) if the Company has advised KHC of an event described in Section
4(c)(v) or (vi) and such loss, claim, damage, liability or expense is caused
solely by KHC having sold Restricted Securities more than 12 hours after receipt
of such notice and prior to receipt of a supplement or amended prospectus
pursuant to Section 4(k) and the omission or misstatement was caused by such
event and corrected in the supplement or amended prospectus; provided further,
-------- -------
however, that the Company shall not be liable in any such case to the extent
- -------
that any such losses, claims, damages, liabilities or expenses arise out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus if (i) KHC failed to send or
deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale of Restricted Securities to the person asserting such
loss who purchased such Restricted Securities which are the subject thereof and
(ii) the Prospectus would have corrected such untrue statement or omission or
alleged untrue statement
7
<PAGE>
or alleged omission. In addition to its other obligations under this Section
6(a), the Company agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission, or
failure to perform its obligations hereunder, all as described in this Section
6(a), they will reimburse KHC (and, to the extent applicable, each controlling
person) on a quarterly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse KHC (and, to the extent applicable, each controlling
person) for such expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction. To the extent
that any such interim reimbursement payment is so held to have been improper,
KHC (and, to the extent applicable, each controlling person) shall promptly
return it to the Company together with interest, compounded daily, determined on
the basis of the prime rate (or other commercial lending rate for borrowers of
the highest credit standing) announced from time to time by Bank of America
NT&SA, San Francisco, California (the "Prime Rate"). Any such interim
reimbursement payments which are not made to KHC (and, to the extent applicable,
each controlling person) within 30 days of a request for reimbursement, shall
bear interest at the Prime Rate from the date of such request. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have. The Company shall also indemnify underwriters, dealer managers and similar
securities industry professionals participating in the distribution and each
Person who controls such Persons (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent as provided
above, and subject to the same obligation to repay the Company as provided
above, with respect to the indemnification of the holders of Restricted
Securities. The Company shall in no event be liable for any losses, damages,
costs or expenses relating to or arising out of any settlement effected without
the Company's written consent (which shall not be unreasonably withheld).
(b) Indemnification by KHC. In connection with any Registration Statement
----------------------
in which KHC is participating, KHC shall furnish to the Company in writing such
information as the Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees to indemnify the Company, each
of its directors, each of its officers who signed the Registration Statement and
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), against any losses, claims,
damages, liabilities or expenses to which the Company or any such director,
officer or controlling person may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of KHC), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as contemplated
below) arise out of or are based upon any untrue or alleged untrue statement of
any material fact contained in the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
8
<PAGE>
alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with the information furnished to the Company in writing
by KHC expressly for use therein; and will reimburse the Company, or any such
director, officer or controlling person for any legal and other expense
reasonably incurred by the Company or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. In addition
to its other obligations under this Section 6(b), KHC agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 6(b) which relates to
information furnished to the Company in writing by KHC expressly for use
therein, it will reimburse the Company (and, to the extent applicable, each
officer, director or controlling person) on a quarterly basis for all reasonable
legal or other expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of KHC's obligation to reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and, to the
extent applicable, each officer, director or controlling person) shall promptly
return it to KHC together with interest, compounded daily, determined on the
basis of the Prime Rate. Any such interim reimbursement payments which are not
made to the Company (and, to the extent applicable, each officer, director or
controlling person) within 30 days of a request for reimbursement, shall bear
interest at the Prime Rate from the date of such request. This indemnity
agreement will be in addition to any liability which KHC may otherwise have. In
no event shall the liability of KHC hereunder be greater in amount than the
dollar amount of the proceeds (net of payment of all expenses) received by KHC
upon the sale of the Restricted Securities giving rise to such indemnification
obligation. The Company (and, to the extent applicable, each officer, director
or controlling person) shall be entitled to receive indemnities from
underwriters, dealer managers and similar securities industry professionals
participating in the distribution to the same extent as provided above with
respect to information so furnished in writing by such Persons expressly for use
in any Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. Promptly after receipt by an
--------------------------------------
indemnified party under this Section of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section, notify the indemnifying party
in writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party for contribution or otherwise than under the indemnity
agreement contained in this Section or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought against
any indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with
counsel
9
<PAGE>
reasonably satisfactory to such indemnified party; provided, however, if
-------- -------
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have been advised by legal
counsel that there may be a conflict between the positions of the indemnifying
party and the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel representing the indemnified parties who are parties to such
action) or (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action, in
each of which cases the fees and expenses of counsel to the indemnified party
shall be at the expense of the indemnifying party.
(d) Contribution. If the indemnification provided for in this Section 6
------------
is required by its terms but is for any reason (other than as provided above)
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party under subsections (a), (b) or (c) in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein in such proportion as is appropriate to reflect
the relative fault of the Company and KHC in connection with the statements or
omissions or inaccuracies which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company and KHC shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or KHC and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in subsection (c) of
this Section 6, any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim. The
provisions set forth in subsection (c) of this Section 6 with respect to notice
of commencement of any action shall apply if a claim for contribution is to be
made under this subsection (d); provided, however, that no additional notice
-------- -------
shall be required with respect to any action for which notice has been given
under subsection (c) for purposes of indemnification. The Company and KHC agree
that it would not be just and equitable if contribution pursuant to this Section
6 were determined solely by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
10
<PAGE>
referred to in this subsection. Notwithstanding the provisions of this
subsection (d), KHC shall not be required to contribute any amount in excess of
the amount by which the total price at which the Restricted Securities sold by
KHC and distributed to the public were offered to the public exceeds the amount
of any damages which KHC has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
7. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company of any of its
--------
obligations under this Agreement, KHC, in addition to being entitled to exercise
all rights granted by law, will be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(b) Actions Affecting Restricted Securities. The Company agrees to act in
---------------------------------------
good faith with respect to its obligations hereunder and the Company shall not
take any action, or fail to take such action which has the primary effect of
materially adversely affecting the rights of holders of Restricted Securities
hereunder.
(c) Amendments. Any amendment of this Agreement or waiver of compliance
----------
with any provisions hereof shall be in writing and shall require the written
approval of the party to be charged. Any such amendment or waiver so approved
in writing shall be binding upon all of the parties hereto and their respective
permitted successors and permitted assigns.
(d) Notices. All notices, requests and other communications hereunder
-------
shall be in writing and, if by personal delivery, shall be deemed to have been
validly served, given or delivered upon actual delivery, and, if by facsimile
transmission, shall be deemed to have been validly served, given or delivered
upon transmission and acknowledgement of receipt thereof, in each case addressed
to the party or parties to be notified, at the following addresses (or such
other address(es) as a party may designate for itself by like notice):
If to Company: KMS Holding Corporation
c/o Freeman Spogli Co. Incorporated
11100 Santa Monica Boulevard
Suite 1900
Los Angeles, California 90025
Facsimile: (310) 444-1870
Attention: William M. Wardlaw
11
<PAGE>
If to TKC or KHC: The Koll Holding Company
4343 Von Karman Avenue
Newport Beach, California 92660
Facsimile: (714) 250-4344
Attention: Raymond E. Wirta
(e) No Assignment. This Agreement shall be binding upon and inure to
-------------
the benefit of the parties and their respective permitted successors and
permitted assigns. This Agreement shall not be assignable without the express
written consent of each of the parties hereto; provided, that the rights
accorded to KHC hereunder shall be assigned automatically to a secured lender of
The Koll Company, the parent of KHC, that has, upon the exercise of its rights
and remedies as a secured lender, become the owner of Restricted Securities and
that has agreed in writing to be bound by the terms and conditions of this
Agreement.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(g) Headings. Introductory headings at the beginning of each Section
--------
and paragraph of this Agreement are solely for the convenience of the parties
and shall not be deemed to be a limitation upon or description of the contents
of this Agreement.
(h) Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with, the laws of the State of Delaware, without
regard to conflicts of law principles thereof.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
(j) Disputes. In the event of any dispute among the parties arising
--------
out of this Agreement, the prevailing party shall be entitled to recover from
the non-prevailing party the reasonable expenses of the prevailing party,
including, without limitation, reasonable attorneys' fees and expenses.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"COMPANY"
KMS HOLDING CORPORATION
By: /s/ William M. Wardlaw
---------------------------------
Name: William M. Wardlaw
Title: Vice President and Secretary
"KHC"
THE KOLL HOLDING COMPANY
By:
---------------------------------
Name:
Title:
"TKC"
THE KOLL COMPANY
By:
---------------------------------
Name:
Title:
13
<PAGE>
EXHIBIT 10.12
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of October 18, 1995, by and among KMS
Holding Corporation, a Delaware corporation (the "Company"), The Koll Holding
Company, a California corporation ("KHC"), which is a wholly-owned subsidiary of
The Koll Company, a California corporation ("TKC"), and TKC.
R E C I T A L S
A. Unless otherwise defined herein, all capitalized terms used
herein have the meanings given to such terms in the Registration Agreement (as
hereinafter defined).
B. Pursuant to the terms of that certain Registration Rights
Agreement, dated as of November 23, 1994, by and among the Company, KHC and TKC
(the "Registration Agreement"), the Company granted to KHC certain registration
rights.
C. In connection with that certain Stock Purchase Agreement, dated
as of the date hereof, by and among KHC, TKC and AP KMS Partners, L.P., a
Delaware limited partnership, the Company, KHC and TKC desire to amend the
Registration Agreement for the purpose of, among other things, modifying the
registration rights granted to KHC thereunder.
A G R E E M E N T
NOW THEREFORE, taking into account the foregoing Recitals, and in
consideration of the mutual covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company, KHC and TKC hereby agree as follows:
1. AMENDMENT TO REGISTRATION AGREEMENT.
------------------------------------
a. The definition of "Restricted Securities" as provided in Section
1 of the Registration Agreement is hereby amended and restated in its entirety
to read as follows:
"'Restricted Securities': Any and all shares of Common Stock
---------------------
acquired by KHC or its Affiliates. As to any proposed offer or sale
of Restricted Securities, such securities shall cease to be Restricted
Securities with respect to such offer and sale when (i) a Registration
Statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall
have been disposed of in
<PAGE>
accordance with such Registration Statement or (ii) such securities
shall have been otherwise transferred pursuant to an applicable
exemption under the Securities Act, new certificates for such
securities not bearing a legend restricting further transfer shall
have been delivered by the Company and such securities shall be freely
transferable to the public without registration under the Securities
Act."
b. KHC hereby consents to the Company entering into the Registration
Rights Agreement, dated the date hereof (the "Apollo Registration Rights
Agreement") between the Company and AP KMS Partners, L.P., and to the grant
pursuant to such agreement of incidental registration rights as set forth
in the Apollo Registration Rights Agreement, subject to the limitations set
forth in the Apollo Registration Rights Agreement.
c. Section 3(d) of the Registration Agreement is hereby amended and
restated in its entirety to read as follows:
"(d) Except as provided for in the Apollo Registration Rights
Agreement, neither the Company nor any holder of Common Stock other than
Restricted Securities shall have the right to participate in any
registration requested under Section 3(a)."
d. Section 3 is hereby amended to add the following subsection (e):
"(e) If the managing underwriter(s) of an underwritten initial public
offering of the Company's Common Stock requests that KHC refrain from
selling or otherwise transferring any of its Restricted Securities during a
reasonable period of time after such initial public offering, then KHC
shall agree to comply with such request."
2. EFFECT OF AMENDMENT.
-------------------
Except as specifically amended pursuant to the terms of this
Agreement, the terms and conditions of the Registration Agreement shall remain
unmodified and in full force and effect.
3. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
2
<PAGE>
4. THIRD PARTY BENEFICIARY.
-----------------------
Any holder of Restricted Securities (as such term is defined in the
Apollo Registration Rights Agreement) shall be deemed a third party beneficiary
of this Agreement.
5. COUNTERPARTS.
------------
This Agreement may be executed and acknowledged in counterparts, all
of which executed and acknowledged counterparts shall together constitute a
single document. Signature and acknowledgment pages may be detached from the
counterparts and attached to a single copy of this document to physically form
one document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
"COMPANY"
KMS HOLDING CORPORATION
By:
-------------------------------------
Name: Raymond E. Wirta
Title: Chief Executive Officer
"KHC"
THE KOLL HOLDING COMPANY
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
"TKC"
THE KOLL COMPANY
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
3
<PAGE>
EXHIBIT 10.13
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made and entered
into as of October 18, 1995, by and between KMS Holding Corporation, a Delaware
corporation (the "Company"), and AP KMS Partners, L.P., a Delaware limited
partnership ("Apollo").
This Agreement is made pursuant to the Stock Purchase Agreement, dated the
date hereof (the "Stock Purchase Agreement"), among The Koll Holding Company, a
California corporation ("KHC"), The Koll Company, a California corporation
("TKC"), and Apollo. In order to induce Apollo to enter into the Stock Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. This Agreement shall be effective as of the Closing (as
defined in the Stock Purchase Agreement).
The parties hereby agree as follows:
1. Definitions
-----------
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Stock Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See the last paragraph of Section 5 hereof.
------
Common Stock: The common stock, par value $.01 per share, of the Company.
------------
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations of the SEC promulgated thereunder.
FS: Collectively, FS Equity Partners II, L.P. and FS Equity Partners
--
International, L.P.
Incidental Registration: See Section 4(a) hereof.
-----------------------
Other Securities: See Section 4(a) hereof.
----------------
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or other
entity.
<PAGE>
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A under the Securities Act) in the form
contained in such Registration Statement at the time it became effective, except
that if the final prospectus for use in connection with an offering of
Restricted Securities differs from the form of prospectus included as part of
the Registration Statement at the time it was declared effective, then such
final prospectus, as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Restricted Securities
covered by such Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
Registration Expenses: See Section 6 hereof.
---------------------
Registration Statement: Any registration statement of the Company which
----------------------
covers any of the Restricted Securities pursuant to the provisions of this
Agreement, including the Prospectus, any amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Restricted Securities: Any and all shares of Common Stock acquired by
---------------------
Apollo or its Affiliates. As to any proposed offer or sale of Restricted
Securities, such securities shall cease to be Restricted Securities with respect
to such offer and sale when (i) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such Registration
Statement or (ii) such securities shall have been otherwise transferred pursuant
to an applicable exemption under the Securities Act, new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company and such securities shall be freely transferable to the
public without registration under the Securities Act.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules and
--------------
regulations promulgated by the SEC thereunder.
Selling Investor: Any holder of Restricted Securities who has requested
----------------
registration pursuant to Section 4.
2
<PAGE>
Special Counsel: Such law firm, if any, as may be designated by Apollo.
---------------
Stockholders Agreement: The Amended and Restated Stockholders Agreement
----------------------
dated the date hereof among the Company, FS, KHC and Apollo.
2. Securities Subject to this Agreement
------------------------------------
Restricted Securities. The securities entitled to the benefits of this
---------------------
Agreement are the Restricted Securities.
3. Demand Registration
-------------------
(a) After (i) the consummation of an Initial Public Offering (as defined
in the Stockholders Agreement), (ii) the rejection by KHC and FS of an offer to
purchase an Apollo Offered Asset (as defined in the Stockholders Agreement)
pursuant to the Stockholders Agreement and (iii) Apollo has attempted in good
faith for a reasonable period of time to sell the Apollo Offered Asset at the
Apollo Target Price (as defined in the Stockholders Agreement), then upon the
written request of Apollo, the Company shall be obligated, on no more than one
occasion, to effect the registration under the Securities Act of the Restricted
Securities, all in accordance with the following provisions of this Agreement;
provided, however, that the obligation of the Company to effect such
- -------- -------
registration shall not be deemed to have been satisfied until the Registration
Statement with respect thereto has become effective under the Securities Act and
it has remained effective as long as required to allow Apollo to effect the
disposition of the Restricted Securities registered (but in no event longer than
nine months from the effective date of the Registration Statement) and only so
long as no stop order suspending the effectiveness of the Registration Statement
or the qualification or registration of any of the Restricted Securities for
sale in any jurisdiction in which the Company shall be required pursuant to
Section 5(i) to register or qualify such Restricted Securities shall not have
been issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC or any state agency.
(b) Whenever the Company shall be requested pursuant to Section 3(a) to
effect the registration of Restricted Securities under the Securities Act, the
Company shall, as provided in Section 5, effect the registration under the
Securities Act of the Restricted Securities which the Company has been requested
to register pursuant to Section 3(a) and shall take all actions necessary to
permit the disposition by Apollo and its Affiliates of the Restricted Securities
so registered.
(c) If Apollo advises the Company that it intends to publicly offer or
distribute Restricted Securities to be covered by the Registration Statement
pursuant to a firm commitment underwriting with an investment banking firm or
firms selected by Apollo and approved by the Company, such approval not to be
unreasonably withheld, the Company shall enter into and perform its obligations
under an underwriting agreement with such underwriters for such
3
<PAGE>
offering, such agreement to contain such representations and warranties by the
Company and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities and contribution to the effect and to the extent
provided in Section 7. The holders of Restricted Securities on whose behalf
Restricted Securities are to be distributed by such underwriters shall be
parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Restricted Securities.
(d) Without the written consent of Apollo, neither the Company nor any
holder of securities of the Company (other than a holder of Restricted
Securities) shall have the right to participate in any registration requested
under Section 3(a).
4. Incidental Registration.
-----------------------
(a) If the Company proposes to register any securities of the Company
("Other Securities") under the Securities Act (other than its initial public
offering and registrations on Forms S-8 or S-4), whether or not pursuant to a
demand by FS, KHC or otherwise, and whether or not for sale for the Company's
own account, the Company shall, each such time, subject to the provisions of
this Section 4, give prompt written notice at least 30 days prior to the
anticipated filing date of the registration statement relating to such
registration to the holders of Restricted Securities, and shall offer all
holders of Restricted Securities the opportunity to include in such registration
statement such number of Restricted Securities as each such holder of Restricted
Securities may request (an "Incidental Registration"). Upon the written request
of any such holder of Restricted Securities made within 15 days after the
receipt of notice from the Company (which request shall specify the number or
aggregate amount of Restricted Securities intended to be disposed of by such
holder of Restricted Securities), the Company shall, subject to the next
sentence, use its reasonable best efforts to effect the registration under the
Securities Act of all Restricted Securities which the Company has been so
requested to register. The Company will not be required to effect any
registration pursuant to this Section 4 if such registration involves an
underwritten public offering of securities of the Company (other than an
underwritten public offering of Restricted Securities pursuant to a registration
effected in accordance with Section 3) and the managing underwriter(s) advises
the Company in writing (with a copy to Apollo) that, in such firm's opinion, the
inclusion of the Restricted Securities requested to be included in such
registration would, in the good faith judgment of such managing underwriter(s)
materially and adversely affect the Company's offering of Other Securities;
provided, however, that if an offering of some but not all of the Restricted
Securities requested to be registered by the Selling Investors would not
materially adversely affect the Company's offering of Other Securities, the
Company shall register the Maximum Excess Amount (as defined below), and such
Maximum Excess Amount shall be allocated pro rata among all Selling Investors
and other holders of securities which have the right to and which have requested
to include such securities in such offering based upon the number of shares for
which registration was requested by each.
4
<PAGE>
For purposes of this Section 4, the "Maximum Excess Amount" shall mean the
largest number of Restricted Securities and other securities which the holders
thereof have the right to include and have requested to include in such offering
(if any), that in the opinion of the managing underwriter selected by the
Company, by FS pursuant to a demand by FS or by KHC pursuant to a demand by KHC,
could be offered to the public without adversely affecting the offering and sale
of Other Securities as then contemplated by the Company, FS or KHC.
Notwithstanding any provision contained herein, in the event of a demand
registration by FS or KHC, as the case may be, pursuant to which the managing
underwriter(s) advise FS or KHC, as the case may be, in writing (with a notice
to Apollo) that in the good faith judgment of the such underwriter(s) the
inclusion of the Restricted Securities would materially and adversely affect the
ability of FS or KHC, as the case may be, to proceed with its requested
offering, the Restricted Securities shall be excluded from such offering to the
extent determined by the such underwriter(s) prior to the exclusion of any
securities requested by FS or KHC, as the case may be.
(b) If, at any time after giving written notice of its intention to
register any securities of the Company pursuant to this Section 4 hereof and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register such securities, the Company shall give written notice to all such
Selling Investors, and, thereupon, shall be relieved of its obligation to
register any securities in connection with such proposed registration.
(c) No registration effected under this Section 4 shall relieve the
Company of its obligations to effect a registration to the extent required by
Section 3 hereof.
(d) The Company shall pay all Registration Expenses in connection
with each registration of Restricted Securities requested pursuant to this
Section 4.
(e) Any Selling Investor may elect in writing prior to the
effective date of the Registration Statement filed with the SEC pursuant to an
Incidental Registration to withdraw all or any portion of its Restricted
Securities from such registration in the following circumstances:
(i) after the date which is sixty days following the date such
Registration Statement is initially filed with the SEC; or
(ii) if in the judgment of the managing underwriter for the
offering to which such Registration Statement relates, such withdrawal
would not materially and adversely affect such offering.
(f) If, in connection with an underwritten initial public offering
of the Company's Common Stock, the managing underwriter(s) requests that all
holders of Restricted
5
<PAGE>
Securities refrain from selling or transferring any of their respective
Restricted Securities during a reasonable period of time after such initial
public offering, then all holders of Restricted Securities shall comply with
such request.
5. Registration Procedures
-----------------------
In connection with the registration obligations of the Company
pursuant to and in accordance with the provisions of Sections 3 and 4 of this
Agreement, the Company shall effect such registration to permit the sale of such
Restricted Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
is reasonably possible:
(a) prepare and file with the SEC, as soon as practicable, a
Registration Statement or Registration Statements on any appropriate form under
the Securities Act, which form shall be available for the sale of the Restricted
Securities in accordance with the intended method or methods of distribution
thereof, and use its best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; provided, however,
-------- -------
that before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, including documents incorporated or deemed to be
incorporated therein by reference, the Company shall furnish to Special Counsel
and to the holders of the Restricted Securities and the Selling Investors (as
applicable), copies of all such documents proposed to be filed (excluding
exhibits unless otherwise requested), which documents will be subject to the
review of Special Counsel and the holders of the Restricted Securities and the
Selling Investors (as applicable), and the Company shall not file any such
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto (including such documents which, upon filing, would be incorporated or
deemed to be incorporated by reference therein) to which the holders of the
Restricted Securities and the Selling Investors (as applicable) shall reasonably
object on a timely basis; provided, however, that the Company shall be entitled
-------- -------
in all events to take such actions which, in the opinion of counsel for the
Company, are required to comply with applicable law;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period; cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the holders of the Restricted Securities and
the Selling Investors (as applicable) set forth in such Registration Statement
as so amended or to such Prospectus as so supplemented;
(c) notify the holders of the Restricted Securities and the Selling
Investors (as applicable) and its Special Counsel, promptly, and (if requested
by any such Person) confirm
6
<PAGE>
such notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment related to such Restricted Securities has been filed,
and, with respect to a Registration Statement or any post-effective amendment
related to such Restricted Securities, when the same has become effective, (ii)
of any request by the SEC for amendments or supplements to a Registration
Statement or related Prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Restricted Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event which makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue or which requires the making of any changes in a Registration
Statement or related Prospectus so that such documents will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or, in the case of a Prospectus, necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (vi) of the Company's reasonable determination that a post-
effective amendment to a Registration Statement would be appropriate;
(d) use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Restricted Securities for sale in any jurisdiction, at the earliest possible
moment;
(e) if requested by the holders of the Restricted Securities and the
Selling Investors (as applicable), as promptly as practicable (i) incorporate in
a Prospectus supplement or post-effective amendment such information as the
holders of the Restricted Securities and the Selling Investors (as applicable)
agrees should be included therein as may be required by applicable law, (ii)
make all required filings of such Prospectus supplement or such post-effective
amendment as promptly as is reasonably practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment, and (iii) supplement or make amendments
to any Registration Statement if requested by the holders of the Restricted
Securities and the Selling Investors (as applicable); provided, however, that
-------- -------
the Company shall not be required to take any actions in this Section 5(e) which
are not, in the opinion of counsel for the Company, in compliance with
applicable law;
(f) upon request of the holders of the Restricted Securities and the
Selling Investors (as applicable), furnish to the holders of the Restricted
Securities and the Selling Investors (as applicable), without charge, a copy of
the Registration Statement or Registration Statements and any post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference), at the earliest practicable time under the circumstances before
the filing of such documents with the SEC;
7
<PAGE>
(g) furnish to the holders of the Restricted Securities and the
Selling Investors (as applicable) and Special Counsel, without charge, at least
one conformed copy of the Registration Statement or Registration Statements and
any post-effective amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference or deemed
incorporated therein by reference and all exhibits, if requested (including
those previously furnished or incorporated by reference), at the earliest
practicable time under the circumstances after the filing of such documents with
the SEC;
(h) deliver to the holders of the Restricted Securities and the
Selling Investors (as applicable) and Special Counsel, without charge, as many
copies of the Prospectus or Prospectuses (including each preliminary prospectus)
and any amendment or supplement thereto as the holders of the Restricted
Securities and the Selling Investors (as applicable) may reasonably request; the
Company consents to the use of such Prospectus or any amendment or supplement
thereto by the holders of the Restricted Securities and the Selling Investors
(as applicable) in connection with the offering and sale of the Restricted
Securities covered by such Prospectus or any amendment or supplement thereto;
(i) prior to any offering of Restricted Securities, to register or
qualify or cooperate with the holders of the Restricted Securities and the
Selling Investors (as applicable), the underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Restricted Securities
for offer and sale under the securities or Blue Sky laws of such jurisdictions
as any seller or underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Restricted Securities covered by the applicable
Registration Statement; provided, however, that the Company will not be required
-------- -------
to (a) qualify generally to do business in any jurisdiction where it is not then
so qualified or (b) take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(j) cooperate with the holders of the Restricted Securities and the
Selling Investors (as applicable) to facilitate the timely preparation and
delivery of certificates representing Restricted Securities after the same have
been sold pursuant to a Registration Statement, which certificates shall not
bear any restrictive legends;
(k) upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) above, prepare a supplement or post-effective amendment to
the applicable Registration Statement or a supplement to the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Restricted
Securities being sold thereunder, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or
8
<PAGE>
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(l) use its best efforts to cause all Restricted Securities covered
by such Registration Statement to be (i) listed on each securities exchange, if
any, on which similar securities issued by the Company are then listed, or (ii)
authorized to be quoted on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") or the National Market of Nasdaq if the
securities so qualify;
(m) provide a CUSIP number for each of the Restricted Securities not
later than the effective date of a Registration Statement; and
(n) use its best efforts to comply with all applicable rules and
regulations of the SEC and make generally available to its security holders
earning statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
The Company may require the holders of the Restricted Securities and
the Selling Investors (as applicable) to furnish to the Company such information
regarding the distribution of such Restricted Securities as the Company may from
time to time reasonably request in writing and as shall be required by law or by
the SEC in connection with any registration.
Upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 5(c)(v) or (vi) hereof, the holders of
the Restricted Securities and the Selling Investors (as applicable) will
forthwith discontinue disposition of such Restricted Securities covered by such
Registration Statement or Prospectus until the holders of the Restricted
Securities and the Selling Investors (as applicable) have received copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
the holders of the Restricted Securities and the Selling Investors (as
applicable) are advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed.
In connection with the preparation and filing of each registration
statement registering Restricted Securities under the Securities Act, the
Company will give the holders of Restricted Securities, the Selling Investors
and the underwriters, if any, and their respective counsel and accountants,
drafts of such registration statement for their review and comment prior to
filing and such reasonable and customary access to its books and records and
such opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified its financial statements
as shall be necessary, in the opinion of the holders of Restricted Securities,
the Selling Investors and such underwriters or their
9
<PAGE>
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company including, without limitation, (i)
all registration and filing fees, including fees and expenses incurred in
connection with compliance with securities or Blue Sky laws and determination of
the eligibility of the Restricted Securities for investment under the laws of
such jurisdictions, in each case, as the holders of the Restricted Securities
and the Selling Investors (as applicable) may designate, subject to the
limitations set forth herein, (ii) printing expenses (including expenses of
printing certificates for the Restricted Securities and of printing
prospectuses), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and one Special Counsel for the holders
of the Restricted Securities and the Selling Investors (as applicable), and (v)
fees and expenses of all other Persons retained by the Company (all such
expenses being herein called "Registration Expenses"), shall be borne by the
Company whether or not any of the Registration Statements becomes effective. The
Company shall, in any event, pay the expense of any annual audit, the fees and
expenses incurred in connection with the listing of the Restricted Securities
pursuant to Section 5(l) hereof and the fees and expenses of any Person,
including special experts, retained by the Company.
7. Indemnification
---------------
(a) Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless each holder of the Restricted Securities and each Selling
Investor and each Person who controls each holder of the Restricted Securities
and each Selling Investor (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) against any losses, claims, damages,
liabilities or expenses, joint or several, to which such indemnified party may
become subject under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state in any of them a material fact
required to be stated therein or necessary to make the statements in any of them
not misleading, or arise out of or are based in whole or in part on any failure
of the Company to perform its obligations hereunder or under law; and will
reimburse, to the extent and subject to the limitations and conditions set forth
below, each holder of the Restricted Securities and each Selling Investor and
each such controlling person for any legal and other expenses as such expenses
are reasonably incurred by them in connection with investigating, defending,
settling, compromising or paying
10
<PAGE>
any such loss, claim, damage, liability, expense or action; provided, however,
-------- -------
that the Company will not be liable in any such case (i) to the extent that any
such loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, any preliminary prospectus, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity with
the information furnished to the Company in writing by such holders of the
Restricted Securities or the Selling Investors expressly for use therein, or
(ii) if the Company has advised such holders of the Restricted Securities or the
Selling Investors of an event described in Section 5(c)(v) or (vi) and such
loss, claim, damage, liability or expense is caused solely by such holders of
the Restricted Securities or the Selling Investors having sold Restricted
Securities more than 12 hours after receipt of such notice and prior to receipt
of a supplement or amended prospectus pursuant to Section 5(k) or an Advice and
the omission or misstatement was caused by such event and corrected in the
supplement or amended prospectus; provided further, however, with respect to an
-------- ------- -------
underwritten offering, that the Company shall not be liable in any such case to
the extent that any such losses, claims, damages, liabilities or expenses arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus if (i) the
underwriter failed to send or deliver a copy of the Prospectus with or prior to
the delivery of written confirmation of the sale of Restricted Securities to the
person asserting such loss who purchased such Restricted Securities which are
the subject thereof and (ii) the Prospectus would have corrected such untrue
statement or omission or alleged untrue statement or alleged omission. In
addition to its other obligations under this Section 7(a), the Company agrees
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, or failure to
perform its obligations hereunder, all as described in this Section 7(a), they
will reimburse each holder of the Restricted Securities and each Selling
Investor and each controlling person of each holder of Restricted Securities and
each Selling Investor on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse such person for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the applicable holder of
Restricted Securities, Selling Investor or controlling person of such holder of
Restricted Securities or Selling Investor shall promptly return it to the
Company together with interest, compounded daily, determined on the basis of the
prime rate (or other commercial lending rate for borrowers of the highest credit
standing) announced from time to time by Bank of America NT&SA, San Francisco,
California (the "Prime Rate"). Any such interim reimbursement payments which are
not made to a holder of Restricted Securities, a Selling Investor or a
controlling person of a holder of a Restricted Security or Selling Investor
within 30 days of a request for reimbursement, shall bear interest at the Prime
Rate from the date of such request. This indemnity agreement will be in addition
to any liability which the Company may otherwise have. The Company shall also
indemnify underwriters, dealer managers and similar securities industry
11
<PAGE>
professionals participating in the distribution and each Person who controls
such Persons (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) to the same extent as provided above, and subject to the
same obligation to repay the Company as provided above, with respect to the
indemnification of the holders of Restricted Securities. The Company shall in no
event be liable for any losses, damages, costs or expenses relating to or
arising out of any settlement effected without the Company's written consent
(which shall not be unreasonably withheld).
(b) Indemnification by Holders of Restricted Securities and Selling
---------------------------------------------------------------
Investors. In connection with any Registration Statement in which a holder of
- ---------
Restricted Securities or a Selling Investor is participating, each such holder
of Restricted Securities and Selling Investor shall furnish to the Company in
writing such information as the Company reasonably requests for use in
connection with any Registration Statement or Prospectus and severally agrees to
indemnify the Company, each of its directors, each of its officers who signed
the Registration Statement and each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
against any losses, claims, damages, liabilities or expenses to which the
Company or any such director, officer or controlling person may become subject
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
holder of Restricted Securities or Selling Investor), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, any
preliminary prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with the information furnished to the Company in writing
by such holder of Restricted Securities or Selling Investor expressly for use
therein; and will severally reimburse the Company, or any such director, officer
or controlling person for any legal and other expense reasonably incurred by the
Company or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. In addition to its other obligations
under this Section 7(b), each such holder of Restricted Securities and Selling
Investor agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
this Section 7(b) which relates to information furnished to the Company in
writing by such holder of Restricted Securities or Selling Investor expressly
for use therein, it will severally reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) on a quarterly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other
12
<PAGE>
proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of such holder of Restricted Securities' or
Selling Investor's obligation to reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and, to the
extent applicable, each officer, director or controlling person) shall promptly
return it to the applicable holder of Restricted Securities or Selling Investors
together with interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments which are not made to the Company
(and, to the extent applicable, each officer, director or controlling person)
within 30 days of a request for reimbursement, shall bear interest at the Prime
Rate from the date of such request. This indemnity agreement will be in addition
to any liability which the applicable holder of Restricted Securities or Selling
Investors may otherwise have. In no event shall the liability of a holder of
Restricted Securities or Selling Investor hereunder be greater in amount than
the dollar amount of the proceeds (net of payment of all expenses) received by
such holder of Restricted Securities or Selling Investor upon the sale of the
Restricted Securities giving rise to such indemnification obligation. The
Company (and, to the extent applicable, each officer, director or controlling
person) shall be entitled to receive indemnities from underwriters, dealer
managers and similar securities industry professionals participating in the
distribution to the same extent as provided above with respect to information so
furnished in writing by such Persons expressly for use in any Prospectus or
Registration Statement.
(c) Conduct of Indemnification Proceedings. Promptly after receipt by
--------------------------------------
an indemnified party under this Section 7 of notice of the commencement of any
action or proceeding involving a claim referred to in subsections (a) or (b) of
this Section 7, such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party under this Section, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party for contribution or otherwise than under the
indemnity agreement contained in this Section or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it may wish, jointly
with all other indemnifying parties similarly notified, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both an
- -------- -------
indemnified party and an indemnifying party and the indemnified party shall have
been advised by legal counsel that there may be a conflict between the positions
of the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so
13
<PAGE>
to assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel to the
indemnified party shall be at the expense of the indemnifying party.
(d) Contribution. If the indemnification provided for in this Section
------------
7 is required by its terms but is for any reason (other than as provided above)
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party under subsections (a) or (b) in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each applicable
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of any losses, claims, damages, liabilities or
expenses referred to herein in such proportion as is appropriate to reflect the
relative fault of indemnifying party on the one hand and the indemnified party
on the other. The relative fault of the holder of the Restricted Security or
Selling Investor shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the holder of the Restricted Security or Selling
Investor and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in subsection (c) of this Section 7, any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
subsection (c) of this Section 7 with respect to notice of commencement of any
action shall apply if a claim for contribution is to be made under this
subsection (d), provided, however, that no additional notice shall be required
-------- -------
with respect to any action for which notice has been given under subsection (c)
for purposes of indemnification. The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined
solely by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in this subsection.
Notwithstanding the provisions of this subsection (d), no holder of a Restricted
Security or Selling Investor shall be required to contribute any amount in
excess of the amount by which the total price at which the Restricted Securities
sold by such holder of a Restricted Security or Selling Investor and distributed
to the public were offered to the public exceeds the amount of any damages which
such holder of a Restricted Security or Selling Investor has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
14
<PAGE>
8. Qualification for Rule 144 Sales. The Company will take all
--------------------------------
actions reasonably necessary to comply with the filing requirements described in
Rule 144(c)(1) promulgated under the Securities Act so as to enable any holder
of Restricted Securities to sell such securities without registration under the
Securities Act and, upon the written request of any such holder, the Company
will deliver to such holder a written statement as to whether it has complied
with such filing requirements.
9. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company of any of its
--------
obligations under this Agreement, any holder of Restricted Securities
(including, without limitation, Apollo and its Affiliates) in addition to being
entitled to exercise all rights granted by law, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) Actions Affecting Restricted Securities. The Company agrees to
---------------------------------------
act in good faith with respect to its obligations hereunder and the Company
shall not take any action, or fail to take such action which has the primary
effect of materially adversely affecting the rights of holders of Restricted
Securities hereunder.
(c) Amendments. Any amendment of this Agreement or waiver of
----------
compliance with any provisions hereof shall be in writing and shall require the
written approval of the party to be charged. Any such amendment or waiver so
approved in writing shall be binding upon all of the parties hereto and their
respective permitted successors and permitted assigns.
(d) Notices. All notices, requests and other communications hereunder
-------
shall be in writing and, if by personal delivery, shall be deemed to have been
validly served, given or delivered upon actual delivery, and, if by facsimile
transmission, shall be deemed to have been validly served, given or delivered
upon transmission and acknowledgement of receipt thereof, in each case addressed
to the party or parties to be notified, at the following addresses (or such
other address(es) as a party may designate for itself by like notice):
If to Company: KMS Holding Corporation
c/o Freeman Spogli & Co. Incorporated
11100 Santa Monica Boulevard
Suite 1900
Los Angeles, California 90025
Facsimile: (310) 444-1870
Attention: William M. Wardlaw
15
<PAGE>
If to Apollo or AP KMS Partners, L.P.
its Affiliates: c/o Apollo Real Estate Advisors, L.P.
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 261-4060
Attention: W. Edward Scheetz and Ricardo Koenigsberger
If to Other Holders The address set forth in the notice to the
of Restricted Company provided for in subsection (e) of
Securities: this Section 9
(e) No Assignment. This Agreement shall be binding upon and inure to
-------------
the benefit of the parties and their respective permitted successors and
permitted assigns. This Agreement shall be assignable to any Affiliate or to
any transferee of Restricted Securities provided that Apollo (or any subsequent
trustee of such Restricted Securities) notifies the Company in writing of the
name and address of such transferee and the Restricted Securities so
transferred, and such notice is accompanied by a signature page to this
Agreement pursuant to which such transferee agrees to be bound by the terms and
conditions hereof; provided, however, Apollo shall have the right to assign its
rights under Section 3 hereof only to an Affiliate or a transferee more than 50%
of its Initial Shares (as defined in the Stockholders Agreement). Affiliates of
Apollo together with any and all subsequent holders of the Restricted Securities
shall be deemed third party beneficiaries under this Agreement.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(g) Headings. Introductory headings at the beginning of each Section
--------
and paragraph of this Agreement are solely for the convenience of the parties
and shall not be deemed to be a limitation upon or description of the contents
of this Agreement.
(h) Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with, the laws of the State of Delaware, without
regard to conflicts of law principles thereof.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed
16
<PAGE>
the remaining terms, provisions, covenants and restrictions without including
any of such which may be hereafter declared invalid, void or unenforceable.
(j) Disputes. In the event of any dispute among the parties arising
--------
out of this Agreement, the prevailing party shall be entitled to recover from
the non-prevailing party the reasonable expenses of the prevailing party,
including, without limitation, reasonable attorneys' fees and expenses.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
17
<PAGE>
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
"COMPANY"
KMS HOLDING CORPORATION
By:
------------------------------------
Name:
Title:
18
<PAGE>
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
"APOLLO"
AP KMS PARTNERS, L.P.
By: AP GP KMS, L.P.,
its general partner
By: AP KMS Acquisition Corporation,
its general partner
By:
--------------------------------
Name:
Title:
19
<PAGE>
EXHIBIT 10.14
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of April 1, 1996, by and among KMS
Holding Corporation, a Delaware corporation (the "Company"), and AP KMS
Partners, L.P., a Delaware limited partnership ("Apollo").
R E C I T A L S
A. Unless otherwise defined herein, all capitalized terms used
herein have the meanings given to such terms in the Registration Agreement (as
hereinafter defined).
B. Pursuant to the terms of that certain Registration Rights
Agreement, dated as of October 18, 1995, by and between the Company and Apollo
(the "Registration Agreement"), the Company granted to Apollo certain
registration rights.
C. In connection with that certain Apollo Stock Purchase Agreement,
dated as of the date hereof, by and among KHC, TKC and Apollo, the Company and
Apollo desire to amend the Registration Agreement as set forth herein.
A G R E E M E N T
NOW THEREFORE, taking into account the foregoing Recitals, and in
consideration of the mutual covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and Apollo hereby agree as follows:
1. AMENDMENT TO REGISTRATION AGREEMENT. Paragraph (a) of Section 3
------------------------------------
of the Registration Agreement is hereby amended and restated in its entirety to
read as follows:
"(a) After six months from the consummation of an Initial Public
Offering (as defined in the Stockholders Agreement), then upon the
written request of Apollo, the Company shall be obligated, on no more
than one occasion, to effect the registration under the Act of the
Restricted Securities, all in accordance with the following provisions
of this Agreement; provided, however, that the obligation of the
-------- -------
Company to effect such registration shall not be deemed to have been
satisfied until the Registration Statement with respect thereto has
become effective under the Act and it has remained effective as long
as required to allow Apollo to effect the disposition of the
Restricted Securities registered (but in no event longer than nine
months from the effective date of the Registration
<PAGE>
Statement) and only so long as no stop order suspending the
effectiveness of the registration statement or the qualification or
registration of any of the Restricted Securities for sale in any
jurisdiction in which the Company shall be required pursuant to
Section 5(i) to register or qualify such Restricted Securities shall
not have been issued and no proceedings for that purpose shall have
been initiated or threatened by the SEC or any similar state agency."
2. EFFECT OF AMENDMENT.
-------------------
Except as specifically amended pursuant to the terms of this
Agreement, the terms and conditions of the Registration Agreement shall remain
unmodified and in full force and effect.
3. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
4. COUNTERPARTS.
------------
This Agreement may be executed and acknowledged in counterparts, all
of which executed and acknowledged counterparts shall together constitute a
single document. Signature and acknowledgment pages may be detached from the
counterparts and attached to a single copy of this document to physically form
one document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
2
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT]
"COMPANY"
KMS HOLDING CORPORATION
By:
-------------------------------
Name: Raymond E. Wirta
Title: Chief Executive Officer
3
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT]
"Apollo"
AP KMS PARTNERS, L.P.,
a Delaware limited partnership
By: AP-GP KMS PARTNERS, L.P.,
a Delaware limited partnership
Its: General partner
By: AP KMS ACQUISITION CORPORATION,
a Delaware corporation
Its: General Partner
By:
----------------------------------
Name: Ricardo Koenigsberger
Title: Vice President and Assistant
Secretary
4
<PAGE>
EXHIBIT 10.15
KMS HOLDING CORPORATION
SECOND AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
By and Among
KMS Holding Corporation,
FS Equity Partners III, L.P.,
FS Equity Partners International, L.P.,
The Koll Holding Company,
The Koll Company
and
AP KMS Partners, L.P.
March 29, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. CERTAIN DEFINITIONS........................................... 2
1.1 "Additional Securities"....................................... 2
1.2 "Affiliate"................................................... 2
1.3 "Apollo Offered Asset"........................................ 3
1.4 "Apollo Stock Purchase Agreement"............................. 3
1.5 "Board"....................................................... 3
1.6 "Company Common Stock"........................................ 3
1.7 "Escrow and Security Agreement"............................... 3
1.8 "Exchange Act"................................................ 3
1.9 "FS Offered Asset"............................................ 3
1.10 "FS Pro Rata Share"........................................... 3
1.11 "Initial Shares".............................................. 3
1.12 "KHC Offered Asset"........................................... 4
1.13 "Person"...................................................... 4
1.14 "Proceeding".................................................. 4
1.15 "Pledge Agreement"............................................ 4
1.16 "Public Market Sale".......................................... 4
1.17 "Public Offering"............................................. 4
1.18 "Related Person".............................................. 4
1.19 "Securities".................................................. 5
1.20 "Securities Act".............................................. 5
1.21 "SEC"......................................................... 5
1.22 "Specified Affiliates"........................................ 5
1.23 "Stockholders"................................................ 5
1.24 "Subsidiary".................................................. 5
1.25 "Voting Securities"........................................... 5
SECTION 2. FIRST REFUSAL RIGHTS TO PURCHASE ADDITIONAL
SECURITIES................................................... 5
2.1 First Refusal Rights.......................................... 5
2.2 Pro Rata Share................................................ 5
2.3 Company Notice................................................ 5
2.4 Response Notice............................................... 6
2.5 Consummation.................................................. 6
2.6 Termination................................................... 6
SECTION 3. TAG ALONG RIGHTS.............................................. 6
3.1 Rights........................................................ 6
3.2 TAR Offer..................................................... 7
</TABLE>
i
<PAGE>
TABLE OF CONTENTS (Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.3 Acceptance Notice............................................. 7
3.4 Consummation.................................................. 8
3.5 Expenses...................................................... 8
3.6 Nonassignability.............................................. 9
3.7 Termination................................................... 9
SECTION 4. FS AND APOLLO RIGHTS OF FIRST OFFER; FS DRAG-ALONG
RIGHTS; ASSET SALE............................................ 9
4.1 FS Drag-Along Rights; Obligation to Facilitate Sale by FS..... 9
4.2 FS Rights of First Offer...................................... 10
4.3 Apollo Rights of First Offer.................................. 12
4.4 Asset Sale.................................................... 14
SECTION 5. FS AND APOLLO RIGHTS OF FIRST OFFER........................... 15
5.1 KHC Offer..................................................... 15
5.2 Acceptance.................................................... 16
5.3 Rejection..................................................... 17
5.4 Below KHC Target Price Offer.................................. 17
5.5 Termination................................................... 18
SECTION 6. COMPANY BOARD OF DIRECTORS.................................... 18
6.1 The Board..................................................... 18
6.2 Initial Public Offering....................................... 20
6.3 Assignability; Termination.................................... 20
SECTION 7. APPROVAL RIGHTS............................................... 20
7.1 Approval Rights............................................... 20
7.2 Termination................................................... 22
7.3 Non-Assignability............................................. 23
7.4 Specified Board Approvals..................................... 23
7.5 Certificate of Incorporation.................................. 23
SECTION 8. RESTRICTIONS ON SALE OF SECURITIES; REGISTRATION IN
INITIAL PUBLIC OFFERING....................................... 24
8.1 Restrictions on Transfer Generally............................ 24
8.2 Restrictions on Sale of Initial Shares........................ 25
8.3 Apollo Transfer............................................... 25
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS (Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.4 Safeco Pledge Agreement............................................ 25
8.5 Restrictions on Transfer of KHC Capital Stock...................... 26
8.6 Restrictions on Transfer of TKC Capital Stock...................... 26
8.7 Registration in Initial Public Offering; Registration Rights....... 26
8.8 FS Right of First Refusal upon Foreclosure under Pledge Agreement.. 27
8.9 Option to Purchase Additional Common Stock......................... 28
SECTION 9. MISCELLANEOUS...................................................... 28
9.1 Stockholders' Commitment........................................... 28
9.2 Injunctive Relief.................................................. 29
9.3 Severability....................................................... 29
9.4 Governing Law...................................................... 29
9.5 Entire Agreement................................................... 29
9.6 Amendments and Waivers............................................. 29
9.7 Successors and Assigns............................................. 29
9.8 Further Assurances................................................. 29
9.9 Copy of Agreement.................................................. 30
9.10 Headings........................................................... 30
9.11 Counterparts....................................................... 30
9.12 Assignment......................................................... 30
9.13 Notices............................................................ 30
9.14 Legends on Certificates............................................ 31
9.15 Disputes; Resolution............................................... 32
9.16 Effectiveness...................................................... 32
</TABLE>
iii
<PAGE>
SECOND AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
THIS SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement")
is made and entered into as of March 29, 1996 by and among the following
parties: KMS Holding Corporation, a Delaware corporation (the "Company"); FS
Equity Partners III, L.P., a Delaware limited partnership, and FS Equity
Partners International, L.P., a Delaware limited partnership (collectively,
"FS"); The Koll Holding Company, a California corporation ("KHC"), which is a
wholly-owned subsidiary of The Koll Company, a California corporation ("TKC");
TKC; and AP KMS Partners, L.P., a Delaware limited partnership ("Apollo").
R E C I T A L S:
- - - - - - - -
A. In connection with the Company's acquisition of Koll Management
Services, Inc., a Delaware corporation ("KMS"), the Company, FS, KHC and TKC
entered into that certain Stockholders Agreement, dated as of November 23, 1994
(the "Original Agreement").
B. On October 18, 1995, Apollo acquired 635,202 shares (subject to
adjustment) of Company common stock from KHC pursuant to a Stock Purchase
Agreement dated as of that date by and among KHC, TKC and Apollo (the "Apollo
Stock Purchase Agreement") and the Original Agreement was amended and restated
in connection with such acquisition of shares by Apollo (the "Amended
Agreement").
C. Concurrently herewith and on April 1, 1996, FS and Apollo are
acquiring a total of 751,790 and 189,323 shares of Company common stock,
respectively, from KHC pursuant to a Stock Purchase Agreement (the "FS Stock
Purchase Agreement") dated as of the date hereof by and among KHC, TKC and FS
and a Stock Purchase Agreement (the "Second Apollo Stock Purchase Agreement")
dated as of April 1, 1996 by and among KHC, TKC and Apollo (collectively, the
"Stock Purchase Agreements").
D. The parties hereto desire to amend and restate the Amended Agreement
to reflect FS's and Apollo's purchase of Company common stock from KHC, with
such amendment to become effective upon the expiration of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
with respect to the purchase of a total 751,790 shares by FS (which shall take
place at the Second Closing as defined in the FS Stock Purchase Agreement and
such shares shall be deposited under a Trust Agreement dated March 29, 1996 by
and among KHC, TKC, the Company and the Agents pending termination or expiration
of such waiting period).
<PAGE>
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, taking into account the foregoing recitals and in
consideration of the mutual covenants and conditions contained herein, the
parties agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
For purposes of this Agreement, securities of an issuer that are held by
such issuer (i.e., treasury shares) or a Subsidiary (as defined below) of such
issuer shall not be deemed to be "outstanding." As used in this Agreement, the
following capitalized terms shall have the meanings indicated:
1.1 "Additional Securities": Shall mean all Securities; provided,
---------------------
however, that the term "Additional Securities" shall not include the following:
(a) The Initial Shares;
(b) Any Securities that are issued on a proportional basis to all of
the holders of Company Common Stock;
(c) Any Securities that are issued or issuable or reissued or
reissuable to any employee, consultant or independent member of the Board of the
Company or any Subsidiary of the Company pursuant to any employee benefit plan,
arrangement or agreement approved by the Board;
(d) Any Securities that are issued or issuable in connection with any
Public Offering undertaken by the Company;
(e) Any Securities that are issued or issuable in connection with the
acquisition by the Company of any business, business assets or securities from
any Person;
(f) Any Securities issued to any financing source for the Company or
any Subsidiary of the Company (or any assignee of the rights to acquire such
Securities held by any such financing source) other than FS, KHC or any of their
respective Specified Affiliates; or
(g) Any Securities that are issued or issuable upon the exercise of
rights, options or warrants to purchase Securities or upon the conversion or
exchange of Securities convertible into or exchangeable for Securities where a
Stockholder received (or was not required to receive) a Company Notice pursuant
to Section 2.3 of this Agreement.
1.2 "Affiliate": Shall mean an affiliate as such term is defined in Rule
---------
12b-2 of the General Rules and Regulations promulgated by the SEC under the
Exchange Act.
2
<PAGE>
1.3 "Apollo Offered Asset": Shall mean any Securities of the Company
--------------------
owned by Apollo. Any other debt or equity security of the Company or KMS owned
by Apollo may be designated as part of an Apollo Offered Asset in an Apollo
Notice (as defined in Section 4.8 below).
1.4 "Apollo Stock Purchase Agreement": Shall have the meaning set forth
-------------------------------
in the RECITALS to this Agreement.
1.5 "Board": Shall mean the Board of Directors of the Company.
-----
1.6 "Company Common Stock": Shall mean the Company's common stock, $.01
--------------------
par value per share.
1.7 "Escrow and Security Agreement": Shall mean that certain Escrow and
-----------------------------
Security Agreement, dated November __, 1995, among KHC, Apollo and Chemical
Bank.
1.8 "Exchange Act": Shall mean the Securities Exchange Act of 1934, as
------------
amended, together with the rules and regulations promulgated thereunder.
1.9 "FS Offered Asset": Shall mean any Securities of the Company owned
----------------
by FS. Any other debt or equity security of the Company or KMS owned by FS may
be designated as part of an FS Offered Asset in an FS Notice (as defined in
Section 4.3 below.) Subject to Section 4.4, all or substantially all of the
assets of the Company or KMS may also be an FS Offered Asset.
1.10 "FS Pro Rata Share": Shall mean a fraction (i) the numerator of
------------------
which is the total number of Voting Securities then held by either FS or Apollo,
as applicable, and (ii) the denominator of which is the total number of Voting
Securities then held by FS and Apollo.
1.11 "Initial Shares": Shall mean the 5,044,704 shares of Company Common
--------------
Stock issued and outstanding on the effective date hereof and held of record by
the Stockholders as follows (appropriately adjusted in the future to reflect any
subsequent stock dividends, stock splits, reverse stock splits or any similar
transactions):
<TABLE>
<CAPTION>
NUMBER
OF INITIAL
STOCKHOLDER SHARES
-------------------------------------- -----------
<S> <C>
FS Equity Partners III, L.P. 3,157,272
FS Equity Partners International, L.P. 116,870
---------
FS Total 3,274,142
The Koll Holding Company 946,037
AP KMS Partners, L.P. 824,525
---------
Total Initial Shares 5,044,704
=========
</TABLE>
3
<PAGE>
1.12 "KHC Offered Asset": Shall mean any Securities owned by KHC. Any
-----------------
other debt or equity security of the Company or KMS owned by KHC may be
designated as part of a KHC Offered Asset in a KHC Notice (as defined in Section
5.1 below). Company Common Stock subject to options granted by KHC which are
outstanding on the date hereof and listed on Schedule A hereto (the "Outstanding
Options") and held by the optionees (the "Optionees") listed on Schedule A will
not be considered to be a KHC Offered Asset when purchased upon the exercise of
such options provided that the Optionee executes a written undertaking to be and
becomes bound by this Agreement in the same manner and to the same extent as
KHC. Company Common Stock that has been or will be required to be delivered to
Apollo pursuant to the terms of the Apollo Stock Purchase Agreement or Escrow
and Security Agreement or has been pledged to Apollo pursuant to the terms of
the Pledge Agreement will not be considered a KHC Offered Asset when and if
acquired by Apollo in accordance with the terms of either such agreement or the
enforcement of Apollo's rights under either such agreement.
1.13 "Person": Shall mean any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
other entity.
1.14 "Proceeding": Shall mean any (a) insolvency, bankruptcy,
----------
receivership, conservatorship, liquidation, reorganization, readjustment,
composition or other similar proceeding relating to either the Company or KMS,
whether under any bankruptcy, reorganization or insolvency law or laws, federal
or state, or any laws, federal or state, relating to default of debtors,
readjustment of indebtedness, reorganization, composition or extension, (b)
proceeding for any liquidation, liquidating distribution, distribution or other
winding up of either the Company or KMS, voluntary or involuntary, whether or
not involving insolvency or bankruptcy proceedings, (c) assignment for the
benefit of creditors of the Company or KMS or (d) other marshalling of assets of
the Company or KMS, except that a Proceeding shall not include an involuntary
Proceeding involving the Company or KMS, as the case may be, that is dismissed
or stayed within 60 days after the commencement thereof.
1.15 "Pledge Agreement": Shall mean the Pledge Agreement among KHC, TKC
----------------
and Apollo dated October 18, 1995, as amended and restated on April 1, 1996.
1.16 "Public Market Sale": Shall mean any sale of Securities into the
------------------
public market after the Initial Public Offering which is made pursuant to Rule
144 (including Rule 144(k)) promulgated under the Securities Act or pursuant to
a registration statement filed with and declared effective by the SEC.
1.17 "Public Offering": Shall mean a public offering of Securities of the
---------------
Company registered under the Securities Act. The term "Initial Public Offering"
shall mean an underwritten Public Offering of Voting Securities which results in
gross proceeds to the Company in excess of $15 million from the sale of Voting
Securities.
4
<PAGE>
1.18 "Related Person": Shall mean Related Person as defined in the Apollo
--------------
Stock Purchase Agreement.
1.19 "Securities": Shall mean all (i) Voting Securities, (ii) all rights,
----------
options, warrants to purchase such Voting Securities or the securities described
in the following clause and (iii) all other securities of any type whatsoever
that are, or may become, convertible into or exchangeable for, or that entitle
the holder to purchase, Voting Securities.
1.20 "Securities Act": Shall mean the Securities Act of 1933, as amended,
--------------
together with the rules and regulations promulgated thereunder.
1.21 "SEC": Shall mean the Securities and Exchange Commission.
---
1.22 "Specified Affiliates": Shall mean an Affiliate, a limited or
--------------------
general partner (in their capacity as such), or director, officer or employee of
a specified Person.
1.23 "Stockholders": Shall mean (i) TKC prior to the assignment of the
------------
Initial Shares issued to TKC and, after such assignment, KHC (with the term
"KHC" understood to refer to TKC prior to such assignment), (ii) taken together,
both of the entities included in the term "FS," and (iii) Apollo. For purposes
of consents and approvals under this Agreement, FS shall be considered as one
Stockholder.
1.24 "Subsidiary": Shall mean with respect to any Person, a corporation
----------
or other entity of which shares of stock or other ownership interests having
ordinary voting power to elect a majority of the directors of such corporation,
or other Persons performing similar functions for such entity, are owned,
directly or indirectly, by such Person.
1.25 "Voting Securities": Shall mean all Securities of the Company which
-----------------
possess general voting power to elect members of the Board.
SECTION 2. FIRST REFUSAL RIGHTS TO PURCHASE ADDITIONAL SECURITIES.
2.1 First Refusal Rights. If the Company proposes to issue Additional
--------------------
Securities (a "Proposed Issuance"), the Company shall offer such Additional
Securities to the Stockholders other than KHC (the "PR Holders") and the PR
Holders shall have the right ("First Refusal Rights") to purchase all or any
portion of their Pro Rata Share (as defined below) of such Additional Securities
upon the terms of the Proposed Issuance.
2.2 Pro Rata Share. For purposes of such First Refusal Rights, the "Pro
--------------
Rata Share" of a PR Holder shall mean a fraction (i) the numerator of which
shall be the total number of shares of Voting Securities then held by the PR
Holder and (ii) the denominator of which shall be the total number of shares of
Voting Securities then outstanding.
5
<PAGE>
2.3 Company Notice. The Company shall give each of the PR Holders
--------------
written notice of the Proposed Issuance stating the material terms thereof,
including the type of Additional Securities involved, the proposed purchase
price therefor and the anticipated closing date of such issuance (the "Company
Notice").
2.4 Response Notice. If a PR Holder desires to exercise its First
---------------
Refusal Rights, such PR Holder shall, within 20 days of receipt of the Company
Notice, deliver to the Company written notice stating the portion of such PR
Holder's Pro Rata Share of such Additional Securities that it is willing to
purchase (a "Response Notice"). The PR Holders' Response Notices shall be
deemed to constitute their respective irrevocable agreements to purchase the
specified portions of their Pro Rata Share of the Additional Securities upon the
terms of the Proposed Issuance described in the Company Notice, on the later of
(i) the closing date specified in the Company Notice, or (ii) the closing date
of the Proposed Issuance if Persons who are not PR Holders are purchasing
Additional Securities.
2.5 Consummation. The Company shall have 90 days from the date of the
------------
Company Notice to consummate such Proposed Issuance with respect to the
Additional Securities which are not being purchased by the PR Holders at a price
and upon terms that are not materially less favorable to the Company than the
price and terms specified in the Company Notice, and such price and terms shall
be made available to the PR Holders who have elected to purchase Additional
Securities. If the Company proposes to issue Additional Securities after such
90-day period, or at a price and upon terms which are materially less favorable
to the Company than those specified in the Company Notice, it must again comply
with the procedures set forth in this Section 2.
2.6 Termination. The rights provided to a PR Holder under this Section 2
-----------
shall not be assignable by a PR Holder with the following exceptions: (i)
Apollo may assign First Refusal Rights to its Affiliates (so long as Apollo Real
Estate Advisors, L.P. controls such Affiliates and retains sole power and
authority to make all decisions with respect to all rights and obligations
transferred in connection with any transfer or assignment of Securities
("Controlled Affiliates") and to any Person who purchases more than 50% of
Apollo's Initial Shares, provided that such Person agrees to be and becomes
bound by the terms of this Agreement in the same manner and to the same extent
as Apollo, and (ii) FS may assign First Refusal Rights to an investment fund or
partnership that is an Affiliate of FS (an "FS Fund") provided the FS Fund
executes a written undertaking to be and becomes bound by this Agreement in the
same manner and to the same extent as FS. The rights provided to FS under this
Section 2 shall terminate (i) as to FS at such time as FS shall have sold a
number of Voting Securities which represents at least 50% of FS's Initial Shares
or (ii) upon the consummation of an Initial Public Offering. The rights granted
to Apollo under this Section 2 shall terminate upon the consummation of an
Initial Public Offering.
6
<PAGE>
SECTION 3. TAG ALONG RIGHTS.
3.1 Rights: Without FS's consent, KHC may not sell, assign, transfer or
------
otherwise dispose of its Securities prior to November 23, 1998 (the "Permitted
Sale Date") provided, that FS's consent shall not be required for KHC's delivery
of shares under the Apollo Stock Purchase Agreement, the Stock Purchase
Agreements, the Escrow and Security Agreement or the Pledge Agreement or in
connection with the enforcement of Apollo's rights under the Escrow and Security
Agreement and the Pledge Agreement. Notwithstanding the foregoing, the
Permitted Sale Date shall be accelerated to the date of a Proceeding. Neither
FS nor Apollo nor KHC (each of the foregoing may from time to time be the
"Selling Holder") shall sell or otherwise dispose of to any Person (the "Buyer")
(other than a disposition without payment of consideration to a Specified
Affiliate of FS, Apollo or KHC, as the case may be) any Securities held or
beneficially owned by the Selling Holder unless the Stockholders who are not the
Selling Holder other than KHC (the "Non-Selling Holders"), together with all
other holders of Voting Securities who have rights to participate in sales or
other dispositions of the Voting Securities by any of the Stockholders pursuant
to written agreements by and between such Stockholder and any such holders
(collectively, and together with the Non-Selling Holders, the "Co-Sale Right
Holders"), are given an opportunity to sell or otherwise dispose of to the Buyer
their respective Pro Rata Share (determined in accordance with Section 3.2
below) of any Securities held by such Co-Sale Right Holders (the "Tag Along
Rights"); provided however, no Co-Sale Right Holder shall have Tag Along Rights
in connection with any sale, transfer or delivery of the Company's Common Stock
by KHC pursuant to the terms of the Apollo Stock Purchase Agreement, the Stock
Purchase Agreements, the Escrow and Security Agreement or the Pledge Agreement
or in connection with the enforcement of Apollo's rights under the Escrow and
Security Agreement and the Pledge Agreement or in connection with the exercise
of an Outstanding Option by an Optionee.
3.2 TAR Offer. Prior to the consummation by the Selling Holder of any
---------
sale or other disposition of the Selling Holder's Securities which is subject to
the provisions of Section 3.1, the Selling Holder shall cause the bona fide
offer from the Buyer to purchase or otherwise acquire such Selling Holder's
Securities from the Selling Holder to be reduced to writing (the "TAR Offer")
and shall deliver written notice of the TAR Offer, together with a true copy of
the TAR Offer (the "TAR Notice"), to each of the Co-Sale Right Holders in the
event such proposed sale or other disposition is subject to the Tag Along Rights
(a "TAR Sale"). Each TAR Offer shall include an offer to purchase or otherwise
acquire from each Co-Sale Right Holder (individually, a "TAR Offeree" and
collectively, the "TAR Offerees"), at the same time, at the same price and on
the same terms as apply to the sale or other disposition by the Selling Holder
to the Buyer and according to the terms and subject to the conditions of this
Agreement, not less than the amount of Securities held by such TAR Offeree as
shall be equal to the product of (i) the total number of Securities which the
Buyer desires to purchase or otherwise acquire, times (ii) the TAR Offeree's Pro
Rata Share, which is a fraction, the numerator of which is the total number of
shares of Securities held by such TAR Offeree on the date of the TAR Notice and
the denominator of which is the total number of shares of Securities held on
such date by the Selling Holder and all the TAR
7
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Offerees who elect, pursuant to Section 3.3 below, to accept the TAR Offer with
respect to their Securities. Pursuant to Section 3.4, the Selling Holder may
then sell to the Buyer the number of Securities remaining after the Securities
to be sold by the TAR Offerees are subtracted from the number of Securities to
be sold by the Selling Holder as contained in the TAR Offer.
3.3 Acceptance Notice. If a TAR Offeree desires to accept the TAR Offer
-----------------
with respect to its Securities, such TAR Offeree shall do so by delivering to
the Selling Holder a written notice stating such TAR Offeree's irrevocable
acceptance of the TAR Offer with respect to such TAR Offeree's Securities and
setting forth such amount of the Securities that such TAR Offeree desires to
sell to the Buyer (the "Acceptance Notice"), which Acceptance Notice shall be
delivered to the Selling Holder within 20 days after the delivery of the TAR
Notice to such TAR Offeree. Such Acceptance Notice shall constitute such TAR
Offeree's agreement to sell to the Buyer the lesser of (i) the amount of such
TAR Offeree's Securities which such TAR Offeree is entitled to sell to the Buyer
pursuant to this Section 3 and (ii) the amount of such TAR Offeree's Securities
which such TAR Offeree desires to sell to the Buyer as set forth in such TAR
Offeree's Acceptance Notice. In addition, such Acceptance Notice shall include
(i) a written undertaking of the TAR Offeree to deliver, at least three business
days prior to the expected date of the consummation of such sale or other
disposition to the Buyer as indicated in the TAR Notice, such documents
(including stock assignments and stock certificates, if any) as shall be
reasonably required to transfer the amount of such TAR Offeree's Securities that
such TAR Offeree agrees to sell to the Buyer pursuant to the TAR Offer and (ii)
a limited power-of-attorney authorizing the Selling Holder to transfer such
Securities to the Buyer pursuant to the terms of the TAR Offer. If a TAR
Offeree does not deliver an Acceptance Notice to the Selling Holder in
accordance with the provisions of this Section 3.3, such TAR Offeree shall be
deemed to have irrevocably rejected the TAR Offer.
3.4 Consummation. If there is a decrease in the price to be paid by the
------------
Buyer for the Securities to be sold from the price set forth in the TAR Offer,
which decrease is acceptable to the Selling Holder or other material change in
terms which are less favorable to the Selling Holder but which are acceptable to
the Selling Holder, the Selling Holder shall notify the TAR Offerees of such
decrease or other material terms, and each TAR Offeree shall have five business
days from the date of receipt of the notice of such decrease to reduce the
Securities it will sell to such Buyer as previously indicated in the applicable
Acceptance Notice. The Selling Holder shall act as agent for the TAR Offerees
in connection with such sale or other disposition and shall cause to be remitted
promptly to each of the TAR Offerees the total consideration for the Securities
sold by such TAR Offeree pursuant thereto, which consideration shall be in the
same form as the consideration received by the Selling Holder and shall be net
of such TAR Offeree's applicable portion of the expenses of such sale or other
disposition, as provided in Section 3.5 below. The Selling Holder shall
furnish, or shall cause to be furnished, promptly such other evidence of the
consummation and time of consummation of such sale or other disposition and the
terms thereof as shall be reasonably requested. If the Selling Holder does not
complete such sale or other disposition, the Selling Holder shall return to the
TAR Offerees all documents (including stock assignments and
8
<PAGE>
stock certificates, if any) and powers-of-attorney which the TAR Offerees
delivered to the Selling Holder pursuant to the terms of this Section 3 or
otherwise in connection with such sale or other disposition.
3.5 Expenses. Each Co-Sale Right Holder shall bear such holder's pro
--------
rata share of the reasonable expenses incurred by the Selling Holder in
connection with any sales or other dispositions of such Co-Sale Right Holder's
Securities made pursuant to the Tag Along Rights.
3.6 Nonassignability. The rights granted to FS under this Section 3
----------------
shall not be assignable. Subject to compliance with the terms and conditions of
this Section by the transferring party, neither FS nor Apollo shall exercise the
Tag Along Rights with respect to Securities transferred without consideration
(except such consideration as may be received with respect to the Outstanding
Options) to their respective Specified Affiliates; provided further that any
Specified Affiliate whose Securities are sought to be transferred pursuant to
this Section shall have appointed FS, Apollo or KHC, as the case may be, as
attorney-in-fact with full power and authority to transfer the Securities held
by such Specified Affiliate and to execute all documents as shall be reasonably
required to transfer such Securities to the Buyer. Apollo may assign its rights
under this Section 3 to any Person who purchases more than 50% of Apollo's
Initial Shares, provided that such Person agrees to be and become bound by the
terms of this Agreement in the same manner and to the same extent as Apollo.
3.7 Termination. The rights provided to FS under this Section 3 shall
-----------
terminate upon the earlier of (i) such time as FS shall have sold a number of
shares of Voting Securities which represents at least 50% of FS's Initial Shares
or (ii) upon a declaration of effectiveness of a registration statement for the
Initial Public Offering provided the Initial Public Offering thereafter is
consummated. The rights granted to Apollo under this Section 3 shall terminate
upon a declaration of effectiveness of a registration statement for the Initial
Public Offering provided the Initial Public Offering thereafter is consummated.
SECTION 4. FS AND APOLLO RIGHTS OF FIRST OFFER; FS DRAG-ALONG RIGHTS; ASSET
SALE.
4.1 FS Drag-Along Rights; Obligation to Facilitate Sale by FS. If FS is
---------------------------------------------------------
selling all Securities beneficially owned by FS, then after complying with its
right of first offer obligation under this Section 4 and after Apollo or its
permitted assignee has elected not to accept the offer to purchase such FS
Offered Asset during the FS Acceptance Period or the 20-day period in Section
4.3(b) (or the periods provided in Section 4.3(d)), including if FS proposes to
sell or otherwise dispose of such Securities to a third-party buyer through any
form of transaction, including a merger, exchange, consolidation or stock sale,
all Stockholders shall, at FS's option, sell or otherwise dispose of all
Securities and all other equity or debt securities of the Company and KMS held
or beneficially owned by them pursuant to the terms and conditions negotiated by
FS and for the same consideration for the
9
<PAGE>
sale or other disposition of the FS Securities; provided, however, that this
obligation shall only apply if the price to be received by such Stockholder or
Stockholders for each of its Initial Shares in such transaction is at least
equal to the per share price (the "Initial Share Price") at which such Initial
Shares were originally issued and sold to TKC on the date of the Original
Agreement. Any series of preferred stock held by KHC or Apollo which is not
also being sold by FS shall be purchased for its stated liquidation preference
plus accrued and unpaid dividends and any debt instrument held by KHC or Apollo
not also being sold by FS shall be purchased at its outstanding principal amount
plus accrued and unpaid interest. The exercise price (if any) of a security
sold hereunder shall be deducted from the consideration to be received by a
Stockholder or Stockholders. FS may not exercise its option to require the
other Stockholders to sell Securities and other debt and equity securities (i)
as part of, or in connection with, the sale of assets or businesses of FS or
Affiliates of FS (other than a permitted sale of Securities), (ii) to an
Affiliate of FS, (iii) as part of or in connection with the acquisition of
assets (other than Securities) or businesses by FS or an Affiliate of FS, or
(iv) if the third party offer for the FS Offered Asset is not a bona fide offer.
If FS requires the other Stockholders to sell Securities pursuant to this
Section 4.1, or if the transaction is an Asset Sale (as defined in Section 4.4
below) as a condition to such sale, the general partner of each entity within
the term FS shall reasonably determine in good faith (as evidenced by a
resolution of such general partner's board of directors) that the price to be
paid for such Securities of the Company or KMS is not less than the fair market
value thereof. If after complying with the provisions of this Section 4 and
Section 4.4, if the transaction is an Asset Sale, FS proposes to sell or
otherwise dispose of all of its Securities, or sell all or substantially all of
the assets of the Company's or KMS to a third-party buyer through any form of
transaction, including a merger, exchange, consolidation or stock sale, in a
transaction where FS is exercising its option under this Section 4.1, or
proposes to make an Asset Sale, all Stockholders agree, subject to their receipt
of the Initial Share Price for each Initial Share in such transaction, to cause
their nominees to the Board of the Company (as provided for in Section 6 below),
if any, to approve or consent to any such sale or other disposition (including
an Asset Sale) and to cause them to execute, and all Stockholders shall execute,
such agreements, powers-of-attorney, voting proxies or other documents and
instruments, and take such other actions (including obtaining necessary
governmental approvals), as FS may reasonably request to enforce the obligation
of the other Stockholder or Stockholders to sell or otherwise dispose of their
Securities and other equity and debt securities of the Company and KMS and to
approve and consummate the sale or other disposition of the FS's Securities or
the Company's or KMS's assets in an Asset Sale, including any approval by the
stockholders of the Company in connection with such sale or other disposition.
With respect to any transfers made by any Stockholder of its Securities or other
equity or debt securities of the Company, (i) the obligations of such
Stockholder set forth in this Section 4.1 shall be binding on such Stockholder's
transferees (except for a transferee in a Public Market Sale), including,
without limitation, any transferee purchasing such Securities in connection with
any enforcement action under the Pledge Agreement, and (ii) KHC and Apollo shall
obtain a written commitment to be so bound from such transferee(s) and shall
deliver such written commitment to FS prior to any such transfer. The rights
granted to FS and the obligations of KHC and Apollo and any transferees under
this Section 4.1 shall survive and continue after the consummation of an Initial
Public
10
<PAGE>
Offering (except with respect to a transferee in a Public Market Sale), but
shall not be assignable by FS at any time. Any other provision of this
Agreement notwithstanding, FS shall have no right to compel a sale of Securities
(and other debt and equity securities) held by other Stockholders or cooperation
with an Asset Sale if FS's rights to receive a KHC Notice have terminated
pursuant to Section 5.5.
4.2 FS Rights of First Offer.
------------------------
(a) Apollo Offer. If Apollo determines to solicit, or causes to be
------------
solicited, proposals for the acquisition (whether by means of a sale of stock,
exchange, consolidation or merger) of any Apollo Offered Asset, or receives an
unsolicited offer to so acquire any Apollo Offered Asset and Apollo determines
to pursue such an offer for the acquisition of an Apollo Offered Asset, Apollo
shall first give FS written notice (the "Apollo Notice") of such intention,
which notice shall include a term sheet stating, among other material terms, the
minimum sales price that Apollo would entertain for such Apollo Offered Asset
(the "Apollo Target Price"). FS shall have the right for a period of 20 days
following the delivery of the Apollo Notice (the "Apollo Acceptance Period") to
accept the offer to purchase all but not less than all of such Apollo Offered
Asset at the Apollo Target Price and upon the other terms provided with the
Apollo Notice. Section 4.2 shall not apply to a Public Market Sale.
(b) Acceptance. FS shall, if it so desires, exercise its rights by
----------
delivering to Apollo written notice of its election prior to 5:00 p.m. Los
Angeles time on or before the last day of the Apollo Offeree Acceptance Period.
The acceptance of the offer to purchase all of the Apollo Offered Asset shall
identify the committed source of financing for such purchase or provide evidence
that FS is able to effect the purchase. Apollo and FS shall, as soon as
reasonably possible, negotiate in good faith a definitive acquisition agreement
containing appropriate provisions customary for a transaction of the
contemplated type. If no definitive agreement is agreed upon within 20 days
after negotiations are so commenced, Apollo shall be free to resume its efforts
to sell the relevant Apollo Offered Asset to other prospective buyers in
accordance with Section 4.2(c) below.
(c) Rejection. If FS elects not to exercise its purchase rights
---------
under Section 4.2(a) during the Apollo Acceptance Period or Apollo and FS are
unable to conclude negotiations of a definitive agreement during the 20-day
period described above, Apollo shall have the right for a period of 120 days
thereafter to sell such Apollo Offered Asset or, within such 120-day period, to
enter into a definitive agreement to sell such Apollo Offered Asset within 30
days of the date of such agreement for a sales price equal to or greater than
the Apollo Target Price and upon terms that are not materially less favorable to
Apollo than the terms provided to FS in the Apollo Notice. In connection with
such a sale, Apollo may retain an investment banker to assist it in the sale of
the Apollo Offered Asset.
(d) Below Apollo Target Price Offer. If Apollo receives a written
-------------------------------
offer for such Apollo Offered Asset at any time during such 120-day period which
is acceptable to Apollo but is less than the Apollo Target Price or upon terms
materially less favorable to Apollo than the terms provided to FS in the Apollo
Notice (the "Below Apollo Target Price
11
<PAGE>
Offer"), Apollo shall promptly deliver a copy of such written offer to FS.
During the 10-day period following delivery of such written offer, FS shall have
the right to accept the offer to purchase all, but not less than all, of the
Apollo Offered Asset on the terms reflected in such written offer. FS shall, if
it so desires, exercise such right by delivering to Apollo written notice of its
election prior to 5:00 p.m. Los Angeles time on or before the final day of such
additional 10-day period (and shall identify the committed source of financing
or evidence that FS is able to effect the purchase), and Apollo and FS shall
then negotiate a definitive acquisition agreement, in each case in the manner
contemplated by Section 4.2(b) above. If FS does not elect to accept the offer
to purchase the Apollo Offered Asset on such terms within such 10-day period or
Apollo and FS are unable to conclude negotiations of a definitive agreement
within 15 days of the date of the acceptance of the Below Apollo Target Price
Offer, Apollo shall have 120 days to consummate the sale of the Apollo Offered
Asset at a price and upon terms that are not materially less favorable to Apollo
than the price and terms specified in the written offer delivered to each
Stockholder entitled to receive the offer.
(e) Termination. The rights granted to FS under this Section 4.2
-----------
shall survive and continue after the consummation of the Initial Public Offering
but such rights shall terminate with respect to FS if FS (i) sells, in the
aggregate, to any Person or Persons (other than a Specified Affiliate which
agrees to be and becomes bound by the terms of this Agreement in the same manner
and to the same extent as FS), and/or (ii) distributes to the general and
limited partners of FS after the Initial Public Offering, that number of Voting
Securities held or beneficially owned by FS as shall be equal to 50% of FS's
Initial Shares. The rights granted to FS under this Section 4.2 shall terminate
with respect to an Apollo Offered Asset upon the sale or other disposition
thereof by Apollo to a third party and such third party shall not be bound by
the provisions of this Section 4.2 (but shall be bound by Section 4.1 and
compelled to sell if Apollo is compelled to sell pursuant to either such
section) so long as (i) prior to such sale or other disposition, Apollo first
complied with the provisions of this Section 4.2 and (ii) such sale or other
disposition was consummated in accordance with the provisions of this Section
4.2.
4.3 Apollo Rights of First Offer.
----------------------------
(a) FS Offer. If FS determines to solicit, or causes to be
--------
solicited, proposals for the acquisition (whether by means of a sale of stock,
exchange, consolidation, sale of assets or merger) of any FS Offered Asset, or
receives an unsolicited offer to so acquire any FS Offered Asset and FS
determines to pursue such an offer for the acquisition of an FS Offered Asset,
FS shall first give Apollo written notice (the "FS Notice") of such intention,
which notice shall include a term sheet stating, among other material terms, the
minimum sales price that FS would entertain for such FS Offered Asset (the "FS
Target Price"). Apollo shall have the right for a period of 20 days following
the delivery of the FS Notice (the "FS Acceptance Period") to accept the offer
to purchase all but not less than all of such FS Offered Asset at the FS Target
Price and upon the other terms provided with the FS Notice. Section 4.3 shall
not apply to a Public Market Sale.
12
<PAGE>
(b) Acceptance. Apollo shall, if it so desires, exercise its rights
----------
by delivering to FS written notice of its election prior to 5:00 p.m. Los
Angeles time on or before the last day of the FS Acceptance Period. The
acceptance of the offer to purchase all of the FS Offered Asset shall identify
the committed source of financing for such purchase or provide evidence that
Apollo is able to effect the purchase. FS and Apollo shall, as soon as
reasonably possible, negotiate in good faith a definitive acquisition agreement
containing appropriate provisions customary for a transaction of the
contemplated type. If no definitive agreement is agreed upon within 20 days
after negotiations are so commenced, FS shall be free to resume its efforts to
sell the relevant FS Offered Asset to other prospective buyers in accordance
with Section 4.3(c) below.
(c) Rejection. If Apollo elects not to exercise its purchase rights
---------
under Section 4.3(a) during the FS Acceptance Period, or FS and Apollo are
unable to conclude negotiations of a definitive agreement during the 20 day
period described above, FS shall have the right for a period of 120 days
thereafter to sell such FS Offered Asset or, within such 120-day period, to
enter into a definitive agreement to sell such FS Offered Asset within 30 days
of the date of such agreement for a sales price equal to or greater than the FS
Target Price and upon terms that are not materially less favorable to FS than
the terms provided to Apollo in the FS Notice. In connection with such a sale,
FS may retain an investment banker to assist it in the sale of the Offered
Asset.
(d) Below FS Target Price Offer. If FS receives a written offer for
---------------------------
such FS Offered Asset at any time during such 120-day period which is acceptable
to FS but is less than the FS Target Price or upon terms materially less
favorable to FS than the terms provided to Apollo in the FS Notice (the "Below
FS Target Price Offer"), FS shall promptly deliver a copy of such written offer
to Apollo. During the 10-day period following delivery of such written offer,
Apollo shall have the right to accept the offer to purchase all, but not less
than all, of the FS Offered Asset on the terms reflected in such written offer.
Apollo shall, if it so desires, exercise such right by delivering to FS written
notice of its election prior to 5:00 p.m. Los Angeles time on or before the
final day of such additional 10-day period (and shall identify the committed
source of financing or evidence that Apollo is able to effect the purchase) and
FS and Apollo shall then negotiate a definitive acquisition agreement, in each
case in the manner contemplated by Section 4.3(b) above. If Apollo does not
elect to accept the offer to purchase the FS Offered Asset on such terms within
such 10-day period or FS and Apollo are unable to conclude negotiations of a
definitive agreement within 15 days of the date of the acceptance of the Below
FS Target Price Offer, FS shall have 120 days to consummate the sale of the FS
Offered Asset at a price and upon terms that are not materially less favorable
to FS than the price and terms specified in the written offer delivered to each
Stockholder entitled to receive the offer.
(e) FS Acquiring Parties' Bring-Along Obligation. Prior to the
--------------------------------------------
Initial Public Offering, if a Person who is an assignee or transferee of
Apollo's rights under this Section 4.3 upon an assignment or transfer of more
than 50% of Apollo's Initial Shares, acquires an FS Offered Asset (the "FS
Acquiring Parties") from FS in accordance with the provisions of this Section 4
and such acquisition involves the acquisition of all Securities
13
<PAGE>
beneficially owned by FS, whether by merger, exchange, consolidation or stock
sale, then (a) such Stockholder or Stockholders or Person shall offer to
purchase, at the same price and on the same terms that applied to such purchase
by such Person, any Securities then beneficially owned by any financing source
for the Company (other than the FS Acquiring Parties or their Specified
Affiliates who are not employees of the Company or a Subsidiary), any equity
investor in the Company (including Apollo), any employees or consultants of the
Company or any Subsidiary who acquired any such Securities from the Company or
any other Security holder of the Company (collectively, the "BAR Holders"), and
(b) the BAR Holders may sell to such FS Acquiring Parties all the Securities
beneficially owned by them at the price and on the terms so offered by such FS
Acquiring Parties. The FS Acquiring Parties shall be further obligated to
purchase or retire any other equity or debt securities of the Company then
beneficially owned by any BAR Holder on the same terms set forth in the FS
Notice; provided that any series of preferred stock not included in an FS Notice
shall be purchased for its stated liquidation preference plus accrued and unpaid
dividends; provided, further, that the exercise price (if any) of a security
sold hereunder shall be deducted from the consideration to be received by any
BAR Holders. Any sale by any BAR Holder pursuant to the foregoing shall be
consummated contemporaneously with the sale of all Securities beneficially owned
by FS. The FS Acquiring Parties shall purchase the foregoing securities in the
same proportions as they are purchasing the FS Offered Asset.
(f) Termination. The rights granted to Apollo under this Section 4.3
-----------
shall survive and continue after the consummation of the Initial Public Offering
but such rights shall terminate with respect to Apollo (but not with respect to
any assignee or transferee of more than 50% of Apollo's Initial Shares) if
Apollo sells, transfers or distributes in the aggregate, to any Person or
Persons (other than Controlled Affiliates of Apollo) that number of Voting
Securities held or beneficially owned by Apollo as shall be equal to 50% of
Apollo's Initial Shares. Such termination of Apollo's rights shall not affect
the rights granted to FS and the obligations of Apollo under Section 4.1 or its
transferees under Section 4.3(e). The rights granted to Apollo under this
Section 4.3 shall terminate with respect to an FS Offered Asset upon the sale or
other disposition thereof by Apollo to a third party and such third party shall
not be bound by the provisions of this Section 4.3 (but shall be bound by
Section 4.1 and compelled to sell if any Stockholder is compelled to sell
pursuant to such section) so long as (i) prior to such sale or other
disposition, FS first complied with the provisions of this Section 4.3 and (ii)
such sale or other disposition was consummated in accordance with the provisions
of this Section 4.3. Apollo may assign its rights under this Section 4.3 to any
Person who purchases more than 50% of Apollo's Initial Shares, provided that
such Person agrees to be and becomes bound by the terms of this Agreement in the
same manner and to the same extent as Apollo and further agrees to be bound by
the bring-along obligation applicable to such Person (but not Apollo) in Section
4.3(e), but such rights shall not be assignable after consummation of an Initial
Public Offering.
4.4 Asset Sale. If FS receives an unsolicited offer to purchase all or
----------
substantially all of the assets of the Company or KMS (collectively, an "Asset
Sale") which FS wishes to accept or if an FS Notice (or notice of a Below FS
Target Price Offer) is for a proposed Asset Sale, the FS Offered Asset shall, at
the option of Apollo, if Apollo elects to accept the
14
<PAGE>
offer, be either such assets or all Securities and other debt or equity
securities of the Company and KMS held by FS; provided, however, that after the
Initial Public Offering, Apollo shall only have the option to purchase all
Securities and other debt or equity securities of the Company and KMS held by FS
(and assuming FS wishes to accept the offer for the Asset Sale). The FS Notice
(or the notice of a Below FS Target Price Offer) shall specify the price for the
Asset Sale, and Apollo may, prior to the Initial Public Offering, either (i)
purchase all, but not less than all, of the assets described in the FS Notice
(or the notice of a Below FS Target Price Offer), provided that all of the
assets described in the applicable notice are purchased, or (ii) purchase all
Securities and other debt or equity securities of the Company and KMS owned by
FS, provided that all Securities and other debt or equity securities of the
Company and KMS owned by FS are purchased at the fair market value thereof
determined from the proposed price for the Asset Sale, which shall be determined
in good faith and included in the applicable offer or notice, taking due
consideration of corporate taxes on an Asset Sale. After the Initial Public
Offering, Apollo may only purchase all Securities and other debt and equity
securities of the Company and KMS held by FS (and assuming FS wishes to accept
the offer for the Asset Sale), provided that all Securities and other debt or
equity securities of the Company and KMS owned by FS are purchased. If Apollo
objects to such fair market value determination and the price for such
Securities and other debt and equity securities, a representative of Apollo must
notify FS of its objection within ten days of receipt of the FS Notice (or the
notice of a Below FS Target Price Offer) or the fair market value determination
shall be deemed accepted. If Apollo timely objects, the fair market value
determination and the price for all Securities and other debt and equity
securities of the Company and KMS owned by FS shall be determined by an
investment banking firm of nationally-recognized standing jointly selected by FS
and Apollo or in the absence of agreement on such selection, by Houlihan, Lokey,
Howard & Zukin ("HLHZ"). The determination of the investment banking firm shall
be binding on all parties. The cost of such investment banking determination
shall be borne by the offering party or parties if the determination results in
a lower price for the Securities and debt and equity securities of the Company
and KMS owned by FS and shall be borne by Apollo if such determination results
in the same or a higher price. If Apollo does not purchase the FS Offered Asset
(or Securities and debt and equity securities of the Company and KMS owned by
FS), the sale transaction may be in the form of an Asset Sale and the
obligations of Section 4.1 to cooperate with and facilitate such transaction
shall apply to such Asset Sale; provided, however, that such obligations shall
only be applicable if the price to be received by a party after consummation of
such transaction for each of its Initial Shares is at least equal to the Initial
Share Price. The rights granted to Apollo pursuant to this Section 4.4 shall
not preclude the enforcement of security interests or other creditors' rights by
any lender to or creditor of the Company or any Subsidiary. The rights granted
to Apollo pursuant to Section 4.4 shall not delay, inhibit, encumber or affect
in any way the exercise of any such security or other creditor's rights granted
by the Company or any Subsidiary of the Company, or the ability of any such
entity to grant such security or other rights to, any such lender or creditor.
15
<PAGE>
SECTION 5. FS AND APOLLO RIGHTS OF FIRST OFFER.
5.1 KHC Offer. If, from and after the Permitted Sale Date, KHC
---------
determines to solicit, or causes to be solicited, proposals for the acquisition
(whether by means of a sale of stock, exchange, consolidation, or merger) of any
KHC Offered Asset, or receives an unsolicited offer to so acquire any KHC
Offered Asset and KHC determines to pursue such an offer for the acquisition of
a KHC Offered Asset, KHC shall first give FS and Apollo written notice (the "KHC
Notice") of such intention, which notice shall include a term sheet stating,
among other material terms, the minimum sales price that KHC would entertain for
such KHC Offered Asset (the "KHC Target Price"). FS and Apollo shall have the
right for a period of 20 days following the delivery of the KHC Notice (the "KHC
Offeree Acceptance Period") to accept the offer to purchase all but not less
than all of their respective FS Pro Rata Share of such KHC Offered Asset at the
KHC Target Price and upon the other terms provided with the KHC Notice, provided
that all and not less than all of the KHC Offered Asset is purchased. FS and
Apollo will have the right to purchase all of the unsubscribed portion of the
KHC Offered Asset on a pro rata basis in accordance with the number of shares of
Voting Securities owned by the party or parties who have elected to purchase
their FS Pro Rata Share of the KHC Offered Asset. The foregoing
notwithstanding, if the KHC Offered Asset is Voting Securities held by an
Optionee (with the defined term KHC understood under such circumstances to refer
to such Optionee) which were acquired upon the exercise of an Outstanding
Option, the Optionee shall first submit the KHC Notice to FS, Apollo and KHC,
and KHC shall then have 15 days to acquire all but not less than all of the
Voting Securities described in the KHC Notice on the terms and for the KHC
Target Price described in the KHC Notice and after such 15-day period KHC's
rights under this Section 5.1 with respect to the offered Voting Securities of
the Optionee shall terminate. FS and Apollo shall have the right for a period
of 15 days following the termination of KHC's rights (in this case also, the
"KHC Offeree Acceptance Period"), to accept the offer to purchase all but not
less than all of their respective FS Pro Rata Share of the Voting Securities
described in the KHC Notice at the KHC Target Price and upon the other terms
provided in this Section 5.1 and in the KHC Notice, provided that all and not
less than all of the KHC Offered Asset is purchased. FS or Apollo (as the case
may be) will have the right to purchase the other's unsubscribed portion of its
FS Pro Rata Share of the KHC Offered Asset. If FS and Apollo elect not to
purchase the Voting Securities described in the KHC Notice, Section 5.2 through
5.4 shall thereafter apply to the benefit of FS and Apollo with respect to the
sale of the Voting Securities held by an Optionee described in the KHC Notice.
Section 5.1 shall not apply to a Public Market Sale.
5.2 Acceptance. Each Stockholder entitled to receive the KHC Notice
----------
shall, if it so desires, exercise such right by delivering written notice of its
election prior to 5:00 p.m. Los Angeles time on or before the last day of the
KHC Offeree Acceptance Period. The acceptance of the offer to purchase all of
the KHC Offered Asset shall identify the committed source of financing for such
purchase or provide evidence that each Stockholder which is accepting the offer
is able to effect the purchase. KHC and the Stockholder which is accepting the
largest portion of the KHC Offered Asset ("KHC Major Stockholder") shall, as
soon as reasonably possible, negotiate in good faith a definitive acquisition
agreement
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containing appropriate provisions customary for a transaction of the
contemplated type (with the other Stockholders subject to and obligated to
accept the terms negotiated by the KHC Major Stockholder); provided, however,
that if the KHC Major Stockholder which is accepting the offer is unable to
conclude the negotiation of such definitive agreement within 20 days of delivery
of acceptance of the offer (the "KHC Negotiation Period") KHC shall offer the
portion of the KHC Offered Asset that the KHC Major Stockholder (the "Remaining
Portion") agreed to acquire (but did not acquire) to the other Stockholder(s)
which have accepted the KHC offer, and such Stockholders shall have the right to
purchase all of the Remaining Portion, in proportion to their Voting Securities
or any other proportion determined by such Stockholders. KHC shall, as soon as
reasonably possible, negotiate in good faith a definitive acquisition agreement
with the stockholder which is now accepting the largest portion of the KHC
Offered Asset (the "KHC Second Major Stockholder") containing appropriate
provisions customary for a transaction of the contemplated type (with any other
Stockholders subject to and obligated to accept the terms so negotiated). If
no definitive agreement is agreed upon within 10 days after negotiations are so
commenced, KHC shall be free to resume its efforts to sell the relevant KHC
Offered Asset to other prospective buyers in accordance with Section 5.3 below.
5.3 Rejection. If the Stockholder or Stockholders entitled to receive
---------
the offer do not elect to accept the offer to purchase such KHC Offered Asset
during the KHC Offeree Acceptance Period or KHC and the KHC Major Stockholder
(or the KHC Second Major Stockholder) which is accepting the offer are unable to
conclude negotiations of a definitive agreement during the KHC Negotiation
Period or the 10-day period described above, KHC shall have the right for a
period of 120 days thereafter to sell such KHC Offered Asset or, within such
120-day period, to enter into a definitive agreement to sell such KHC Offered
Asset within 30 days of the date of such agreement for a sales price equal to or
greater than the KHC Target Price and upon terms that are not materially less
favorable to KHC than the terms provided to the Stockholder or Stockholders
entitled to receive the KHC Notice. In connection with such a sale, KHC may
retain an investment banker to assist it in the sale of the Offered Asset and
any Securities and debt and equity securities of the Company and KMS.
5.4 Below KHC Target Price Offer. If KHC receives a written offer for
----------------------------
such KHC Offered Asset at any time during such 120-day period which is
acceptable to KHC but is less than the KHC Target Price or upon terms materially
less favorable to KHC than the terms provided to the Stockholder or Stockholders
entitled to receive the KHC Notice (the "Below KHC Target Price Offer"), KHC
shall promptly deliver a copy of such written offer to such Stockholder or
Stockholders. During the 10-day period following delivery of such written
offer, the Stockholder or Stockholders entitled to receive the offer shall have
the right to accept the offer to purchase all, but not less than all, of their
respective FS Pro Rata Share of the KHC Offered Asset on the terms reflected in
such written offer and, if applicable, in accordance with the procedures for
purchase of an unsubscribed for portion described in Section 5.1. Each
Stockholder entitled to receive such offer shall, if it so desires, exercise
such right by delivering to KHC written notice of its election prior to 5:00
p.m. Los Angeles time on or before the final day of such additional 10-day
period (and shall identify the
17
<PAGE>
committed source of financing or evidence that each Stockholder which is
accepting the offer is able to effect the purchase) and KHC and the KHC Major
Stockholder (or KHC Second Major Stockholder, as the case may be) shall then
negotiate a definitive acquisition agreement, in each case in the manner
contemplated by Section 5.2 above. If the Stockholder or Stockholders entitled
to receive the Below KHC Target Price Offer do not elect to accept the offer to
purchase the KHC Offered Asset on such terms within such 10-day period or KHC
and the KHC Major Stockholder is unable to conclude negotiations of a definitive
agreement within 10 days of the date of their acceptance of the Below KHC Target
Price Offer or KHC and the KHC Second Major Stockholders are unable to conclude
negotiations of a definitive agreement within 10 days after negotiations (which
shall be commenced as soon as possible). KHC shall have 120 days to consummate
the sale of the KHC Offered Asset at a price and upon terms that are not
materially less favorable to KHC than the price and terms specified in the
written offer delivered to each Stockholder entitled to receive such offer. The
procedures and rights set forth in Section 5.1 with respect to a KHC Offered
Asset, which consists of Voting Securities held by an Optionee that were
acquired upon the exercise of an Outstanding Option, shall also apply to this
Section 5.4 where the KHC Seller is an Optionee who has received a Below KHC
Target Price Offer, and the 10-day period contemplated by the foregoing
provisions of this Section 5.4 shall not commence until KHC has been given the
opportunity for a period of 10 days to acquire such KHC Offered Asset from the
Optionee at the terms reflected in the Below KHC Target Price Offer.
5.5 Termination. The rights granted to FS and Apollo under this Section
-----------
5 shall survive and continue after the consummation of the Initial Public
Offering but such rights shall terminate with respect to FS if FS (i) sells, in
the aggregate, to any Person or Persons (other than a Specified Affiliate which
agrees to be and becomes bound by the terms of this Agreement in the same manner
and to the same extent as FS), and/or (ii) distributes to the general and
limited partners of FS after the Initial Public Offering, that number of Voting
Securities held or beneficially owned by FS as shall be equal to 50% of FS's
Initial Shares. The rights granted to Apollo under this Section 5 shall
terminate with respect to Apollo (but not with respect to any assignee or
transferee of more than 50% of Apollo's Initial Shares) if Apollo sells, in the
aggregate, to any Person or Persons shares of Voting Securities held or
beneficially owned by Apollo equal to more than 50% of Apollo's Initial Shares.
In addition, the rights granted to FS and Apollo under this Section 5 shall
terminate with respect to a KHC Offered Asset upon the sale or other disposition
thereof by a Stockholder to a third party and such third party shall not be
bound by the provisions of this Section 5 (but shall be bound by Section 4.1 and
compelled to sell if any Stockholder is compelled to sell pursuant to such
Section) so long as (i) prior to such sale or other disposition, such
Stockholder first complied with the provisions of this Section 5 and (ii) such
sale or other disposition was consummated in accordance with the provisions of
this Section 5. The rights granted to FS under this Section 5 shall not be
assignable by FS to any Person (except an FS Fund) unless FS shall have
transferred all of its Securities to such Person, but such rights shall not be
assignable (except to an FS Fund) after consummation of an Initial Public
Offering. Apollo may assign its rights under this Section 5 to any Person who
purchases more than 50% of
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Apollo's Initial Shares, provided that such Person agrees to be and becomes
bound by the terms of this Agreement to the same extent as Apollo.
SECTION 6. COMPANY BOARD OF DIRECTORS.
6.1 The Board. Subject to the terms and conditions of this Section 6, at
---------
each annual or special meeting of stockholders of the Company, or in any written
consent executed in lieu of a stockholder meeting, at or pursuant to which
persons are being elected to fill positions on the Board, FS, Apollo and KHC
agree to exercise, or cause to be exercised, voting rights with respect to the
Voting Securities then owned or held of record or beneficially by each of them
or any Specified Affiliates of each of them in such a manner that seven
candidates are to be elected to the Board, with four of such candidates to be
nominated and elected by FS, one of such candidates to be nominated and elected
by each of Apollo and KHC and one of such candidates who shall be the Chief
Executive Officer of the Company (or if the Company has no Chief Executive
Officer, the most senior executive officer of the Company). This provision
shall continue in force and effect as long as FS holds a majority of the shares
of Voting Securities then held by the Stockholders. In the event that FS does
not hold such majority, then subject to the terms and conditions of this Section
6, at each annual or special meeting of stockholders of the Company, or in any
written consent executed in lieu of a stockholder meeting, at or pursuant to
which persons are being elected to fill positions on the Board, FS, Apollo and
KHC agree to exercise, or cause to be exercised, voting rights with respect to
the Voting Securities then owned or held of record or beneficially by each of
them or any Specified Affiliates of each of them in such a manner that up to
seven candidates to be nominated collectively by FS, KHC and Apollo are elected
to the Board in proportion to FS's, KHC's and Apollo's respective percentage
ownership of outstanding shares of Voting Securities at the time of such
election (rounding up or down to the nearest whole number); provided that in all
such cases Apollo shall be entitled to have elected to the Board at least one
person nominated by Apollo unless Apollo or a purchaser of more than 50% of
Apollo's Initial Shares no longer has the right to nominate a person to the
Board as contemplated in the penultimate sentence of the first paragraph of this
Section 6.1. As an example of the foregoing, if FS held 25% of the outstanding
shares of Voting Securities and KHC and Apollo owned 20% and 10%, respectively,
thereof, FS would be entitled to elect three directors, KHC would be entitled to
elect three directors and Apollo would be entitled to elect one director. After
the death of Donald M. Koll, any nominee of KHC who is not an executive officer
of KMS shall be reasonably acceptable to FS. If Apollo sells more than 50% of
its Initial Shares, it shall lose its right to nominate at least one director
pursuant to this Section 6 unless it sells more than 50% of its Initial Shares
to one purchaser and FS, which in its sole and absolute discretion may withhold
such consent, consents to the transfer of Apollo's right to nominate a member of
the Board of Directors pursuant to Section 6.3, in which case such transferee
may nominate a director. If Apollo loses its right to nominate a director
pursuant to this Section 6.1, Apollo shall cause its nominee to resign.
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If, at any time from and after the date hereof, either FS, Apollo or KHC
shall notify the other of its desire to remove any director previously nominated
by that party or parties to serve on the Board, each of FS, Apollo and KHC agree
to exercise or cause to be exercised voting rights with respect to all Voting
Securities owned or held of record or beneficially by each of them or any
Specified Affiliates of each of them so as to remove such director of the
Company. If at any time from and after the date hereof, any director previously
nominated by either FS, Apollo or KHC to serve on the Board ceases to be a
director (whether by reason of death, resignation, removal or otherwise),
whichever party or parties nominated such director shall be entitled to nominate
a successor director to fill such vacancy if such party is able to then elect
such nominee if an election of all directors were then held and voting conducted
as required pursuant to this Section 6.1. If such party would not be able to
elect such nominee, the party who pursuant to this Section 6.1 shall be entitled
to elect such director shall be entitled to nominate a director to fill such
vacancy, and each of FS, Apollo and KHC agree to exercise their voting rights
with respect to the Voting Securities owned or held of record or beneficially by
each of them or any Specified Affiliates of each of them so as to elect such
nominee as a director of the Company.
The board of directors of KMS and each Subsidiary shall have the same
number of directors elected in the same manner as the Board of Directors of the
Company under this Section 6.1.
6.2 Initial Public Offering. The members of the Board immediately prior
-----------------------
to an Initial Public Offering shall amend the Company's Bylaws to increase the
size of the Board and Stockholders holding a majority of the outstanding shares
of Voting Securities then held by Stockholders shall be entitled to nominate and
have elected to the Board independent members as necessary to comply with
applicable stock exchange or stock market regulations. The members of the Board
immediately prior to an Initial Public Offering shall also amend the Company's
Certificate of Incorporation to increase the Company's authorized capital as
necessary and advisable prior to the Initial Public Offering and FS, Apollo and
KHC shall vote their Voting Securities in favor of such amendment. In the event
the managing underwriter for the Initial Public Offering advises that amendment
of this Agreement is advisable in connection with the Initial Public Offering,
or amendment is necessary to comply with law or the rules and regulations of a
stock exchange or stock market, FS, Apollo and KHC agree to cooperate in good
faith to so amend this Agreement (and the Company's Certificate of Incorporation
and Bylaws (including voting their Voting Securities in favor of such amendment,
if necessary). FS, Apollo and KHC agree that if KMS is to make a Public
Offering of its equity securities, they will first negotiate appropriate
revisions and amendments to this Agreement to ensure that their respective
rights and obligations are preserved to the fullest extent possible.
6.3 Assignability; Termination. With regard to FS, its right to
--------------------------
designate members of the Board of Directors pursuant to Section 6.1 shall not be
assigned or otherwise transferred to a transferee unless FS shall have
transferred all of its Securities to the transferee. KHC may not assign its
right to nominate a director. With the consent of FS (which consent may be
withheld in the sole and absolute discretion of FS), Apollo may
20
<PAGE>
assign its right to have one candidate nominated by Apollo elected to the Board
to a purchaser of more than 50% of Apollo's Initial Shares. Apollo or KHC, as
the case may be, shall no longer have the right to nominate and elect any member
of the Board of Directors pursuant to the first two sentences of Section 6.1 in
the event the ownership by Apollo or KHC, as the case may be, of shares of
Voting Securities falls below 6% of the total outstanding shares of Voting
Securities.
SECTION 7. APPROVAL RIGHTS.
7.1 Approval Rights. The Company shall not take (and shall cause KMS not
---------------
to take) any of the following actions without the affirmative vote or written
consent of at least one of the nominees to the Company's Board of Directors
nominated by FS pursuant to the terms of Section 6 above:
(a) appointment or removal of the chief executive officer of the
Company or KMS;
(b) the issuance or sale by the Company of any Securities where any
such issuance or sale would result in any Person owning greater than 10% of the
Voting Securities of the Company or the issuance or sale by the Company of any
Voting Securities to any Person which owns greater than 10% of the Voting
Securities, except that this clause (b) shall not apply to any issuance or sale
to any financing source for the Company or any Subsidiary of the Company (or any
assignee of the rights to acquire such additional Securities held by any such
financing source) other than FS (or a Specified Affiliate of FS) or KHC (or a
Specified Affiliate of KHC);
(c) any consolidation, combination or merger of the Company or any
Subsidiary with or into any other Person, which consolidation, combination or
merger has a fair market value in excess of $3.0 million;
(d) the sale, assignment, transfer or lease of any assets of the
Company or any Subsidiary with a fair market value in excess of $1.0 million
other than in the ordinary course of business;
(e) the purchase or other acquisition by the Company or any
Subsidiary of assets with a fair market value in excess of $3.0 million other
than in the ordinary course of business;
(f) the entering into, terminating or modifying any contract where
such contract (in the case of an entry into, or termination of such contract),
or a modification to an existing contract, has a value in excess of $3.0 million
except for any such action taken in the ordinary course of business;
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<PAGE>
(g) the involvement by the Company or any Subsidiary in any line of
business other than the line of business currently conducted by KMS and its
Subsidiaries, as such business may evolve in the ordinary course from time to
time;
(h) any transaction with any Stockholder or any Specified Affiliate
of any Stockholder other than transactions that are at least as favorable to the
Company as could have been obtained upon an arms-length basis with a Person who
is not a Stockholder or a Specified Affiliate of a Stockholder (as determined in
the good faith judgment of the Board);
(i) the declaration of any dividends, provided, however, that no
affirmative vote or written consent of any of the nominees to the Company's
Board of Directors nominated by FS shall be required to approve any dividends in
additional shares of Common Stock;
(j) the liquidation or dissolution of the Company or any Subsidiary;
(k) the voluntary bankruptcy of the Company or any Subsidiary;
(l) the appointment or removal of the independent certified public
accountants of the Company or any Subsidiary;
(m) subject to Section 6.3, the amendment of the Company's
Certificate of Incorporation or Bylaws in a manner that would disproportionately
affect in an adverse manner the rights of FS in relation to the other
Stockholders provided that no affirmative vote or written consent of any
nominees to the Company's Board of Directors designated by FS shall be required
to approve any amendment that affects all holders of Company Common Stock in the
same manner;
(n) the repurchase or redemption of any securities of the Company
other than securities which by their terms are required to be repurchased or
redeemed), except for repurchases or redemptions of Securities issued to
employees, consultants or independent members of the Board of the Company or any
Subsidiary of the Company pursuant to any employee benefit plan, arrangement or
agreement approved by the Board;
(o) any significant change in the tax or accounting policies or
principles of the Company or any Subsidiary, except as required by or resulting
from a change in generally accepted accounting principles or law;
(p) the establishment of any committee of the Board.
The Company may not take (and shall cause KMS not to take) any of the
following actions without the affirmative vote or written consent of the nominee
to the Company's Board of Directors designated by Apollo, if any, pursuant to
the terms of Section 6 above: (i) the actions described in Section 7.1(k)
above, (ii) the amendment of the Company's Certificate of Incorporation or
Bylaws in a manner that would disproportionately affect in an
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<PAGE>
adverse manner the rights of Apollo in relation to FS and KHC, provided that no
affirmative vote or written consent of the nominee to the Company's Board of
Directors designated by Apollo shall be required to approve any amendment that
affects all holders of Company Common Stock in the same manner, (iii) except for
any transaction contemplated by this Agreement or identified on Schedule 7.1A,
any transaction with KHC, or any Specified Affiliate of KHC or any Related
Person of KHC or any Specified Affiliate of KHC and (iv) any transaction with FS
or any Specified Affiliate of FS or any Related Person of FS or any Specified
Affiliate of FS that are described on Schedule 7.1B.
7.2 Termination. The approval rights of FS provided for in Section 7.1
-----------
above shall terminate upon the later of (i) consummation of an Initial Public
Offering, or (ii) November 23, 1997. The approval rights provided for in
Section 7.1 above shall terminate as to Apollo upon consummation of an Initial
Public Offering. In addition, with respect to FS or Apollo, such approval
rights shall also terminate upon the earlier to occur of (i) the date FS or
Apollo, as applicable, transfers that number of shares of Voting Securities held
by FS or Apollo, respectively, as is equal to 50% of the Initial Shares held by
FS or Apollo or (ii) the date the number of shares of Voting Securities held by
FS constitutes less than 24% of the total number of outstanding shares of Voting
Securities, or with respect to Apollo, the date the number of shares of Voting
Securities held by Apollo constitutes less than 6% of the total number of
outstanding shares of Voting Securities.
7.3 Non-Assignability. The rights granted under Section 7.1 shall not be
-----------------
assigned or otherwise transferred to any transferee.
7.4 Specified Board Approvals. If the nominees to the Company's Board of
-------------------------
Directors elected by FS approve (i) any consolidation, combination or merger of
the Company or any Subsidiary with or into any other Person under circumstances
in which FS has the right to compel a sale of Securities held by the other
Stockholders in accordance with Section 4.1, (ii) the sale, assignment, transfer
or lease of any assets of the Company or any Subsidiary under circumstances in
which FS has complied with its obligations under Sections 4 and 4.4 and Apollo
has elected not to purchase the assets in the FS Notice prior to the Initial
Public Offering or prior to or after the Initial Public Offering, the Securities
and other debt or equity securities of the Company and KMS as provided in
Section 4.4, (iii) an Initial Public Offering, Apollo and KHC shall cause their
nominees to the Board of Directors elected pursuant to Section 6.1, if any, to
approve such transaction, provided that such obligation shall not apply with
respect to a transaction described in clause (ii) if FS has lost its right to
receive a KHC Notice pursuant to Section 5.5. If the nominee to the Company's
Board of Directors designated by Apollo (or by a purchaser of more than 50% of
Apollo's Initial Shares) desires to effectuate an Initial Public Offering after
October 1, 2000, FS and KHC shall cause their nominees to the Board of Directors
elected pursuant to Section 6.1, if any, to approve such transaction. If FS, in
its sole and absolute discretion, has consented to the transfer of Apollo's
right to nominate a director to a purchaser of more than 50% of Apollo's Initial
Shares, the rights granted to Apollo with respect to an Initial Public Offering
in this Section 7.4 may be exercised by such purchaser, as a stockholder of the
Company, by notice to the Company's Board of Directors; and, upon receipt of
such notice FS and KHC
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<PAGE>
shall cause their nominees to the Board of Directors to approve such
transaction. In the event that such right is exercised by Apollo or Apollo's
purchaser, the Company shall select a nationally recognized underwriter
(reasonably acceptable to Apollo or such purchaser, as the case may be) to
effectuate such offering.
7.5 Certificate of Incorporation. The provisions of Section 6 and
----------------------------
Section 7 shall be included in the Company's Certificate of Incorporation. The
parties agree to cause to be filed within 30 days after the date hereof, an
amendment to the Company's Certificate of Incorporation to include the
provisions of Section 6 and Section 7.
SECTION 8. RESTRICTIONS ON SALE OF SECURITIES; REGISTRATION IN INITIAL PUBLIC
OFFERING
8.1 Restrictions on Transfer Generally.
----------------------------------
(a) Except as permitted by sub-section (b) below, and subject to
Sections 8.2, 8.3 and 8.4, no Stockholder shall sell, assign, transfer,
hypothecate, encumber or otherwise dispose of any Securities, or any right,
title or interest therein, except (i) in compliance with the Securities Act and
all applicable state securities laws and (ii) for sales of Securities expressly
permitted by and in compliance with this Agreement. Any attempt to sell,
assign, transfer, hypothecate, encumber or otherwise dispose of any Securities
not in compliance with this Agreement shall be null and void, and the Company
shall not give effect to any such attempted transaction or transfer. Any
Securities transferred pursuant to the terms and requirements of this Agreement
shall be transferred free and clear of all mortgages, liens, pledges, charges
and security interests or encumbrances, or any obligations or liabilities in
connection therewith. Except as otherwise provided herein, all transferees
(other than a transferee in a Public Market Sale) will be bound by this
Agreement in the same manner and to the same extent as the transferor.
(b) Apollo may pledge any Securities held by it or any of its
Controlled Affiliates to a commercial bank, insurance company or other financial
institution ("Apollo Lender") in connection with an ordinary course of business
borrowing which includes the pledge of a material amount of other securities
held by Apollo or its Controlled Affiliates. Prior to any initiation of any
public or private sale or other proceedings or actions to enforce its security
interest in any Securities pledged to such Apollo Lender, Apollo Lender and
Apollo shall fully comply with Section 4.2 of this Agreement, including, without
limitation, with the provisions of Section 4.2(d) with Apollo Lender subject to
all obligations of Apollo under such Section. If an Apollo Lender or a Person
other than FS purchases such Securities upon enforcement of Apollo Lender's
security interest, such Person shall be bound by the Stockholders Agreement to
the extent Apollo is so bound as if such Person had executed the Stockholders
Agreement, including, without limitation (x) the obligation to provide FS with a
right of first offer with respect to the sale of any such Securities as required
under Section 4.2 and (y) the obligation to comply with the "drag-along"
obligations pursuant to Sections 4.1 of this Agreement. If requested by FS or
the Company, such Apollo Lender or
24
<PAGE>
Person shall execute a written instrument in form and substance reasonably
satisfactory to FS and the Company, assuming Apollo's obligations under this
Agreement. The Apollo Lender and each such Person further must agree that at
such time as it may hold any Initial Shares or Securities, it shall not be
entitled to any of the rights granted to Apollo under Sections 2, 3, 4, 5, 6 and
7 of this Agreement, notwithstanding any other provision of this Agreement which
might provide otherwise. In addition, each Apollo Lender and each such Person
must agree that, prior to the transfer of any Initial Shares or Securities to
the Apollo Lender or such Person, upon enforcement of Apollo Lender's security
interest, Apollo Lender and such Person shall deliver to FS an opinion from
counsel reasonably satisfactory to FS, in a form which is reasonably
satisfactory to counsel for FS, to the effect that the terms of this Agreement,
as modified in this Section 8.1(b) with respect to Apollo lender or such Person,
are binding and enforceable obligations (subject to customary exceptions) of
Apollo Lender or such Person. When and if such pledge is granted, Apollo
represents and warrants to FS that this Section 8.1(b) will be a binding
obligation of Apollo Lender enforceable against Apollo Lender in accordance with
its terms, and does not violate or contravene the terms of the Apollo's Lender's
pledge agreement. Within forty-five days of the date hereof, Apollo shall cause
its counsel to provide a legal opinion, reasonably satisfactory to FS, to the
effect that this Section 8.1(b) is a binding obligation of the Apollo Lender
enforceable against the Apollo Lender in accordance with its terms (subject to
customary exceptions), and does not contravene or violate the pledge agreement
of the Apollo Lender. If Apollo is unable to have such opinion rendered within
the forty-five day period, Apollo shall have such pledge released until such
opinion can be given. Each subsequent Apollo Lender shall agree to be bound by
the terms of this Section 8.1(b). A sale of Apollo Initial Shares upon
enforcement of Apollo Lender's security interest will be considered a sale of
Apollo Initial Shares for purposes of this Agreement. If FS purchases any such
Initial Shares pursuant to any enforcement of Apollo Lender's security interest,
such Initial Shares in the hands of FS shall be considered Initial Shares and
entitled to the same rights and obligations as other Initial Shares in the hands
of FS.
8.2 Restrictions on Sale of Initial Shares. KHC shall not sell any of
--------------------------------------
its Initial Shares prior to the Permitted Sale Date without the prior written
consent of FS. The foregoing provisions of this Section 8.2 shall not be
applicable to any transfer of Securities which are transferred to a Specified
Affiliate without consideration therefor and not for estate planning purposes,
except as provided in this Section 8.2 (except consideration may be received
with respect to the Outstanding Options); provided, however, that such Specified
Affiliate executes a written undertaking to be and becomes bound by this
Agreement in the same manner and to the same extent as the transferring
Stockholder. Any other provision of this Agreement notwithstanding, FS may
distribute its Initial Shares to its general and limited partners and KHC may
distribute its Initial Shares to The Koll Company Stock Trust, the sole
stockholder of TKC (the "Trust"), and to devisees or legatees of the trustees of
the Trust, after the Initial Public Offering, provided that such distributees
execute a written undertaking to be and become bound by this Agreement in the
same manner and to the same extent as the transferring Stockholder.
25
<PAGE>
8.3 Apollo Transfer. Section 8.1 notwithstanding, KHC may pledge (and
---------------
such pledge shall not be deemed a disposition of Initial Shares for any purpose
under the Agreement) its Initial Shares to Apollo, and KHC may transfer its
Initial Shares to Apollo pursuant to the terms of the Stock Purchase Agreement,
the Escrow and Security Agreement and upon the enforcement of Apollo's rights
under the Pledge Agreement.
8.4 Safeco Pledge Agreement. In Section 4.1 of that certain Pledge
-----------------------
Agreement dated November 13, 1995 (the "Safeco Pledge Agreement") by and among
TKC, KHC, Safeco Insurance Company of America ("Safeco") and Raymond E. Wirta
("Wirta"), Safeco agreed to be bound by the following obligations (formerly
included in clause (i) of the first sentence of this Section 8.4 (formerly
Section 9.4)): (x) the obligation to sell such Initial Shares in connection
with the sale of an FS Offered Asset pursuant to the provisions of Section 4.1
(formerly 4.6) of this Agreement and (y) the obligation to provide FS and Apollo
with a right of first offer with respect to the sale of any Initial Shares as
required under Section 5 of this Agreement. These provisions are included to
avoid confusion under the Safeco Pledge Agreement. The parties also note that
the references in Section 4.1 of the Safeco Pledge Agreement to "Section 4.6 of
the Stockholders Agreement" and to "Sections 2, 3, 4, 5, 6, 7 and 8" refer to
Section 4.1 and Section 2, 3, 4, 5, 6 and 7 of this Agreement.
8.5 Restrictions on Transfer of KHC Capital Stock. TKC agrees not to (i)
---------------------------------------------
sell, assign, transfer, hypothecate, pledge, encumber or otherwise dispose of
any capital stock of KHC, or (ii) issue any capital stock or other ownership
interests in KHC, while any rights granted to KHC or any obligations of KHC
hereunder remain in force and effect. TKC will ensure that KHC complies with
its obligations hereunder and agrees to take all actions necessary to cause KHC
to comply with all of KHC's obligations under this Agreement, including, without
limitation, the voting of all KHC shares in a manner which will ensure that KHC
complies with its obligations hereunder. KHC shall have only one class of
capital stock.
8.6 Restrictions on Transfer of TKC Capital Stock. The Trust agrees that
---------------------------------------------
it will not sell, assign, transfer, hypothecate, encumber or otherwise dispose
of TKC voting stock or permit TKC to issue voting stock if the result of such
action causes or might cause the Trust or devisees or legatees of the trustees
of the Trust (together, with the Trust, the "Trust Group") to beneficially own,
control and retain full voting rights with respect to less than 50% of the
securities which possess general voting power to elect members of the Board of
Directors of TKC, unless prior to any such action, all Securities and other debt
and equity securities of the Company then held by TKC are transferred to KHC,
and all right, title and interest in and to the shares of KHC are transferred to
the Trust and/or members of the Trust Group and the Trust and/or such members
deliver an undertaking or undertakings in the form and substance reasonably
satisfactory to FS to be bound by this Agreement to the same extent as TKC is so
bound as if the Trust had executed this Agreement, and containing such other
terms and conditions as may be reasonably required by FS in connection
therewith.
26
<PAGE>
8.7 Registration in Initial Public Offering; Registration Rights. Except
------------------------------------------------------------
as set forth in Apollo's Registration Rights Agreement, neither FS, Apollo nor
KHC may include Voting Securities in the registration statement for the Initial
Public Offering or in a registration statement for a Public Offering filed
within two years of completion of an Initial Public Offering unless KHC (and the
Optionees, with respect to the Outstanding Options), Apollo, and FS, as the case
may be, are given an opportunity to include in such registration (on a
proportionate basis, based on the number of Voting Securities held by FS,
Apollo, KHC and the Optionees, assuming exercise of such Outstanding Options)
Voting Securities at the same price and on the same terms as the sale by KHC,
Apollo or FS, as the case may be. This Section 9.7 shall not apply to a
registration statement filed pursuant to a demand registration requested by FS,
Apollo or KHC, as the case may be, pursuant to the registration rights
agreements (the "Registration Agreements") by and between the Company and each
of FS, Apollo and KHC as in effect on the date hereof.
The Company will, upon any registration rights agreement hereafter becoming
effective (other than the Registration Agreements), extend to FS and Apollo
registration rights no less favorable than those accruing to any stockholder
under such new registration rights agreement, it being the intention of the
parties hereto for the Company to extend to each of FS and Apollo "most favored
nations" treatment with respect to any registration rights that are granted by
the Company.
8.8 FS Right of First Refusal upon Foreclosure under Pledge Agreement.
-----------------------------------------------------------------
Apollo agrees that prior to initiation of any public or private sale or other
proceedings or actions to enforce its security interest in the KHC Initial
Shares pledged to Apollo under the Pledge Agreement, it will provide ten (10)
days prior written notice to FS. At any such public or private sale (including
any sale of which Apollo purchases any such Initial Shares) or other proceeding
at which Initial Shares are sold or transferred, pursuant to the Pledge
Agreement, FS shall have a right of first refusal to purchase all or any part of
such Initial Shares at the same price and subject to the same terms and
conditions at which Apollo or any other Person is purchasing such Initial
Shares, provided that FS shall have fifteen (15) business days after the date of
such sale or transfer to pay the purchase price therefor. If FS purchases any
such Initial Shares held by KHC they shall be considered to be "Initial Shares"
of FS for purposes of this Agreement and if Apollo purchases any such Initial
Shares held by KHC they shall be considered to be "Initial Shares" of Apollo for
purposes of this Agreement, and such Initial Shares in the hands of FS or
Apollo, as the case may be, shall be entitled to the same rights and subject to
the same obligations as the Initial Shares held by FS or Apollo prior to such
purchase. If a Person other than FS or Apollo purchases such Initial Shares
upon enforcement of the security interest granted under the Pledge Agreement,
such Person shall be bound by this Agreement to the extent KHC is so bound as if
such Person had executed this Agreement, including, without limitation, the
obligations described in clause (x) and (y) of clause (i) of the first sentence
of Section 8.4. If requested by FS, Apollo or the Company, such Person shall
execute a written instrument in form and substance reasonably satisfactory to
FS, Apollo or the Company, as the case may be, assuming KHC's obligations under
this Agreement. Each such Person further must agree that at such time as it may
hold any Initial Shares, it shall not be entitled to any of the rights granted
to KHC or Apollo
27
<PAGE>
under Sections 2, 3, 4, 5, 6, and 7 of this Agreement. In addition, prior to
the transfer of any Initial Shares to such Person upon enforcement of Apollo's
security interest in the Initial Shares, Apollo and such Person shall deliver to
FS an opinion (subject to customary exceptions) from counsel reasonably
satisfactory to FS, in a form which is reasonably satisfactory to counsel to FS,
to the effect that the terms of this Agreement, as modified by this Section 8.8
with respect to such Person, are binding and enforceable obligations of such
Person. Apollo and KHC represent and warrant to FS that the Pledge Agreement is
consistent with this Section 8.8 and that the provisions of this Section 8.8 are
binding obligations of KHC and Apollo enforceable against KHC and Apollo in
accordance with their terms. If FS exercises its right of first refusal in this
Section 8.8, or if Apollo or any other Person owns Initial Shares pursuant to
the Pledge Agreement, the Initial Shares so transferred will be considered to be
a sale or transfer by KHC of Initial Shares for all purposes of this Agreement.
The Pledge Agreement shall confer no voting rights on Apollo with respect to the
pledged Initial Shares and shall provide that Apollo will release and terminate
its pledge and all associated liens and encumbrances on pledged Initial Shares
in the event FS has the right to, and compels a sale of such Securities in
accordance with Section 4.1 and shall further provide that Apollo shall ensure
that a Person who purchases Initial Shares under the Pledge Agreement agrees to
be bound by this Agreement.
8.9 Option to Purchase Additional Common Stock. TKC and KHC agree to use
------------------------------------------
their reasonable efforts to cause the termination of the Safeco Pledge Agreement
on or prior to the scheduled termination date of November 13, 1996 (the
"Termination Date"). KHC hereby grants to FS and Apollo an option (the
"Option") to purchase shares of Company common stock beneficially owned by KHC,
provided that this Section 8.9 shall not apply with respect to 100,800 shares
subject to the options of William S. Rothe ("Rothe"). The Option only may be
exercised if the Safeco Pledge Agreement has not been terminated by the
Termination Date. The Option shall terminate 60 days from the later of (i) the
Termination Date or (ii) the date upon which the interest of Apollo in the
Option Shares or any shares of KHC held in escrow is terminated. The exercise
price for each share underlying the Option shall be $14.00, except as provided
below. Proceeds from the sale of any shares sold pursuant to this Section 8.9
shall be used to terminate the Safeco Pledge Agreement. The Option shall be
exercisable first as to any shares of Company common stock which are not Option
Shares (as defined in the FS Stock Purchase Agreement) ("Non-Option Shares") and
then only as to that number of Non-Option Shares which are sufficient to cause
the termination of the Safeco Pledge Agreement. However, if the purchase price
of the Non-Option Shares is not sufficient to cause Safeco to terminate the
Safeco Pledge Agreement, the Option shall be further exercisable up to that
number of Option Shares from KHC which are subject to the option held by Wirta
for a purchase price sufficient to cause Safeco to terminate the Safeco Pledge
Agreement, with the exercise price for the Option Shares being equal to $4.53
per share, but with the Option Shares still being subject to the option of
Wirta. If the aggregate proceeds received by KHC are still insufficient to
cause Safeco to terminate the Safeco Pledge Agreement, FS and Apollo shall
purchase from KHC as many of the remainder rights to the Option Shares subject
to the options of Wirta (but not the options of Rothe) as necessary to cause
Safeco to terminate the Safeco Pledge Agreement by paying KHC $9.47 per share,
in which case any such Option Shares to which the
28
<PAGE>
remainder rights have been purchased by FS and Apollo shall no longer be subject
to the option of Wirta, provided the options of Rothe shall remain unaffected.
FS and Apollo shall be entitled to purchase any additional shares under this
Section 8.9 pro rata based upon the number of shares of Company common stock
purchased under the Stock Purchase Agreements.
SECTION 9. MISCELLANEOUS
9.1 Stockholders' Commitment. The Stockholders shall exercise, or cause
------------------------
to be exercised, voting rights with respect to Voting Securities held or
beneficially owned by them in a manner so that, and shall otherwise take any
necessary actions in order that, the covenants and understandings of the parties
set forth in this Agreement shall be implemented.
9.2 Injunctive Relief. It is acknowledged that it will be impossible to
-----------------
measure in money the damages that would be suffered if the parties hereto fail
to comply with any of the obligations imposed herein on them and that, in the
event of any such failure, an aggrieved party hereto will be irreparably damaged
and will not have an adequate remedy at law. In addition to being entitled to
exercise all rights granted by law, any such party shall, therefore, be entitled
to injunctive relief, including specific performance, to enforce such
obligations, and if any action should be brought in equity to enforce any of the
provisions of this Agreement, none of the parties hereto shall raise the defense
that there is an adequate remedy at law.
9.3 Severability. In case any provision of this Agreement shall be held
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof or thereof will not in any way be effected or
impaired thereby.
9.4 Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with, the laws of the State of Delaware, without
regard to the conflicts of laws principles thereof.
9.5 Entire Agreement. This Agreement and the representations and
----------------
warranties with respect to this Agreement contained in that certain Stock
Subscription Agreement dated as of November 23, 1994, among FS, KHC and the
Company, together with the Registration Agreements, the Agreement, dated May 25,
1994, among FS, KHC, TKC and the Optionees and the Exchange Agreement, dated
July 26, 1994, among the Company, FS, KHC and TKC, the Apollo Stock Purchase
Agreement, the Safeco Pledge Agreement and the Stock Purchase Agreement
constitute the entire agreement and understanding among the parties pertaining
to the subject matter hereof and supersede any and all prior agreements, whether
written or oral, relating hereto.
9.6 Amendments and Waivers. Any amendment of this Agreement or waiver of
----------------------
compliance with any provisions hereof shall be in writing and shall require the
written approval of FS and KHC, provided, that no amendment that would
disproportionately affect
29
<PAGE>
in a material and adverse manner the rights of any Stockholder who owns more
than 5% of the outstanding Voting Securities shall be made without the approval
of such stockholder, provided, further, that such stockholder shall have no
separate approval right if the amendment affects all Stockholders in the same
manner. Any such amendment or waiver so approved in writing shall be binding
upon all of the parties hereto and their respective successors and permitted
assigns.
9.7 Successors and Assigns. This Agreement shall be binding on the
----------------------
parties hereto and their respective permitted successors and permitted assigns.
9.8 Further Assurances. Each party hereto agrees to perform any further
------------------
acts and execute and deliver any documents which may be reasonably necessary to
carry out the intent of this Agreement and to make appropriate changes to the
procedures set forth herein to implement such rights to the extent necessary to
conform to the General Corporation Law of the State of Delaware or other
applicable law. Each party hereto further agrees not to take any action
violating the intent and purpose of this Agreement.
9.9 Copy of Agreement. A copy of this Agreement and all permitted
-----------------
amendments hereto and waivers hereof shall be kept at the principal executive
offices of the Company.
9.10 Headings. The Table of Contents hereto and the introductory headings
--------
at the beginning of each Section and paragraph of this Agreement are solely for
the convenience of the parties and shall not be deemed to be a limitation upon
or description of the contents of this Agreement.
9.11 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
9.12 Assignment. Unless expressly permitted herein, this Agreement and
----------
the rights granted hereunder shall not be assignable.
9.13 Notices. All notices, requests and other communications hereunder
-------
shall be in writing and, if by personal delivery, shall be deemed to have been
validly served, given or delivered upon actual delivery, and, if by facsimile
transmission, shall be deemed to have been validly served, given or delivered
upon transmission and confirmation of receipt thereof, in each case addressed to
the party or parties to be notified, at the following addresses (or such other
address(es) as a party may designate for itself by like notice):
30
<PAGE>
. If to FS:
--------
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
c/o Freeman Spogli & Co. Incorporated
11100 Santa Monica Boulevard, Suite 1900
Los Angeles, California 90025
Facsimile: (310) 444-1870
Attention: William M. Wardlaw
. If to TKC or KHC:
----------------
The Koll Holding Company
4343 Von Karman Avenue
Newport Beach, California 92660
Facsimile: (714) 250-4344
Attention: Raymond E. Wirta
. If to Apollo:
------------
c/o Apollo Real Estate Advisors, L.P.
1301 Avenue of the Americas
38th Floor
New York, New York 10019
Attention: W. Edward Scheetz and Ricardo Koenigsberger
Telecopy: (212) 261-4060
and:
c/o Apollo Real Estate Advisors, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, California 90067
Attention: Michael D. Weiner, Esq.
Telecopy: (310) 201-4166
. If to the Company:
-----------------
KMS Holding Corporation
c/o Freeman Spogli & Co. Incorporated
11100 Santa Monica Boulevard, Suite 1900
Los Angeles, California 90025
Facsimile: (310) 444-1870
Attention: William M. Wardlaw
31
<PAGE>
9.14 Legends on Certificates. Any and all certificates now or hereafter
-----------------------
issued evidencing the Securities governed by this Agreement shall have endorsed
upon them a legend substantially as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
UPON TRANSFER AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE WITH THE TERMS
AND CONDITIONS OF THAT CERTAIN SECOND AMENDED AND RESTATED STOCKHOLDERS
AGREEMENT DATED AS OF MARCH 29, 1996, A COPY OF WHICH AGREEMENT IS ON FILE
AT THE PRINCIPAL EXECUTIVE OFFICES OF KMS HOLDING CORPORATION."
Such certificates shall also bear such legends and shall be subject to such
restrictions on transfer as may be necessary to comply with all applicable
federal and state securities laws and regulations. Certificates evidencing
capital stock of KHC shall bear a legend reflecting the provisions of Section
8.5 of this Agreement.
9.15 Disputes; Resolution. In the event of any dispute among the parties
--------------------
arising out of this Agreement, the prevailing party shall be entitled to recover
from the non-prevailing party the reasonable expenses of the prevailing party,
including, without limitation, reasonable attorneys' fees. The parties hereby
agree that all actions or proceedings arising directly or indirectly hereunder
shall be litigated or otherwise resolved in Southern California and hereby waive
trial by jury, any objection based on forum non conveniens and any objection to
venue of any action instituted hereunder.
9.16 Effectiveness. This Agreement shall become effective upon the
-------------
termination or expiration of the waiting period under the HSR Act with respect
to the purchase of and release from trust of a total of 751,790 shares purchased
by FS under the FS Stock Purchase Agreement. Prior to the effectiveness of this
Agreement, the Amended and Restated Stockholders Agreement dated as of October
18, 1995 shall remain in full force and effect.
32
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
"COMPANY"
KMS HOLDING CORPORATION
By: _______________________________________
Name: William M. Wardlaw
Title: Vice President and Secretary
33
<PAGE>
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT]
"FS"
FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners, L.P.,
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: __________________________________
Name: William M. Wardlaw
Title: Vice President and Secretary
FS EQUITY PARTNERS INTERNATIONAL, L.P.
By: FS&Co. International, L.P.,
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By: ________________________________
Name: William M. Wardlaw
Title: Vice President
34
<PAGE>
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT]
"KHC"
THE KOLL HOLDING COMPANY
By: __________________________________________
Its: _____________________________________
"TKC"
THE KOLL COMPANY
By: __________________________________________
Its: _____________________________________
35
<PAGE>
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT]
"APOLLO"
AP KMS PARTNERS, L.P.,
By: APGP KMS Partners, L.P.
its general partner
By: AP KMS Acquisition Corporation,
its general partner
By: ________________________________
Name: _____________________
Title: _____________________
36
<PAGE>
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT]
For purposes of Section 8.6:
DONALD M. KOLL
_________________________________________________
Donald M. Koll
37
<PAGE>
EXHIBIT 10.19
LICENSE AGREEMENT
-----------------
THIS LICENSE AGREEMENT is dated as of November 23, 1994, by and between THE
KOLL COMPANY, a California corporation ("Licensor"), and KOLL MANAGEMENT
SERVICES, INC., a Delaware corporation ("Licensee"), each sometimes referred to
hereinafter as a "party" or jointly as the "parties" to this Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Licensor owns the name "KOLL" (the "Name") and the trademark and
trade name incorporating the name "KOLL" identified on Exhibit A attached hereto
---------
(the "Logo") for use in the real estate services industry, (the Name and the
Logo shall hereinafter be collectively referred to as the "Licensed Marks");
WHEREAS, Licensor or a subsidiary of Licensor is a significant shareholder
of Licensee;
WHEREAS, Licensee desires a license to use (i) the Name as part of its
trade name or corporate name and (ii) the Licensed Marks in and in connection
with the production, advertising, promotion and sale of, the Licensee Services
(as defined below); and
WHEREAS, Licensor desires to grant Licensee a license so to use the
Licensed Marks.
NOW, THEREFORE, in consideration of the mutual covenants and the
undertakings hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Licensor and Licensee do hereby respectively covenant and agree as follows:
1. Grant of License.
(a) Licensor hereby grants to Licensee, on the terms and conditions
hereinafter set forth, a royalty-free license throughout the world during the
Term (as defined below), to use (i) the Name, solely and only as part of its
trade name, corporate name or the logo identified on Exhibit B and (ii) the
---------
Licensed Marks, solely and only in connection with the production, advertising,
promotion and sale of, the services identified in Exhibit C attached hereto (the
---------
"Licensee Services"). Licensee hereby accepts such license and agrees not to
use the Licensed Marks in any manner inconsistent with the terms and conditions
set forth herein. All rights not expressly granted to Licensee hereunder are
reserved by Licensor.
(b) Notwithstanding the License granted in Subparagraph 1(a) above: (i)
Licensor retains the right to use
1
<PAGE>
and to grant others the right to use Licensed Marks in any manner whatsoever
except in connection with providing Licensee Services and (ii) Licensee hereby
acknowledges and agrees that Licensor may enter into exclusive and nonexclusive
licenses with various Licensees for the use of the Licensed Marks and other
copyrights, trademarks, service marks, tradenames, trade dresses and proprietary
rights of the Licensor; provided that Licensor shall not use the Licensed Marks
and shall not grant to any third party a license to use the Licensed Marks in
connection with providing Licensee Services.
(c) Licensee acknowledges that Licensor owns all right, title and interest
in and to the Licensed Marks throughout the world in any form or embodiment
thereof and is also the owner of the goodwill attached and which shall become
attached to the Licensed Marks. Licensee acknowledges and agrees that it has
not acquired any property rights in or to the Licensed Marks and will not
acquire any property rights in or to the Licensed Marks other than the license
specifically granted herein. Licensee will never challenge Licensor's ownership
of or the validity of the Licensed Marks or any application for registration
thereof, or any copyright or trademark registrations thereof, or any rights of
Licensor therein, or otherwise at any time do or suffer to be done any act or
thing which will in any way jeopardize, dilute or adversely affect any rights of
Licensor in and to the Licensed Marks or any registrations thereof.
(d) Licensee acknowledges that the Licensed Marks have acquired a valuable
secondary meaning and goodwill with the public, and that products bearing and
services marketed under the Licensed Marks have acquired a reputation of high
quality. Accordingly, Licensee undertakes and agrees not to use the Licensed
Marks in any manner whatsoever which, directly or indirectly, would derogate or
detract from their repute or which would demean, ridicule or reflect materially
adversely upon the Licensed Marks or Licensor. Licensee recognizes that the
undertaking on its part set forth in this subparagraph represents a major
inducement and consideration for Licensor to enter into this Agreement.
2. Quality Control and Approval.
(a) In order to assure that the quality of the Licensee Services is
consonant with Licensor's name and with the goodwill associated with Licensor's
business, the following rights are retained by Licensor:
(i) the right to reasonably approve, in writing, in advance each form
and manner in which the Licensed Marks are to be used and displayed; and
(ii) in exercising the right to grant or withhold any approval
required by this Agreement, Licensor may take
2
<PAGE>
into consideration such subjective, aesthetic and other considerations as
Licensor shall in its reasonable discretion determine.
Licensor hereby approves the Licensee Services currently rendered by Licensee
and any and all materials used in connection with such Licensee Services and the
quality thereof and approves the form and manner in which Licensee currently
uses and displays the Licensed Marks.
(b) The reasonable refusal at any point to grant approval pursuant to this
Agreement shall not result in any liability of Licensor on account thereof. The
approvals provided for herein may be granted or withheld as Licensor in its
reasonable discretion may determine. Licensee shall, before utilizing any
materials bearing the Licensed Marks, furnish samples of such materials to
Licensor free of cost, for its express prior written approval. Failure by
Licensor to disapprove in writing such samples furnished to Licensor within ten
(10) business days from the date of Licensor's receipt thereof shall be deemed
approval thereof. After such materials have been approved pursuant to this
Paragraph, Licensee shall not depart therefrom in any material respect without
resubmitting such materials for prior written approval of Licensor in accordance
with this subparagraph (b) and obtaining such approval.
(c) Licensee shall not use any Licensed Mark as part of a trade name or
corporate name other than those set forth in Exhibit D or as may be authorized
---------
in writing by Licensor. Subject to subparagraph 1(b) above, notwithstanding any
other provision of this Agreement, Licensor expressly reserves the right to use
the Name and any version of the Licensed Marks as, or as part of, any trade name
or corporate name of Licensor or with any affiliate of Licensor.
(d) Licensee shall, at its own expense, apply trademark notices or other
markings as may be necessary or appropriate or as Licensor may request in
connection with Licensee's use of each and every one of the Licensed Marks under
the laws or regulations of each country where such Licensed Mark is used.
(e) Licensee agrees that the nature and quality of the Licensee Services
rendered by Licensee in connection with the Licensed Marks shall conform to the
high level of quality associated with the services rendered by Licensor under
the Licensed Marks. Licensee shall use the Licensed Marks licensed to it by
Licensor hereunder, in accordance with such standard of quality and the quality
standards established by Licensor from time to time; provided, however, that any
quality standards established by Licensor after the date of this Agreement shall
be consistent with Licensor's prior quality standards.
3
<PAGE>
(f) Twice per year, or more often if Licensor reasonably believes or
determines that any of the Licensee Services do not meet the required standards
of quality as set forth herein, Licensor or its representatives shall, upon
reasonable notice, have access for quality inspection purposes to the premises
wherein the Licensee Services are produced or rendered during regular business
hours. All expenses of conducting such inspections shall be borne by Licensor,
unless such inspection reveals that the Licensee Services do not comply in all
material respects with the standards of quality set forth herein, in which case
Licensee shall pay all reasonable costs and expenses of carrying out the
inspection.
3. Term of License.
The term (the "Term") of this Agreement shall commence on the date of this
Agreement and shall continue in perpetuity unless and until sooner terminated
pursuant to the provisions hereof.
4. Registration and Protection of Licensed Marks.
(a) Licensee shall fully cooperate with Licensor in protecting all rights
in and to the Licensed Marks. Licensee shall not at any time register or apply
to register for Licensee's benefit any of the Licensed Marks or any modified or
derivative version thereof. Sales by Licensee shall be deemed to have been made
by Licensor for purposes of trademark registration and all uses of the Licensed
Marks by Licensee hereunder shall inure to the benefit of Licensor.
(b) Upon receipt of knowledge thereof, the parties agree to notify each
other in writing promptly of any material act of infringement of or unfair
competition involving any Licensed Mark or any claim by a third party that use
of a Licensed Mark by Licensee infringes the rights of a third party.
Notwithstanding anything to the contrary contained in subparagraph 4(c) or 4(d)
below, neither party shall be authorized to enter into any agreement, consent
order or other resolution of a claim by or against a third party that affects
the Licensee's use of the Licensed Marks without giving the other prior notice
of such proposed agreement, consent order or other resolution. Such other party
shall have the right to approve any such action which materially affects its
rights with respect to the Licensed Marks.
(c) Licensee will at all times have the right to take whatever steps it
deems necessary or desirable to protect the Licensed Marks from harmful or
wrongful activities of third parties solely involving the Licensee Services and
shall have the right to control any litigation or other proceeding undertaken by
it for any such purpose. Licensor will at all times have the right, in its sole
discretion, to take whatever steps it deems
4
<PAGE>
necessary or desirable to protect the Licensed Marks from all other harmful or
wrongful activities of third parties and shall have the right to control any
litigation or other proceeding undertaken by it for such purpose. Licensee will
provide Licensor with prior notice of any legal action it takes to protect the
Licensed Marks and upon reasonable request of Licensor, shall notify Licensor of
the status of such legal action. Each party at its own expense shall have the
right to include the other in such legal proceedings where necessary or
desirable for the conduct thereof, shall keep the other informed of the progress
of such proceedings and shall indemnify and hold harmless such other party from
any costs, expenses, liabilities or damages incurred by such other party as a
result of it being so included in such proceedings.
(d) Notwithstanding the foregoing, if a party desires to commence
litigation or any other proceeding against a third party, and the party having
the right to control the proceeding unreasonably declines to commence such
litigation or proceeding, the party desiring action shall be entitled to
commence and prosecute the litigation or proceeding at its own expense. Unless
otherwise agreed in writing by the parties, the party that commences and
prosecutes any litigation or proceeding to protect the Licensed Marks pursuant
to this Paragraph 4 shall be entitled to all monetary damages and other benefits
received as the result thereof. Each party shall cooperate with the other in
the prosecution of any litigation or proceeding provided for in this Paragraph
4.
5. Indemnification. Licensee does hereby indemnify and agrees to save and
hold Licensor, its affiliates, successors, licensees and assigns, and the
officers, directors, agents and employees of each of them, harmless of and from
any and all liability, claims, causes of action, suits, losses, settlements,
damages, fines, penalties and expenses (including, but not limited to,
reasonable attorneys' fees and expenses) for which they or any of them may
become liable or may incur or be compelled to pay in any action or claim against
them or any of them, by reason of or in connection with (a) any breach or
alleged breach by Licensee of this Agreement, or (b) the use by Licensee of the
Licensed Marks; provided, however, that with respect to any such action or claim
Licensee shall have the right to assume the Licensor's defense in any such
action or claim and/or shall have the right to approve any agreement, consent
order or other resolution with respect to each such action or claim. Licensor
does hereby indemnify and agrees to save and hold Licensee, its affiliates,
successors, licensees and assigns, and the officers, directors, agents and
employees of each of them, harmless of and from any and all liability, claims,
causes of action, suits, losses, settlements, damages, fines, penalties and
expenses (including, but not limited to, reasonable attorneys' fees and
expenses) for which they or any of them may become liable or may incur or be
compelled to pay in any action
5
<PAGE>
or claim against them or any of them, by reason of or in connection with (a) any
breach or alleged breach by Licensor of this Agreement, or (b) the use by
Licensor of the Licensed Marks; provided, however, that with respect to any such
action or claim Licensor shall have the right to assume the Licensee's defense
in any such action or claim and/or shall have the right to approve any
agreement, consent order or other resolution with respect to each such action or
claim.
6. Termination.
(a) Licensor shall have the right to terminate this Agreement without
prejudice to any rights which it may have under the provisions of this
Agreement, in law, or in equity, or otherwise, upon the occurrence of any one or
more of the following events:
(i) If Licensee materially breaches any of its representations,
warranties or agreements hereunder and, with respect to any curable breach
other than any wilful or repeated breach, has not cured such breach within
ten (10) business days after written notice of such breach from Licensor;
(ii) If any court of competent jurisdiction makes a final
determination that the Licensee Services materially violates any laws,
rules or regulations; or
(iii) If Licensee abandons its use of all of the Licensed Marks by
ceasing bona fide commercial use thereof in the ordinary course of trade
for a period of two (2) consecutive years.
(b) If (i) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect to Licensee in an involuntary or voluntary case
under the United States Bankruptcy Code or any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect in the United States or any
foreign jurisdiction, which decree or order is unstayed for a period of thirty
(30) days; or any other similar relief shall be granted under any applicable
federal or state law; (ii) a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over Licensee, or over
all or a substantial part of its property, shall have been entered; or the
involuntary appointment of an interim receiver, trustee or other custodian of
Licensee for all or a substantial part of its property, shall have been made; or
the issuance of a warrant of attachment, execution or similar process against
any substantial part of the property of Licensee, shall have been made, and any
such event in this subpart (ii) shall continue for sixty (60) days unless
dismissed, bonded or discharged; (iii) Licensee makes any assignment for the
benefit
6
<PAGE>
of creditors; or Licensee states in writing its inability to pay its debts as
such debts become due; or Licensee shall commence a voluntary case under the
United States Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect in the United States or any foreign
jurisdiction; or the Board of Directors of Licensee (or any committee thereof)
adopts any resolution or otherwise authorizes action to approve any of the
foregoing in this subpart (iii); or (iv) any order, judgment or decree shall be
entered against Licensee decreeing the dissolution or split up of Licensee and
such order shall remain undischarged or unstayed for a period in excess of
thirty (30) days, Licensor may, at its sole election, terminate this Agreement
forthwith by written notice.
7. Rights on Termination.
(a) Upon termination of this Agreement Licensee shall cease all use of any
and all of the Licensed Marks; provided, however, that for six (6) months
immediately following the termination of this Agreement, Licensee may sell or
otherwise dispose of any materials bearing the Licensed Marks.
(b) Without limiting the foregoing, upon termination of this Agreement, the
parties shall perform all other acts which may be necessary or useful to render
effective the termination of the interest of Licensee in the Licensed Marks, and
the Licensee shall execute any assignment, conveyance, acknowledgement or other
document that the Licensor may require, relinquishing or conveying to Licensor
any and all rights to or interest in the Licensed Marks that Licensee has, and
any goodwill associated therewith.
8. Notices.
Any notice or other communication hereunder must be given in writing and
(a) delivered in person, (b) transmitted by telex, telefax or telecommunications
mechanism or (c) mailed by certified or registered mail, postage prepaid,
receipt requested, as follows:
If to Licensor,
addressed to: The Koll Company
4343 Von Karman Avenue
Newport Beach, CA 92660
Fax: (714) 833-3755
Attention: Ray Wirta
and
If to Licensee,
addressed to: Koll Management Services, Inc.
4343 Von Karman Avenue
Newport Beach, CA 92660
7
<PAGE>
Fax: (714) 476-1215
Attention: President
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Paragraph 8 and an appropriate answerback is received, (ii) if given by mail,
three days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when actually delivered to such address.
9. Assignment.
Neither this Agreement nor the license or other rights granted hereunder
may be assigned or transferred by any act of Licensee or by operation of law
without the prior written approval of Licensor (except to a parent or subsidiary
of Licensee or pursuant to the following sentence), and any attempt by Licensee
to assign or part with possession or control of the license granted hereunder or
any of Licensee's rights hereunder shall constitute a material breach of this
Agreement (except to a parent or subsidiary of Licensee or pursuant to the
following sentence). In the event that Licensee shall merge or consolidate with
or into any other corporation, partnership or business entity or all or
substantially all of Licensee's business and assets shall be transferred in any
manner to any other corporation, partnership or business entity, such successor
shall thereupon succeed to, and be subject to, all rights, interests, duties and
obligations of Licensee hereunder. Notwithstanding the foregoing, Licensee
shall remain liable with respect to any duties or obligations transferred or
assigned by Licensee as permitted hereunder. Licensor shall have the right to
assign this Agreement or any part thereof, in which event Licensor shall be
relieved of any and all obligations hereunder, provided such assignee shall
assume this Agreement and all of the Licensor's respective rights and
obligations hereunder in writing. Except as otherwise provided herein, this
Agreement shall inure to the benefit of and shall be binding upon the parties
and their respective successors and assigns.
10. Representation and Warranty.
Licensor represents and warrants that it has the right to grant the license
granted herein and has not granted to any person or business any license or
right to use any of the Licensed Marks in connection with the Licensee Services
during the Term, but makes no warranty as to the right of Licensee against third
parties to use any trademark not covered by a valid registration, and makes no
other representations or warranties.
8
<PAGE>
11. Remedies; Injunctive Relief.
To the extent permitted by law and except as otherwise expressly provided
herein, all rights and remedies existing under this Agreement and any related
agreements or documents are cumulative to, and not exclusive of, any rights or
remedies otherwise available under applicable law. Licensee acknowledges and
agrees that the Licensor would be irreparably (but not necessarily materially)
damaged by its breach of the terms of this Agreement. It is accordingly
expressly agreed that any such breach shall entitle the Licensor, in addition to
any other remedies available to it, to an injunction or injunctions to prevent
such breaches and to enforce specifically the terms and provisions hereof in any
court having jurisdiction.
12. Attorneys' Fees.
In the event of any claim or cause of action for the breach of this
Agreement or a misrepresentation by any party, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and expenses incurred in any such
claim or cause of action.
13. Relationship of the Parties.
Except as may be expressly provided herein, this Agreement does not
constitute either party, and neither party shall represent itself as, the agent
of the other, or create a partnership or joint venture between the parties, and
neither party shall have the power to obligate or bind the other in any manner
whatsoever.
14. Entire Agreement.
This Agreement contains the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof, supersedes all prior
oral and written understandings, arrangements and agreements relating thereto,
and may not be modified, amended, extended, discharged or terminated orally.
15. Governing Law.
This Agreement and the legal relations between the parties shall be
governed by and construed in accordance with the laws of the State of California
applicable to contracts made and performed in such State and without regard to
conflicts of law doctrines except to the extent set forth below. Any and all
disputes, controversies and claims between the parties pertaining to Licensor's
ownership of or the validity of the Licensed Marks or any registration thereof
or any application for registration thereof shall be governed by and construed
in accordance with the federal trademark and copyright laws and related laws,
statutes, rules and regulations of the United States unless there are no
9
<PAGE>
federal laws, statutes, rules or regulations dispositive of such disputes,
controversies and claims, in which case any and all such disputes, controversies
and claims shall be governed by and construed in accordance with the laws of the
State of California.
16. Consent to Jurisdiction; Service of Process; Venue.
Licensor and Licensee hereby irrevocably and unconditionally (i) consent to
the submission to the exclusive jurisdiction of the courts of the State of
California and of the United States of America located in Orange County,
California for any actions, suits or proceedings arising out of or relating to
this Agreement and the transactions contemplated by this Agreement, (ii) agree
not to commence any action, suit or proceeding relating thereto except in such
courts and in accordance with the provisions of this Agreement, (iii) agree that
service of any process, summons, notice or document by U.S. registered mail or
as otherwise provided in this Agreement shall be effective service of process
for any action, suit or proceeding brought in any such court, (iv) waive any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated by this Agreement in the
courts of the State of California or the United States of America located in
Orange County, California, and (v) agree 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.
17. Amendments; Waivers.
This Agreement and any annex, schedule or exhibit attached hereto may be
amended only by agreement in writing of all parties. No waiver of any provision
nor consent to any exception to the terms of this Agreement or any other
agreement contemplated hereby shall be effective unless in writing and signed by
the party to be bound, and then only for the specific purpose, extent and
instance so provided. Failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of such rights, and a waiver by
either party of a default hereunder in any instance shall not be construed as
constituting a continuing waiver or as a waiver in other instances.
18. Severability.
If any provision of this Agreement is determined to be invalid, illegal or
unenforceable, the remaining provisions of this Agreement shall remain in full
force and effect provided that the economic and legal substance of the
transactions contemplated is not affected in any manner materially adverse to
any party. In the event of any such determination, the parties agree to
negotiate in good faith to modify this Agreement to fulfill as closely as
possible the original intent and purposes
10
<PAGE>
hereof. To the extent permitted by law, the parties hereby to the same extent
waive any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this License
Agreement the day and year first above written.
THE KOLL COMPANY
By:
--------------------------
Title:
-----------------------
KOLL MANAGEMENT SERVICES, INC.
By:
--------------------------
Title:
-----------------------
12
<PAGE>
EXHIBIT 10.20
OFFICE BUILDING LEASE
This OFFICE BUILDING LEASE ("Lease") is entered into as of the 13 day of April,
1995 by and between Koll Center Newport Number 14, a California General
Partnership, ("Landlord"), and Koll Management Services, Inc., a Delaware
Corporation ("Tenant").
1. BASIC LEASE TERMS. For purposes of this Lease, the following terms have the
following definitions and meanings:
(a) Landlord: Koll Center Newport Number 14, a California General Partnership.
(b) Landlord's Address (For Notices):
4350 Von Karman Avenue, Suite 100
Newport Beach, California 92660 Attention: KCN 14 Manager
or such other place as Landlord may from time to time designate by notice
to Tenant.
(c) Tenant: Koll Management Services, Inc., a Delaware corporation.
(d) Tenant's Address (Premises):
5000 Birch Street, Suite 8000
Newport Beach, California 92660 Attention: Lynda McMillen
(e) Development: The parcel(s) of real property commonly known as Koll Center
Newport and located in the City of Newport Beach (the "City"), County of Orange
(the "County"), State of California ("State"), as shown on the site plan
attached hereto as Exhibit "A-I".
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(f) Building: One ten (10) and one six (6) story office tower located within
the Development,which Building contains approximately 294,792 Rentable Square
Feet (subject to adjustment as provided in Exhibit "B"), with the street address
-----------
of 5000 Birch Street, Newport Beach, CA 92660.
(g) Premises: Those certain premises known as Suite 8000 as generally shown on
the floor plan(s) attached hereto as Exhibit "A-II", located on the eighth (8th)
--------------
floor of the Building, which Premises contains approximately 19,032 Rentable
Square Feet and 18,010 Usable Square Feet (subject to adjustment as provided in
Exhibit "B" and Exhibit "D").
- ----------- -----------
(h) Tenant's Percentage: Tenant's percentage of the Building on a Rentable
Square Foot basis, which initially is 6.4561%, subject to Paragraph 44 and
subject to final determination as provided in Exhibit "B" and Exhibit "D".
----------- -----------
(i) Term: Five (5) Lease Years subject to Paragraph 42.
(j) Estimated Commencement Date: June 5, 1995.
<PAGE>
Estimated Expiration Date: June 4, 2000.
(k) Commencement Date: The date on which the Term of this Lease will commence
as determined in accordance with the provisions of Exhibit "C" and as stated on
-----------
Exhibit "D".
- -----------
(l) Initial Monthly Base Rent: $25,693.20, subject to adjustment as provided in
Subparagraph 1(m) below and as otherwise provided in this Lease subject to
Paragraph 44.
(m) Adjustment to Monthly Base Rent: Monthly Base Rent will be adjusted in
accordance with the following:
<TABLE>
<CAPTION>
LEASE YEAR OR MONTHS MONTHLY BASE RENT
<S> <C>
Months 1-12 $1.35 per rentable square foot
per month;/(1)/
Months 13-24 $1.40 per rentable square foot
per month;
Months 25-36 $1.45 per rentable square foot
per month;
Months 37-48 $1.50 per rentable square foot
per month;
Months 49-60 $1.55 per rentable square foot
per month.
</TABLE>
- -----------------
/(1)/ Subject to Addendum of Office Building Lease, Item #44
(n) Operating Expense Allowance: Operating Expense Allowance means that portion
of Tenant's Percentage of Operating Expenses as described in Paragraph 6 below
which Landlord has included in Monthly Base Rent, which, for purposes of this
Lease, will be an amount equal to Tenant's Percentage of Operating Expenses for
the Building for the 1995 calendar year.
(o) Security Deposit: N/A.
(p) Tenant Improvements: All tenant improvements installed or to be installed
by Landlord or Tenant within the Premises to prepare the Premises for occupancy
pursuant to the terms of the Work Letter Agreement attached hereto as Exhibit
-------
"C".
- ---
(q) OMITTED.
(r) Permitted Use: General office use consistent with other Class "A" office
uses at Koll Center Newport and no other use without the express written consent
of Landlord, which consent Landlord may withhold in its sole but reasonable
discretion.
(s) Parking: Up to seventy-two (72) unreserved employee parking spaces at
$15.00 per space per month for the initial Lease Term and up to ten (10)
reserved parking spaces at $50.00 per
<PAGE>
space per month for the initial Lease subject to the terms and conditions of
Paragraph 32 below and the Rules and Regulations regarding parking contained in
Exhibit "H".
- -----------
(t) Broker(s): Koll Marketing Group and Koll Corporate Advisory Group (KCAG).
KCAG shall be paid a commission in the amount of $32,213.34.
(u) Guarantor(s): N/A.
(v) Interest Rate: shall mean the greater of ten percent (10%) per annum or two
percent (2%) in excess of the prime lending or reference rate of Wells Fargo
Bank N.A. or any successor bank in effect on the twenty-fifth (25th) day of the
calendar month immediately prior to the event giving rise to the Interest Rate
imposition; provided, however, the Interest Rate will in no event exceed the
maximum interest rate permitted to be charged by applicable law.
(w) Exhibits: "A-I" through "H", inclusive, which Exhibits are attached to this
Lease and incorporated herein by this reference. As provided in Paragraph 3
below, a completed version of Exhibit "D" will be delivered to Tenant after
-----------
Landlord delivers possession of the Premises to Tenant.
(x) Addendum Paragraphs: 40 through 48, inclusive, which Addendum Paragraphs
are attached to this Lease and incorporated herein by this reference.
This Paragraph 1 represents a summary of the basic terms and definitions of this
Lease. In the event of any inconsistency between the terms contained in this
Paragraph 1 and any specific provision of this Lease, the terms of the more
specific provision shall prevail.
2. PREMISES AND COMMON AREAS.
(a) Premises. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises as improved or to be improved with the Tenant Improvements
described in the Work Letter Agreement, a copy of which is attached hereto as
Exhibit "C".
- -----------
(b) Mutual Covenants. Landlord and Tenant agree that the letting and hiring of
the Premises is upon and subject to the terms, covenants and conditions
contained in this Lease and each party covenants as a material part of the
consideration for this Lease to keep and perform their respective obligations
under this Lease.
(c) Tenant's Use of Common Areas. During the Term of this Lease, Tenant shall
have the nonexclusive right to use in common with Landlord and all persons,
firms and corporations conducting business in the Development and their
respective customers, guests, licensees, invitees, subtenants, employees and
agents (collectively, "Development Occupants"), subject to the terms of this
Lease, the Rules and Regulations referenced in Paragraph 32 below and all
covenants, conditions and restrictions now or hereafter affecting the
Development, the following common areas of the Building and/or the Development
(collectively, the "Common Areas"):
(i) The Building's common entrances, hallways, lobbies, public restrooms on
multi-tenant
<PAGE>
floors, elevators, stairways and accessways, loading docks, ramps, drives and
platforms and any passageways and serviceways thereto, and the common pipes,
conduits, wires and appurtenant equipment within the Building which serve the
Premises (collectively, "Building Common Areas"); and
(ii) The parking facilities of the Development which serve the Building (subject
to the provisions of Exhibit "H"), loading and unloading areas, trash areas,
-----------
roadways, sidewalks, walkways, parkways, driveways, landscaped areas, plaza
areas, fountains and similar areas and facilities situated within the
Development and appurtenant to the Building which are not reserved for the
exclusive use of any Development Occupants (collectively, "Development Common
Areas").
(d) Landlord's Reservation of Rights. Provided Tenant's use of and access to
the Premises and parking to be provided to Tenant under this Lease is not
interfered with in an unreasonable manner, Landlord reserves for itself and for
all other owner(s) and operator(s) of the Development Common Areas and the
balance of the Development, the right from time to time to: (i) install, use,
maintain, repair, replace and relocate pipes, ducts, conduits, wires and
appurtenant meters and equipment above the ceiling surfaces, below the floor
surfaces, within the walls and in the central core areas of the Building; (ii)
make changes to the design and layout of the Development, including, without
limitation, changes to buildings, driveways, entrances, loading and unloading
areas, direction of traffic, landscaped areas and walkways, and, subject to the
parking provisions contained in Paragraph 32 and Exhibit "H", parking spaces and
-----------
parking areas; and (iii) use or close temporarily the Building Common Areas, the
Development Common Areas and/or other portions of the Development (with
reasonable prior notice to Tenant) while engaged in making improvements, repairs
or alterations to the Building, the Development, or any portion thereof.
3. TERM. The term of this Lease ("Term") will be for the period designated in
Subparagraph 1(i), commencing on the Commencement Date, and ending on the last
day of the month in which the expiration of such period occurs, including any
extensions of the Term pursuant to any provision of this Lease or written
agreement of the parties. Notwithstanding the foregoing, if the Commencement
Date falls on any day other than the first day of a calendar month then the Term
of this Lease will be measured from the first day of the month following the
month in which the Commencement Date occurs. Each consecutive twelve (12) month
period of the Term of this Lease, commencing on the Commencement Date, will be
referred to herein as a "Lease Year". Landlord's Notice of Lease Term Dates and
Tenant's Percentage ("Notice"), in the form of Exhibit "D" attached hereto, will
-----------
set forth the Commencement Date, the date upon which the Term of this Lease
shall end, the Rentable Square Feet within the Premises and the Building, and
Tenant's Percentage and will be delivered to Tenant after Landlord delivers
possession of the Premises to Tenant. The Notice will be binding upon Tenant
unless Tenant objects to the Notice in writing within fifteen (15) days of
Tenant's receipt of the Notice.
4. POSSESSION.
(a) Delivery of Possession. Landlord agrees to deliver possession of the
Premises to Tenant in accordance with the terms of the Work Letter Agreement
attached hereto as Exhibit "C", or,
-----------
<PAGE>
if no Work Letter Agreement is required for this Lease, then Landlord agrees to
deliver possession of the Premises to Tenant on the Commencement Date; provided,
however, Tenant agrees that if Landlord is unable to deliver possession of the
Premises to Tenant on the Commencement Date due to Landlord's negligence or
willful misconduct or due to any Force Majeure Delay(s) (as described in
Paragraph 33 of this Lease), then this Lease will not be void or voidable and
Landlord will not be liable to Tenant for any loss or damage resulting
therefrom, but the Commencement Date and the Expiration Date will be extended by
the number of days Landlord is late in delivering the Premises to Tenant, and
rent will not commence to accrue under this Lease until Landlord delivers the
Premises to Tenant. Notwithstanding the foregoing, Landlord will not be
obligated to deliver possession of the Premises to Tenant (but Tenant will be
liable for rent if Landlord can otherwise deliver the Premises to Tenant) until
Landlord has received from Tenant all of the following: (i) a copy of this Lease
fully executed by Tenant and the guaranty of Tenant's obligations under this
Lease, if any, executed by the Guarantor(s); (ii) the first installment of
Monthly Base Rent; (iii) executed copies of policies of insurance or
certificates thereof as required under Paragraph 19 of this Lease; (iv) copies
of all governmental permits and authorizations, if any, required in connection
with Tenant's operation of its business within the Premises; and (v) if Tenant
is a corporation or partnership, such evidence of due formation, valid existence
and authority as Landlord may reasonably require, which may include, without
limitation, a certificate of good standing, certificate of secretary, articles
of incorporation, statement of partnership, or other similar documentation.
(b) Condition of Premises. Prior to the Commencement Date and in accordance
with the Work Letter Agreement attached hereto as Exhibit "C", Landlord and
-----------
Tenant will jointly conduct a walk-through inspection of the Premises and will
jointly prepare a punch-list ("Punch-List") of items required to be installed by
Landlord under the Work Letter Agreement which require finishing or correction.
The Punch-List will not include any items of damage to the Premises caused by
Tenant's move-in or early entry, if permitted, which damage will be corrected or
repaired by Landlord, at Tenant's expense or, at Tenant's election, by Tenant,
at Tenant's expense. Other than the items specified in the Punch-List, by taking
possession of the Premises, Tenant will be deemed to have accepted the Premises
in its condition on the date of delivery of possession and to have acknowledged
that the Tenant Improvements have been installed as required by the Work Letter
Agreement and that there are no additional items needing work or repair.
Landlord will cause all items in the Punch-List to be repaired or corrected
within thirty (30) days following the preparation of the Punch-List or as soon
as practicable after the preparation of the Punch-List. Tenant acknowledges that
neither Landlord nor any agent of Landlord has made any representation or
warranty with respect to the Premises (other than Tenant shall have the benefit
of warranties provided on the Tenant Improvement), the Building, the Development
or any portions thereof or with respect to the suitability of same for the
conduct of Tenant's business and Tenant further acknowledges that Landlord will
have no obligation to construct or complete any additional buildings or
improvements within the Development.
5. RENT.
(a) Monthly Base Rent. Tenant agrees to pay Landlord the Monthly Base Rent for
the Premises (subject to adjustment as hereinafter provided) in advance on the
first day of each calendar month during the Term without prior notice or demand.
If the Term of this Lease
<PAGE>
commences or ends on a day other than the first day of a calendar month, then
the rent for such period will be prorated in the proportion that the number of
days this Lease is in effect during such period bears to the number of days in
such month. All rent must be paid to Landlord, without any deduction or offset,
in lawful money of the United States of America, at the address designated by
Landlord or to such other person or at such other place as Landlord may from
time to time designate in writing. Monthly Base Rent will be adjusted during the
Term of this Lease as provided in Subparagraph l(m).
(b) Additional Rent. All amounts and charges to be paid by Tenant hereunder,
including, without limitation, payments for Operating Expenses, insurance,
repairs and parking, will be considered additional rent for purposes of this
Lease, and the word "rent" as used in this Lease will include all such
additional rent unless the context specifically or clearly implies that only
Monthly Base Rent is intended.
(c) Late Payments. Late payments of Monthly Base Rent and/or any item of
additional rent will be subject to interest and a late charge as provided in
Subparagraph 22(f) below.
6. OPERATING EXPENSES.
(a) Operating Expenses. In addition to Monthly Base Rent, throughout the Term
of this Lease, Tenant agrees to pay Landlord as additional rent in accordance
with the terms of this Paragraph 6, Tenant's Percentage of Operating Expenses as
defined in Exhibit "E" attached hereto to the extent Tenant's Percentage of
-----------
Operating Expenses exceeds Tenant's Operating Expense Allowance.
(b) Estimate Statement. Prior to the Commencement Date and on or about March
1st of each subsequent calendar year during the Term of this Lease, Landlord
will endeavor to deliver to Tenant a statement ("Estimate Statement") wherein
Landlord will estimate both the Operating Expenses and Tenant's Percentage of
Operating Expenses for the then current calendar year. If the estimate of
Tenant's Percentage of Operating Expenses in the Estimate Statement exceeds
Tenant's Operating Expense Allowance, Tenant agrees to pay Landlord, as
"Additional Rent", one-twelfth (1/l2th) of such excess each month thereafter,
beginning with the next installment of rent due, until such time as Landlord
issues a revised Estimate Statement or the Estimate Statement for the succeeding
calendar year, except that, concurrently with the regular monthly rent payment
next due following the receipt of each such Estimate Statement, Tenant agrees to
pay Landlord an amount equal to one monthly installment of such excess (less any
applicable Operating Expenses already paid) multiplied by the number of months
from January, in the current calendar year, to the month of such rent payment
next due, all months inclusive. If at any time during the Term of this Lease,
but not more often than quarterly, Landlord reasonably determines that Tenant's
Percentage of Operating Expenses for the current calendar year will be greater
than the amount set forth in the then current Estimate Statement, Landlord may
issue a revised Estimate Statement and Tenant agrees to pay Landlord, within
thirty (30) days of receipt of the revised Estimate Statement, the difference
between the amount owed by Tenant under such revised Estimate Statement and the
amount owed by Tenant under the original Estimate Statement for the portion of
the then current calendar year which has expired. Thereafter Tenant agrees to
pay Tenant's Percentage of Operating Expenses based on such revised Estimate
<PAGE>
Statement until Tenant receives the next calendar year's Estimate Statement or a
new revised Estimate Statement for the current calendar year. In the event
Tenant's Percentage of Operating Expenses for any calendar year is less than
Tenant's Operating Expense Allowance, Tenant will not be entitled to a credit
against any rent, additional rent or Tenant's Percentage of future Operating
Expenses payable hereunder.
Notwithstanding anything to the contrary herein, Landlord shall deliver to
Tenant a final Actual Statement with respect to each year during the Term not
later than one (1) year following March 1 of the applicable year.
In respect to the Estimate Statement, the estimated amount will be divided by
the denominator of the then remaining months of that calendar year; i.e.,
estimated statement delivered on April 1, 1996, would have a denominator of 9.
(c) Actual Statement. By March 1st of each calendar year during the Term of
this Lease, Landlord will also endeavor to deliver to Tenant a statement
("Actual Statement") which states the actual Operating Expenses for the
preceding calendar year. If the Actual Statement reveals that Tenant's
Percentage of the actual Operating Expenses is more than the total Additional
Rent paid by Tenant for Operating Expenses on account of the preceding calendar
year, Tenant agrees to pay Landlord the difference in a lump sum within fifteen
(15) days of receipt of the Actual Statement. If the Actual Statement reveals
that Tenant's Percentage of the actual Operating Expenses is less than the
Additional Rent paid by Tenant for Operating Expenses on account of the
preceding calendar year, Landlord will credit any overpayment toward the next
monthly installment(s) of Tenant's Percentage of the Operating Expenses due
under this Lease (or Monthly Base Rent, if no Operating Expenses).
(d) Miscellaneous. Any delay or failure by Landlord in delivering any Estimate
Statement or Actual Statement pursuant to this Paragraph 6 will not constitute a
waiver of its right to require an increase in rent nor will it relieve Tenant of
its obligations pursuant to this Paragraph 6, except that Tenant will not be
obligated to make any payments based on such Estimate Statement or Actual
Statement until fifteen (15) days after receipt of such Estimate Statement or
Actual Statement. Even though the Term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's Percentage of the
actual Operating Expenses for the year in which this Lease terminates, Tenant
agrees to promptly pay any increase due over the estimated expenses paid and,
conversely, any overpayment made in the event said expenses decrease shall
promptly be rebated by Landlord to Tenant. Such obligation will be a continuing
one which will survive the expiration or earlier termination of this Lease.
Prior to the expiration or sooner termination of the Lease Term and Landlord's
acceptance of Tenant's surrender of the Premises, Landlord will have the right
to estimate the actual Operating Expenses for the then current Lease Year and to
collect from Tenant prior to Tenant's surrender of the Premises, Tenant's
Percentage of any excess of such actual Operating Expenses over the estimated
Operating Expenses paid by Tenant in such Lease Year.
(See Rider 1.)
7. OMITTED.
8. USE.
(a) Tenant's Use of the Premises. The Premises may be used for the use or uses
set forth in Subparagraph 1(r) only, and Tenant will not use or permit the
Premises to be used for any other purpose without the prior written consent of
Landlord, which consent Landlord may withhold in its sole but reasonable
discretion. Nothing in this Lease will be deemed to give Tenant any exclusive
right to such use in the Building or the Development. It is agreed between the
parties that Tenant shall not lease space to third party tenants in such a way
that would constitute an
<PAGE>
"executive suite."
(b) Compliance. At Tenant's sole cost and expense, Tenant agrees to procure,
maintain and hold available for Landlord's inspection, all governmental licenses
and permits required for the proper and lawful conduct of Tenant's business from
the Premises, if any. Tenant agrees not to use, alter or occupy the Premises or
allow the Premises to be used, altered or occupied in violation of, and Tenant,
at its sole cost and expense, agrees to use and occupy the Premises and cause
the Premises to be used and occupied in compliance with: (i) any and all laws,
statutes, zoning restrictions, ordinances, rules, regulations, orders and
rulings now or hereafter in force and any requirements of any insurer, insurance
authority or duly constituted public authority having jurisdiction over the
Premises, the Building or the Development now or hereafter in force, (ii) the
requirements of the Board of Fire Underwriters and any other similar body, (iii)
the Certificate of Occupancy issued for the Building, and (iv) any recorded
covenants, conditions and restrictions and similar regulatory agreements, if
any, which affect the use, occupation or alteration of the Premises, the
Building and/or the Development. Tenant agrees to comply with the Rules and
Regulations referenced in Paragraph 28 below. Tenant agrees not to do or permit
anything to be done in or about the Premises which will in any manner obstruct
or interfere with the rights of other tenants or occupants of the Development,
or injure or unreasonably annoy them, or use or allow the Premises to be used
for any unlawful or unreasonably objectionable purpose. Tenant agrees not to
cause, maintain or permit any nuisance or waste in, on, under or about the
Premises or elsewhere within the Development. Notwithstanding anything contained
in this Lease to the contrary, all transferable development rights related in
any way to the Development are and will remain vested in Landlord, and Tenant
hereby waives any rights thereto.
(c) Hazardous Materials. Except for ordinary and general office supplies
typically used in the ordinary course of business within office buildings, such
as copier toner, liquid paper, glue, ink and common household cleaning materials
(some or all of which may constitute "Hazardous Materials" as defined in this
Lease), Tenant agrees not to cause or permit any Hazardous Materials to be
brought upon, stored, used, handled, generated, released or disposed of on, in,
under or about the Premises, the Building, the Common Areas or any other portion
of the Development by Tenant, its agents, employees, subtenants, assignees,
licensees, contractors or invitees (collectively, "Tenant's Parties"), without
the prior written consent of Landlord, which consent Landlord may withhold in
its sole and absolute discretion. Upon the expiration or earlier termination of
this Lease, Tenant agrees to promptly remove from the Premises, the Building and
the Development, at its sole cost and expense, any and all Hazardous Materials,
including any equipment or systems containing Hazardous Materials which are
installed, brought upon, stored, used, generated or released upon, in, under or
about the Premises, the Building and/or the Development or any portion thereof
by Tenant or any of Tenant's Parties. To the fullest extent permitted by law,
Tenant agrees to promptly indemnify, protect, defend and hold harmless Landlord
and Landlord's partners, officers, directors, employees, agents, successors and
assigns (collectively, "Landlord Indemnified Parties") from and against any and
all claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including, without limitation, clean-up,
removal, remediation and restoration costs, sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees and court costs) which arise or
result from the presence of Hazardous Materials on, in, under or about the
Premises, the
<PAGE>
Building or any other portion of the Development and which are caused or
permitted by Tenant or any of Tenant's Parties. Tenant agrees to promptly notify
Landlord of any release of Hazardous Materials at the Premises, the Building or
any other portion of the Development which Tenant becomes aware of during the
Term of this Lease, whether caused by Tenant or any other persons or entities.
In the event of any release of Hazardous Materials caused or permitted by Tenant
or any of Tenant's Parties, Landlord shall have the right, but not the
obligation, to cause Tenant to immediately take all steps Landlord deems
necessary or appropriate to remediate such release and prevent any similar
future release to the satisfaction of Landlord and Landlord's mortgagee(s). As
used in this Lease, the term "Hazardous Materials" shall mean and include any
hazardous or toxic materials, substances or wastes as now or hereafter
designated under any law, statute, ordinance, rule, regulation, order or ruling
of any agency of the State, the United States Government or any local
governmental authority, including, without limitation, asbestos, petroleum,
petroleum hydrocarbons and petroleum based products, urea formaldehyde foam
insulation, polychlorinated biphenyls ("PCBs"), and freon and other
chlorofluorocarbons. The provisions of this Subparagraph 8(c) will survive the
expiration or earlier termination of this Lease.
Notwithstanding anything contained to the contrary herein, Tenant shall not be
responsible for costs resulting from the clean-up or removal of hazardous
materials released, discharged, or introduced into the Building or Premises by
Landlord or other tenants.
9. NOTICES. Any notice required or permitted to be given hereunder must be in
writing and may be given by personal delivery (including delivery by overnight
courier or an express mailing service) or by mail, if sent by registered or
certified mail. Notices to Tenant shall be sufficient if delivered to Tenant at
Tenant's address for notices which may be changed from time to time by written
notice from Tenant to Landlord and notices to Landlord shall be sufficient if
delivered to Landlord at the address designated in Subparagraph 1(b). Either
party may specify a different address for notice purposes by written notice to
the other, except that the Landlord may in any event use the Premises as
Tenant's address for notice purposes.
10. BROKERS. The parties acknowledge that the broker(s) who negotiated this
Lease are stated in Subparagraph 1(t). Each party represents and warrants to
the other, that, to its knowledge, no other broker, agent or finder (a)
negotiated or was instrumental in negotiating or consummating this Lease on its
behalf, and (b) is or might be entitled to a commission or compensation in
connection with this Lease. Landlord and Tenant each agree to promptly
indemnify, protect, defend and hold harmless the other from and against any and
all claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including attorneys' fees and court costs)
resulting from any breach by the indemnifying party of the foregoing
representation, including, without limitation, any claims that may be asserted
by any broker, agent or finder undisclosed by the indemnifying party. The
foregoing mutual indemnity shall survive the expiration or earlier termination
of this Lease.
11. SURRENDER; HOLDING OVER.
(a) Surrender. The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, shall not constitute a merger, and shall, at the
option of Landlord, operate as an assignment to Landlord of any or all subleases
or subtenancies. Upon the expiration or earlier termination of this Lease,
Tenant agrees to peaceably surrender the Premises to Landlord
<PAGE>
broom clean and in a state of first-class order, repair and condition, ordinary
wear and tear and casualty damage (if this Lease is terminated as a result
thereof pursuant to Paragraph 20) excepted, with all of Tenant's personal
property and Alterations (as defined in Paragraph 13) removed from the Premises
to the extent required under Paragraph 13 and all damage caused by such removal
repaired as required by Paragraph 13. Prior to the date Tenant is to actually
surrender the Premises to Landlord, Tenant agrees to give Landlord reasonable
prior notice of the exact date Tenant will surrender the Premises so that
Landlord and Tenant can schedule a walk-through of the Premises to review the
condition of the Premises and identify the Alterations and personal property
which are to remain upon the Premises and which items Tenant is to remove, as
well as any repairs Tenant is to make upon surrender of the Premises. The
delivery of keys to any employee of Landlord or to Landlord's agent or any
employee thereof alone will not be sufficient to constitute a termination of
this Lease or a surrender of the Premises.
(b) Holding Over. Tenant will not be permitted to hold over possession of the
Premises after the expiration or earlier termination of the Term without the
express written consent of Landlord, which consent Landlord may withhold in its
sole and absolute discretion. If Tenant holds over after the expiration or
earlier termination of the Term, Landlord may, at its option, treat Tenant as a
tenant at sufferance only, and such continued occupancy by Tenant shall be
subject to all of the terms, covenants and conditions of this Lease, so far as
applicable, except that the Monthly Base Rent for any such holdover period shall
be equal to the greater of (i) one hundred twenty-five percent (125%) of the
Monthly Base Rent in effect under this Lease immediately prior to such holdover,
or (ii) the then currently scheduled rental rate for comparable space in the
Building, in either event prorated on a daily basis. Acceptance by Landlord of
rent after such expiration or earlier termination will not result in a renewal
of this Lease. The foregoing provisions of this Paragraph 11 are in addition to
and do not affect Landlord's right of re-entry or any rights of Landlord under
this Lease or as otherwise provided by law. If Tenant fails to surrender the
Premises upon the expiration of this Lease in accordance with the terms of this
Paragraph 11 despite demand to do so by Landlord, Tenant agrees to promptly
indemnify, protect, defend and hold Landlord harmless from all claims, damages,
judgments, suits, causes of action, losses, liabilities, penalties, fines,
expenses and costs (including attorneys' fees and costs), including, without
limitation, costs and expenses incurred by Landlord in returning the Premises to
the condition in which Tenant was to surrender it and claims made by any
succeeding tenant founded on or resulting from Tenant's failure to surrender the
Premises. The provisions of this Subparagraph 11(b) will survive the expiration
or earlier termination of this Lease.
12. TAXES ON TENANT'S PROPERTY. Tenant agrees to pay before delinquency, all
taxes and assessments (real and personal) levied against (a) any personal
property or trade fixtures placed by Tenant in or about the Premises (including
any increase in the assessed value of the Premises based upon the value of any
such personal property or trade fixtures); and (b) any Tenant Improvements or
Alterations in the Premises (installed and/or paid for by Tenant) to the extent
such items are assessed at a valuation higher than the valuation at which tenant
improvements conforming to Landlord's building standard tenant improvements are
assessed. If any such taxes or assessments are levied against Landlord or
Landlord's property, Landlord may, after written notice to Tenant (and under
proper protest if requested by Tenant) pay such taxes and assessments, in which
event Tenant agrees to reimburse Landlord all amounts paid by Landlord within
fifteen (15) business days after demand by Landlord; provided, however, Tenant,
<PAGE>
at its sole cost and expense, will have the right, with Landlord's cooperation,
to bring suit in any court of competent jurisdiction to recover the amount of
any such taxes and assessments so paid under protest.
13. ALTERATIONS. After installation of the initial Tenant Improvements for the
Premises pursuant to Exhibit "C", Tenant may, at its sole cost and expense, make
-----------
alterations, additions, improvements and decorations to the Premises
(collectively, "Alterations") subject to and upon the following terms and
conditions:
(a) Prohibited Alterations. Tenant may not make any Alterations which: (i)
affect any area outside the Premises; (ii) affect the Building's structure,
equipment, services or systems, or the proper functioning thereof, or Landlord's
access thereto; (iii) affect the outside appearance, character or use of the
Building or the Building Common Areas; (iv) in the reasonable opinion of
Landlord, lessen the value of the Building; or (v) will violate or require a
change in any occupancy certificate applicable to the Premises.
(b) Landlord's Approval. Before proceeding with any Alterations which are not
prohibited in Subparagraph 13(a) above, Tenant must first obtain Landlord's
written approval of the plans, specifications and working drawings for such
Alterations, which approval Landlord will not unreasonably withhold or delay;
provided, however, Landlord's prior approval will not be required for any such
Alterations which are not prohibited by Subparagraph 13(a) above and which cost
less than Ten Thousand Dollars ($10,000) as long as (i) Tenant delivers to
Landlord notice and a copy of any final plans, specifications and working
drawings for any such Alterations prior to commencement of the work thereof, and
(ii) the other conditions of this Paragraph 13 are satisfied, including, without
limitation, conforming to Landlord's rules, regulations and insurance
requirements which govern contractors. Landlord's approval of plans,
specifications and/or working drawings for Alterations will not create any
responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with applicable permits, laws, rules and
regulations of governmental agencies or authorities.
(c) Contractors. Alterations may be made or installed only by contractors and
subcontractors which have been approved by Landlord, which approval Landlord
will not unreasonably withhold or delay; provided, however, Landlord reserves
the right to require that Landlord's fire/life safety, electrical and mechanical
contractors for the Building be given the first opportunity to bid for any
Alteration work. Before proceeding with any Alterations, Tenant agrees to
provide Landlord with ten (10) days prior written notice and Tenant's
contractors must obtain and maintain, on behalf of Tenant and at Tenant's sole
cost and expense: (i) all necessary governmental permits and approvals for the
commencement and completion of such Alterations. Throughout the performance of
any Alterations, Tenant agrees to obtain, or cause its contractors to obtain,
workers compensation insurance and general liability insurance in compliance
with the provisions of Paragraph 19 of this Lease.
(d) Manner of Performance. All Alterations must be performed: (i) in accordance
with the approved plans, specifications and working drawings; (ii) in a lien-
free and first-class and workmanlike manner; (iii) in compliance with all
applicable permits, laws, statutes, ordinances, rules, regulations, orders and
rulings now or hereafter in effect and imposed by any governmental
<PAGE>
agencies and authorities which assert jurisdiction; (iv) in such a manner so as
not to interfere with the occupancy of any other tenant in the Building, nor
impose any additional expense upon nor delay Landlord in the maintenance and
operation of the Building; and (v) at such times, in such manner, and subject to
such rules and regulations as Landlord may from time to time reasonably
designate.
(e) Ownership. The Tenant Improvements, including, without limitation, all
affixed sinks, dishwashers, microwave ovens and other fixtures, and all
Alterations will become the property of Landlord and will remain upon and be
surrendered with the Premises at the end of the Term of this Lease; provided,
however, Landlord may, by written notice delivered to Tenant concurrently with
Landlord's approval of the final working drawings for any Alterations, identify
those Alterations which Landlord will require Tenant to remove at the end of the
Term of this Lease. Landlord may also require Tenant to remove Alterations which
Landlord did not have the opportunity to approve as provided in this Paragraph
13. If Landlord requires Tenant to remove any Alterations, Tenant, at its sole
cost and expense, agrees to remove the identified Alterations on or before the
expiration or earlier termination of this Lease and repair any damage to the
Premises caused by such removal.
(f) Plan Review. Tenant agrees to pay Landlord, as additional rent, the
reasonable costs of professional services and costs for general conditions of
Landlord's third party consultants if utilized by Landlord (but not Landlord's
"in-house" personnel) for review of all plans, specifications and working
drawings for any Alterations, within ten (10) business days after Tenant's
receipt of invoices either from Landlord or such consultants. In addition,
Tenant agrees to pay Landlord, within ten (10) business days after completion of
any Alterations, a fee to cover Landlord's costs of supervising and
administering the installation of such Alterations, in the amount of five
percent (5%) of the cost of such Alterations (hard construction costs only), but
in no event less than Two Hundred Fifty Dollars ($250.00).
(g) Personal Property. All articles of personal property owned by Tenant or
installed by Tenant at its expense in the Premises (including Tenant's business
and trade fixtures, furniture, movable partitions and equipment [such as
telephones, copy machines, computer terminals, refrigerators and facsimile
machines]) will be and remain the property of Tenant, and must be removed by
Tenant from the Premises, at Tenant's sole cost and expense, on or before the
expiration or earlier termination of this Lease. Tenant agrees to repair any
damage caused by such removal at its cost on or before the expiration or earlier
termination of this Lease.
(h) Removal of Alterations. If Tenant fails to remove by the expiration or
earlier termination of this Lease all of its personal property, or any
Alterations identified by Landlord for removal, Landlord may, at its option,
treat such failure as a hold-over pursuant to Subparagraph 11(b) above, and/or
Landlord may (without liability to Tenant for loss thereof) treat such personal
property and/or Alterations as abandoned and, at Tenant's sole cost and expense,
and in addition to Landlord's other rights and remedies under this Lease, at law
or in equity: (a) remove and store such items; and/or (b) upon ten (10) days
prior notice to Tenant, sell, discard or otherwise dispose of all or any such
items at private or public sale for such price as Landlord may obtain or by
other commercially reasonable means. Tenant shall be liable for all costs of
disposition of Tenant's abandoned property and Landlord shall have no liability
to Tenant with respect to
<PAGE>
any such abandoned property. Landlord agrees to apply the proceeds of any sale
of any such property to any amounts due to Landlord under this Lease from Tenant
(including Landlord's attorneys' fees and other costs incurred in the removal,
storage and/or sale of such items), with any remainder to be paid to Tenant.
14. REPAIRS.
(a) Landlord's Obligations. Landlord agrees to repair and maintain in a manner
consistent with other high-rise buildings at Koll Center Newport the structural
portions of the Building and the plumbing, heating, ventilating, air
conditioning, elevator and electrical systems installed or furnished by
Landlord, unless such maintenance and repairs are (i) attributable to items
installed in Tenant's Premises which are above standard interior improvements
(such as, for example, custom lighting, special HVAC and/or electrical panels or
systems, kitchen or restroom facilities and appliances constructed or installed
within Tenant's Premises) or (ii) caused in part or in whole by the act, neglect
or omission of any duty by Tenant, its agents, servants, employees or invitees,
in which case Tenant will pay to Landlord, as additional rent, the reasonable
cost of such maintenance and repairs. Landlord will not be liable for any
failure to make any such repairs or to perform any maintenance unless such
failure shall persist for an unreasonable time after written notice of the need
of such repairs or maintenance is given to Landlord by Tenant. Except as
provided in Paragraph 20, Tenant will not be entitled to any abatement of rent
and Landlord will not have any liability by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Premises
or in or to fixtures, appurtenances and equipment therein. Tenant waives the
right to make repairs at Landlord's expense under any law, statute, ordinance,
rule, regulation, order or ruling (including, without limitation, to the extent
the Premises are located in California, the provisions of California Civil Code
Sections 1941 and 1942 and any successor statutes or laws of a similar nature).
(b) Tenant's Obligations. Tenant agrees to keep, maintain and preserve the
Premises in first class condition and repair and, when and if needed, at
Tenant's sole cost and expense, to make all repairs to the Premises and every
part thereof. Any such maintenance and repairs will be performed by Landlord's
contractor, or by such contractor or contractors as Tenant may choose from an
approved list to be submitted by Landlord. Tenant agrees to pay all costs and
expenses incurred in such maintenance and repair within thirty (30) days after
billing by Landlord or such contractor or contractors. Tenant agrees to cause
any mechanics' liens or other liens arising as a result of work performed by
Tenant or at Tenant's direction to be eliminated as provided in Paragraph 15
below. Except as provided in Subparagraph 14(a) above, Landlord has no
obligation to alter, remodel, improve, repair, decorate or paint the Premises or
any part thereof.
(c) Tenant's Failure to Repair. If Tenant refuses or neglects to repair and
maintain the Premises properly as required hereunder to the reasonable
satisfaction of Landlord, Landlord, at any time following fifteen (15) days from
the date on which Landlord makes a written demand on Tenant to effect such
repair and maintenance, may enter upon the Premises and make such repairs and/or
maintenance, and upon completion thereof, Tenant agrees to pay to Landlord as
additional rent, Landlord's costs for making such repairs plus an amount not to
exceed ten percent (10%) of such costs for overhead, within fifteen (15) days of
receipt from Landlord of
<PAGE>
a written itemized bill therefor. Any amounts not reimbursed by Tenant within
such fifteen (15) day period will bear interest at the Interest Rate until paid
by Tenant.
15. LIENS. Tenant agrees not to permit any mechanic's, materialmen's or other
liens to be filed against all or any part of the Development, the Building or
the Premises, nor against Tenant's leasehold interest in the Premises, by reason
of or in connection with any repairs, alterations, improvements or other work
contracted for or undertaken by Tenant or any other act or omission of Tenant or
Tenant's agents, employees, contractors, licensees or invitees. At Landlord's
request, Tenant agrees to provide Landlord with enforceable, conditional and
final lien releases (or other evidence reasonably requested by Landlord to
demonstrate protection from liens) from all persons furnishing labor and/or
materials at the Premises. Landlord will have the right at all reasonable times
to post on the Premises and record any notices of non-responsibility which it
deems necessary for protection from such liens. If any such liens are filed,
Tenant will, at its sole cost, promptly cause such liens to be released of
record or bonded so that it no longer affects title to the Development, the
Building or the Premises. If Tenant fails to cause any such liens to be so
released or bonded within ten (10) days after filing thereof, such failure will
be deemed a material breach by Tenant under this Lease without the benefit of
any additional notice or cure period described in Paragraph 22 below, and
Landlord may, without waiving its rights and remedies based on such breach, and
without releasing Tenant from any of its obligations, cause such liens to be
released by any means it shall deem proper, including payment in satisfaction of
the claims giving rise to such liens. Tenant agrees to pay to Landlord within
fifteen (15) days after receipt of invoice from Landlord, any sum paid by
Landlord to remove such liens, together with interest at the Interest Rate from
the date of such payment by Landlord.
16. ENTRY BY LANDLORD. Landlord and its employees and agents will at all times
have the right to enter the Premises to inspect the same, to supply janitorial
service and any other service to be provided by Landlord to Tenant hereunder, to
show the Premises to prospective purchasers or tenants, to post notices of non-
responsibility, and/or to repair the Premises as permitted or required by this
Lease. In exercising such entry rights, Landlord will endeavor to minimize, as
reasonably practicable, the interference with Tenant's business, and will
provide Tenant with reasonable advance notice of any such entry (except in
emergency situations). Landlord may, in order to carry out such purposes, erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed. Landlord will at all times have and
retain a key with which to unlock all doors in the Premises, excluding Tenant's
vaults and safes. Landlord will have the right to use any and all means which
Landlord may reasonably deem proper to open said doors in an emergency in order
to obtain entry to the Premises. Any entry to the Premises obtained by Landlord
by any of said means, or otherwise, will not be construed or deemed to be a
forcible or unlawful entry into the Premises, or an eviction of Tenant from the
Premises. Except for Landlord's negligence, Landlord will not be liable to
Tenant for any damages or losses for any entry by Landlord.
17. UTILITIES AND SERVICES. Throughout the Term of the Lease so long as the
Premises are occupied, Landlord agrees to furnish or cause to be furnished to
the Premises the utilities and services described in the Standards for Utilities
and Services attached hereto as Exhibit "F", subject to the conditions and in
-----------
accordance with the standards set forth therein. Landlord may require Tenant
from time to time to provide Landlord with a list of Tenant's employees and/or
<PAGE>
agents which are authorized by Tenant to subscribe on behalf of Tenant for any
additional services which may be provided by Landlord. Any such additional
services will be provided to Tenant at Tenant's cost. Landlord will not be
liable to Tenant for any failure to furnish any of the foregoing utilities and
services if such failure is caused by all or any of the following: (i) accident,
breakage or repairs; (ii) strikes, lockouts or other labor disturbance or labor
dispute of any character; (iii) governmental regulation, moratorium or other
governmental action or inaction; (iv) inability despite the exercise of
reasonable diligence to obtain electricity, water or fuel; or (v) any other
cause beyond Landlord's reasonable control. In addition, in the event of any
stoppage or interruption of services or utilities, Tenant shall not be entitled
to any abatement or reduction of rent (except as expressly provided in
Subparagraphs 20(f) or 21(b) if such failure results from a damage or taking
described therein), no eviction of Tenant will result from such failure and
Tenant will not be relieved from the performance of any covenant or agreement in
this Lease because of such failure. In the event of any failure, stoppage or
interruption thereof, Landlord agrees to diligently attempt to resume service
promptly. If Tenant requires or utilizes more water or electrical power than is
reasonable or is proven to exceed those levels utilized by Tenants in the
Building, Landlord may at its option require Tenant to pay, as additional rent,
the cost, as fairly determined by Landlord, incurred by such extraordinary usage
and/or Landlord or Tenant may install separate meter(s) for the Premises, at
Tenant's sole expense, and Tenant agrees thereafter to pay all charges of the
utility providing service and Landlord will make an appropriate adjustment to
Tenant's Operating Expenses calculation to account for the fact Tenant is
directly paying such metered charges, provided Tenant will remain obligated to
pay its proportionate share of Operating Expenses subject to such adjustment.
Notwithstanding anything to the contrary contained in this Paragraph 17, if (i)
Landlord ceases to furnish any service in the Building, and Tenant notified
Landlord of such cessation in writing (the "Interruption Notice"), (ii) such
cessation does not arise as a result of an act or omission of Tenant, (iii) such
cessation is not caused by a fire or other casualty (in which case Paragraph 20
shall control), (iv) as a result of such cessation, the Premises or a material
portion thereof, is rendered untenantable (meaning that Tenant is unable to use
the Premises in the normal course of its business) and Tenant in fact ceases to
use the Premises, or material portion thereof, then, Tenant's sole remedy for
such cessation shall be as follows: On the fifth (5th) consecutive business day
following the later to occur of the date of the Premises (or material portion
thereof) becomes untenantable, the date Tenant ceases to use such space and the
date Tenant provides Landlord with an Interruption Notice, the Monthly Base Rent
and additional rent payable hereunder shall be abated on a per-diem basis for
each day after such five (5) business day period based upon the percentage of
the Premises so rendered untenantable and not used by Tenant, and such abatement
shall continue until the date the Premises become tenantable again.
18. ASSUMPTION OF RISK AND INDEMNIFICATION.
(a) Assumption of Risk. Tenant, as a material part of the consideration to
Landlord, hereby agrees that neither Landlord nor any Landlord Indemnified
Parties (as defined in Subparagraph 8(c) above) will be liable to Tenant for,
and Tenant expressly assumes the risk of and waives any and all claims it may
have against Landlord or any Landlord Indemnified Parties with respect to, (i)
any and all damage to property or injury to persons in, upon or about the
Premises, the Building or the Development resulting from any act or omission
(except for negligent or intentionally wrongful act or omission) of Landlord,
(ii) any such damage caused by other tenants or persons in or about the Building
or the Development, or caused by quasi-public work, (iii) any damage to property
entrusted to employees of the Building, (iv) any loss of or damage to property
by theft or otherwise, or (v) any injury or damage to persons or property
resulting from any casualty, explosion, falling plaster or other masonry or
glass, steam, gas, electricity, water or rain which may leak from any part of
the Building or any other portion of the Development or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place, or resulting from dampness. Notwithstanding anything to
the contrary contained in this Lease, neither Landlord nor any Landlord
Indemnified Parties will be liable for consequential damages arising out of any
loss of the use of the Premises or any equipment or facilities therein by Tenant
or any Tenant Parties or for interference with light or other incorporeal
hereditaments. Tenant agrees to give prompt notice to Landlord in case of fire
or accidents in the Premises or the Building, or of defects therein or in the
fixtures or equipment.
<PAGE>
(b) Indemnification. Tenant will be liable for, and agrees, to the maximum
extent permissible under applicable law, to promptly indemnify, protect, defend
and hold harmless Landlord and all Landlord Indemnified Parties, from and
against, any and all claims, damages, judgments, suits, causes of action,
losses, liabilities, penalties, fines, expenses and costs, including attorneys'
fees and court costs (collectively, "Indemnified Claims"), arising or resulting
from (i) any act or omission of Tenant or any Tenant Parties (as defined in
Subparagraph 8(c) above); (ii) the use of the Premises and Common Areas and
conduct of Tenant's business by Tenant or any Tenant Parties, or any other
activity, work or thing done, permitted or suffered by Tenant or any Tenant
Parties, in or about the Premises, the Building or elsewhere within the
Development; and/or (iii) any default by Tenant of any obligations on Tenant's
part to be performed under the terms of this Lease. In case any action or
proceeding is brought against Landlord or any Landlord Indemnified Parties by
reason of any such Indemnified Claims, Tenant, upon notice from Landlord, agrees
to promptly defend the same at Tenant's sole cost and expense by counsel
approved in writing by Landlord, which approval Landlord will not unreasonably
withhold.
Except for losses, liabilities, obligations, damages, penalties, claims, costs,
charges, and expenses resulting from the negligence of Tenant and/or its agents,
employees, or contractors, and subject to the provisions of Paragraph 18(b)
hereof, Landlord shall indemnify, defend and hold Tenant, its principals, agents
and employees (collectively, the "Tenant Related Parties") harmless from and
against all liabilities, obligations, damages (other than consequential
damages), penalties, claims, costs, charges and expenses, including, without
limitation, reasonable attorneys' fees, which may be imposed upon, incurred by,
or asserted against Tenant or any of the Tenant Related Parties and arising,
directly or indirectly, out of or in connection with any of the following: (i)
any work or thing done in, on or about the Building or any part thereof by
Landlord or any of its agents, contractors, or employees; (ii) any use, non-use,
possession, occupation, condition, operation, maintenance or management of the
Building or any part thereof by Landlord or any of its agents, contractors or
employees, (iii) any act or omission of Landlord or any of its agent,
contractors or employees; and (iv) any injury or damage to any person or
property occurring in, on or about the Building or any part thereof; provided,
however, that in each case such liability, obligation, damage, penalty, claim,
cost, charge or expense results from the negligence of Landlord and/or its
agents, employees, or contractors.
(c) Survival; No Release of Insurers. Tenant's indemnification obligations
under Subparagraph 18(b) will survive the expiration or earlier termination of
this Lease. Tenant's covenants, agreements and indemnification obligation in
Subparagraphs 18(a) and 18(b) above, are not intended to and will not relieve
any insurance carrier of its obligations under policies required to be carried
by Tenant pursuant to the provisions of this Lease.
19. INSURANCE.
(a) Tenant's Insurance. On or before the earlier to occur of (i) the
Commencement Date, or (ii) the date Tenant commences any work of any type in the
Premises pursuant to this Lease (which may be prior to the Commencement Date),
and continuing throughout the entire Term hereof and any other period of
occupancy, Tenant agrees to keep in full force and effect, at its sole cost and
expense, the following insurance:
(i) "All Risks" property insurance including at least the following perils:
fire and extended coverage, smoke damage, vandalism, malicious mischief,
sprinkler leakage (including earthquake sprinkler leakage). This insurance
policy must be upon all property owned by Tenant, for which Tenant is legally
liable, or which is installed at Tenant's expense, and which is located in the
Building including, without limitation, any Tenant Improvements which satisfy
the foregoing qualification and any Alterations, and all furniture, fittings,
installations, fixtures and any other personal property of Tenant, in an amount
not less than the full replacement cost thereof. If there is a dispute as to
full replacement cost, the decision of Landlord or any mortgagee of Landlord
will be presumptive.
(ii) One (1) year insurance coverage for business interruption and loss of
income and extra expense insuring the same perils described in Subparagraph
19(a)(i) above, in such amounts as will reimburse Tenant for any direct or
indirect loss of earnings attributable to any such perils including prevention
of access to the Premises, Tenant's parking areas or the Building as a result of
any such perils.
<PAGE>
(iii) Commercial General Liability Insurance or Comprehensive General Liability
Insurance (on an occurrence form) insuring bodily injury, personal injury and
property damage including the following divisions and extensions of coverage:
Premises and Operations; Owners and Contractors protective; blanket contractual
liability (including coverage for Tenant's indemnity obligations under this
Lease); products and completed operations; liquor liability (if Tenant serves
alcohol on the Premises); and fire and water damage legal liability in an amount
sufficient to cover the replacement value of the Premises, including Tenant
Improvements, that are rented under the terms of this Lease. Such insurance
must have the following minimum limits of liability: bodily injury, personal
injury and property damage - $1,000,000 each occurrence, provided that if
liability coverage is provided by a Commercial General Liability policy the
general aggregate limit shall apply separately and in total to this location
only (per location general aggregate), and provided further, such minimum limits
of liability may be adjusted from year to year to reflect increases in coverages
as recommended by Landlord's insurance carrier as being prudent and commercially
reasonable for tenants of first class office buildings comparable to the
Building, rounded to the nearest five hundred thousand dollars.
(iv) Comprehensive Automobile Liability insuring bodily injury and property
damage arising from all owned, non-owned and hired vehicles, if any, with
minimum limits of liability of $1,000,000 per accident.
(v) Worker's Compensation as required by the laws of the State with the
following minimum limits of liability: Coverage A - statutory benefits; Coverage
B - $1,000,000 per accident and disease.
(vi) Any other form or forms of insurance as Tenant or Landlord or any
mortgagees of Landlord may reasonably require from time to time in form, in
amounts, and for insurance risks against which, a prudent tenant would protect
itself, but only to the extent coverage for such risks and amounts are available
in the insurance market at commercially acceptable rates. Landlord makes no
representation that the limits of liability required to be carried by Tenant
under the terms of this Lease are adequate to protect Tenant's interests and
Tenant should obtain such additional insurance or increased liability limits as
Tenant deems appropriate.
(b) Supplemental Tenant Insurance Requirements.
(i) All policies must be in a form reasonably satisfactory to Landlord and
issued by an insurer admitted to do business in the State.
(ii) All policies must be issued by insurers with a policyholder rating of "A"
and a financial rating of "X" in the most recent version of Best's Key Rating
Guide.
(iii) All policies must contain a requirement to notify Landlord (and
Landlord's property manager and any mortgagees or ground lessors of Landlord who
are named as additional insureds, if any) in writing not less than thirty (30)
days prior to any material change, reduction in coverage, cancellation or other
termination thereof. Tenant agrees to deliver to Landlord, as soon as
practicable after placing the required insurance, but in any event within the
time frame specified in Subparagraph 19(a) above, certificate(s) of insurance
and/or if required by Landlord,
<PAGE>
certified copies of each policy evidencing the existence of such insurance and
Tenant's compliance with the provisions of this Paragraph 19. Tenant agrees to
cause replacement policies or certificates to be delivered to Landlord not less
than thirty (30) days prior to the expiration of any such policy or policies.
If any such initial or replacement policies or certificates are not furnished
within the time(s) specified herein, Tenant will be deemed to be in material
default under this Lease without the benefit of any additional notice or cure
period provided in Subparagraph 22(a)(iii) below, and Landlord will have the
right, but not the obligation, to procure such insurance as Landlord deems
necessary to protect Landlord's interests at Tenant's expense. If Landlord
obtains any insurance that is the responsibility of Tenant under this Paragraph
19, Landlord agrees to deliver to Tenant a written statement setting forth the
cost of any such insurance and showing in reasonable detail the manner in which
it has been computed and Tenant agrees to promptly reimburse Landlord for such
costs as additional rent.
(iv) General Liability and Automobile Liability policies under Subparagraphs
19(a)(iii) and (iv) must name Landlord and Landlord's property manager (and at
Landlord's request, Landlord's mortgagees and ground lessors of which Tenant has
been informed in writing) as additional insureds and must also contain a
provision that the insurance afforded by such policy is primary insurance and
any insurance carried by Landlord and Landlord's property manager or Landlord's
mortgagees or ground lessors, if any, will be excess over and non-contributing
with Tenant's insurance.
(c) Tenant's Use. Tenant will not keep, use, sell or offer for sale in or upon
the Premises any article which may be prohibited by any insurance policy
periodically in force covering the Building or the Development Common Areas. If
Tenant's occupancy or business in, or on, the Premises, whether or not Landlord
has consented to the same, results in any increase in premiums for the insurance
periodically carried by Landlord with respect to the Building or the Development
Common Areas or results in the need for Landlord to maintain special or
additional insurance, Tenant agrees to pay Landlord the cost of any such
increase in premiums or special or additional coverage as additional rent within
fifteen (15) days after being billed therefor by Landlord. In determining
whether increased premiums are a result of Tenant's use of the Premises, a
schedule issued by the organization computing the insurance rate on the
Building, the Development Common Areas or the Tenant Improvements showing the
various components of such rate, will be conclusive evidence of the several
items and charges which make up such rate. Tenant agrees to promptly comply with
all reasonable requirements of the insurance authority or any present or future
insurer relating to the Premises.
(d) Cancellation of Landlord's Policies. If any of Landlord's insurance
policies are cancelled or cancellation is threatened or the coverage reduced or
threatened to be reduced in any way because of the use of the Premises or any
part thereof by Tenant or any assignee or subtenant of Tenant or by anyone
Tenant permits on the Premises and, if Tenant fails to remedy the condition
giving rise to such cancellation, threatened cancellation, reduction of
coverage, threatened reduction of coverage, increase in premiums, or threatened
increase in premiums, within forty-eight (48) hours after written notice
thereof, Tenant will be deemed to be in material default of this Lease and
Landlord may, at its option, either terminate this Lease or enter upon the
Premises and attempt to remedy such condition, and Tenant shall promptly pay
Landlord the reasonable costs of such remedy as additional rent. If Landlord is
unable, or elects not to remedy such
<PAGE>
condition, then Landlord will have all of the remedies provided for in this
Lease in the event of a default by Tenant.
(e) Waiver of Subrogation. Tenant's property insurance shall contain a clause
whereby the insurer waives all rights of recovery by way of subrogation against
Landlord. Tenant shall also obtain and furnish evidence to Landlord of the
waiver by Tenant's worker's compensation insurance carrier of all rights of
recovery by way of subrogation against Landlord.
Notwithstanding any provision of this Lease to the contrary, whenever (a) any
loss, cost, damage or expense relating to personal property (excluding personal
injuries or death) resulting from fire, explosion or any other casualty is
incurred by either Landlord or by Tenant or by anyone claiming by, through or
under Landlord or Tenant in connection with the Premises or the Building, and
(b) such party is covered in whole or in part by insurance with respect to such
loss, cost,damage or expense or is required under this Lease to be so insured,
then the party so insured (or so required) hereby waives (on its behalf and on
behalf of its insurer) any claims against and releases the other party from any
liability said other party may have on account of such loss, cost, damage or
expense.
20. DAMAGE OR DESTRUCTION.
(a) Partial Destruction. If the Premises or the Building are damaged by fire or
other casualty to an extent not exceeding twenty-five percent (25%) of the full
replacement cost thereof, and Landlord's contractor reasonably estimates in a
writing delivered to Landlord and Tenant that the damage thereto may be
repaired, reconstructed or restored to substantially its condition immediately
prior to such damage within one hundred eighty (180) days from the date of such
casualty, and Landlord will receive insurance proceeds sufficient to cover the
costs of such repairs, reconstruction and restoration (including proceeds from
Tenant and/or Tenant's insurance which Tenant is required to deliver to Landlord
pursuant to Subparagraph 20(e) below to cover Tenant's obligation for the costs
of repair, reconstruction and restoration of any portion of the Tenant
Improvements and any Alterations for which Tenant is responsible under this
Lease), then Landlord agrees to commence and proceed diligently with the work of
repair, reconstruction and restoration and this Lease will continue in full
force and effect.
(b) Substantial Destruction. Any damage or destruction to the Premises or the
Building which Landlord is not obligated to repair pursuant to Subparagraph
20(a) above will be deemed a substantial destruction. In the event of a
substantial destruction, Landlord may elect to either (i) repair, reconstruct
and restore the portion of the Building or the Premises damaged by such
casualty, in which case this Lease will continue in full force and effect,
subject to Tenant's termination right contained in Subparagraph 20(d) below; or
(ii) terminate this Lease effective as of the date which is thirty (30) days
after Tenant's receipt of Landlord's election to so terminate.
(c) Notice. Under any of the conditions of Subparagraph 20(a) or (b) above,
Landlord agrees to give written notice to Tenant of its intention to repair or
terminate, as permitted in such paragraphs, within the earlier of sixty (60)
days after the occurrence of such casualty, or fifteen (15) days after
Landlord's receipt of the estimate from Landlord's contractor (the applicable
time period to be referred to herein as the "Notice Period").
(d) Tenant's Termination Rights. If Landlord elects to repair, reconstruct and
restore pursuant to Subparagraph 20(b)(i) hereinabove, and if Landlord's
contractor estimates that as a result of such damage, Tenant cannot be given
reasonable use of and access to the Premises within two hundred seventy (270)
days after the date of such damage, then Tenant may terminate this Lease
effective upon delivery of written notice to Landlord within ten (10) days after
Landlord delivers notice to Tenant of its election to so repair, reconstruct or
restore.
<PAGE>
(e) Tenant's Costs and Insurance Proceeds. In the event of any damage or
destruction of all or any part of the Premises, Tenant agrees to immediately (i)
notify Landlord thereof, and (ii) deliver to Landlord all property insurance
proceeds received by Tenant with respect to any Tenant Improvements installed by
or at the cost of Tenant and any Alterations, but excluding proceeds for
Tenant's furniture, fixtures, equipment and other personal property, whether or
not this Lease is terminated as permitted in this Paragraph 20, and Tenant
hereby assigns to Landlord all rights to receive such insurance proceeds. If,
for any reason (including Tenant's failure to obtain insurance for the full
replacement cost of any Tenant Improvements installed by or at the cost of
Tenant and any Alterations from any and all casualties), Tenant fails to receive
insurance proceeds covering the full replacement cost of any Tenant Improvements
installed by or at the cost of Tenant and any Alterations which are damaged,
Tenant will be deemed to have self-insured the replacement cost of such items,
and upon any damage or destruction thereto, Tenant agrees to immediately pay to
Landlord the full replacement cost of such items, less any insurance proceeds
actually received by Landlord from Landlord's or Tenant's insurance with respect
to such items.
(f) Abatement of Rent. In the event of any damage, repair, reconstruction
and/or restoration described in this Paragraph 20, rent will be abated or
reduced, as the case may be, from the date of such casualty, in proportion to
the degree to which Tenant's use of the Premises is impaired during such period
of repair until such use is restored. Except for abatement of rent as provided
hereinabove, Tenant will not be entitled to any compensation or damages for loss
of, or interference with, Tenant's business or use or access of all or any part
of the Premises or for lost profits or any other consequential damages of any
kind or nature, which result from any such damage, repair, reconstruction or
restoration.
(g) Inability to Complete. Notwithstanding anything to the contrary contained
in this Paragraph 20, if Landlord is obligated or elects to repair, reconstruct
and/or restore the damaged portion of the Building or the Premises pursuant to
Subparagraph 20(a) or 20(b)(i) above, but is delayed from completing such
repair, reconstruction and/or restoration beyond the date which is one hundred
eighty (180) days after the date estimated by Landlord's contractor for
completion thereof by reason of any causes (other than delays caused by Tenant,
its subtenants, employees, agents or contractors) which are beyond the
reasonable control of Landlord as described in Paragraph 33, then Tenant may
elect to terminate this Lease upon ten (10) days prior written notice given to
the other after the expiration of such one hundred eighty (180) day period.
(h) Damage Near End of Term. Landlord and Tenant shall each have the right to
terminate this Lease if any damage to the Premises or the Building occurs during
the last twelve (12) months of the Term of this Lease where Landlord's
contractor estimates in a writing delivered to Landlord and Tenant that the
repair, reconstruction or restoration of such damage cannot be completed within
sixty (60) days after the date of such casualty. If either party desires to
terminate this Lease under this Subparagraph (h), it shall provide written
notice to the other party of such election within ten (10) days after receipt of
Landlord's contractor's repair estimates.
(i) Waiver of Termination Right. Landlord and Tenant agree that the foregoing
provisions of this Paragraph 20 are to govern their respective rights and
obligations in the event of any damage or destruction and supersede and are in
lieu of the provisions of any applicable law,
<PAGE>
statute, ordinance, rule, regulation, order or ruling now or hereafter in force
which provide remedies for damage or destruction of leased premises (including,
without limitation, to the extent the Premises are located in California, the
provisions of California Civil Code Section 1932, Subsection 2, and Section
1933, Subsection 4 and any successor statute or laws of a similar nature).
(j) Termination. Upon any termination of this Lease under any of the provisions
of this Paragraph 20, the parties will be released without further obligation to
the other from the date possession of the Premises is surrendered to Landlord
except for items which have accrued and are unpaid as of the date of termination
and matters which are to survive any termination of this Lease as provided in
this Lease.
21. EMINENT DOMAIN.
(a) Substantial Taking. If the whole of the Premises, or such part thereof as
shall substantially interfere with Tenant's use and occupancy of the Premises,
as contemplated by this Lease, is taken for any public or quasi-public purpose
by any lawful power or authority by exercise of the right of appropriation,
condemnation or eminent domain, or sold to prevent such taking, either party
will have the right to terminate this Lease effective as of the date possession
is required to be surrendered to such authority.
(b) Partial Taking; Abatement of Rent. In the event of a taking of a portion of
the Premises which does not substantially interfere with Tenant's use and
occupancy of the Premises, then, neither party will have the right to terminate
this Lease and Landlord will thereafter proceed to make a functional unit of the
remaining portion of the Premises (but only to the extent Landlord receives
proceeds therefor from the condemning authority), and rent will be abated with
respect to the part of the Premises which Tenant is deprived of on account of
such taking. Notwithstanding the immediately preceding sentence to the contrary,
if any part of the Building or the Development is taken (whether or not such
taking substantially interferes with Tenant's use of the Premises), Landlord may
terminate this Lease upon thirty (30) days prior written notice to Tenant if
Landlord also terminates the leases of the other tenants of the Building which
are leasing comparably sized space for comparable lease terms.
(c) Condemnation Award. In connection with any taking of the Premises or the
Building, Landlord will be entitled to receive the entire amount of any award
which may be made or given in such taking or condemnation, without deduction or
apportionment for any estate or interest of Tenant, it being expressly
understood and agreed by Tenant that no portion of any such award will be
allowed or paid to Tenant for any so-called bonus or excess value of this Lease,
and such bonus or excess value will be the sole property of Landlord. Tenant
agrees not to assert any claim against Landlord or the taking authority for any
compensation because of such taking (including any claim for bonus or excess
value of this Lease); provided, however, if any portion of the Premises is
taken, Tenant will have the right to recover from the condemning authority (but
not from Landlord) any compensation as may be separately awarded or recoverable
by Tenant for the taking of Tenant's furniture, fixtures, equipment and other
personal property within the Premises, for Tenant's relocation expenses, and for
any loss of goodwill or other damage to Tenant's business by reason of such
taking.
<PAGE>
(d) Temporary Taking. In the event of taking of the Premises or any part
thereof for temporary use, (i) this Lease will remain unaffected thereby and
rent will not abate, and (ii) Tenant will be entitled to receive such portion or
portions of any award made for such use with respect to the period of the taking
which is within the Term, provided that if such taking remains in force at the
expiration or earlier termination of this Lease, Tenant will then pay to
Landlord a sum equal to the reasonable cost of performing Tenant's obligations
under Paragraph 11 with respect to surrender of the Premises and upon such
payment Tenant will be excused from such obligations. For purpose of this
Subparagraph 21(d), a temporary taking shall be defined as a taking for a period
of ninety (90) days or less.
22. DEFAULTS AND REMEDIES.
(a) Defaults. The occurrence of any one or more of the following events will
be deemed a default by Tenant:
(i) The abandonment of the Premises by Tenant, which for purposes of this Lease
means any absence by Tenant from the Premises for five (5) business days or
longer while in material default of any other provision of this Lease, which for
purposes of this Lease means any absence by Tenant from the Premises for thirty
(30) days or longer whether or not Tenant is in default under any provision of
this Lease.
(ii) The failure by Tenant to make any payment of rent or additional rent or any
other payment required to be made by Tenant hereunder, as and when due, where
such failure continues for a period of three (3) days after written notice
thereof from Landlord to Tenant; provided, however, that any such notice will be
in lieu of, and not in addition to, any notice required under applicable law
(including, without limitation, to the extent the Premises are located in
California, the provisions of California Code of Civil Procedure Section 1161
regarding unlawful detainer actions or any successor statute or law of a similar
nature).
(iii) The failure by Tenant to observe or perform any of the covenants or
provisions of this Lease to be observed or performed by Tenant, other than as
specified in Subparagraph 22(a)(i) or (ii) above, where such failure continues
for a period of ten (10) days after written notice thereof from Landlord to
Tenant. The provisions of any such notice will be in lieu of, and not in
addition to, any notice required under applicable law (including, without
limitation, to the extent the Premises are located in California, California
Code of Civil Procedure Section 1161 regarding unlawful detainer actions and any
successor statute or similar law). If the nature of Tenant's default is such
that more than ten (10) days are reasonably required for its cure, then Tenant
will not be deemed to be in default if Tenant, with Landlord's concurrence,
commences such cure within such ten (10) day period and thereafter diligently
prosecutes such cure to completion.
(iv) (A) The making by Tenant of any general assignment for the benefit of
creditors; (B) the filing by or against Tenant of a petition to have Tenant
adjudged a bankrupt or a petition for reorganization or arrangement under any
law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty (60) days); (C) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the
<PAGE>
Premises or of Tenant's interest in this Lease, where possession is not restored
to Tenant within thirty (30) days; or (D) the attachment, execution or other
judicial seizure of substantially all of Tenant's assets located at the Premises
or of Tenant's interest in this Lease where such seizure is not discharged
within thirty (30) days.
(b) Landlord's Remedies; Termination. In the event of any default by Tenant, in
addition to any other remedies available to Landlord at law or in equity under
applicable law (including, without limitation, to the extent the Premises are
located in California, the remedies of Civil Code Section 1951.4 and any
successor statute or similar law), Landlord will have the immediate right and
option to terminate this Lease and all rights of Tenant hereunder. If Landlord
elects to terminate this Lease then, to the extent permitted under applicable
law, Landlord may recover from Tenant (i) the worth at the time of award of any
unpaid rent which had been earned at the time of such termination; plus (ii) the
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount of
such rent loss that Tenant proves could have been reasonably avoided; plus (iii)
the worth at the time of award of the amount by which the unpaid rent for the
balance of the Term after the time of award exceeds the amount of such rent loss
that Tenant proves could be reasonably avoided; plus (iv) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or which, in the
ordinary course of things, results therefrom including, but not limited to:
attorneys' fees and costs; brokers' commissions; the costs of refurbishment,
alterations, renovation and repair of the Premises, and removal (including the
repair of any damage caused by such removal) and storage (or disposal) of
Tenant's personal property, equipment, fixtures, Alterations, the Tenant
Improvements and any other items which Tenant is required under this Lease to
remove but does not remove, as well as the unamortized value of any free rent,
reduced rent, free parking, reduced rate parking and any Tenant Improvement
Allowance or other costs or economic concessions provided, paid, granted or
incurred by Landlord pursuant to this Lease. The unamortized value of such
concessions shall be determined by taking the total value of such concessions
and multiplying such value by a fraction, the numerator of which is the number
of months of the Lease Term not yet elapsed as of the date on which the Lease is
terminated, and the denominator of which is the total number of months of the
Lease Term. As used in Subparagraphs 22(b)(i) and (ii) above, the "worth at the
time of award" is computed by allowing interest at the Interest Rate. As used in
Subparagraph 22(b)(iii) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).
(c) Landlord's Remedies; Re-Entry Rights. In the event of any default by
Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord will also have the right, with or without
terminating this Lease, to re-enter the Premises and remove all persons and
property from the Premises; such property may be removed and stored in a public
warehouse or elsewhere and/or disposed of at the sole cost and expense of and
for the account of Tenant in accordance with the provisions of Subparagraph
13(h) of this Lease or any other procedures permitted by applicable law. No re-
entry or taking possession of the Premises by Landlord pursuant to this
Subparagraph 22(c) will be construed as an election to terminate this Lease
unless a written notice of such intention is given to Tenant or unless the
termination thereof is decreed by a court of competent jurisdiction.
<PAGE>
(d) Landlord's Remedies; Re-Letting. In the event of the abandonment of the
Premises by Tenant or in the event that Landlord elects to re-enter the Premises
or takes possession of the Premises pursuant to legal proceeding or pursuant to
any notice provided by law, then if Landlord does not elect to terminate this
Lease, Landlord may from time to time, without terminating this Lease, either
recover all rent as it becomes due or relet the Premises or any part thereof on
terms and conditions as Landlord in its sole and absolute discretion may deem
advisable with the right to make alterations and repairs to the Premises in
connection with such reletting. If Landlord elects to relet the Premises, then
rents received by Landlord from such reletting will be applied: first, to the
payment of any indebtedness other than rent due hereunder from Tenant to
Landlord; second, to the payment of any cost of such reletting; third, to the
payment of the cost of any alterations and repairs to the Premises incurred in
connection with such reletting; fourth, to the payment of rent due and unpaid
hereunder and the residue, if any, will be held by Landlord and applied to
payment of future rent as the same may become due and payable hereunder. Should
that portion of such rents received from such reletting during any month, which
is applied to the payment of rent hereunder, be less than the rent payable
during that month by Tenant hereunder, then Tenant agrees to pay such deficiency
to Landlord immediately upon demand therefor by Landlord. Such deficiency will
be calculated and paid monthly.
(e) Landlord's Remedies; Performance for Tenant. All covenants and agreements
to be performed by Tenant under any of the terms of this Lease are to be
performed by Tenant at Tenant's sole cost and expense and without any abatement
of rent. If Tenant fails to pay any sum of money owed to any party other than
Landlord, for which it is liable under this Lease, or if Tenant fails to perform
any other act on its part to be performed hereunder, and such failure continues
for ten (10) days after notice thereof by Landlord, Landlord may, without
waiving or releasing Tenant from its obligations, but shall not be obligated to,
make any such payment or perform any such other act to be made or performed by
Tenant. Tenant agrees to reimburse Landlord upon demand for all sums so paid by
Landlord and all necessary incidental costs, together with interest thereon at
the Interest Rate, from the date of such payment by Landlord until reimbursed by
Tenant. This remedy shall be in addition to any other right or remedy of
Landlord set forth in this Paragraph 22.
(f) Late Payment. If Tenant fails to pay any installment of rent within five
(5) days of when due or if Tenant fails to make any other payment for which
Tenant is obligated under this Lease within five (5) days of when due, such late
amount will accrue interest at the Interest Rate and Tenant agrees to pay
Landlord as additional rent such interest on such amount from the date such
amount becomes due until such amount is paid. In addition, Tenant agrees to pay
to Landlord concurrently with such late payment amount, as additional rent, a
late charge equal to five percent (5%) of the amount due to compensate Landlord
for the extra costs Landlord will incur as a result of such late payment. The
parties agree that (i) it would be impractical and extremely difficult to fix
the actual damage Landlord will suffer in the event of Tenant's late payment,
(ii) such interest and late charge represents a fair and reasonable estimate of
the detriment that Landlord will suffer by reason of late payment by Tenant, and
(iii) the payment of interest and late charges are distinct and separate in that
the payment of interest is to compensate Landlord for the use of Landlord's
money by Tenant, while the payment of late charges is to compensate Landlord for
Landlord's processing, administrative and other costs incurred by Landlord as a
result of Tenant's delinquent payments. Acceptance of any such interest and late
charge will not
<PAGE>
constitute a waiver of the Tenant's default with respect to the overdue amount,
or prevent Landlord from exercising any of the other rights and remedies
available to Landlord. If Tenant incurs a late charge more than three (3) times
in any period of twelve (12) months during the Lease Term, then, notwithstanding
that Tenant cures the late payments for which such late charges are imposed,
Landlord will have the right to require Tenant thereafter to pay all
installments of Monthly Base Rent quarterly in advance throughout the remainder
of the Lease Term.
(g) Landlord's Security Interest. Tenant hereby grants to Landlord a lien and
security interest on all property of Tenant now or hereafter placed in or upon
the Premises including, but not limited to, all fixtures, machinery, equipment,
furnishings and other articles of personal property, and all proceeds of the
sale or other disposition of such property (collectively, the "Collateral") to
secure the payment of all rent to be paid by Tenant pursuant to this Lease. Such
lien and security interest shall be in addition to any landlord's lien provided
by law. This Lease shall constitute a security agreement under the Commercial
Code of the State so that Landlord shall have and may enforce a security
interest in the Collateral. Tenant agrees to execute as debtor and deliver such
financing statement or statements and any further documents as Landlord may now
or hereafter reasonably request to protect such security interest pursuant to
such code. Landlord may also at any time file a copy of this Lease as a
financing statement. Landlord, as secured party, shall be entitled to all rights
and remedies afforded as secured party under such code, which rights and
remedies shall be in addition to Landlord's liens and rights provided by law or
by the other terms and provisions of this Lease.
(h) Rights and Remedies Cumulative. All rights, options and remedies of
Landlord contained in this Lease will be construed and held to be cumulative,
and no one of them will be exclusive of the other, and Landlord shall have the
right to pursue any one or all of such remedies or any other remedy or relief
which may be provided by law or in equity, whether or not stated in this Lease.
Nothing in this Paragraph 22 will be deemed to limit or otherwise affect
Tenant's indemnification of Landlord pursuant to any provision of this Lease.
23. LANDLORD'S DEFAULT.
Landlord will not be in default in the performance of any obligation required to
be performed by Landlord under this Lease unless Landlord fails to perform such
obligation within thirty (30) days after the receipt of written notice from
Tenant specifying in detail Landlord's failure to perform; provided however,
that if the nature of Landlord's obligation is such that more than thirty (30)
days are required for performance, then Landlord will not be deemed in default
if it commences such performance within such thirty (30) day period and
thereafter diligently pursues the same to completion. Upon any default by
Landlord, Tenant may exercise any of its rights provided at law or in equity,
subject to the limitations on liability set forth in Paragraph 35 of this Lease.
24. ASSIGNMENT AND SUBLETTING.
(a) Restriction on Transfer. Except as expressly provided in this Paragraph 24,
Tenant will not, either voluntarily or by operation of law, assign or encumber
this Lease or any interest herein
<PAGE>
or sublet the Premises or any part thereof, or permit the use or occupancy of
the Premises by any party other than Tenant or a transfer under Subparagraph
24(c) (any such assignment, encumbrance, sublease or the like will sometimes be
referred to as a "Transfer"), without the prior written consent of Landlord,
which consent Landlord will not unreasonably withhold.
(b) Corporate and Partnership Transfers. For purposes of this Paragraph 24, if
Tenant is a corporation, partnership or other entity, any transfer, assignment,
encumbrance or hypothecation of twenty-five percent (25%) or more (individually
or in the aggregate) of any stock or other ownership interest in such entity,
and/or any transfer, assignment, hypothecation or encumbrance of any controlling
ownership or voting interest in such entity, will be deemed a Transfer and will
be subject to all of the restrictions and provisions contained in this Paragraph
24. Notwithstanding the foregoing, the immediately preceding sentence will not
apply to any transfers of stock of Tenant if Tenant is a publicly-held
corporation and such stock is transferred publicly over a recognized security
exchange or over-the-counter market.
(c) Permitted Controlled Transfers. Notwithstanding the provisions of this
Paragraph 24 to the contrary, Tenant may assign this Lease or sublet the
Premises or any portion thereof ("Permitted Transfer"), without Landlord's
consent and without extending any sublease termination option to Landlord, to
any parent, subsidiary or affiliate corporation which controls, is controlled by
or is under common control with Tenant, or to any corporation resulting from a
merger or consolidation with Tenant, or to any person or entity which acquires
all the assets of Tenant's business as a going concern, provided that: (i) at
least twenty (20) days prior to such assignment or sublease, Tenant makes its
best efforts to deliver to Landlord, at Landlord's request, the financial
statements and other financial and background information of the assignee or
sublessee described in Subparagraph 24(d) below; (ii) if an assignment, the
assignee assumes, in full, the obligations of Tenant under this Lease (or if a
sublease, the sublessee of a portion of the Premises or Term assumes, in full,
the obligations of Tenant with respect to such portion); (iii) the financial net
worth of the assignee or sublessee as of the time of the proposed assignment or
sublease equals or exceeds that of Tenant as of the date of execution of this
Lease; (iv) Tenant remains fully liable under this Lease; and (v) the use of the
Premises under Paragraph 8 remains unchanged.
(d) Transfer Notice. If Tenant desires to effect a Transfer, then at least
thirty (30) days prior to the date when Tenant desires the Transfer to be
effective (the "Transfer Date"), Tenant agrees to give Landlord a notice (the
"Transfer Notice"), stating the name, address and business of the proposed
assignee, sublessee or other transferee (sometimes referred to hereinafter as
"Transferee"), reasonable information (including references) concerning the
character, ownership, and financial condition of the proposed Transferee, the
Transfer Date, any ownership or commercial relationship between Tenant and the
proposed Transferee, and the consideration and all other material terms and
conditions of the proposed Transfer, all in such detail as Landlord may
reasonably require. If Landlord reasonably requests additional detail, the
Transfer Notice will not be deemed to have been received until Landlord receives
such additional detail, and Landlord may withhold consent to any Transfer until
such information is provided to it.
(e) Landlord's Options. Within fifteen (15) days of Landlord's receipt of any
Transfer Notice, and any additional information requested by Landlord concerning
the proposed
<PAGE>
Transferee's financial responsibility, Landlord will elect to do one of the
following: (i) consent to the proposed Transfer; or (ii) refuse such consent,
which refusal shall be on reasonable grounds including, without limitation,
those set forth in Subparagraph 24(f) below.
(f) Reasonable Disapproval. Landlord and Tenant hereby acknowledge that
Landlord's disapproval of any proposed Transfer pursuant to Subparagraph 24(e)
will be deemed reasonably withheld if based upon any reasonable factor,
including, without limitation, any or all of the following factors: (i) the
proposed Transferee is a governmental entity; (ii) the portion of the Premises
to be sublet or assigned is irregular in shape with inadequate means of ingress
and egress; (iii) the use of the Premises by the Transferee (A) is not permitted
by the use provisions in Paragraph 8 hereof, (B) violates any exclusive use
granted by Landlord to another tenant in the Building, or (C) otherwise poses a
risk of increased liability to Landlord; (v) the Transfer would likely result in
a significant and inappropriate increase in the use of the parking areas or
Development Common Areas by the Transferee's employees or visitors, and/or
significantly increase the demand upon utilities and services to be provided by
Landlord to the Premises; (vi) the Transferee does not have the financial
capability to fulfill the obligations imposed by the Transfer and this Lease;
(vii) the Transferee is not in Landlord's reasonable opinion consistent with
Landlord's desired tenant mix; or (viii) the Transferee poses a business or
other economic risk which Landlord deems unacceptable.
(g) Additional Conditions. A condition to Landlord's consent to any Transfer of
this Lease will be the delivery to Landlord of a true copy of the fully executed
instrument of assignment, sublease, transfer or hypothecation, and, in the case
of an assignment, the delivery to Landlord of an agreement executed by the
Transferee in form and substance reasonably satisfactory to Landlord, whereby
the Transferee assumes and agrees to be bound by all of the terms and provisions
of this Lease and to perform all of the obligations of Tenant hereunder. As a
condition for granting its consent to any assignment or sublease, Landlord may
require that the assignee or sublessee remit directly to Landlord on a monthly
basis, all monies due to Tenant by said assignee or sublessee. As a condition to
Landlord's consent to any sublease, such sublease must provide that it is
subject and subordinate to this Lease and to all mortgages; that Landlord may
enforce the provisions of the sublease, including collection of rent; that in
the event of termination of this Lease for any reason, including without
limitation a voluntary surrender by Tenant, or in the event of any reentry or
repossession of the Premises by Landlord, Landlord may, at its option, either
(i) terminate the sublease, or (ii) take over all of the right, title and
interest of Tenant, as sublessor, under such sublease, in which case such
sublessee will attorn to Landlord, but that nevertheless Landlord will not (1)
be liable for any previous act or omission of Tenant under such sublease, (2) be
subject to any defense or offset previously accrued in favor of the sublessee
against Tenant, or (3) be bound by any previous modification of any sublease
made without Landlord's written consent, or by any previous prepayment by
sublessee of more than one month's rent.
(h) Excess Rent. If Landlord consents to any assignment of this Lease, Tenant
agrees to pay to Landlord, as additional rent, fifty percent (50%) of all sums
and other consideration payable to and for the benefit of Tenant by the assignee
on account of the assignment, as and when such sums and other consideration are
due and payable by the assignee to or for the benefit of Tenant (or, if Landlord
so requires, and without any release of Tenant's liability for the same, Tenant
<PAGE>
agrees to instruct the assignee to pay such sums and other consideration
directly to Landlord). If for any sublease, Tenant receives rent or other
consideration, either initially or over the term of the sublease, in excess of
the rent fairly allocable to the portion of the Premises which is subleased
based on square footage, Tenant agrees to pay to Landlord as additional rent
fifty percent (50%) of the excess of each such payment of rent or other
consideration received by Tenant promptly after its receipt. In calculating
excess rent or other consideration which may be payable to Landlord under this
paragraph, Tenant will be entitled to deduct commercially reasonable third party
brokerage commissions and attorneys' fees and other amounts reasonably and
actually expended by Tenant in connection with such assignment or subletting if
acceptable written evidence of such expenditures is provided to Landlord.
(i) OMITTED.
(j) No Release. No Transfer will release Tenant of Tenant's obligations under
this Lease or alter the primary liability of Tenant to pay the rent and to
perform all other obligations to be performed by Tenant hereunder. Landlord may
require that any Transferee remit directly to Landlord on a monthly basis, all
monies due Tenant by said Transferee. However, the acceptance of rent by
Landlord from any other person will not be deemed to be a waiver by Landlord of
any provision hereof. Consent by Landlord to one Transfer will not be deemed
consent to any subsequent Transfer. In the event of default by any Transferee of
Tenant or any successor of Tenant in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant, after providing Tenant with notice
of such default by the Transferee without the necessity of exhausting remedies
against such Transferee or successor. Tenants shall have the right to enforce
any sublease. Landlord may consent to subsequent assignments of this Lease or
sublettings or amendments or modifications to this Lease with assignees of
Tenant, without notifying Tenant, or any successor of Tenant, and without
obtaining its or their consent thereto and any such actions will not relieve
Tenant of liability under this Lease.
(k) Administrative and Attorneys' Fees. If Tenant effects a Transfer or
requests the consent of Landlord to any Transfer (whether or not such Transfer
is consummated), then, upon demand, Tenant agrees to pay Landlord a non-
refundable administrative fee of Two Hundred Fifty Dollars ($250.00), plus any
reasonable attorneys' and paralegal fees incurred by Landlord in connection with
such Transfer or request for consent (whether attributable to Landlord's in-
house attorneys or paralegals or otherwise) not to exceed One Hundred Dollars
($100.00) for each one thousand (1,000) rentable square feet of area contained
within the Premises or portion thereof to be assigned or sublet. Acceptance of
the Two Hundred Fifty Dollar ($250.00) administrative fee and/or reimbursement
of Landlord's attorneys' and paralegal fees will in no event obligate Landlord
to consent to any proposed Transfer.
25. SUBORDINATION.
Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, and at the election of Landlord or any
mortgagee or beneficiary with a deed of trust encumbering the Building and/or
the Development, or any lessor of a ground or underlying lease with respect to
the Building, this Lease will be subject and subordinate at all times to: (i)
all ground leases or underlying leases which may now exist or hereafter be
executed
<PAGE>
affecting the Building; and (ii) the lien of any mortgage or deed of trust which
may now exist or hereafter be executed for which the Building, the Development
or any leases thereof, or Landlord's interest and estate in any of said items,
is specified as security. Notwithstanding the foregoing, Landlord reserves the
right to subordinate any such ground leases or underlying leases or any such
liens to this Lease. If any such ground lease or underlying lease terminates
for any reason or any such mortgage or deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, at the election of
Landlord's successor in interest, Tenant agrees to attorn to and become the
tenant of such successor in which event Tenant's right to possession of the
Premises will not be disturbed as long as Tenant is not in default under this
Lease. Tenant hereby waives its rights under any law which gives or purports to
give Tenant any right to terminate or otherwise adversely affect this Lease and
the obligations of Tenant hereunder in the event of any such foreclosure
proceeding or sale. Tenant covenants and agrees to execute and deliver, upon
demand by Landlord and in the form reasonably required by Landlord, any
additional documents evidencing the priority or subordination of this Lease and
Tenant's attornment agreement with respect to any such ground lease or
underlying leases or the lien of any such mortgage or deed of trust. If Tenant
fails to sign and return any such documents within ten (10) days of receipt,
Tenant will be in default hereunder.
26. ESTOPPEL CERTIFICATE.
(a) Tenant's Obligations. Within fifteen (15) days following any written
request which Landlord may make from time to time, Tenant agrees to execute and
deliver to Landlord a statement, in a form substantially similar to the form of
Exhibit "G" attached hereto or as may reasonably be required by Landlord's
- -----------
lender, certifying: (i) the date of commencement of this Lease; (ii) the fact
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that this Lease is in full force and effect, and stating the
date and nature of such modifications); (iii) the date to which the rent and
other sums payable under this Lease have been paid; (iv) that there are no
current defaults under this Lease by either Landlord or Tenant except as
specified in Tenant's statement; and (v) such other matters reasonably requested
by Landlord. Landlord and Tenant intend that any statement delivered pursuant to
this Paragraph 26 may be relied upon by any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or any interest therein. Any errors made
by Tenant on any estoppel certificate delivered to Landlord or any other party
shall not modify the terms, covenants, or conditions of this Lease.
(b) Tenant's Failure to Deliver. Tenant's failure to deliver such statement
within such time will be conclusive upon Tenant (i) that this Lease is in full
force and effect, without modification except as may be represented by Landlord,
(ii) that there are no uncured defaults in Landlord's performance, and (iii)
that not more than one (1) month's rent has been paid in advance. Without
limiting the foregoing, if Tenant fails to deliver any such statement within
such fifteen (15) day period, Landlord may deliver to Tenant an additional
request for such statement and Tenant's failure to deliver such statement to
Landlord within ten (10) days after delivery of such additional request will
constitute a default under this Lease. Tenant agrees to indemnify and protect
Landlord from and against any and all claims, damages, losses, liabilities and
expenses (including attorneys' fees and costs) attributable to any failure by
Tenant to timely deliver any such estoppel certificate to Landlord as required
by this Paragraph 26.
<PAGE>
27. OMITTED.
28. RULES AND REGULATIONS.
Tenant agrees to faithfully observe and comply with the "Rules and Regulations,"
a copy of which is attached hereto and incorporated herein by this reference as
Exhibit "H", and all reasonable and nondiscriminatory modifications thereof and
- -----------
additions thereto from time to time put into effect by Landlord. Landlord will
not be responsible to Tenant for the violation or non-performance by any other
tenant or occupant of the Building of any of the Rules and Regulations.
29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND LESSORS.
(a) Modifications. If, in connection with Landlord's obtaining or entering into
any financing or ground lease for any portion of the Building or the
Development, the lender or ground lessor requests modifications to this Lease,
Tenant, within ten (10) days after request therefor, agrees to execute an
amendment to this Lease incorporating such modifications, provided such
modifications are reasonable and do not increase the obligations of Tenant or
reduce Tenant's rights under this Lease or adversely affect the leasehold estate
created by this Lease.
(b) Cure Rights. In the event of any default on the part of Landlord, Tenant
will give notice by registered or certified mail to any beneficiary of a deed of
trust or mortgage covering the Premises or ground lessor of Landlord whose
address has been furnished to Tenant, by Landlord in accordance with the notice
provision and Tenant agrees to offer such beneficiary, mortgagee or ground
lessor a reasonable opportunity to cure the default (including with respect to
any such beneficiary or mortgagee, time to obtain possession of the Premises,
subject to this Lease and Tenant's rights hereunder, by power of sale or a
judicial foreclosure, if such should prove necessary to effect a cure).
30. DEFINITION OF LANDLORD.
The term "Landlord," as used in this Lease, so far as covenants or obligations
on the part of Landlord are concerned, means and includes only the owner or
owners, at the time in question, of the fee title of the Premises or the lessees
under any ground lease, if any. In the event of any transfer, assignment or
other conveyance or transfers of any such title (other than a transfer for
security purposes only), Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) will be automatically relieved from
and after the date of such transfer, assignment or conveyance of all liability
as respects the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed, so long as the
transferee assumes in writing all such covenants and obligations of Landlord
arising after the date of such transfer. Landlord and Landlord's transferees
and assignees have the absolute right to transfer all or any portion of their
respective title and interest in the Development, the Building, the Premises
and/or this Lease without the consent of Tenant, and such transfer or subsequent
transfer will not be deemed a violation on Landlord's part of any of the terms
and conditions of this Lease.
<PAGE>
31. WAIVER.
The waiver by either party of any breach of any term, covenant or condition
herein contained will not be deemed to be a waiver of any subsequent breach of
the same or any other term, covenant or condition herein contained, nor will any
custom or practice which may develop between the parties in the administration
of the terms hereof be deemed a waiver of or in any way affect the right of
either party to insist upon performance in strict accordance with said terms.
The subsequent acceptance of rent or any other payment hereunder by Landlord
will not be deemed to be a waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease, other than the failure of Tenant to pay the
particular rent so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such rent. No acceptance by
Landlord of a lesser sum than the basic rent and additional rent or other sum
then due will be deemed to be other than on account of the earliest installment
of such rent or other amount due, nor will any endorsement or statement on any
check or any letter accompanying any check be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such installment or other amount or pursue any
other remedy provided in this Lease. The consent or approval of Landlord to or
of any act by Tenant requiring Landlord's consent or approval will not be deemed
to waive or render unnecessary Landlord's consent or approval to or of any
subsequent similar acts by Tenant.
32. PARKING.
(a) Grant of Parking Rights. So long as this Lease is in effect and provided
Tenant is not in default hereunder, Landlord grants to Tenant and Tenant's
Authorized Users (as defined below) a license to use the number and type of
parking spaces designated in Subparagraph 1(s) subject to the terms and
conditions of this Paragraph 32 and the Rules and Regulations regarding parking
contained in Exhibit "H" attached hereto. Except as otherwise expressly set
-----------
forth in Subparagraph 1(s), as consideration for the use of such parking spaces,
Tenant agrees to pay to Landlord or, at Landlord's election, directly to
Landlord's parking operator, as additional rent under this Lease, the prevailing
parking rate for each such parking space as established by Landlord in its
discretion from time to time. Tenant agrees that all parking charges will be
payable on a monthly basis concurrently with each monthly payment of Monthly
Base Rent. Tenant agrees to submit to Landlord or, at Landlord's election,
directly to Landlord's parking operator with a copy to Landlord, written notice
in a form reasonably specified by Landlord containing the names, home and office
addresses and telephone numbers of those persons who are authorized by Tenant to
use Tenant's parking spaces on a monthly basis ("Tenant's Authorized Users") and
shall use its best efforts to identify each vehicle of Tenant's Authorized Users
by make, model and license number. Tenant agrees to deliver such notice prior to
the beginning of the Term of this Lease and to periodically update such notice
as well as upon specific request by Landlord or Landlord's parking operator to
reflect changes to Tenant's Authorized Users or their vehicles.
(b) Visitor Parking. So long as this Lease is in effect, Tenant's visitors and
guests will be entitled to use those specific parking areas which are designated
for short term visitor parking and which are located within the surface parking
area(s), if any, and/or within the parking structure(s)
<PAGE>
which serve the Building. Visitor parking will be made available at a charge to
Tenant's visitors and guests, with the rate being established by Landlord in its
discretion from time to time. Tenant, at its sole cost and expense, may elect to
validate such parking for its visitors and guests. All such visitor parking will
be on a non-exclusive, in common basis with all other visitors and guests of the
Development.
(c) Use of Parking Spaces. Tenant will not use or allow any of Tenant's
Authorized Users to use any parking spaces which have been specifically assigned
by Landlord to other tenants or occupants or for other uses such as visitor
parking or which have been designated by any governmental entity as being
restricted to certain uses. Tenant will not be entitled to increase its parking
privileges applicable to the Premises during the Term of the Lease except as
follows: If at any time Tenant desires to increase the number of parking spaces
allocated to it under the terms of this Lease, Tenant must notify Landlord in
writing of such desire and Landlord will have the right, in its sole and
absolute discretion, to either (a) approve such requested increase in the number
of parking spaces allocated to Tenant (with an appropriate increase to the
additional rent payable by Tenant for such additional spaces based on the then
prevailing parking rates), (b) approve such requested decrease in the number of
parking spaces allocated to Tenant (with an appropriate reduction in the
additional rent payable by Tenant for such eliminated parking spaces based on
the then prevailing parking rates), or (c) disapprove such requested increase in
the number of parking spaces allocated to Tenant. Promptly following receipt of
Tenant's written request, Landlord will provide Tenant with written notice of
its decision including a statement of any adjustments to the additional rent
payable by Tenant for parking under the Lease, if applicable.
(d) General Provisions. Except as otherwise expressly set forth in Subparagraph
1(s), Landlord reserves the right to set and increase monthly fees and/or daily
and hourly rates for parking privileges from time to time during the Term of the
Lease. Landlord may assign any unreserved and unassigned parking spaces and/or
make all or any portion of such spaces reserved, if Landlord reasonably
determines that it is necessary for orderly and efficient parking or for any
other reasonable reason. Failure to pay the rent for any particular parking
spaces or failure to comply with any terms and conditions of this Lease
applicable to parking may be treated by Landlord as a default under this Lease
and, in addition to all other remedies available to Landlord under the Lease, at
law or in equity, Landlord may elect to recapture such parking spaces for the
balance of the Term of this Lease if Tenant does not cure such failure within
the applicable cure period set forth in Paragraph 22 of this Lease. In such
event, Tenant and Tenant's Authorized Users will be deemed visitors for purposes
of parking space use and will be entitled to use only those parking areas
specifically designated for visitor parking subject to all provisions of this
Lease applicable to such visitor parking use. Except in connection with an
assignment or sublease expressly permitted under the terms of this Lease,
Tenant's parking rights and privileges described herein are personal to Tenant
and may not be assigned or transferred, or otherwise conveyed, without
Landlord's prior written consent, which consent Landlord may withhold in its
sole and absolute discretion. In any event, under no circumstances may Tenant's
parking rights and privileges be transferred, assigned or otherwise conveyed
separate and apart from Tenant's interest in this Lease.
(e) Cooperation with Traffic Mitigation Measures. Tenant agrees to use its
reasonable, good
<PAGE>
faith efforts to cooperate in traffic mitigation programs which may be
undertaken by Landlord independently, or in cooperation with local
municipalities or governmental agencies or other property owners in the vicinity
of the Building. Such programs may include, but will not be limited to,
carpools, vanpools and other ridesharing programs, public and private transit,
flexible work hours, preferential assigned parking programs and programs to
coordinate tenants within the Development with existing or proposed traffic
mitigation programs.
(f) Parking Rules and Regulations. Tenant and Tenant's Authorized Users shall
comply with all rules and regulations regarding parking set forth in Exhibit "H"
-----------
attached hereto and Tenant agrees to cause its employees, subtenants, assignees,
contractors, suppliers, customers and invitees to comply with such rules and
regulations. Landlord reserves the right from time to time to modify and/or
adopt such other reasonable and non-discriminatory rules and regulations for the
parking facilities as it deems reasonably necessary for the operation of the
parking facilities.
33. FORCE MAJEURE.
If either Landlord or Tenant is delayed, hindered in or prevented from the
performance of any act required under this Lease by reason of strikes, lock-
outs, labor troubles, inability to procure standard materials, failure of power,
restrictive governmental laws, regulations or orders or governmental action or
inaction (including failure, refusal or delay in issuing permits, approvals
and/or authorizations which is not the result of the action or inaction of the
party claiming such delay), riots, civil unrest or insurrection, war, fire,
earthquake, flood or other natural disaster, unusual and unforeseeable delay
which results from an interruption of any public utilities (e.g., electricity,
gas, water, telephone) or other unusual and unforeseeable delay not within the
reasonable control of the party delayed in performing work or doing acts
required under the provisions of this Lease, then performance of such act will
be excused for the period of the delay and the period for the performance of any
such act will be extended for a period equivalent to the period of such delay.
The provisions of this Paragraph 33 will not operate to excuse Tenant from
prompt payment of rent or any other payments required under the provisions of
this Lease.
34. SIGNS.
Landlord will designate the location on the Premises, if any, for one or more
Tenant identification sign(s). Tenant agrees to have Landlord install and
maintain Tenant's identification sign(s) in such designated location in
accordance with this Paragraph 34 at Tenant's sole cost and expense. Tenant has
no right to install Tenant identification signs in any other location in, on or
about the Premises or the Development and will not display or erect any other
signs, displays or other advertising materials that are visible from the
exterior of the Building or from within the Building in any interior or exterior
common areas. The size, design, color and other physical aspects of any and all
permitted sign(s) will be subject to (i) Landlord's written approval prior to
installation, which approval may be withheld in Landlord's discretion, (ii) any
covenants, conditions or restrictions governing the Premises, and (iii) any
applicable municipal or governmental permits and approvals. Tenant will be
solely responsible for all costs for installation, maintenance, repair and
removal of any Tenant identification sign(s). If Tenant fails to remove
Tenant's sign(s) upon termination of this Lease and repair any damage caused by
such removal, Landlord may do so at Tenant's sole cost and expense. Tenant
agrees to reimburse
<PAGE>
Landlord for all costs incurred by Landlord to effect any installation,
maintenance or removal on Tenant's account, which amount will be deemed
additional rent, and may include, without limitation, all sums disbursed,
incurred or deposited by Landlord including Landlord's costs, expenses and
actual attorneys' fees with interest thereon at the Interest Rate from the date
of Landlord's demand until paid by Tenant. Any sign rights granted to Tenant
under this Lease are personal to Tenant and may not be assigned, transferred or
otherwise conveyed to any assignee or subtenant of Tenant without Landlord's
prior written consent, which consent Landlord may withhold in its sole and
absolute discretion.
35. LIMITATION ON LIABILITY.
In consideration of the benefits accruing hereunder, Tenant on behalf of itself
and all successors and assigns of Tenant covenants and agrees that, in the event
of any actual or alleged failure, breach or default hereunder by Landlord: (a)
Tenant's recourse against Landlord for monetary damages will be limited to
Landlord's interest in the Building including, subject to the prior rights of
any Mortgagee, Landlord's interest in the rents of the Building and any
insurance proceeds payable to Landlord; (b) Except as may be necessary to
secure jurisdiction of the partnership, no partner of Landlord shall be sued or
named as a party in any suit or action and no service of process shall be made
against any partner of Landlord; (c) No partner of Landlord shall be required
to answer or otherwise plead to any service of process; (d) No judgment will be
taken against any partner of Landlord and any judgment taken against any partner
of Landlord may be vacated and set aside at any time after the fact; (e) No
writ of execution will be levied against the assets of any partner of Landlord;
(f) The obligations under this Lease do not constitute personal obligations of
the individual partners, directors, officers or shareholders of Landlord, and
Tenant shall not seek recourse against the individual partners, directors,
officers or shareholders of Landlord or any of their personal assets for
satisfaction of any liability in respect to this Lease; and (g) These covenants
and agreements are enforceable both by Landlord and also by any partner of
Landlord.
36. FINANCIAL STATEMENTS.
Prior to the execution of this Lease by Landlord and at any time during the Term
of this Lease upon fifteen (15) days prior written notice from Landlord, Tenant
agrees to provide Landlord with a current financial statement for Tenant and any
guarantors of Tenant and financial statements for the two (2) years prior to the
current financial statement year for Tenant and any guarantors of Tenant. Such
statements are to be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant, audited by an
independent certified public accountant.
37. QUIET ENJOYMENT.
Landlord covenants and agrees with Tenant that upon Tenant paying the rent
required under this Lease and paying all other charges and performing all of the
covenants and provisions on Tenant's part to be observed and performed under
this Lease, Tenant may peaceably and quietly have, hold and enjoy the Premises
in accordance with this Lease.
<PAGE>
38. MISCELLANEOUS.
(a) Conflict of Laws. This Lease shall be governed by and construed solely
pursuant to the laws of the State, without giving effect to choice of law
principles thereunder.
(b) Successors and Assigns. Except as otherwise provided in this Lease, all of
the covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
(c) Professional Fees and Costs. If either Landlord or Tenant should bring suit
against the other with respect to this Lease, then all costs and expenses,
including without limitation, actual professional fees and costs such as
appraisers', accountants' and attorneys' fees and costs, incurred by the party
which prevails in such action, whether by final judgment or out of court
settlement, shall be paid by the other party, which obligation on the part of
the other party shall be deemed to have accrued on the date of the commencement
of such action and shall be enforceable whether or not the action is prosecuted
to judgment. As used herein, attorneys' fees and costs shall include, without
limitation, attorneys' fees, costs and expenses incurred in connection with any
(i) postjudgment motions; (ii) contempt proceedings; (iii) garnishment, levy,
and debtor and third party examination; (iv) discovery; and (v) bankruptcy
litigation.
(d) Terms and Headings. The words "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular. Words used in any gender include
other genders. The paragraph headings of this Lease are not a part of this Lease
and shall have no effect upon the construction or interpretation of any part
hereof.
(e) Time. Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor.
(f) Prior Agreement; Amendments. This Lease constitutes and is intended by the
parties to be a final, complete and exclusive statement of their entire
agreement with respect to the subject matter of this Lease. This Lease
supersedes any and all prior and contemporaneous agreements and understandings
of any kind relating to the subject matter of this Lease. There are no other
agreements, understandings, representations, warranties, or statements, either
oral or in written form, concerning the subject matter of this Lease. No
alteration, modification, amendment or interpretation of this Lease shall be
binding on the parties unless contained in a writing which is signed by both
parties.
(g) Separability. The provisions of this Lease shall be considered separable
such that if any provision or part of this Lease is ever held to be invalid,
void or illegal under any law or ruling, all remaining provisions of this Lease
shall remain in full force and effect to the maximum extent permitted by law.
(h) Recording. Neither Landlord nor Tenant shall record this Lease nor a short
form memorandum thereof without the consent of the other.
(i) Counterparts. This Lease may be executed in one or more counterparts, each
of which
<PAGE>
shall constitute an original and all of which shall be one and the same
agreement.
(j) Nondisclosure of Lease Terms. Tenant acknowledges and agrees that the
terms of this Lease are confidential and constitute proprietary information of
Landlord. Disclosure of the terms could adversely affect the ability of Landlord
to negotiate other leases and impair Landlord's relationship with other tenants.
Accordingly, Tenant agrees that it, and its partners, officers, directors,
employees, agents and attorneys, shall not intentionally and voluntarily
disclose the terms and conditions of this Lease to any newspaper or other
publication or any other tenant or apparent prospective tenant of the Building
or other portion of the Development, or real estate agent, either directly or
indirectly, without the prior written consent of Landlord, provided, however,
that Tenant may disclose the terms to prospective subtenants or assignees under
this Lease.
(k) Non-Discrimination. Tenant acknowledges and agrees that there shall be no
discrimination against, or segregation of, any person, group of persons, or
entity on the basis of race, color, creed, religion, age, sex, marital status,
national origin, or ancestry in the leasing, subleasing, transferring,
assignment, occupancy, tenure, use, or enjoyment of the Premises, or any portion
thereof.
39. EXECUTION OF LEASE.
(a) Joint and Several Obligations. If more than one person executes this Lease
as Tenant, their execution of this Lease will constitute their covenant and
agreement that (i) each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions, provisions
and agreements of this Lease to be kept, observed and performed by Tenant, and
(ii) the term "Tenant" as used in this Lease means and includes each of them
jointly and severally. The act of or notice from, or notice or refund to, or the
signature of any one or more of them, with respect to the tenancy of this Lease,
including, but not limited to, any renewal, extension, expiration, termination
or modification of this Lease, will be binding upon each and all of the persons
executing this Lease as Tenant with the same force and effect as if each and all
of them had so acted or so given or received such notice or refund or so signed.
(b) Tenant as Corporation or Partnership. If Tenant executes this Lease as a
corporation or partnership, then Tenant and the persons executing this Lease on
behalf of Tenant represent and warrant that such entity is duly qualified and in
good standing to do business in California and that the individuals executing
this Lease on Tenant's behalf are duly authorized to execute and deliver this
Lease on its behalf, and in the case of a corporation, in accordance with a duly
adopted resolution of the board of directors of Tenant, a copy of which is to be
delivered to Landlord on execution hereof, if requested by Landlord, and in
accordance with the by-laws of Tenant, and, in the case of a partnership, in
accordance with the partnership agreement and the most current amendments
thereto, if any, copies of which are to be delivered to Landlord on execution
hereof, if requested by Landlord, and that this Lease is binding upon Tenant in
accordance with its terms.
(c) Examination of Lease. Submission of this instrument by Landlord to Tenant
for examination or signature by Tenant does not constitute a reservation of or
option for lease, and
<PAGE>
it is not effective as a lease or otherwise until execution by and delivery to
both Landlord and Tenant.
IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed by
their duly authorized representatives as of the date first above written.
<TABLE>
<CAPTION>
"TENANT" "LANDLORD"
<S> <C>
KOLL MANAGEMENT SERVICES, INC. KOLL CENTER NEWPORT NUMBER 14
a Delaware Corporation a California general partnership
By: _____________________________________ By: Koll Management Services, Inc.,
Print Name: Lynda McMillen A Delaware Corporation,
Print Title: Executive Vice President Its Authorized Agent
By: _____________________________________ By:_________________________________
Print Name: Print Name: Jana L. Turner
Title: Print Title: Regional President
By:_________________________________
Print Name: Stephen G. Stage
Print Title: Portfolio Manager
</TABLE>
<PAGE>
ADDENDUM TO OFFICE BUILDING LEASE
DATED APRIL 13, 1995
BY AND BETWEEN KOLL CENTER NEWPORT NUMBER 14,
A CALIFORNIA GENERAL PARTNERSHIP, AS "LANDLORD" AND
KOLL MANAGEMENT SERVICES, INC., A DELAWARE CORPORATION
AS "TENANT"
________________________________________________________________________________
40. OPTION TO EXTEND:
----------------
(a) Subject to the terms of this Paragraph 40 and Paragraph 43, entitled
"Options," Landlord hereby grants to Tenant an option (the "Extension Option")
to extend the Term of this Lease with respect to the entire Premises (as
expanded) for one (1) additional period of five (5) years (the "Option Term"),
on the same terms, covenants and conditions as provided for in this Lease during
the initial lease Term, except that all economic terms such as, without
limitation, Monthly Base Rent, an Operating Expense Allowance, if any, parking
charges, partially abated rent, etc., shall be established based on the "fair
market rental rate" for the Premises for the Option Term as defined and
determined in accordance with the provisions of this Paragraph 40 below.
(b) The Extension Option must be exercised, if at all, by written notice
("Extension Notice") delivered by Tenant to Landlord no earlier than the date
which is two hundred seventy (270) days, and no later than the date which is one
hundred eighty (180) days prior to the expiration of the then current Term of
this Lease.
(c) The term "fair market rental rate" as used in the Lease and any Rider or
Addendum attached thereto shall mean Landlord's reasonable and good faith
determination of the annual amount per rentable square foot, projected during
the relevant period, that a willing, financially comparable, non-equity, non-
renewal tenant (excluding sublease and assignment transactions) would pay, and a
willing, financially comparable landlord of a comparable quality office building
located in the Newport Beach-Irvine-Costa Mesa airport are ("Comparison Area")
would accept, at arm's length (what Landlord is accepting in current
transactions for the Building may be considered), for space comparable size,
quality and floor height as the leased area at issue taking into account the
age, quality and layout of the existing improvements in the leased area at issue
and taking into account items that professional real estate brokers customarily
consider, including, but not limited to, rental rates, office space
availability, tenant size, tenant improvement allowances, operating expenses and
allowance, parking charges, free rent, free parking and any other lease
concessions, if any, then being charged or granted by Landlord or the lessors of
such similar office buildings. The fair market rental rate will be an effective
rate, not including, but accounting for, the appropriate lease concessions
described above.
(d) Landlord's determination of fair market rental rate shall be delivered
to Tenant in writing not late than thirty (30) days following Landlord's receipt
of Tenant's Extension Notice. Tenant will have thirty (30) days ("Tenant's
Review Period") after receipt of Landlord's notice of the fair market rental
rate within which to accept such fair market rental rate or to reasonably
<PAGE>
object thereto in writing. Tenant's failure to object to the fair market rental
rate submitted by Landlord in writing within Tenant's Review Period will
conclusively be deemed Tenant's approval and acceptance thereof. If Tenant
reasonably objects to the fair market rental rate submitted by Landlord within
Tenant's Review Period, then Landlord and Tenant will attempt in good faith to
agree upon such fair market rental rate using their best good faith efforts. If
Landlord and Tenant fail to reach agreement on such fair market rental rate
within fifteen (15) days following the expiration of Tenant's Review Period (the
"Outside Agreement Date"), then Tenant's Extension Option shall be voided unless
Tenant notifies Landlord in writing within five (5) days of the Outside
Agreement Date of its election to agree upon a fair market rental rate pursuant
to an appraisal method, n which event each party's determination will be
submitted to appraisal in accordance with the provisions below.
(e) (i) Landlord and Tenant shall each appoint one appraiser who shall
by profession be a real estate broker who has been active over the five (5) year
period ending on the date of such appointment in the leasing of high-rise office
space in the Comparison Area. Each such appraiser will be appointed within
thirty (30) days after the Outside Agreement Date.
(ii) The two (2) appraisers so appointed will within fifteen (15) days
of the date of the appointment of the last appointed appraiser agree upon and
appoint a third appraiser who shall be qualified under the same criteria set
forth herein above for qualification of the initial two (2) appraisers.
(iii) The determination of the appraisers shall be limited solely to
the issue of whether Landlord's or Tenant's last proposed (as of the Outside
Agreement Date) new Monthly Base Rent for the Premises is the closest to the
actual new Monthly Base Rent for the Premises as determined by the appraisers,
taking into account the requirements of Paragraph (c) and this Paragraph (e)
regarding same.
(iv) The three (3) appraisers shall within thirty (30) days of the
appointment of the third appraiser reach a decision as to whether the parties
shall use Landlord's or Tenant's submitted new Monthly Base Rent, and shall
notify Landlord and Tenant thereof.
(v) The decision of the majority of the three (3) appraisers shall be
binding upon Landlord and Tenant. The cost of each party's appraiser shall be
the responsibility of the party selecting such appraiser, and the cost of the
third appraiser (or arbitration, if necessary) shall be shared equally by
Landlord and Tenant.
(vi) If either Landlord or Tenant fails to appoint an appraiser within
the time period in Paragraph (f)(i) herein above, the appraiser appointed by one
of them shall reach a decision, notify Landlord and Tenant thereof, and such
appraiser's decision shall be binding upon Landlord and Tenant.
(vii) If the two (2) appraisers fail to agree upon and appoint a
third appraiser, both appraisers shall be dismissed and the matter to be decided
shall be forthwith submitted to arbitration under the provisions of the American
Arbitration Association.
<PAGE>
(viii) Landlord and Tenant shall split the cost of the third
appraiser and shall pay for their own appraisers.
41. RIGHT TO LEASE ADDITIONAL SPACE:
-------------------------------
(a) Subject to the terms of this Paragraph 41 and Paragraph 43 below,
entitled "Options," Tenant shall have a continuing right to lease ("Right to
Lease") space on the ninth (9th) floor of the Building, to the extent such space
becomes available for lease to third parties after the expiration of any
existing lease for such space during the Lease Term, including the expiration of
all renewal or extension options under such leases, and after any existing
tenant or occupant vacates such space ("First Offer Space"). Tenant's Right to
Lease is subject and subordinate to the rights of all other existing tenants of
the Building granted prior to the date of this Lease with regard to the First
Offer Space or any portion thereof.
(b) Upon written request from Tenant to Landlord ("Tenant Request"), which
Tenant may not give more than two (2) times per Lease Year, Landlord will give
Tenant written notice of the availability of such First Offer Space and the date
the existing tenant or occupant, if any, is expected to vacate such space
("Landlord's Availability Notice"). Within five (5) business days following
delivery of Landlord's Availability Notice, Tenant will have the right to, in
writing, request from Landlord a written statement setting forth the basic
economic terms, including, but not limited to, Landlord's determination of the
Monthly Base Rent, tenant improvement allowance, if any, and all other economic
terms and conditions (collectively, the "Economic Terms"), upon which Landlord
is willing to lease such First Offer Space, either to Tenant or to a third
party. Such Economic Terms will represent Landlord's reasonable determination
of the fair market rental rate for the First Offer Space determined by Landlord
with reference to the parameters set forth in Subparagraph 40(c) above. The
Lease Term for such First Offer Space shall be coterminous with the initial
Lease Term, subject to extension, in accordance with the terms of Paragraph 40
above.
(c) Within ten (10) days after receipt of the Economic Terms from Landlord,
Tenant must given Landlord written notice pursuant to which Tenant shall elect
to either: (i) lease such First Offer Space upon such Economic Terms and the
same non-Economic Terms as set forth in this Lease with respect to the Premises;
or (ii) refuse to lease such First Offer Space. Tenant's failure to timely
choose either clause (i) or clause (ii) above will be deemed to be Tenant's
choice of clause (ii) above.
(d) If Tenant chooses (or is deemed to have chosen) clause (c)(ii) above,
Tenant's Right to Lease the First Offer Space will be null and void until
Landlord once again delivers to Tenant Landlord's Availability Notice, in which
event, the procedures and sequences set forth above will be followed. If Tenant
exercises its Right to Lease as provided herein, the parties will promptly
thereafter execute an amendment to the Lease to include the First Offer Space in
the Premises and to document the lease terms thereof.
42. OPTION TO TERMINATE: Subject to the terms of this Paragraph 42 and
-------------------
Paragraph 43 entitled "Options," and notwithstanding anything to the contrary
contained in this Lease, Tenant will have a one-time option to terminate and
cancel this Lease (the "Termination Option"),
<PAGE>
effective as of the last day of the thirty-sixth (36th) month of the Lease Term
(the "Termination Date"), by delivering to Landlord, on or before the first day
of the thirtieth (30th) month of the Lease Term, written notice ("Termination
Notice") of Tenant's exercise of its Termination Option. As a condition to the
effectiveness of Tenant's exercise of its Termination Option and in addition to
Tenant's obligation to satisfy all other monetary and non monetary obligations
arising under this Lease through the Termination Date, concurrently with
Tenant's delivery to Landlord of the Termination Notice, Tenant must pay to
Landlord cash (or its equivalent) in the amount of One Hundred Ninety-Five
Thousand Five Hundred Fifteen Dollars ($195,515) (the "Termination
Consideration"), which sum the parties acknowledge is not in the nature of a
penalty and represents the balance of principal and interest payments remaining
as of the effective date of the termination, assuming tenant improvements,
moving allowance and brokerage commissions were fully amortized over the
complete five (5) year Term of the Lease with interest applied at ten percent
(10%). If Tenant properly and timely delivers the Termination Notice and the
Termination Consideration to Landlord and satisfies all other monetary and non
monetary obligations under this Lease through the Termination Date, including,
without limitation, the provisions regarding surrender of the Premises, then
this Lease will terminate as of midnight on the Termination Date.
43. OPTIONS.
-------
(a) Definition. As used in this Paragraph, the word "Option" has the
----------
following meaning:
(i) The Option to Extend pursuant to Paragraph 40 herein;
(ii) The Right to Lease Additional Space pursuant to Paragraph 41
herein;
(iii) The Option to Terminate pursuant to Paragraph 42 herein.
(b) Effect of Default on Option: Tenant shall have no right to exercise any
---------------------------
Option, notwithstanding any provision of the grant of Option to the contrary,
and Tenant's exercise of any Option may be nullified by Landlord and deemed of
no further force or effect, if Tenant shall be in default of any monetary
obligation or material non-monetary obligation under the terms of the Lease (or
if Tenant would be in such default under the Lease but for the passage of time
or the giving of notice, or both) as of Tenant's exercise of the Option in
question or at any time after the exercise of any such Option and prior to the
commencement of the Option event.
44. EXPANSION SPACE: Landlord and Tenant hereby acknowledge that Tenant is
---------------
unable to utilize a portion of the Premises for the initial twelve (12) months
of the Lease term. Accordingly, for a period of twelve (12) months after the
Commencement Date, as defined herein, Tenant shall not occupy or utilize the
portion of the Premises indicated by the diagonal lines on Exhibit I (the
"Expansion Space") consisting of 2,785 rentable square feet, except, however,
that Tenant may utilize the Expansion Space only to the extent necessary for
ingress and egress to the remaining portion of the Premises. Tenant cannot use
the Expansion Space for storage of any of its personal property, equipment,
furniture or other items during said period nor shall Tenant be permitted to
sublease the Expansion Space during said twelve (12) month period.
<PAGE>
Landlord and Tenant hereby agree that so long as Tenant does not occupy or
utilize the Expansion Space, (except as set forth above), Tenant shall receive a
monthly credit in the amount of $3,759.75 (the "Expansion Space Credit") against
Monthly Base Rent due during the initial twelve (12) months of the Lease Term.
In no event shall such credit apply after the initial twelve (12) months of the
Lease Term. Notwithstanding the above, Tenant may utilize portions of the
Expansion Space in increments (the "Expansion Space Increments") as set forth in
Exhibit I by providing written notice to Landlord of its intent to occupy one
(1) or more of said Expansion Space Increments. Tenant's use of any such
Expansion Space Increment shall cause the Expansion Space Credit to be reduced
by twenty-five percent (25%) for each such increment utilized by Tenant,
commencing on the date Tenant occupies the Expansion Space increment(s). In the
event Tenant occupies or utilizes any portion of Expansion Space during the
initial twelve (12) months of the Lease Term, (other than set forth above),
without providing notice to Landlord the Expansion Space Credit shall be
immediately terminated and Tenant shall pay the full Monthly Base Rent due under
the Lease. During the period that Tenant receives the Expansion Space Credit,
Tenant's Percentage for operating expenses shall be 5.551%; provided, however,
that once the Expansion Space Credit terminates Tenant's Percentage shall be
6.4561%.
During the initial twelve (12) months of the Lease Term, Tenant shall cooperate
with Landlord with regard to Landlord's inspection of the Expansion Space to
verify that Tenant is not utilizing such space.
45. AMERICANS WITH DISABILITIES ACT (ADA): Tenant shall be responsible for
-------------------------------------
causing, at Tenant's sole cost and expense, the Premises to comply with the
American With Disabilities Act of 1990, as subsequently amended ("ADA"), and all
similar federal, state and local laws, rules and regulations and subsequent
amendments thereof. Landlord shall be responsible for causing the common areas
of the Building and the Development to comply with the ADA, the costs for which
shall not constitute a component of Operating Expenses (except to the extent
such costs are included in the Operating Expense Allowance).
46. NON-DISTURBANCE AGREEMENT: Landlord shall use its best efforts, prior to
-------------------------
the commencement of the Lease term, cause Tenant to be provided with a
commercially reasonable Non-Disturbance Agreement from existing lender on the
building in the form acceptable to such lender.
47. MOVING ALLOWANCE: Provided the cost of the Tenant Improvements to the
----------------
Premises do not exceed $18.86 per usable square foot as set forth in Schedule 1
of Exhibit "C" herein as a result of modifications made to the approved plans by
Tenant, Tenant shall receive a moving allowance (the "Moving Allowance") in the
amount of $20,604.33. Any increase in cost resulting from modifications to the
approved plans by Tenant shall reduce the Moving Allowance proportionately to
such increase. In the event the increased costs exceed the Moving Allowance,
any additional amounts due from Tenant to Landlord shall be paid as set forth in
Exhibit C. In the event that a Moving Allowance is due from Landlord to Tenant
after the completion of the Tenant Improvements, Landlord shall pay the Moving
Allowance to Tenant within thirty (30) days after Tenant's occupancy of the
Premises.
<PAGE>
48. CONFLICT WITH BASIC LEASE: To the extent of any conflict between the
-------------------------
printed portion of this Lease and the provisions of this Addendum Sections 40
through 47, the provisions of this Addendum shall prevail.
"TENANT" "LANDLORD"
KOLL MANAGEMENT SERVICES, INC. KOLL CENTER NEWPORT NUMBER 14,
a Delaware corporation a California general partnership
By: KOLL MANAGEMENT SERVICES, INC.,
By: a Delaware corporation as Agent
---------------------------------
By:
Print Name: Lynda McMillen ---------------------------------
-------------------------
Print Name: Jana L. Turner
Title: Executive Vice President ----------------------
------------------------------
Print Title: Regional President
By: ---------------------
---------------------------------
By:
Print Name: ---------------------------------
-------------------------
Print Name: Stephen G. Stage
Print Title: ----------------------
------------------------
Print Title: Portfolio Manager
---------------------
<PAGE>
EXHIBIT 10.21
OFFICE BUILDING LEASE
This OFFICE BUILDING LEASE ("Lease") is entered into as of the 2nd day of
October, 1995 by and between Koll Center Newport Number 14, a California General
Partnership ("Landlord"), and Koll Management Services, Inc., a Delaware
Corporation ("Tenant").
1. BASIC LEASE TERMS. For purposes of this Lease, the following terms have the
following definitions and meanings:
(a) Landlord: Koll Center Newport Number 14, a California General Partnership.
(b) Landlord's Address (For Notices):
4350 Von Karman Avenue, Suite 100
Newport Beach, California 92660
Attention: KCN 14 Manager
or such other place as Landlord may from time to time designate by notice
to Tenant.
(c) Tenant: Koll Management Services, Inc., a Delaware corporation.
(d) Tenant's Address (Premises):
5000 Birch Street, Suite 7000
Newport Beach, California 92660
Attention: Lynda McMillen
(e) Development: The parcel(s) of real property commonly known as Koll Center
Newport and located in the City of Newport Beach (the "City"), County of Orange
(the "County"), State of California ("State"), as shown on the site plan
attached hereto as Exhibit "A-I".
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(f) Building: One ten (10) and one six (6) story office tower located within
the Development,which Building contains approximately 294,792 Rentable Square
Feet (subject to adjustment as provided in Exhibit "B"), with the street address
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of 5000 Birch Street, Newport Beach, CA 92660.
(g) Premises: Those certain premises known as Suite(s) 7000 and 2700 as
generally shown on the floor plan(s) attached hereto as Exhibit "A-II", located
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located on the seventh (7th) and second (2nd) floor(s) of the Building, which
Premises contains approximately 20,481 Rentable Square Feet and 19,292 Usable
Square Feet (subject to adjustment as provided in Exhibit "B" and Exhibit "D").
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(h) Tenant's Percentage: Tenant's percentage of the Building on a Rentable
Square Foot basis, which initially is 6.9476%, subject to final determination as
provided in Exhibit "B" and Exhibit "D".
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(i) Term: six (6) Lease Years and three (3) Months.
(j) Estimated Commencement Date: December 1, 1995.
<PAGE>
Estimated Expiration Date: February 28, 2002.
(k) Commencement Date: The date on which the Term of this Lease will commence
as determined in accordance with the provisions of Exhibit "C" and as stated on
-----------
Exhibit "D".
- -----------
(l) Initial Monthly Base Rent: $29,045.40, subject to adjustment as provided
in Subparagraph 1(m) below and as otherwise provided in this Lease and subject
to Addendum to Office Building Lease, Item #44.
(m) Adjustment to Monthly Base Rent: Monthly Base Rent will be adjusted in
accordance with the following:
<TABLE>
<CAPTION>
LEASE YEAR OR MONTHS MONTHLY BASE RENT
<S> <C>
Commencement Date -
February 29, 1996 $0.00 /1/
March 1, 1996 -
February 28, 2002 $29,045.40 per month
</TABLE>
(n) Operating Expense Allowance: Operating Expense Allowance means that
portion of Tenant's Percentage of Operating Expenses as described in Paragraph 6
below which Landlord has included in Monthly Base Rent, which, for purposes of
this Lease, will be an amount equal to Tenant's Percentage of Operating Expenses
for the Building for the 1996 calendar year.
(o) Security Deposit: $ N/A
(p) Tenant Improvements: All tenant improvements installed or to be installed
by Landlord or Tenant within the Premises to prepare the Premises for occupancy
pursuant to the terms of the Work Letter Agreement attached hereto as Exhibit
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"C".
- ---
(q) Tenant Improvement Allowance: $450,250 to be applied as provided in the
Work Letter Agreement attached hereto as Exhibit "C".
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(r) Permitted Use: General office use consistent with other Class "A" office
uses at Koll Center Newport and no other use without the express written consent
of Landlord, which consent Landlord may withhold in its sole but reasonable
discretion.
(s) Parking: Up to sixty-two (62) unreserved employee parking spaces for the
initial Lease Term, up to fifteen (15) reserved parking spaces for the initial
Lease Term, and up to twenty-eight (28) designated unreserved parking spaces for
the initial Lease Term, subject to Addendum to Office Building Lease, Item #48
and to the terms and conditions of Paragraph 32 below and the Rules and
Regulations regarding parking contained in Exhibit "H".
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___________________
/1/ Subject to Addendum to Office Building Lease, Item #44.
<PAGE>
(t) Broker(s): Koll Marketing Group and Koll Corporate Advisory Group (KCAG).
KCAG shall be paid a commission in the amount of $37,468.57.
(u) Guarantor(s): N/A
(v) Interest Rate: shall mean the greater of ten percent (10%) per annum or
two percent (2%) in excess of the prime lending or reference rate of Wells Fargo
Bank N.A. or any successor bank in effect on the twenty-fifth (25th) day of the
calendar month immediately prior to the event giving rise to the Interest Rate
imposition; provided, however, the Interest Rate will in no event exceed the
maximum interest rate permitted to be charged by applicable law.
(w) Exhibits: "A-I" through "H", inclusive, which Exhibits are attached to
this Lease and incorporated herein by this reference. As provided in Paragraph 3
below, a completed version of Exhibit "D" will be delivered to Tenant after
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Landlord delivers possession of the Premises to Tenant.
(x) Addendum Paragraphs: 40 through 49, inclusive, which Addendum Paragraphs
are attached to this Lease and incorporated herein by this reference.
This Paragraph 1 represents a summary of the basic terms and definitions of this
Lease. In the event of any inconsistency between the terms contained in this
Paragraph 1 and any specific provision of this Lease, the terms of the more
specific provision shall prevail.
2. PREMISES AND COMMON AREAS.
(a) Premises. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises as improved or to be improved with the Tenant Improvements
described in the Work Letter Agreement, a copy of which is attached hereto as
Exhibit "C".
- -----------
(b) Mutual Covenants. Landlord and Tenant agree that the letting and hiring of
the Premises is upon and subject to the terms, covenants and conditions
contained in this Lease and each party covenants as a material part of the
consideration for this Lease to keep and perform their respective obligations
under this Lease.
(c) Tenant's Use of Common Areas. During the Term of this Lease, Tenant shall
have the nonexclusive right to use in common with Landlord and all persons,
firms and corporations conducting business in the Development and their
respective customers, guests, licensees, invitees, subtenants, employees and
agents (collectively, "Development Occupants"), subject to the terms of this
Lease, the Rules and Regulations referenced in Paragraph 32 below and all
covenants, conditions and restrictions now or hereafter affecting the
Development, the following common areas of the Building and/or the Development
(collectively, the "Common Areas"):
(i) The Building's common entrances, hallways, lobbies, public restrooms on
multi-tenant floors, elevators, stairways and accessways, loading docks, ramps,
drives and platforms and any passageways and serviceways thereto, and the common
pipes, conduits, wires and appurtenant equipment within the Building which serve
the Premises (collectively, "Building Common
<PAGE>
Areas"); and
(ii) The parking facilities of the Development which serve the Building (subject
to the provisions of Exhibit "H"), loading and unloading areas, trash areas,
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roadways, sidewalks, walkways, parkways, driveways, landscaped areas, plaza
areas, fountains and similar areas and facilities situated within the
Development and appurtenant to the Building which are not reserved for the
exclusive use of any Development Occupants (collectively, "Development Common
Areas").
(d) Landlord's Reservation of Rights. Provided Tenant's use of and access to
the Premises and parking to be provided to Tenant under this Lease is not
interfered with in an unreasonable manner, Landlord reserves for itself and for
all other owner(s) and operator(s) of the Development Common Areas and the
balance of the Development, the right from time to time to: (i) install, use,
maintain, repair, replace and relocate pipes, ducts, conduits, wires and
appurtenant meters and equipment above the ceiling surfaces, below the floor
surfaces, within the walls and in the central core areas of the Building; (ii)
make changes to the design and layout of the Development, including, without
limitation, changes to buildings, driveways, entrances, loading and unloading
areas, direction of traffic, landscaped areas and walkways, and, subject to the
parking provisions contained in Paragraph 32 and Exhibit "H", parking spaces and
-----------
parking areas; and (iii) use or close temporarily the Building Common Areas, the
Development Common Areas and/or other portions of the Development (with
reasonable prior notice to Tenant) while engaged in making improvements, repairs
or alterations to the Building, the Development, or any portion thereof.
3. TERM. The term of this Lease ("Term") will be for the period designated in
Subparagraph 1(i), commencing on the Commencement Date, and ending on the last
day of the month in which the expiration of such period occurs, including any
extensions of the Term pursuant to any provision of this Lease or written
agreement of the parties. Notwithstanding the foregoing, if the Commencement
Date falls on any day other than the first day of a calendar month then the Term
of this Lease will be measured from the first day of the month following the
month in which the Commencement Date occurs. Each consecutive twelve (12) month
period of the Term of this Lease, commencing on the Commencement Date, will be
referred to herein as a "Lease Year". Landlord's Notice of Lease Term Dates and
Tenant's Percentage ("Notice"), in the form of Exhibit "D" attached hereto, will
-----------
set forth the Commencement Date, the date upon which the Term of this Lease
shall end, the Rentable Square Feet within the Premises and the Building, and
Tenant's Percentage and will be delivered to Tenant after Landlord delivers
possession of the Premises to Tenant. The Notice will be binding upon Tenant
unless Tenant objects to the Notice in writing within fifteen (15) days of
Tenant's receipt of the Notice.
4. POSSESSION.
(a) Delivery of Possession. Landlord agrees to deliver possession of the
Premises to Tenant in accordance with the terms of the Work Letter Agreement
attached hereto as Exhibit "C", or, if no Work Letter Agreement is required for
-----------
this Lease, then Landlord agrees to deliver possession of the Premises to Tenant
on the Commencement Date; provided, however, Tenant agrees that if Landlord is
unable to deliver possession of the Premises to Tenant on the
<PAGE>
Commencement Date due to Landlord's negligence or willful misconduct or due to
any Force Majeure Delay(s) (as described in Paragraph 33 of this Lease), then
this Lease will not be void or voidable and Landlord will not be liable to
Tenant for any loss or damage resulting therefrom, but the Commencement Date and
the Expiration Date will be extended by the number of days Landlord is late in
delivering the Premises to Tenant, and rent will not commence to accrue under
this Lease until Landlord delivers the Premises to Tenant. Notwithstanding the
foregoing, Landlord will not be obligated to deliver possession of the Premises
to Tenant (but Tenant will be liable for rent if Landlord can otherwise deliver
the Premises to Tenant) until Landlord has received from Tenant all of the
following: (i) a copy of this Lease fully executed by Tenant and the guaranty of
Tenant's obligations under this Lease, if any, executed by the Guarantor(s);
(ii) the first installment of Monthly Base Rent; (iii) executed copies of
policies of insurance or certificates thereof as required under Paragraph 19 of
this Lease; (iv) copies of all governmental permits and authorizations, if any,
required in connection with Tenant's operation of its business within the
Premises; and (v) if Tenant is a corporation or partnership, such evidence of
due formation, valid existence and authority as Landlord may reasonably require,
which may include, without limitation, a certificate of good standing,
certificate of secretary, articles of incorporation, statement of partnership,
or other similar documentation.
(b) Condition of Premises. Prior to the Commencement Date and in accordance
with the Work Letter Agreement attached hereto as Exhibit "C", Landlord and
-----------
Tenant will jointly conduct a walk-through inspection of the Premises and will
jointly prepare a punch-list ("Punch-List") of items required to be installed by
Landlord under the Work Letter Agreement which require finishing or correction.
The Punch-List will not include any items of damage to the Premises caused by
Tenant's move-in or early entry, if permitted, which damage will be corrected or
repaired by Landlord, at Tenant's expense or, at Tenant's election, by Tenant,
at Tenant's expense. Other than the items specified in the Punch-List, by taking
possession of the Premises, Tenant will be deemed to have accepted the Premises
in its condition on the date of delivery of possession and to have acknowledged
that the Tenant Improvements have been installed as required by the Work Letter
Agreement and that there are no additional items needing work or repair.
Landlord will cause all items in the Punch-List to be repaired or corrected
within thirty (30) days following the preparation of the Punch-List or as soon
as practicable after the preparation of the Punch-List. Tenant acknowledges that
neither Landlord nor any agent of Landlord has made any representation or
warranty with respect to the Premises (other than Tenant shall have the benefit
of warranties provided on the Tenant Improvement), the Building, the Development
or any portions thereof or with respect to the suitability of same for the
conduct of Tenant's business and Tenant further acknowledges that Landlord will
have no obligation to construct or complete any additional buildings or
improvements within the Development.
5. RENT.
(a) Monthly Base Rent. Tenant agrees to pay Landlord the Monthly Base Rent for
the Premises (subject to adjustment as hereinafter provided) in advance on the
first day of each calendar month during the Term without prior notice or demand.
If the Term of this Lease commences or ends on a day other than the first day of
a calendar month, then the rent for such period will be prorated in the
proportion that the number of days this Lease is in effect during such period
bears to the number of days in such month. All rent must be paid to Landlord,
<PAGE>
without any deduction or offset, in lawful money of the United States of
America, at the address designated by Landlord or to such other person or at
such other place as Landlord may from time to time designate in writing. Monthly
Base Rent will be adjusted during the Term of this Lease as provided in
Subparagraph l(m).
(b) Additional Rent. All amounts and charges to be paid by Tenant hereunder,
including, without limitation, payments for Operating Expenses, insurance,
repairs and parking, will be considered additional rent for purposes of this
Lease, and the word "rent" as used in this Lease will include all such
additional rent unless the context specifically or clearly implies that only
Monthly Base Rent is intended.
(c) Late Payments. Late payments of Monthly Base Rent and/or any item of
additional rent will be subject to interest and a late charge as provided in
Subparagraph 22(f) below.
6. OPERATING EXPENSES.
(a) Operating Expenses. In addition to Monthly Base Rent, throughout the Term
of this Lease, Tenant agrees to pay Landlord as additional rent in accordance
with the terms of this Paragraph 6, Tenant's Percentage of Operating Expenses as
defined in Exhibit "E" attached hereto to the extent Tenant's Percentage of
-----------
Operating Expenses exceeds Tenant's Operating Expense Allowance.
(b) Estimate Statement. Prior to the Commencement Date and on or about March
1st of each subsequent calendar year during the Term of this Lease, Landlord
will endeavor to deliver to Tenant a statement ("Estimate Statement") wherein
Landlord will estimate both the Operating Expenses and Tenant's Percentage of
Operating Expenses for the then current calendar year. If the estimate of
Tenant's Percentage of Operating Expenses in the Estimate Statement exceeds
Tenant's Operating Expense Allowance, Tenant agrees to pay Landlord, as
"Additional Rent", one-twelfth (1/l2th) of such excess each month thereafter,
beginning with the next installment of rent due, until such time as Landlord
issues a revised Estimate Statement or the Estimate Statement for the succeeding
calendar year, except that, concurrently with the regular monthly rent payment
next due following the receipt of each such Estimate Statement, Tenant agrees to
pay Landlord an amount equal to one monthly installment of such excess (less any
applicable Operating Expenses already paid) multiplied by the number of months
from January, in the current calendar year, to the month of such rent payment
next due, all months inclusive. If at any time during the Term of this Lease,
but not more often than quarterly, Landlord reasonably determines that Tenant's
Percentage of Operating Expenses for the current calendar year will be greater
than the amount set forth in the then current Estimate Statement, Landlord may
issue a revised Estimate Statement and Tenant agrees to pay Landlord, within
thirty (30) days of receipt of the revised Estimate Statement, the difference
between the amount owed by Tenant under such revised Estimate Statement and the
amount owed by Tenant under the original Estimate Statement for the portion of
the then current calendar year which has expired. Thereafter Tenant agrees to
pay Tenant's Percentage of Operating Expenses (see Rider 1) based on such
revised Estimate Statement until Tenant receives the next calendar year's
Estimate Statement or a new revised Estimate Statement for the current calendar
year. In the event Tenant's Percentage of Operating Expenses for any calendar
year is less than Tenant's Operating Expense Allowance, Tenant will
<PAGE>
not be entitled to a credit against any rent, additional rent or Tenant's
Percentage of future Operating Expenses payable hereunder.
Notwithstanding anything to the contrary herein, Landlord shall deliver to
Tenant a final Actual Statement with respect to each year during the Term not
later than one (1) year following March 1 of the applicable year.
With respect to the Estimate Statement, the estimated amount will be divided by
the denominator of the then remaining months of that calendar year; i.e.,
estimated statement delivered on April 1, 1996, would have a denominator of 9.
(c) Actual Statement. By March 1st of each calendar year during the Term of
this Lease, Landlord will also endeavor to deliver to Tenant a statement
("Actual Statement") which states the actual Operating Expenses for the
preceding calendar year. If the Actual Statement reveals that Tenant's
Percentage of the actual Operating Expenses is more than the total Additional
Rent paid by Tenant for Operating Expenses on account of the preceding calendar
year, Tenant agrees to pay Landlord the difference in a lump sum within fifteen
(15) days of receipt of the Actual Statement. If the Actual Statement reveals
that Tenant's Percentage of the actual Operating Expenses is less than the
Additional Rent paid by Tenant for Operating Expenses on account of the
preceding calendar year, Landlord will credit any overpayment toward the next
monthly installment(s) of Tenant's Percentage of the Operating Expenses due
under this Lease (or Monthly Base Rent, if no Operating Expenses).
(d) Miscellaneous. Any delay or failure by Landlord in delivering any Estimate
Statement or Actual Statement pursuant to this Paragraph 6 will not constitute a
waiver of its right to require an increase in rent nor will it relieve Tenant of
its obligations pursuant to this Paragraph 6, except that Tenant will not be
obligated to make any payments based on such Estimate Statement or Actual
Statement until fifteen (15) days after receipt of such Estimate Statement or
Actual Statement. Even though the Term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's Percentage of the
actual Operating Expenses for the year in which this Lease terminates, Tenant
agrees to promptly pay any increase due over the estimated expenses paid and,
conversely, any overpayment made in the event said expenses decrease shall
promptly be rebated by Landlord to Tenant. Such obligation will be a continuing
one which will survive the expiration or earlier termination of this Lease.
Prior to the expiration or sooner termination of the Lease Term and Landlord's
acceptance of Tenant's surrender of the Premises, Landlord will have the right
to estimate the actual Operating Expenses for the then current Lease Year and to
collect from Tenant prior to Tenant's surrender of the Premises, Tenant's
Percentage of any excess of such actual Operating Expenses over the estimated
Operating Expenses paid by Tenant in such Lease Year.
7. OMITTED.
8. USE.
(a) Tenant's Use of the Premises. The Premises may be used for the use or uses
set forth in Subparagraph 1(r) only, and Tenant will not use or permit the
Premises to be used for any other purpose without the prior written consent of
Landlord, which consent Landlord may withhold in its sole but reasonable
discretion. Nothing in this Lease will be deemed to give Tenant any exclusive
right to such use in the Building or the Development. It is agreed between the
parties that Tenant shall not lease space to third party tenants in such a way
that would constitute an "executive suite."
(b) Compliance. At Tenant's sole cost and expense, Tenant agrees to procure,
maintain and hold available for Landlord's inspection, all governmental licenses
and permits required for the
<PAGE>
proper and lawful conduct of Tenant's business from the Premises, if any. Tenant
agrees not to use, alter or occupy the Premises or allow the Premises to be
used, altered or occupied in violation of, and Tenant, at its sole cost and
expense, agrees to use and occupy the Premises and cause the Premises to be used
and occupied in compliance with: (i) any and all laws, statutes, zoning
restrictions, ordinances, rules, regulations, orders and rulings now or
hereafter in force and any requirements of any insurer, insurance authority or
duly constituted public authority having jurisdiction over the Premises, the
Building or the Development now or hereafter in force, (ii) the requirements of
the Board of Fire Underwriters and any other similar body, (iii) the Certificate
of Occupancy issued for the Building, and (iv) any recorded covenants,
conditions and restrictions and similar regulatory agreements, if any, which
affect the use, occupation or alteration of the Premises, the Building and/or
the Development. Tenant agrees to comply with the Rules and Regulations
referenced in Paragraph 28 below. Tenant agrees not to do or permit anything to
be done in or about the Premises which will in any manner obstruct or interfere
with the rights of other tenants or occupants of the Development, or injure or
unreasonably annoy them, or use or allow the Premises to be used for any
unlawful or unreasonably objectionable purpose. Tenant agrees not to cause,
maintain or permit any nuisance or waste in, on, under or about the Premises or
elsewhere within the Development. Notwithstanding anything contained in this
Lease to the contrary, all transferable development rights related in any way to
the Development are and will remain vested in Landlord, and Tenant hereby waives
any rights thereto.
(c) Hazardous Materials. Except for ordinary and general office supplies
typically used in the ordinary course of business within office buildings, such
as copier toner, liquid paper, glue, ink and common household cleaning materials
(some or all of which may constitute "Hazardous Materials" as defined in this
Lease), Tenant agrees not to cause or permit any Hazardous Materials to be
brought upon, stored, used, handled, generated, released or disposed of on, in,
under or about the Premises, the Building, the Common Areas or any other portion
of the Development by Tenant, its agents, employees, subtenants, assignees,
licensees, contractors or invitees (collectively, "Tenant's Parties"), without
the prior written consent of Landlord, which consent Landlord may withhold in
its sole and absolute discretion. Upon the expiration or earlier termination of
this Lease, Tenant agrees to promptly remove from the Premises, the Building and
the Development, at its sole cost and expense, any and all Hazardous Materials,
including any equipment or systems containing Hazardous Materials which are
installed, brought upon, stored, used, generated or released upon, in, under or
about the Premises, the Building and/or the Development or any portion thereof
by Tenant or any of Tenant's Parties. To the fullest extent permitted by law,
Tenant agrees to promptly indemnify, protect, defend and hold harmless Landlord
and Landlord's partners, officers, directors, employees, agents, successors and
assigns (collectively, "Landlord Indemnified Parties") from and against any and
all claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including, without limitation, clean-up,
removal, remediation and restoration costs, sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees and court costs) which arise or
result from the presence of Hazardous Materials on, in, under or about the
Premises, the Building or any other portion of the Development and which are
caused or permitted by Tenant or any of Tenant's Parties. Tenant agrees to
promptly notify Landlord of any release of Hazardous Materials at the Premises,
the Building or any other portion of the Development which Tenant becomes aware
of during the Term of this Lease, whether caused by Tenant or any other
<PAGE>
persons or entities. In the event of any release of Hazardous Materials caused
or permitted by Tenant or any of Tenant's Parties, Landlord shall have the
right, but not the obligation, to cause Tenant to immediately take all steps
Landlord deems necessary or appropriate to remediate such release and prevent
any similar future release to the satisfaction of Landlord and Landlord's
mortgagee(s). As used in this Lease, the term "Hazardous Materials" shall mean
and include any hazardous or toxic materials, substances or wastes as now or
hereafter designated under any law, statute, ordinance, rule, regulation, order
or ruling of any agency of the State, the United States Government or any local
governmental authority, including, without limitation, asbestos, petroleum,
petroleum hydrocarbons and petroleum based products, urea formaldehyde foam
insulation, polychlorinated biphenyls ("PCBs"), and freon and other
chlorofluorocarbons. The provisions of this Subparagraph 8(c) will survive the
expiration or earlier termination of this Lease. (See Rider 2.)
Notwithstanding anything contained to the contrary herein, Tenant shall not be
responsible for costs resulting from the clean-up or removal of hazardous
materials released, discharged, or introduced into the Building or Premises by
Landlord or other tenants.
9. NOTICES. Any notice required or permitted to be given hereunder must be in
writing and may be given by personal delivery (including delivery by overnight
courier or an express mailing service) or by mail, if sent by registered or
certified mail. Notices to Tenant shall be sufficient if delivered to Tenant at
Tenant's address for notices which may be changed from time to time by written
notice from Tenant to Landlord and notices to Landlord shall be sufficient if
delivered to Landlord at the address designated in Subparagraph 1(b). Either
party may specify a different address for notice purposes by written notice to
the other, except that the Landlord may in any event use the Premises as
Tenant's address for notice purposes.
10. BROKERS. The parties acknowledge that the broker(s) who negotiated this
Lease are stated in Subparagraph 1(t). Each party represents and warrants to
the other, that, to its knowledge, no other broker, agent or finder (a)
negotiated or was instrumental in negotiating or consummating this Lease on its
behalf, and (b) is or might be entitled to a commission or compensation in
connection with this Lease. Landlord and Tenant each agree to promptly
indemnify, protect, defend and hold harmless the other from and against any and
all claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including attorneys' fees and court costs)
resulting from any breach by the indemnifying party of the foregoing
representation, including, without limitation, any claims that may be asserted
by any broker, agent or finder undisclosed by the indemnifying party. The
foregoing mutual indemnity shall survive the expiration or earlier termination
of this Lease.
11. SURRENDER; HOLDING OVER.
(a) Surrender. The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, shall not constitute a merger, and shall, at the
option of Landlord, operate as an assignment to Landlord of any or all subleases
or subtenancies. Upon the expiration or earlier termination of this Lease,
Tenant agrees to peaceably surrender the Premises to Landlord broom clean and in
a state of first-class order, repair and condition, ordinary wear and tear and
casualty damage (if this Lease is terminated as a result thereof pursuant to
Paragraph 20) excepted, with all of Tenant's personal property and Alterations
(as defined in Paragraph 13) removed from the Premises to the extent required
under Paragraph 13 and all damage caused by such removal repaired as required by
Paragraph 13. Prior to the date Tenant is to actually surrender the Premises to
Landlord, Tenant agrees to give Landlord reasonable prior notice of
<PAGE>
the exact date Tenant will surrender the Premises so that Landlord and Tenant
can schedule a walk-through of the Premises to review the condition of the
Premises and identify the Alterations and personal property which are to remain
upon the Premises and which items Tenant is to remove, as well as any repairs
Tenant is to make upon surrender of the Premises. The delivery of keys to any
employee of Landlord or to Landlord's agent or any employee thereof alone will
not be sufficient to constitute a termination of this Lease or a surrender of
the Premises.
(b) Holding Over. Tenant will not be permitted to hold over possession of the
Premises after the expiration or earlier termination of the Term without the
express written consent of Landlord, which consent Landlord may withhold in its
sole and absolute discretion. If Tenant holds over after the expiration or
earlier termination of the Term, Landlord may, at its option, treat Tenant as a
tenant at sufferance only, and such continued occupancy by Tenant shall be
subject to all of the terms, covenants and conditions of this Lease, so far as
applicable, except that the Monthly Base Rent for any such holdover period shall
be equal to the greater of (i) one hundred twenty-five percent (125%) of the
Monthly Base Rent in effect under this Lease immediately prior to such holdover,
or (ii) the then currently scheduled rental rate for comparable space in the
Building, in either event prorated on a daily basis. Acceptance by Landlord of
rent after such expiration or earlier termination will not result in a renewal
of this Lease. The foregoing provisions of this Paragraph 11 are in addition to
and do not affect Landlord's right of re-entry or any rights of Landlord under
this Lease or as otherwise provided by law. If Tenant fails to surrender the
Premises upon the expiration of this Lease in accordance with the terms of this
Paragraph 11 despite demand to do so by Landlord, Tenant agrees to promptly
indemnify, protect, defend and hold Landlord harmless from all claims, damages,
judgments, suits, causes of action, losses, liabilities, penalties, fines,
expenses and costs (including attorneys' fees and costs), including, without
limitation, costs and expenses incurred by Landlord in returning the Premises to
the condition in which Tenant was to surrender it and claims made by any
succeeding tenant founded on or resulting from Tenant's failure to surrender the
Premises. The provisions of this Subparagraph 11(b) will survive the expiration
or earlier termination of this Lease.
12. TAXES ON TENANT'S PROPERTY. Tenant agrees to pay before delinquency, all
taxes and assessments (real and personal) levied against (a) any personal
property or trade fixtures placed by Tenant in or about the Premises (including
any increase in the assessed value of the Premises based upon the value of any
such personal property or trade fixtures); and (b) any Tenant Improvements or
Alterations in the Premises (installed and/or paid for by Tenant) to the extent
such items are assessed at a valuation higher than the valuation at which tenant
improvements conforming to Landlord's building standard tenant improvements are
assessed. If any such taxes or assessments are levied against Landlord or
Landlord's property, Landlord may, after written notice to Tenant (and under
proper protest if requested by Tenant) pay such taxes and assessments, in which
event Tenant agrees to reimburse Landlord all amounts paid by Landlord within
fifteen (15) business days after demand by Landlord; provided, however, Tenant,
at its sole cost and expense, will have the right, with Landlord's cooperation,
to bring suit in any court of competent jurisdiction to recover the amount of
any such taxes and assessments so paid under protest.
13. ALTERATIONS. After installation of the initial Tenant Improvements for the
Premises pursuant to Exhibit "C", Tenant may, at its sole cost and expense, make
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alterations, additions,
<PAGE>
improvements and decorations to the Premises (collectively, "Alterations")
subject to and upon the following terms and conditions:
(a) Prohibited Alterations. Tenant may not make any Alterations which: (i)
affect any area outside the Premises; (ii) affect the Building's structure,
equipment, services or systems, or the proper functioning thereof, or Landlord's
access thereto; (iii) affect the outside appearance, character or use of the
Building or the Building Common Areas; (iv) in the reasonable opinion of
Landlord, lessen the value of the Building; or (v) will violate or require a
change in any occupancy certificate applicable to the Premises.
(b) Landlord's Approval. Before proceeding with any Alterations which are not
prohibited in Subparagraph 13(a) above, Tenant must first obtain Landlord's
written approval of the plans, specifications and working drawings for such
Alterations, which approval Landlord will not unreasonably withhold or delay;
provided, however, Landlord's prior approval will not be required for any such
Alterations which are not prohibited by Subparagraph 13(a) above and which cost
less than Ten Thousand Dollars ($10,000) as long as (i) Tenant delivers to
Landlord notice and a copy of any final plans, specifications and working
drawings for any such Alterations prior to commencement of the work thereof, and
(ii) the other conditions of this Paragraph 13 are satisfied, including, without
limitation, conforming to Landlord's rules, regulations and insurance
requirements which govern contractors. Landlord's approval of plans,
specifications and/or working drawings for Alterations will not create any
responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with applicable permits, laws, rules and
regulations of governmental agencies or authorities.
(c) Contractors. Alterations may be made or installed only by contractors and
subcontractors which have been approved by Landlord, which approval Landlord
will not unreasonably withhold or delay; provided, however, Landlord reserves
the right to require that Landlord's fire/life safety, electrical and mechanical
contractors for the Building be given the first opportunity to bid for any
Alteration work. Before proceeding with any Alterations, Tenant agrees to
provide Landlord with ten (10) days prior written notice and Tenant's
contractors must obtain and maintain, on behalf of Tenant and at Tenant's sole
cost and expense: (i) all necessary governmental permits and approvals for the
commencement and completion of such Alterations. Throughout the performance of
any Alterations, Tenant agrees to obtain, or cause its contractors to obtain,
workers compensation insurance and general liability insurance in compliance
with the provisions of Paragraph 19 of this Lease.
(d) Manner of Performance. All Alterations must be performed: (i) in
accordance with the approved plans, specifications and working drawings; (ii) in
a lien-free and first-class and workmanlike manner; (iii) in compliance with all
applicable permits, laws, statutes, ordinances, rules, regulations, orders and
rulings now or hereafter in effect and imposed by any governmental agencies and
authorities which assert jurisdiction; (iv) in such a manner so as not to
interfere with the occupancy of any other tenant in the Building, nor impose any
additional expense upon nor delay Landlord in the maintenance and operation of
the Building; and (v) at such times, in such manner, and subject to such rules
and regulations as Landlord may from time to time reasonably designate.
<PAGE>
(e) Ownership. The Tenant Improvements, including, without limitation, all
affixed sinks, dishwashers, microwave ovens and other fixtures, and all
Alterations will become the property of Landlord and will remain upon and be
surrendered with the Premises at the end of the Term of this Lease; provided,
however, Landlord may, by written notice delivered to Tenant concurrently with
Landlord's approval of the final working drawings for any Alterations, identify
those Alterations which Landlord will require Tenant to remove at the end of the
Term of this Lease. Landlord may also require Tenant to remove Alterations which
Landlord did not have the opportunity to approve as provided in this Paragraph
13. If Landlord requires Tenant to remove any Alterations, Tenant, at its sole
cost and expense, agrees to remove the identified Alterations on or before the
expiration or earlier termination of this Lease and repair any damage to the
Premises caused by such removal.
(f) Plan Review. Tenant agrees to pay Landlord, as additional rent, the
reasonable costs of professional services and costs for general conditions of
Landlord's third party consultants if utilized by Landlord (but not Landlord's
"in-house" personnel) for review of all plans, specifications and working
drawings for any Alterations, within ten (10) business days after Tenant's
receipt of invoices either from Landlord or such consultants. In addition,
Tenant agrees to pay Landlord, within ten (10) business days after completion of
any Alterations, a fee to cover Landlord's costs of supervising and
administering the installation of such Alterations, in the amount of five
percent (5%) of the cost of such Alterations (hard construction costs only), but
in no event less than Two Hundred Fifty Dollars ($250.00).
(g) Personal Property. All articles of personal property owned by Tenant or
installed by Tenant at its expense in the Premises (including Tenant's business
and trade fixtures, furniture, movable partitions and equipment [such as
telephones, copy machines, computer terminals, refrigerators and facsimile
machines]) will be and remain the property of Tenant, and must be removed by
Tenant from the Premises, at Tenant's sole cost and expense, on or before the
expiration or earlier termination of this Lease. Tenant agrees to repair any
damage caused by such removal at its cost on or before the expiration or earlier
termination of this Lease.
(h) Removal of Alterations. If Tenant fails to remove by the expiration or
earlier termination of this Lease all of its personal property, or any
Alterations identified by Landlord for removal, Landlord may, at its option,
treat such failure as a hold-over pursuant to Subparagraph 11(b) above, and/or
Landlord may (without liability to Tenant for loss thereof) treat such personal
property and/or Alterations as abandoned and, at Tenant's sole cost and expense,
and in addition to Landlord's other rights and remedies under this Lease, at law
or in equity: (a) remove and store such items; and/or (b) upon ten (10) days
prior notice to Tenant, sell, discard or otherwise dispose of all or any such
items at private or public sale for such price as Landlord may obtain or by
other commercially reasonable means. Tenant shall be liable for all costs of
disposition of Tenant's abandoned property and Landlord shall have no liability
to Tenant with respect to any such abandoned property. Landlord agrees to apply
the proceeds of any sale of any such property to any amounts due to Landlord
under this Lease from Tenant (including Landlord's attorneys' fees and other
costs incurred in the removal, storage and/or sale of such items), with any
remainder to be paid to Tenant.
14. REPAIRS.
<PAGE>
(a) Landlord's Obligations. Landlord agrees to repair and maintain in a manner
consistent with other high-rise buildings at Koll Center Newport the structural
portions of the Building and the plumbing, heating, ventilating, air
conditioning, elevator and electrical systems installed or furnished by
Landlord, unless such maintenance and repairs are (i) attributable to items
installed in Tenant's Premises which are above standard interior improvements
(such as, for example, custom lighting, special HVAC and/or electrical panels or
systems, kitchen or restroom facilities and appliances constructed or installed
within Tenant's Premises) or (ii) caused in part or in whole by the act, neglect
or omission of any duty by Tenant, its agents, servants, employees or invitees,
in which case Tenant will pay to Landlord, as additional rent, the reasonable
cost of such maintenance and repairs. Landlord will not be liable for any
failure to make any such repairs or to perform any maintenance unless such
failure shall persist for an unreasonable time after written notice of the need
of such repairs or maintenance is given to Landlord by Tenant. Except as
provided in Paragraph 20, Tenant will not be entitled to any abatement of rent
and Landlord will not have any liability by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Premises
or in or to fixtures, appurtenances and equipment therein. Tenant waives the
right to make repairs at Landlord's expense under any law, statute, ordinance,
rule, regulation, order or ruling (including, without limitation, to the extent
the Premises are located in California, the provisions of California Civil Code
Sections 1941 and 1942 and any successor statutes or laws of a similar nature).
(b) Tenant's Obligations. Tenant agrees to keep, maintain and preserve the
Premises in first class condition and repair and, when and if needed, at
Tenant's sole cost and expense, to make all repairs to the Premises and every
part thereof. Any such maintenance and repairs will be performed by Landlord's
contractor, or by such contractor or contractors as Tenant may choose from an
approved list to be submitted by Landlord. Tenant agrees to pay all costs and
expenses incurred in such maintenance and repair within thirty (30) days after
billing by Landlord or such contractor or contractors. Tenant agrees to cause
any mechanics' liens or other liens arising as a result of work performed by
Tenant or at Tenant's direction to be eliminated as provided in Paragraph 15
below. Except as provided in Subparagraph 14(a) above, Landlord has no
obligation to alter, remodel, improve, repair, decorate or paint the Premises or
any part thereof.
(c) Tenant's Failure to Repair. If Tenant refuses or neglects to repair and
maintain the Premises properly as required hereunder to the reasonable
satisfaction of Landlord, Landlord, at any time following fifteen (15) days from
the date on which Landlord makes a written demand on Tenant to effect such
repair and maintenance, may enter upon the Premises and make such repairs and/or
maintenance, and upon completion thereof, Tenant agrees to pay to Landlord as
additional rent, Landlord's costs for making such repairs plus an amount not to
exceed ten percent (10%) of such costs for overhead, within fifteen (15) days of
receipt from Landlord of a written itemized bill therefor. Any amounts not
reimbursed by Tenant within such fifteen (15) day period will bear interest at
the Interest Rate until paid by Tenant.
15. LIENS. Tenant agrees not to permit any mechanic's, materialmen's or other
liens to be filed against all or any part of the Development, the Building or
the Premises, nor against Tenant's leasehold interest in the Premises, by reason
of or in connection with any repairs, alterations, improvements or other work
contracted for or undertaken by Tenant or any other act
<PAGE>
or omission of Tenant or Tenant's agents, employees, contractors, licensees or
invitees. At Landlord's request, Tenant agrees to provide Landlord with
enforceable, conditional and final lien releases (or other evidence reasonably
requested by Landlord to demonstrate protection from liens) from all persons
furnishing labor and/or materials at the Premises. Landlord will have the right
at all reasonable times to post on the Premises and record any notices of non-
responsibility which it deems necessary for protection from such liens. If any
such liens are filed, Tenant will, at its sole cost, promptly cause such liens
to be released of record or bonded so that it no longer affects title to the
Development, the Building or the Premises. If Tenant fails to cause any such
liens to be so released or bonded within ten (10) days after filing thereof,
such failure will be deemed a material breach by Tenant under this Lease without
the benefit of any additional notice or cure period described in Paragraph 22
below, and Landlord may, without waiving its rights and remedies based on such
breach, and without releasing Tenant from any of its obligations, cause such
liens to be released by any means it shall deem proper, including payment in
satisfaction of the claims giving rise to such liens. Tenant agrees to pay to
Landlord within fifteen (15) days after receipt of invoice from Landlord, any
sum paid by Landlord to remove such liens, together with interest at the
Interest Rate from the date of such payment by Landlord.
16. ENTRY BY LANDLORD. Landlord and its employees and agents will at all times
have the right to enter the Premises to inspect the same, to supply janitorial
service and any other service to be provided by Landlord to Tenant hereunder, to
show the Premises to prospective purchasers or tenants, to post notices of
nonresponsibility, and/or to repair the Premises as permitted or required by
this Lease. In exercising such entry rights, Landlord will endeavor to
minimize, as reasonably practicable, the interference with Tenant's business,
and will provide Tenant with reasonable advance notice of any such entry (except
in emergency situations). Landlord may, in order to carry out such purposes,
erect scaffolding and other necessary structures where reasonably required by
the character of the work to be performed. Landlord will at all times have and
retain a key with which to unlock all doors in the Premises, excluding Tenant's
vaults and safes. Landlord will have the right to use any and all means which
Landlord may reasonably deem proper to open said doors in an emergency in order
to obtain entry to the Premises. Any entry to the Premises obtained by Landlord
by any of said means, or otherwise, will not be construed or deemed to be a
forcible or unlawful entry into the Premises, or an eviction of Tenant from the
Premises. Except for Landlord's negligence, Landlord will not be liable to
Tenant for any damages or losses for any entry by Landlord.
17. UTILITIES AND SERVICES. Throughout the Term of the Lease so long as the
Premises are occupied, Landlord agrees to furnish or cause to be furnished to
the Premises the utilities and services described in the Standards for Utilities
and Services attached hereto as Exhibit "F", subject to the conditions and in
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accordance with the standards set forth therein. Landlord may require Tenant
from time to time to provide Landlord with a list of Tenant's employees and/or
agents which are authorized by Tenant to subscribe on behalf of Tenant for any
additional services which may be provided by Landlord. Any such additional
services will be provided to Tenant at Tenant's cost. Landlord will not be
liable to Tenant for any failure to furnish any of the foregoing utilities and
services if such failure is caused by all or any of the following: (i) accident,
breakage or repairs; (ii) strikes, lockouts or other labor disturbance or labor
dispute of any character; (iii) governmental regulation, moratorium or other
governmental action or inaction; (iv) inability despite the exercise of
reasonable diligence to obtain electricity, water or fuel; or
<PAGE>
(v) any other cause beyond Landlord's reasonable control. In addition, in the
event of any stoppage or interruption of services or utilities, Tenant shall not
be entitled to any abatement or reduction of rent (except as expressly provided
in Subparagraphs 20(f) or 21(b) if such failure results from a damage or taking
described therein), no eviction of Tenant will result from such failure and
Tenant will not be relieved from the performance of any covenant or agreement in
this Lease because of such failure. In the event of any failure, stoppage or
interruption thereof, Landlord agrees to diligently attempt to resume service
promptly. If Tenant requires or utilizes more water or electrical power than is
reasonable or is proven to exceed those levels utilized by Tenants in the
Building, Landlord may at its option require Tenant to pay, as additional rent,
the cost, as fairly determined by Landlord, incurred by such extraordinary usage
and/or Landlord or Tenant may install separate meter(s) for the Premises, at
Tenant's sole expense, and Tenant agrees thereafter to pay all charges of the
utility providing service and Landlord will make an appropriate adjustment to
Tenant's Operating Expenses calculation to account for the fact Tenant is
directly paying such metered charges, provided Tenant will remain obligated to
pay its proportionate share of Operating Expenses subject to such adjustment.
Notwithstanding anything to the contrary contained in this Paragraph 17, if (i)
Landlord ceases to furnish any service in the Building, and Tenant notified
Landlord of such cessation in writing (the "Interruption Notice"), (ii) such
cessation does not arise as a result of an act or omission of Tenant, (iii) such
cessation is not caused by a fire or other casualty (in which case Paragraph 20
shall control), (iv) as a result of such cessation, the Premises or a material
portion thereof, is rendered untenantable (meaning that Tenant is unable to use
the Premises in the normal course of its business) and Tenant in fact ceases to
use the Premises, or material portion thereof, then, Tenant's sole remedy for
such cessation shall be as follows: On the fifth (5th) consecutive business day
following the later to occur of the date of the Premises (or material portion
thereof) becomes untenantable, the date Tenant ceases to use such space and the
date Tenant provides Landlord with an Interruption Notice, the Monthly Base Rent
and additional rent payable hereunder shall be abated on a per-diem basis for
each day after such five (5) business day period based upon the percentage of
the Premises so rendered untenantable and not used by Tenant, and such abatement
shall continue until the date the Premises become tenantable again.
18. ASSUMPTION OF RISK AND INDEMNIFICATION.
(a) Assumption of Risk. Tenant, as a material part of the consideration to
Landlord, hereby agrees that neither Landlord nor any Landlord Indemnified
Parties (as defined in Subparagraph 8(c) above) will be liable to Tenant for,
and Tenant expressly assumes the risk of and waives any and all claims it may
have against Landlord or any Landlord Indemnified Parties with respect to, (i)
any and all damage to property or injury to persons in, upon or about the
Premises, the Building or the Development resulting from any act or omission
(except for negligent or intentionally wrongful act or omission) of Landlord,
(ii) any such damage caused by other tenants or persons in or about the Building
or the Development, or caused by quasi-public work, (iii) any damage to property
entrusted to employees of the Building, (iv) any loss of or damage to property
by theft or otherwise, or (v) any injury or damage to persons or property
resulting from any casualty, explosion, falling plaster or other masonry or
glass, steam, gas, electricity, water or rain which may leak from any part of
the Building or any other portion of the Development or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place, or resulting from dampness. Notwithstanding anything to
the contrary contained in this Lease, neither Landlord nor any Landlord
Indemnified Parties will be liable for consequential damages arising out of any
loss of the use of the Premises or any equipment or facilities therein by Tenant
or any Tenant Parties or for interference with light or other incorporeal
hereditaments. Tenant agrees to give prompt notice to Landlord in case of fire
or accidents in the Premises or the Building, or of defects therein or in the
fixtures or equipment.
(b) Indemnification. Tenant will be liable for, and agrees, to the maximum
extent permissible under applicable law, to promptly indemnify, protect, defend
and hold harmless Landlord and all Landlord Indemnified Parties, from and
against, any and all claims, damages, judgments, suits, causes of action,
losses, liabilities, penalties, fines, expenses and costs, including attorneys'
fees and court costs (collectively, "Indemnified Claims"), arising or resulting
from (i) any act or omission of Tenant or any Tenant Parties (as defined in
Subparagraph 8(c) above); (ii) the use of the Premises and Common Areas and
conduct of Tenant's business by Tenant or any Tenant Parties, or any other
activity, work or thing done, permitted or suffered by Tenant or any Tenant
<PAGE>
Parties, in or about the Premises, the Building or elsewhere within the
Development; and/or (iii) any default by Tenant of any obligations on Tenant's
part to be performed under the terms of this Lease. In case any action or
proceeding is brought against Landlord or any Landlord Indemnified Parties by
reason of any such Indemnified Claims, Tenant, upon notice from Landlord, agrees
to promptly defend the same at Tenant's sole cost and expense by counsel
approved in writing by Landlord, which approval Landlord will not unreasonably
withhold.
Except for losses, liabilities, obligations, damages, penalties, claims, costs,
charges, and expenses resulting from the negligence of Tenant and/or its agents,
employees, or contractors, and subject to the provisions of Paragraph 18(b)
hereof, Landlord shall indemnify, defend and hold Tenant, its principals, agents
and employees (collectively, the "Tenant Related Parties") harmless from and
against all liabilities, obligations, damages (other than consequential
damages), penalties, claims, costs, charges and expenses, including, without
limitation, reasonable attorneys' fees, which may be imposed upon, incurred by,
or asserted against Tenant or any of the Tenant Related Parties and arising,
directly or indirectly, out of or in connection with any of the following: (i)
any work or thing done in, on or about the Building or any part thereof by
Landlord or any of its agents, contractors, or employees; (ii) any use, non-use,
possession, occupation, condition, operation, maintenance or management of the
Building or any part thereof by Landlord or any of its agents, contractors or
employees, (iii) any act or omission of Landlord or any of its agent,
contractors or employees; and (iv) any injury or damage to any person or
property occurring in, on or about the Building or any part thereof; provided,
however, that in each case such liability, obligation, damage, penalty, claim,
cost, charge or expense results from the negligence of Landlord and/or its
agents, employees, or contractors.
(c) Survival; No Release of Insurers. Tenant's indemnification obligations
under Subparagraph 18(b) will survive the expiration or earlier termination of
this Lease. Tenant's covenants, agreements and indemnification obligation in
Subparagraphs 18(a) and 18(b) above, are not intended to and will not relieve
any insurance carrier of its obligations under policies required to be carried
by Tenant pursuant to the provisions of this Lease.
19. INSURANCE.
(a) Tenant's Insurance. On or before the earlier to occur of (i) the
Commencement Date, or (ii) the date Tenant commences any work of any type in the
Premises pursuant to this Lease (which may be prior to the Commencement Date),
and continuing throughout the entire Term hereof and any other period of
occupancy, Tenant agrees to keep in full force and effect, at its sole cost and
expense, the following insurance:
(i) "All Risks" property insurance including at least the following perils:
fire and extended coverage, smoke damage, vandalism, malicious mischief,
sprinkler leakage (including earthquake sprinkler leakage). This insurance
policy must be upon all property owned by Tenant, for which Tenant is legally
liable, or which is installed at Tenant's expense, and which is located in the
Building including, without limitation, any Tenant Improvements which satisfy
the foregoing qualification and any Alterations, and all furniture, fittings,
installations, fixtures and any other personal property of Tenant, in an amount
not less than the full replacement cost thereof. If there is a dispute as to
full replacement cost, the decision of Landlord or any mortgagee of Landlord
will be presumptive.
(ii) One (1) year insurance coverage for business interruption and loss of
income and extra expense insuring the same perils described in Subparagraph
19(a)(i) above, in such amounts as will reimburse Tenant for any direct or
indirect loss of earnings attributable to any such perils including prevention
of access to the Premises, Tenant's parking areas or the Building as a result of
any such perils.
(iii) Commercial General Liability Insurance or Comprehensive General Liability
Insurance (on an occurrence form) insuring bodily injury, personal injury and
property damage including the following divisions and extensions of coverage:
Premises and Operations; Owners and Contractors protective; blanket contractual
liability (including coverage for Tenant's indemnity obligations under this
Lease); products and completed operations; liquor liability (if Tenant serves
alcohol on the Premises); and fire and water damage legal liability in an amount
sufficient to cover the replacement value of the Premises, including Tenant
Improvements, that are rented under the terms of this Lease. Such insurance
must have the following minimum limits of
<PAGE>
liability: bodily injury, personal injury and property damage - $1,000,000 each
occurrence, provided that if liability coverage is provided by a Commercial
General Liability policy the general aggregate limit shall apply separately and
in total to this location only (per location general aggregate), and provided
further, such minimum limits of liability may be adjusted from year to year to
reflect increases in coverages as recommended by Landlord's insurance carrier as
being prudent and commercially reasonable for tenants of first class office
buildings comparable to the Building, rounded to the nearest five hundred
thousand dollars.
(iv) Comprehensive Automobile Liability insuring bodily injury and property
damage arising from all owned, non-owned and hired vehicles, if any, with
minimum limits of liability of $1,000,000 per accident.
(v) Worker's Compensation as required by the laws of the State with the
following minimum limits of liability: Coverage A - statutory benefits; Coverage
B - $1,000,000 per accident and disease.
(vi) Any other form or forms of insurance as Tenant or Landlord or any
mortgagees of Landlord may reasonably require from time to time in form, in
amounts, and for insurance risks against which, a prudent tenant would protect
itself, but only to the extent coverage for such risks and amounts are available
in the insurance market at commercially acceptable rates. Landlord makes no
representation that the limits of liability required to be carried by Tenant
under the terms of this Lease are adequate to protect Tenant's interests and
Tenant should obtain such additional insurance or increased liability limits as
Tenant deems appropriate.
(b) Supplemental Tenant Insurance Requirements.
(i) All policies must be in a form reasonably satisfactory to Landlord and
issued by an insurer admitted to do business in the State.
(ii) All policies must be issued by insurers with a policyholder rating of "A"
and a financial rating of "X" in the most recent version of Best's Key Rating
Guide.
(iii) All policies must contain a requirement to notify Landlord (and Landlord's
property manager and any mortgagees or ground lessors of Landlord who are named
as additional insureds, if any) in writing not less than thirty (30) days prior
to any material change, reduction in coverage, cancellation or other termination
thereof. Tenant agrees to deliver to Landlord, as soon as practicable after
placing the required insurance, but in any event within the time frame specified
in Subparagraph 19(a) above, certificate(s) of insurance and/or if required by
Landlord, certified copies of each policy evidencing the existence of such
insurance and Tenant's compliance with the provisions of this Paragraph 19.
Tenant agrees to cause replacement policies or certificates to be delivered to
Landlord not less than thirty (30) days prior to the expiration of any such
policy or policies. If any such initial or replacement policies or certificates
are not furnished within the time(s) specified herein, Tenant will be deemed to
be in material default under this Lease without the benefit of any additional
notice or cure period provided in Subparagraph 22(a)(iii) below, and Landlord
will have the right, but not the obligation, to procure such insurance as
Landlord deems necessary to protect Landlord's interests at Tenant's expense.
<PAGE>
If Landlord obtains any insurance that is the responsibility of Tenant under
this Paragraph 19, Landlord agrees to deliver to Tenant a written statement
setting forth the cost of any such insurance and showing in reasonable detail
the manner in which it has been computed and Tenant agrees to promptly reimburse
Landlord for such costs as additional rent.
(iv) General Liability and Automobile Liability policies under Subparagraphs
19(a)(iii) and (iv) must name Landlord and Landlord's property manager (and at
Landlord's request, Landlord's mortgagees and ground lessors of which Tenant has
been informed in writing) as additional insureds and must also contain a
provision that the insurance afforded by such policy is primary insurance and
any insurance carried by Landlord and Landlord's property manager or Landlord's
mortgagees or ground lessors, if any, will be excess over and non-contributing
with Tenant's insurance.
(c) Tenant's Use. Tenant will not keep, use, sell or offer for sale in or upon
the Premises any article which may be prohibited by any insurance policy
periodically in force covering the Building or the Development Common Areas. If
Tenant's occupancy or business in, or on, the Premises, whether or not Landlord
has consented to the same, results in any increase in premiums for the insurance
periodically carried by Landlord with respect to the Building or the Development
Common Areas or results in the need for Landlord to maintain special or
additional insurance, Tenant agrees to pay Landlord the cost of any such
increase in premiums or special or additional coverage as additional rent within
fifteen (15) days after being billed therefor by Landlord. In determining
whether increased premiums are a result of Tenant's use of the Premises, a
schedule issued by the organization computing the insurance rate on the
Building, the Development Common Areas or the Tenant Improvements showing the
various components of such rate, will be conclusive evidence of the several
items and charges which make up such rate. Tenant agrees to promptly comply with
all reasonable requirements of the insurance authority or any present or future
insurer relating to the Premises.
(d) Cancellation of Landlord's Policies. If any of Landlord's insurance
policies are cancelled or cancellation is threatened or the coverage reduced or
threatened to be reduced in any way because of the use of the Premises or any
part thereof by Tenant or any assignee or subtenant of Tenant or by anyone
Tenant permits on the Premises and, if Tenant fails to remedy the condition
giving rise to such cancellation, threatened cancellation, reduction of
coverage, threatened reduction of coverage, increase in premiums, or threatened
increase in premiums, within forty-eight (48) hours after written notice
thereof, Tenant will be deemed to be in material default of this Lease and
Landlord may, at its option, either terminate this Lease or enter upon the
Premises and attempt to remedy such condition, and Tenant shall promptly pay
Landlord the reasonable costs of such remedy as additional rent. If Landlord is
unable, or elects not to remedy such condition, then Landlord will have all of
the remedies provided for in this Lease in the event of a default by Tenant.
(e) Waiver of Subrogation. Tenant's property insurance shall contain a clause
whereby the insurer waives all rights of recovery by way of subrogation against
Landlord. Tenant shall also obtain and furnish evidence to Landlord of the
waiver by Tenant's worker's compensation insurance carrier of all rights of
recovery by way of subrogation against Landlord.
Notwithstanding any provision of this Lease to the contrary, whenever (a) any
loss, cost, damage or expense relating to personal property (excluding personal
injuries or death) resulting from fire, explosion or any other casualty is
incurred by either Landlord or by Tenant or by anyone claiming by, through or
under Landlord or Tenant in connection with the Premises or the Building, and
(b) such party is covered in whole or in part by insurance with respect to such
loss, cost, damage or expense or is required under this Lease to be so insured,
then the party so insured (or so required) hereby waives (on its behalf and on
behalf of its insurer) any claims against and releases the other party from any
liability said other party may have on account of such loss, cost, damage or
expense.
<PAGE>
20. DAMAGE OR DESTRUCTION.
(a) Partial Destruction. If the Premises or the Building are damaged by fire
or other casualty to an extent not exceeding twenty-five percent (25%) of the
full replacement cost thereof, and Landlord's contractor reasonably estimates in
a writing delivered to Landlord and Tenant that the damage thereto may be
repaired, reconstructed or restored to substantially its condition immediately
prior to such damage within one hundred eighty (180) days from the date of such
casualty, and Landlord will receive insurance proceeds sufficient to cover the
costs of such repairs, reconstruction and restoration (including proceeds from
Tenant and/or Tenant's insurance which Tenant is required to deliver to Landlord
pursuant to Subparagraph 20(e) below to cover Tenant's obligation for the costs
of repair, reconstruction and restoration of any portion of the Tenant
Improvements and any Alterations for which Tenant is responsible under this
Lease), then Landlord agrees to commence and proceed diligently with the work of
repair, reconstruction and restoration and this Lease will continue in full
force and effect.
(b) Substantial Destruction. Any damage or destruction to the Premises or the
Building which Landlord is not obligated to repair pursuant to Subparagraph
20(a) above will be deemed a substantial destruction. In the event of a
substantial destruction, Landlord may elect to either (i) repair, reconstruct
and restore the portion of the Building or the Premises damaged by such
casualty, in which case this Lease will continue in full force and effect,
subject to Tenant's termination right contained in Subparagraph 20(d) below; or
(ii) terminate this Lease effective as of the date which is thirty (30) days
after Tenant's receipt of Landlord's election to so terminate.
(c) Notice. Under any of the conditions of Subparagraph 20(a) or (b) above,
Landlord agrees to give written notice to Tenant of its intention to repair or
terminate, as permitted in such paragraphs, within the earlier of sixty (60)
days after the occurrence of such casualty, or fifteen (15) days after
Landlord's receipt of the estimate from Landlord's contractor (the applicable
time period to be referred to herein as the "Notice Period").
(d) Tenant's Termination Rights. If Landlord elects to repair, reconstruct and
restore pursuant to Subparagraph 20(b)(i) hereinabove, and if Landlord's
contractor estimates that as a result of such damage, Tenant cannot be given
reasonable use of and access to the Premises within two hundred seventy (270)
days after the date of such damage, then Tenant may terminate this Lease
effective upon delivery of written notice to Landlord within ten (10) days after
Landlord delivers notice to Tenant of its election to so repair, reconstruct or
restore.
(e) Tenant's Costs and Insurance Proceeds. In the event of any damage or
destruction of all or any part of the Premises, Tenant agrees to immediately (i)
notify Landlord thereof, and (ii) deliver to Landlord all property insurance
proceeds received by Tenant with respect to any Tenant Improvements installed by
or at the cost of Tenant and any Alterations, but excluding proceeds for
Tenant's furniture, fixtures, equipment and other personal property, whether or
not this Lease is terminated as permitted in this Paragraph 20, and Tenant
hereby assigns to Landlord all rights to receive such insurance proceeds. If,
for any reason (including Tenant's failure to obtain insurance for the full
replacement cost of any Tenant Improvements installed by or at the cost of
Tenant and any Alterations from any and all casualties), Tenant fails to receive
insurance
<PAGE>
proceeds covering the full replacement cost of any Tenant Improvements installed
by or at the cost of Tenant and any Alterations which are damaged, Tenant will
be deemed to have self-insured the replacement cost of such items, and upon any
damage or destruction thereto, Tenant agrees to immediately pay to Landlord the
full replacement cost of such items, less any insurance proceeds actually
received by Landlord from Landlord's or Tenant's insurance with respect to such
items.
(f) Abatement of Rent. In the event of any damage, repair, reconstruction
and/or restoration described in this Paragraph 20, rent will be abated or
reduced, as the case may be, from the date of such casualty, in proportion to
the degree to which Tenant's use of the Premises is impaired during such period
of repair until such use is restored. Except for abatement of rent as provided
hereinabove, Tenant will not be entitled to any compensation or damages for loss
of, or interference with, Tenant's business or use or access of all or any part
of the Premises or for lost profits or any other consequential damages of any
kind or nature, which result from any such damage, repair, reconstruction or
restoration.
(g) Inability to Complete. Notwithstanding anything to the contrary contained
in this Paragraph 20, if Landlord is obligated or elects to repair, reconstruct
and/or restore the damaged portion of the Building or the Premises pursuant to
Subparagraph 20(a) or 20(b)(i) above, but is delayed from completing such
repair, reconstruction and/or restoration beyond the date which is one hundred
eighty (180) days after the date estimated by Landlord's contractor for
completion thereof by reason of any causes (other than delays caused by Tenant,
its subtenants, employees, agents or contractors) which are beyond the
reasonable control of Landlord as described in Paragraph 33, then Tenant may
elect to terminate this Lease upon ten (10) days prior written notice given to
the other after the expiration of such one hundred eighty (180) day period.
(h) Damage Near End of Term. Landlord and Tenant shall each have the right to
terminate this Lease if any damage to the Premises or the Building occurs during
the last twelve (12) months of the Term of this Lease where Landlord's
contractor estimates in a writing delivered to Landlord and Tenant that the
repair, reconstruction or restoration of such damage cannot be completed within
sixty (60) days after the date of such casualty. If either party desires to
terminate this Lease under this Subparagraph (h), it shall provide written
notice to the other party of such election within ten (10) days after receipt of
Landlord's contractor's repair estimates.
(i) Waiver of Termination Right. Landlord and Tenant agree that the foregoing
provisions of this Paragraph 20 are to govern their respective rights and
obligations in the event of any damage or destruction and supersede and are in
lieu of the provisions of any applicable law, statute, ordinance, rule,
regulation, order or ruling now or hereafter in force which provide remedies for
damage or destruction of leased premises (including, without limitation, to the
extent the Premises are located in California, the provisions of California
Civil Code Section 1932, Subsection 2, and Section 1933, Subsection 4 and any
successor statute or laws of a similar nature).
(j) Termination. Upon any termination of this Lease under any of the
provisions of this Paragraph 20, the parties will be released without further
obligation to the other from the date possession of the Premises is surrendered
to Landlord except for items which have accrued and
<PAGE>
are unpaid as of the date of termination and matters which are to survive any
termination of this Lease as provided in this Lease.
21. EMINENT DOMAIN.
(a) Substantial Taking. If the whole of the Premises, or such part thereof as
shall substantially interfere with Tenant's use and occupancy of the Premises,
as contemplated by this Lease, is taken for any public or quasi-public purpose
by any lawful power or authority by exercise of the right of appropriation,
condemnation or eminent domain, or sold to prevent such taking, either party
will have the right to terminate this Lease effective as of the date possession
is required to be surrendered to such authority.
(b) Partial Taking; Abatement of Rent. In the event of a taking of a portion
of the Premises which does not substantially interfere with Tenant's use and
occupancy of the Premises, then, neither party will have the right to terminate
this Lease and Landlord will thereafter proceed to make a functional unit of the
remaining portion of the Premises (but only to the extent Landlord receives
proceeds therefor from the condemning authority), and rent will be abated with
respect to the part of the Premises which Tenant is deprived of on account of
such taking. Notwithstanding the immediately preceding sentence to the contrary,
if any part of the Building or the Development is taken (whether or not such
taking substantially interferes with Tenant's use of the Premises), Landlord may
terminate this Lease upon thirty (30) days prior written notice to Tenant if
Landlord also terminates the leases of the other tenants of the Building which
are leasing comparably sized space for comparable lease terms.
(c) Condemnation Award. In connection with any taking of the Premises or the
Building, Landlord will be entitled to receive the entire amount of any award
which may be made or given in such taking or condemnation, without deduction or
apportionment for any estate or interest of Tenant, it being expressly
understood and agreed by Tenant that no portion of any such award will be
allowed or paid to Tenant for any so-called bonus or excess value of this Lease,
and such bonus or excess value will be the sole property of Landlord. Tenant
agrees not to assert any claim against Landlord or the taking authority for any
compensation because of such taking (including any claim for bonus or excess
value of this Lease); provided, however, if any portion of the Premises is
taken, Tenant will have the right to recover from the condemning authority (but
not from Landlord) any compensation as may be separately awarded or recoverable
by Tenant for the taking of Tenant's furniture, fixtures, equipment and other
personal property within the Premises, for Tenant's relocation expenses, and for
any loss of goodwill or other damage to Tenant's business by reason of such
taking.
(d) Temporary Taking. In the event of taking of the Premises or any part
thereof for temporary use, (i) this Lease will remain unaffected thereby and
rent will not abate, and (ii) Tenant will be entitled to receive such portion or
portions of any award made for such use with respect to the period of the taking
which is within the Term, provided that if such taking remains in force at the
expiration or earlier termination of this Lease, Tenant will then pay to
Landlord a sum equal to the reasonable cost of performing Tenant's obligations
under Paragraph 11 with respect to surrender of the Premises and upon such
payment Tenant will be excused from such obligations. For purpose of this
Subparagraph 21(d), a temporary taking shall
<PAGE>
be defined as a taking for a period of ninety (90) days or less.
22. DEFAULTS AND REMEDIES.
(a) Defaults. The occurrence of any one or more of the following events will
be deemed a default by Tenant:
(i) The abandonment of the Premises by Tenant, which for purposes of this Lease
means any absence by Tenant from the Premises for five (5) business days or
longer while in material default of any other provision of this Lease, which for
purposes of this Lease means any absence by Tenant from the Premises for thirty
(30) days or longer whether or not Tenant is in default under any provision of
this Lease.
(ii) The failure by Tenant to make any payment of rent or additional rent or any
other payment required to be made by Tenant hereunder, as and when due, where
such failure continues for a period of three (3) days after written notice
thereof from Landlord to Tenant; provided, however, that any such notice will be
in lieu of, and not in addition to, any notice required under applicable law
(including, without limitation, to the extent the Premises are located in
California, the provisions of California Code of Civil Procedure Section 1161
regarding unlawful detainer actions or any successor statute or law of a similar
nature).
(iii) The failure by Tenant to observe or perform any of the covenants or
provisions of this Lease to be observed or performed by Tenant, other than as
specified in Subparagraph 22(a)(i) or (ii) above, where such failure continues
for a period of ten (10) days after written notice thereof from Landlord to
Tenant. The provisions of any such notice will be in lieu of, and not in
addition to, any notice required under applicable law (including, without
limitation, to the extent the Premises are located in California, California
Code of Civil Procedure Section 1161 regarding unlawful detainer actions and any
successor statute or similar law). If the nature of Tenant's default is such
that more than ten (10) days are reasonably required for its cure, then Tenant
will not be deemed to be in default if Tenant, with Landlord's concurrence,
commences such cure within such ten (10) day period and thereafter diligently
prosecutes such cure to completion.
(iv) (A) The making by Tenant of any general assignment for the benefit of
creditors; (B) the filing by or against Tenant of a petition to have Tenant
adjudged a bankrupt or a petition for reorganization or arrangement under any
law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty (60) days); (C) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty (30) days; or (D) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease where such seizure
is not discharged within thirty (30) days.
(b) Landlord's Remedies; Termination. In the event of any default by Tenant,
in addition to any other remedies available to Landlord at law or in equity
under applicable law (including, without limitation, to the extent the Premises
are located in California, the remedies of Civil Code
<PAGE>
Section 1951.4 and any successor statute or similar law), Landlord will have the
immediate right and option to terminate this Lease and all rights of Tenant
hereunder. If Landlord elects to terminate this Lease then, to the extent
permitted under applicable law, Landlord may recover from Tenant (i) The worth
at the time of award of any unpaid rent which had been earned at the time of
such termination; plus (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rent loss that Tenant proves could have
been reasonably avoided; plus (iii) the worth at the time of award of the amount
by which the unpaid rent for the balance of the Term after the time of award
exceeds the amount of such rent loss that Tenant proves could be reasonably
avoided; plus (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which, in the ordinary course of things, results therefrom
including, but not limited to: attorneys' fees and costs; brokers' commissions;
the costs of refurbishment, alterations, renovation and repair of the Premises,
and removal (including the repair of any damage caused by such removal) and
storage (or disposal) of Tenant's personal property, equipment, fixtures,
Alterations, the Tenant Improvements and any other items which Tenant is
required under this Lease to remove but does not remove, as well as the
unamortized value of any free rent, reduced rent, free parking, reduced rate
parking and any Tenant Improvement Allowance or other costs or economic
concessions provided, paid, granted or incurred by Landlord pursuant to this
Lease. The unamortized value of such concessions shall be determined by taking
the total value of such concessions and multiplying such value by a fraction,
the numerator of which is the number of months of the Lease Term not yet elapsed
as of the date on which the Lease is terminated, and the denominator of which is
the total number of months of the Lease Term. As used in Subparagraphs 22(b)(i)
and (ii) above, the "worth at the time of award" is computed by allowing
interest at the Interest Rate. As used in Subparagraph 22(b)(iii) above, the
"worth at the time of award" is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%).
(c) Landlord's Remedies; Re-Entry Rights. In the event of any default by
Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord will also have the right, with or without
terminating this Lease, to re-enter the Premises and remove all persons and
property from the Premises; such property may be removed and stored in a public
warehouse or elsewhere and/or disposed of at the sole cost and expense of and
for the account of Tenant in accordance with the provisions of Subparagraph
13(h) of this Lease or any other procedures permitted by applicable law. No re-
entry or taking possession of the Premises by Landlord pursuant to this
Subparagraph 22(c) will be construed as an election to terminate this Lease
unless a written notice of such intention is given to Tenant or unless the
termination thereof is decreed by a court of competent jurisdiction.
(d) Landlord's Remedies; Re-Letting. In the event of the abandonment of the
Premises by Tenant or in the event that Landlord elects to re-enter the Premises
or takes possession of the Premises pursuant to legal proceeding or pursuant to
any notice provided by law, then if Landlord does not elect to terminate this
Lease, Landlord may from time to time, without terminating this Lease, either
recover all rent as it becomes due or relet the Premises or any part thereof on
terms and conditions as Landlord in its sole and absolute discretion may deem
advisable with the right to make alterations and repairs to the Premises in
connection with such reletting. If Landlord
<PAGE>
elects to relet the Premises, then rents received by Landlord from such
reletting will be applied first, to the payment of any indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the payment of any cost
of such reletting; third, to the payment of the cost of any alterations and
repairs to the Premises incurred in connection with such reletting; fourth, to
the payment of rent due and unpaid hereunder and the residue, if any, will be
held by Landlord and applied to payment of future rent as the same may become
due and payable hereunder. Should that portion of such rents received from such
reletting during any month, which is applied to the payment of rent hereunder,
be less than the rent payable during that month by Tenant hereunder, then Tenant
agrees to pay such deficiency to Landlord immediately upon demand therefor by
Landlord. Such deficiency will be calculated and paid monthly.
(e) Landlord's Remedies; Performance for Tenant. All covenants and agreements
to be performed by Tenant under any of the terms of this Lease are to be
performed by Tenant at Tenant's sole cost and expense and without any abatement
of rent. If Tenant fails to pay any sum of money owed to any party other than
Landlord, for which it is liable under this Lease, or if Tenant fails to perform
any other act on its part to be performed hereunder, and such failure continues
for ten (10) days after notice thereof by Landlord, Landlord may, without
waiving or releasing Tenant from its obligations, but shall not be obligated to,
make any such payment or perform any such other act to be made or performed by
Tenant. Tenant agrees to reimburse Landlord upon demand for all sums so paid by
Landlord and all necessary incidental costs, together with interest thereon at
the Interest Rate, from the date of such payment by Landlord until reimbursed by
Tenant. This remedy shall be in addition to any other right or remedy of
Landlord set forth in this Paragraph 22.
(f) Late Payment. If Tenant fails to pay any installment of rent within five
(5) days of when due or if Tenant fails to make any other payment for which
Tenant is obligated under this Lease within five (5) days of when due, such late
amount will accrue interest at the Interest Rate and Tenant agrees to pay
Landlord as additional rent such interest on such amount from the date such
amount becomes due until such amount is paid. In addition, Tenant agrees to pay
to Landlord concurrently with such late payment amount, as additional rent, a
late charge equal to five percent (5%) of the amount due to compensate Landlord
for the extra costs Landlord will incur as a result of such late payment. The
parties agree that (i) it would be impractical and extremely difficult to fix
the actual damage Landlord will suffer in the event of Tenant's late payment,
(ii) such interest and late charge represents a fair and reasonable estimate of
the detriment that Landlord will suffer by reason of late payment by Tenant, and
(iii) the payment of interest and late charges are distinct and separate in that
the payment of interest is to compensate Landlord for the use of Landlord's
money by Tenant, while the payment of late charges is to compensate Landlord for
Landlord's processing, administrative and other costs incurred by Landlord as a
result of Tenant's delinquent payments. Acceptance of any such interest and late
charge will not constitute a waiver of the Tenant's default with respect to the
overdue amount, or prevent Landlord from exercising any of the other rights and
remedies available to Landlord. If Tenant incurs a late charge more than three
(3) times in any period of twelve (12) months during the Lease Term, then,
notwithstanding that Tenant cures the late payments for which such late charges
are imposed, Landlord will have the right to require Tenant thereafter to pay
all installments of Monthly Base Rent quarterly in advance throughout the
remainder of the Lease Term.
<PAGE>
(g) Landlord's Security Interest. Tenant hereby grants to Landlord a lien and
security interest on all property of Tenant now or hereafter placed in or upon
the Premises including, but not limited to, all fixtures, machinery, equipment,
furnishings and other articles of personal property, and all proceeds of the
sale or other disposition of such property (collectively, the "Collateral") to
secure the payment of all rent to be paid by Tenant pursuant to this Lease. Such
lien and security interest shall be in addition to any landlord's lien provided
by law. This Lease shall constitute a security agreement under the Commercial
Code of the State so that Landlord shall have and may enforce a security
interest in the Collateral. Tenant agrees to execute as debtor and deliver such
financing statement or statements and any further documents as Landlord may now
or hereafter reasonably request to protect such security interest pursuant to
such code. Landlord may also at any time file a copy of this Lease as a
financing statement. Landlord, as secured party, shall be entitled to all rights
and remedies afforded as secured party under such code, which rights and
remedies shall be in addition to Landlord's liens and rights provided by law or
by the other terms and provisions of this Lease.
(h) Rights and Remedies Cumulative. All rights, options and remedies of
Landlord contained in this Lease will be construed and held to be cumulative,
and no one of them will be exclusive of the other, and Landlord shall have the
right to pursue any one or all of such remedies or any other remedy or relief
which may be provided by law or in equity, whether or not stated in this Lease.
Nothing in this Paragraph 22 will be deemed to limit or otherwise affect
Tenant's indemnification of Landlord pursuant to any provision of this Lease.
23. LANDLORD'S DEFAULT.
Landlord will not be in default in the performance of any obligation required to
be performed by Landlord under this Lease unless Landlord fails to perform such
obligation within thirty (30) days after the receipt of written notice from
Tenant specifying in detail Landlord's failure to perform; provided however,
that if the nature of Landlord's obligation is such that more than thirty (30)
days are required for performance, then Landlord will not be deemed in default
if it commences such performance within such thirty (30) day period and
thereafter diligently pursues the same to completion. Upon any default by
Landlord, Tenant may exercise any of its rights provided at law or in equity,
subject to the limitations on liability set forth in Paragraph 35 of this Lease.
24. ASSIGNMENT AND SUBLETTING.
(a) Restriction on Transfer. Except as expressly provided in this Paragraph
24, Tenant will not, either voluntarily or by operation of law, assign or
encumber this Lease or any interest herein or sublet the Premises or any part
thereof, or permit the use or occupancy of the Premises by any party other than
Tenant or a transfer under Subparagraph 24(c) (any such assignment, encumbrance,
sublease or the like will sometimes be referred to as a "Transfer"), without the
prior written consent of Landlord, which consent Landlord will not unreasonably
withhold.
(b) Corporate and Partnership Transfers. For purposes of this Paragraph 24, if
Tenant is a corporation, partnership or other entity, any transfer, assignment,
encumbrance or hypothecation of twenty-five percent (25%) or more (individually
or in the aggregate) of any stock or other
<PAGE>
ownership interest in such entity, and/or any transfer, assignment,
hypothecation or encumbrance of any controlling ownership or voting interest in
such entity, will be deemed a Transfer and will be subject to all of the
restrictions and provisions contained in this Paragraph 24. Notwithstanding the
foregoing, the immediately preceding sentence will not apply to any transfers of
stock of Tenant if Tenant is a publicly-held corporation and such stock is
transferred publicly over a recognized security exchange or over-the-counter
market.
(c) Permitted Controlled Transfers. Notwithstanding the provisions of this
Paragraph 24 to the contrary, Tenant may assign this Lease or sublet the
Premises or any portion thereof ("Permitted Transfer"), without Landlord's
consent and without extending any sublease termination option to Landlord, to
any parent, subsidiary or affiliate corporation which controls, is controlled by
or is under common control with Tenant, or to any corporation resulting from a
merger or consolidation with Tenant, or to any person or entity which acquires
all the assets of Tenant's business as a going concern, provided that: (i) at
least twenty (20) days prior to such assignment or sublease, Tenant makes its
best efforts to deliver to Landlord, at Landlord's request, the financial
statements and other financial and background information of the assignee or
sublessee described in Subparagraph 24(d) below; (ii) if an assignment, the
assignee assumes, in full, the obligations of Tenant under this Lease (or if a
sublease, the sublessee of a portion of the Premises or Term assumes, in full,
the obligations of Tenant with respect to such portion); (iii) the financial net
worth of the assignee or sublessee as of the time of the proposed assignment or
sublease equals or exceeds that of Tenant as of the date of execution of this
Lease; (iv) Tenant remains fully liable under this Lease; and (v) the use of the
Premises under Paragraph 8 remains unchanged.
(d) Transfer Notice. If Tenant desires to effect a Transfer, then at least
thirty (30) days prior to the date when Tenant desires the Transfer to be
effective (the "Transfer Date"), Tenant agrees to give Landlord a notice (the
"Transfer Notice"), stating the name, address and business of the proposed
assignee, sublessee or other transferee (sometimes referred to hereinafter as
"Transferee"), reasonable information (including references) concerning the
character, ownership, and financial condition of the proposed Transferee, the
Transfer Date, any ownership or commercial relationship between Tenant and the
proposed Transferee, and the consideration and all other material terms and
conditions of the proposed Transfer, all in such detail as Landlord may
reasonably require. If Landlord reasonably requests additional detail, the
Transfer Notice will not be deemed to have been received until Landlord receives
such additional detail, and Landlord may withhold consent to any Transfer until
such information is provided to it.
(e) Landlord's Options. Within fifteen (15) days of Landlord's receipt of any
Transfer Notice, and any additional information requested by Landlord concerning
the proposed Transferee's financial responsibility, Landlord will elect to do
one of the following (i) consent to the proposed Transfer; or (ii) refuse such
consent, which refusal shall be on reasonable grounds including, without
limitation, those set forth in Subparagraph 24(f) below.
(f) Reasonable Disapproval. Landlord and Tenant hereby acknowledge that
Landlord's disapproval of any proposed Transfer pursuant to Subparagraph 24(e)
will be deemed reasonably withheld if based upon any reasonable factor,
including, without limitation, any or all of the following factors: (i) the
proposed Transferee is a governmental entity; (ii) the portion of the
<PAGE>
Premises to be sublet or assigned is irregular in shape with inadequate means of
ingress and egress; (iii) the use of the Premises by the Transferee (A) is not
permitted by the use provisions in Paragraph 8 hereof, (B) violates any
exclusive use granted by Landlord to another tenant in the Building, or (C)
otherwise poses a risk of increased liability to Landlord; (iv) the Transfer
would likely result in a significant and inappropriate increase in the use of
the parking areas or Development Common Areas by the Transferee's employees or
visitors, and/or significantly increase the demand upon utilities and services
to be provided by Landlord to the Premises; (v) the Transferee does not have the
financial capability to fulfill the obligations imposed by the Transfer and this
Lease; (vi) the Transferee is not in Landlord's reasonable opinion consistent
with Landlord's desired tenant mix; or (vii) the Transferee poses a business or
other economic risk which Landlord deems unacceptable.
(g) Additional Conditions. A condition to Landlord's consent to any Transfer
of this Lease will be the delivery to Landlord of a true copy of the fully
executed instrument of assignment, sublease, transfer or hypothecation, and, in
the case of an assignment, the delivery to Landlord of an agreement executed by
the Transferee in form and substance reasonably satisfactory to Landlord,
whereby the Transferee assumes and agrees to be bound by all of the terms and
provisions of this Lease and to perform all of the obligations of Tenant
hereunder. As a condition for granting its consent to any assignment or
sublease, Landlord may require that the assignee or sublessee remit directly to
Landlord on a monthly basis, all monies due to Tenant by said assignee or
sublessee. As a condition to Landlord's consent to any sublease, such sublease
must provide that it is subject and subordinate to this Lease and to all
mortgages; that Landlord may enforce the provisions of the sublease, including
collection of rent; that in the event of termination of this Lease for any
reason, including without limitation a voluntary surrender by Tenant, or in the
event of any reentry or repossession of the Premises by Landlord, Landlord may,
at its option, either (i) terminate the sublease, or (ii) take over all of the
right, title and interest of Tenant, as sublessor, under such sublease, in which
case such sublessee will attorn to Landlord, but that nevertheless Landlord will
not (1) be liable for any previous act or omission of Tenant under such
sublease, (2) be subject to any defense or offset previously accrued in favor of
the sublessee against Tenant, or (3) be bound by any previous modification of
any sublease made without Landlord's written consent, or by any previous
prepayment by sublessee of more than one month's rent.
(h) Excess Rent. If Landlord consents to any assignment of this Lease, Tenant
agrees to pay to Landlord, as additional rent, fifty percent (50%) of all sums
and other consideration payable to and for the benefit of Tenant by the assignee
on account of the assignment, as and when such sums and other consideration are
due and payable by the assignee to or for the benefit of Tenant (or, if Landlord
so requires, and without any release of Tenant's liability for the same, Tenant
agrees to instruct the assignee to pay such sums and other consideration
directly to Landlord). If for any sublease, Tenant receives rent or other
consideration, either initially or over the term of the sublease, in excess of
the rent fairly allocable to the portion of the Premises which is subleased
based on square footage, Tenant agrees to pay to Landlord as additional rent
fifty percent (50%) of the excess of each such payment of rent or other
consideration received by Tenant promptly after its receipt. In calculating
excess rent or other consideration which may be payable to Landlord under this
paragraph, Tenant will be entitled to deduct commercially reasonable third party
brokerage commissions and attorneys' fees and other amounts reasonably
<PAGE>
and actually expended by Tenant in connection with such assignment or subletting
if acceptable written evidence of such expenditures is provided to Landlord.
(i) OMITTED.
(j) No Release. No Transfer will release Tenant of Tenant's obligations under
this Lease or alter the primary liability of Tenant to pay the rent and to
perform all other obligations to be performed by Tenant hereunder. Landlord may
require that any Transferee remit directly to Landlord on a monthly basis, all
monies due Tenant by said Transferee. However, the acceptance of rent by
Landlord from any other person will not be deemed to be a waiver by Landlord of
any provision hereof. Consent by Landlord to one Transfer will not be deemed
consent to any subsequent Transfer. In the event of default by any Transferee of
Tenant or any successor of Tenant in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant, after providing Tenant with notice
of such default by the Transferee without the necessity of exhausting remedies
against such Transferee or successor. Tenant shall have the right to enforce any
sublease. Landlord may consent to subsequent assignments of this Lease or
sublettings or amendments or modifications to this Lease with assignees of
Tenant, without notifying Tenant, or any successor of Tenant, and without
obtaining its or their consent thereto and any such actions will not relieve
Tenant of liability under this Lease.
(k) Administrative and Attorneys' Fees. If Tenant effects a Transfer or
requests the consent of Landlord to any Transfer (whether or not such Transfer
is consummated), then, upon demand, Tenant agrees to pay Landlord a non-
refundable administrative fee of Two Hundred Fifty Dollars ($250.00), plus any
reasonable attorneys' and paralegal fees incurred by Landlord in connection with
such Transfer or request for consent (whether attributable to Landlord's in-
house attorneys or paralegals or otherwise) not to exceed One Hundred Dollars
($100.00) for each one thousand (1,000) rentable square feet of area contained
within the Premises or portion thereof to be assigned or sublet. Acceptance of
the Two Hundred Fifty Dollar ($250.00) administrative fee and/or reimbursement
of Landlord's attorneys' and paralegal fees will in no event obligate Landlord
to consent to any proposed Transfer.
25. SUBORDINATION.
Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, and at the election of Landlord or any
mortgagee or beneficiary with a deed of trust encumbering the Building and/or
the Development, or any lessor of a ground or underlying lease with respect to
the Building, this Lease will be subject and subordinate at all times to: (i)
all ground leases or underlying leases which may now exist or hereafter be
executed affecting the Building; and (ii) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed for which the Building, the
Development or any leases thereof, or Landlord's interest and estate in any of
said items, is specified as security. Notwithstanding the foregoing, Landlord
reserves the right to subordinate any such ground leases or underlying leases or
any such liens to this Lease. If any such ground lease or underlying lease
terminates for any reason or any such mortgage or deed of trust is foreclosed or
a conveyance in lieu of foreclosure is made for any reason, at the election of
Landlord's successor in interest, Tenant agrees to attorn to and become the
tenant of such successor in which event Tenant's right to possession of the
<PAGE>
Premises will not be disturbed as long as Tenant is not in default under this
Lease. Tenant hereby waives its rights under any law which gives or purports to
give Tenant any right to terminate or otherwise adversely affect this Lease and
the obligations of Tenant hereunder in the event of any such foreclosure
proceeding or sale. Tenant covenants and agrees to execute and deliver, upon
demand by Landlord and in the form reasonably required by Landlord, any
additional documents evidencing the priority or subordination of this Lease and
Tenant's attornment agreement with respect to any such ground lease or
underlying leases or the lien of any such mortgage or deed of trust. If Tenant
fails to sign and return any such documents within ten (10) days of receipt,
Tenant will be in default hereunder.
26. ESTOPPEL CERTIFICATE.
(a) Tenant's Obligations. Within fifteen (15) days following any written
request which Landlord may make from time to time, Tenant agrees to execute and
deliver to Landlord a statement, in a form substantially similar to the form of
Exhibit "G" attached hereto or as may reasonably be required by Landlord's
- -----------
Landlord's lender, certifying: (i) the date of commencement of this Lease; (ii)
the fact that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that this Lease is in full force and effect, and
stating the date and nature of such modifications); (iii) the date to which the
rent and other sums payable under this Lease have been paid; (iv) that there are
no current defaults under this Lease by either Landlord or Tenant except as
specified in Tenant's statement; and (v) such other matters reasonably requested
by Landlord. Landlord and Tenant intend that any statement delivered pursuant to
this Paragraph 26 may be relied upon by any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or any interest therein. Any errors made
by Tenant on any estoppel certificate delivered to Landlord or any other party
shall not modify the terms, covenants, or conditions of this Lease.
(b) Tenant's Failure to Deliver. Tenant's failure to deliver such statement
within such time will be conclusive upon Tenant (i) that this Lease is in full
force and effect, without modification except as may be represented by Landlord,
(ii) that there are no uncured defaults in Landlord's performance, and (iii)
that not more than one (1) month's rent has been paid in advance. Without
limiting the foregoing, if Tenant fails to deliver any such statement within
such fifteen (15) day period, Landlord may deliver to Tenant an additional
request for such statement and Tenant's failure to deliver such statement to
Landlord within ten (10) days after delivery of such additional request will
constitute a default under this Lease. Tenant agrees to indemnify and protect
Landlord from and against any and all claims, damages, losses, liabilities and
expenses (including attorneys' fees and costs) attributable to any failure by
Tenant to timely deliver any such estoppel certificate to Landlord as required
by this Paragraph 26.
27. OMITTED.
28. RULES AND REGULATIONS.
Tenant agrees to faithfully observe and comply with the "Rules and Regulations,"
a copy of which is attached hereto and incorporated herein by this reference as
Exhibit "H", and all reasonable and nondiscriminatory modifications thereof and
- -----------
additions thereto from time to time put into effect by Landlord. Landlord will
not be responsible to Tenant for the violation or non-
<PAGE>
performance by any other tenant or occupant of the Building of any of the Rules
and Regulations.
29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND LESSORS.
(a) Modifications. If, in connection with Landlord's obtaining or entering
into any financing or ground lease for any portion of the Building or the
Development, the lender or ground lessor requests modifications to this Lease,
Tenant, within ten (10) days after request therefor, agrees to execute an
amendment to this Lease incorporating such modifications, provided such
modifications are reasonable and do not increase the obligations of Tenant or
reduce Tenant's rights under this Lease or adversely affect the leasehold estate
created by this Lease.
(b) Cure Rights. In the event of any default on the part of Landlord, Tenant
will give notice by registered or certified mail to any beneficiary of a deed of
trust or mortgage covering the Premises or ground lessor of Landlord whose
address has been furnished to Tenant, by Landlord in accordance with the notice
provision and Tenant agrees to offer such beneficiary, mortgagee or ground
lessor a reasonable opportunity to cure the default (including with respect to
any such beneficiary or mortgagee, time to obtain possession of the Premises,
subject to this Lease and Tenant's rights hereunder, by power of sale or a
judicial foreclosure, if such should prove necessary to effect a cure).
30. DEFINITION OF LANDLORD.
The term "Landlord," as used in this Lease, so far as covenants or obligations
on the part of Landlord are concerned, means and includes only the owner or
owners, at the time in question, of the fee title of the Premises or the lessees
under any ground lease, if any. In the event of any transfer, assignment or
other conveyance or transfers of any such title (other than a transfer for
security purposes only), Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) will be automatically relieved from
and after the date of such transfer, assignment or conveyance of all liability
as respects the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed, so long as the
transferee assumes in writing all such covenants and obligations of Landlord
arising after the date of such transfer. Landlord and Landlord's transferees
and assignees have the absolute right to transfer all or any portion of their
respective title and interest in the Development, the Building, the Premises
and/or this Lease without the consent of Tenant, and such transfer or subsequent
transfer will not be deemed a violation on Landlord's part of any of the terms
and conditions of this Lease.
31. WAIVER.
The waiver by either party of any breach of any term, covenant or condition
herein contained will not be deemed to be a waiver of any subsequent breach of
the same or any other term, covenant or condition herein contained, nor will any
custom or practice which may develop between the parties in the administration
of the terms hereof be deemed a waiver of or in any way affect the right of
either party to insist upon performance in strict accordance with said terms.
The subsequent acceptance of rent or any other payment hereunder by Landlord
will not be deemed
<PAGE>
to be a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, other than the failure of Tenant to pay the particular
rent so accepted, regardless of Landlord's knowledge of such preceding breach at
the time of acceptance of such rent. No acceptance by Landlord of a lesser sum
than the basic rent and additional rent or other sum then due will be deemed to
be other than on account of the earliest installment of such rent or other
amount due, nor will any endorsement or statement on any check or any letter
accompanying any check be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such installment or other amount or pursue any other remedy
provided in this Lease. The consent or approval of Landlord to or of any act by
Tenant requiring Landlord's consent or approval will not be deemed to waive or
render unnecessary Landlord's consent or approval to or of any subsequent
similar acts by Tenant.
32. PARKING.
(a) Grant of Parking Rights. So long as this Lease is in effect and provided
Tenant is not in default hereunder, Landlord grants to Tenant and Tenant's
Authorized Users (as defined below) a license to use the number and type of
parking spaces designated in Subparagraph 1(s) subject to the terms and
conditions of this Paragraph 32 and the Rules and Regulations regarding parking
contained in Exhibit "H" attached hereto. Except as otherwise expressly set
-----------
expressly set forth in Subparagraph 1(s), as consideration for the use of such
parking spaces, Tenant agrees to pay to Landlord or, at Landlord's election,
directly to Landlord's parking operator, as additional rent under this Lease,
the prevailing parking rate for each such parking space as established by
Landlord in its discretion from time to time. Tenant agrees that all parking
charges will be payable on a monthly basis concurrently with each monthly
payment of Monthly Base Rent. Tenant agrees to submit to Landlord or, at
Landlord's election, directly to Landlord's parking operator with a copy to
Landlord, written notice in a form reasonably specified by Landlord containing
the names, home and office addresses and telephone numbers of those persons who
are authorized by Tenant to use Tenant's parking spaces on a monthly basis
("Tenant's Authorized Users") and shall use its best efforts to identify each
vehicle of Tenant's Authorized Users by make, model and license number. Tenant
agrees to deliver such notice prior to the beginning of the Term of this Lease
and to periodically update such notice as well as upon specific request by
Landlord or Landlord's parking operator to reflect changes to Tenant's
Authorized Users or their vehicles.
(b) Visitor Parking. So long as this Lease is in effect, Tenant's visitors and
guests will be entitled to use those specific parking areas which are designated
for short term visitor parking and which are located within the surface parking
area(s), if any, and/or within the parking structure(s) which serve the
Building. Visitor parking will be made available at a charge to Tenant's
visitors and guests, with the rate being established by Landlord in its
discretion from time to time. Tenant, at its sole cost and expense, may elect to
validate such parking for its visitors and guests. All such visitor parking will
be on a non-exclusive, in common basis with all other visitors and guests of the
Development.
(c) Use of Parking Spaces. Tenant will not use or allow any of Tenant's
Authorized Users to use any parking spaces which have been specifically assigned
by Landlord to other tenants or
<PAGE>
occupants or for other uses such as visitor parking or which have been
designated by any governmental entity as being restricted to certain uses.
Tenant will not be entitled to increase its parking privileges applicable to the
Premises during the Term of the Lease except as follows: If at any time Tenant
desires to increase the number of parking spaces allocated to it under the terms
of this Lease, Tenant must notify Landlord in writing of such desire and
Landlord will have the right, in its sole and absolute discretion, to either (a)
approve such requested increase in the number of parking spaces allocated to
Tenant (with an appropriate increase to the additional rent payable by Tenant
for such additional spaces based on the then prevailing parking rates), (b)
approve such requested decrease in the number of parking spaces allocated to
Tenant (with an appropriate reduction in the additional rent payable by Tenant
for such eliminated parking spaces based on the then prevailing parking rates),
or (c) disapprove such requested increase in the number of parking spaces
allocated to Tenant. Promptly following receipt of Tenant's written request,
Landlord will provide Tenant with written notice of its decision including a
statement of any adjustments to the additional rent payable by Tenant for
parking under the Lease, if applicable.
(d) General Provisions. Except as otherwise expressly set forth in
Subparagraph 1(s), Landlord reserves the right to set and increase monthly fees
and/or daily and hourly rates for parking privileges from time to time during
the Term of the Lease. Landlord may assign any unreserved and unassigned parking
spaces and/or make all or any portion of such spaces reserved, if Landlord
reasonably determines that it is necessary for orderly and efficient parking or
for any other reasonable reason. Failure to pay the rent for any particular
parking spaces or failure to comply with any terms and conditions of this Lease
applicable to parking may be treated by Landlord as a default under this Lease
and, in addition to all other remedies available to Landlord under the Lease, at
law or in equity, Landlord may elect to recapture such parking spaces for the
balance of the Term of this Lease if Tenant does not cure such failure within
the applicable cure period set forth in Paragraph 22 of this Lease. In such
event, Tenant and Tenant's Authorized Users will be deemed visitors for purposes
of parking space use and will be entitled to use only those parking areas
specifically designated for visitor parking subject to all provisions of this
Lease applicable to such visitor parking use. Except in connection with an
assignment or sublease expressly permitted under the terms of this Lease,
Tenant's parking rights and privileges described herein are personal to Tenant
and may not be assigned or transferred, or otherwise conveyed, without
Landlord's prior written consent, which consent Landlord may withhold in its
sole and absolute discretion. In any event, under no circumstances may Tenant's
parking rights and privileges be transferred, assigned or otherwise conveyed
separate and apart from Tenant's interest in this Lease.
(e) Cooperation with Traffic Mitigation Measures. Tenant agrees to use its
reasonable, good faith efforts to cooperate in traffic mitigation programs which
may be undertaken by Landlord independently, or in cooperation with local
municipalities or governmental agencies or other property owners in the vicinity
of the Building. Such programs may include, but will not be limited to,
carpools, vanpools and other ridesharing programs, public and private transit,
flexible work hours, preferential assigned parking programs and programs to
coordinate tenants within the Development with existing or proposed traffic
mitigation programs.
(f) Parking Rules and Regulations. Tenant and Tenant's Authorized Users shall
comply with
<PAGE>
all rules and regulations regarding parking set forth in Exhibit "H" attached
-----------
hereto and Tenant agrees to cause its employees, subtenants, assignees,
contractors, suppliers, customers and invitees to comply with such rules and
regulations. Landlord reserves the right from time to time to modify and/or
adopt such other reasonable and non-discriminatory rules and regulations for the
parking facilities as it deems reasonably necessary for the operation of the
parking facilities.
33. FORCE MAJEURE.
If either Landlord or Tenant is delayed, hindered in or prevented from the
performance of any act required under this Lease by reason of strikes, lock-
outs, labor troubles, inability to procure standard materials, failure of power,
restrictive governmental laws, regulations or orders or governmental action or
inaction (including failure, refusal or delay in issuing permits, approvals
and/or authorizations which is not the result of the action or inaction of the
party claiming such delay), riots, civil unrest or insurrection, war, fire,
earthquake, flood or other natural disaster, unusual and unforeseeable delay
which results from an interruption of any public utilities (e.g., electricity,
gas, water, telephone) or other unusual and unforeseeable delay not within the
reasonable control of the party delayed in performing work or doing acts
required under the provisions of this Lease, then performance of such act will
be excused for the period of the delay and the period for the performance of any
such act will be extended for a period equivalent to the period of such delay.
The provisions of this Paragraph 33 will not operate to excuse Tenant from
prompt payment of rent or any other payments required under the provisions of
this Lease.
34. SIGNS.
Landlord will designate the location on the Premises, if any, for one or more
Tenant identification sign(s). Tenant agrees to have Landlord install and
maintain Tenant's identification sign(s) in such designated location in
accordance with this Paragraph 34 at Tenant's sole cost and expense. Tenant has
no right to install Tenant identification signs in any other location in, on or
about the Premises or the Development and will not display or erect any other
signs, displays or other advertising materials that are visible from the
exterior of the Building or from within the Building in any interior or exterior
common areas. The size, design, color and other physical aspects of any and all
permitted sign(s) will be subject to (i) Landlord's written approval prior to
installation, which approval may be withheld in Landlord's discretion, (ii) any
covenants, conditions or restrictions governing the Premises, and (iii) any
applicable municipal or governmental permits and approvals. Tenant will be
solely responsible for all costs for installation, maintenance, repair and
removal of any Tenant identification sign(s). If Tenant fails to remove
Tenant's sign(s) upon termination of this Lease and repair any damage caused by
such removal, Landlord may do so at Tenant's sole cost and expense. Tenant
agrees to reimburse Landlord for all costs incurred by Landlord to effect any
installation, maintenance or removal on Tenant's account, which amount will be
deemed additional rent, and may include, without limitation, all sums disbursed,
incurred or deposited by Landlord including Landlord's costs, expenses and
actual attorneys' fees with interest thereon at the Interest Rate from the date
of Landlord's demand until paid by Tenant. Any sign rights granted to Tenant
under this Lease are personal to Tenant and may not be assigned, transferred or
otherwise conveyed to any assignee or subtenant of Tenant without Landlord's
prior written consent, which consent Landlord may withhold in its sole and
absolute discretion.
<PAGE>
35. LIMITATION ON LIABILITY.
In consideration of the benefits accruing hereunder, Tenant on behalf of itself
and all successors and assigns of Tenant covenants and agrees that, in the event
of any actual or alleged failure, breach or default hereunder by Landlord: (a)
Tenant's recourse against Landlord for monetary damages will be limited to
Landlord's interest in the Building including, subject to the prior rights of
any Mortgagee, Landlord's interest in the rents of the Building and any
insurance proceeds payable to Landlord; (b) Except as may be necessary to
secure jurisdiction of the partnership, no partner of Landlord shall be sued or
named as a party in any suit or action and no service of process shall be made
against any partner of Landlord; (c) No partner of Landlord shall be required
to answer or otherwise plead to any service of process; (d) No judgment will be
taken against any partner of Landlord and any judgment taken against any partner
of Landlord may be vacated and set aside at any time after the fact; (e) No
writ of execution will be levied against the assets of any partner of Landlord;
(f) The obligations under this Lease do not constitute personal obligations of
the individual partners, directors, officers or shareholders of Landlord, and
Tenant shall not seek recourse against the individual partners, directors,
officers or shareholders of Landlord or any of their personal assets for
satisfaction of any liability in respect to this Lease; and (g) These covenants
and agreements are enforceable both by Landlord and also by any partner of
Landlord.
36. FINANCIAL STATEMENTS.
Prior to the execution of this Lease by Landlord and at any time during the Term
of this Lease upon fifteen (15) days prior written notice from Landlord, Tenant
agrees to provide Landlord with a current financial statement for Tenant and any
guarantors of Tenant and financial statements for the two (2) years prior to the
current financial statement year for Tenant and any guarantors of Tenant. Such
statements are to be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant, audited by an
independent certified public accountant.
37. QUIET ENJOYMENT.
Landlord covenants and agrees with Tenant that upon Tenant paying the rent
required under this Lease and paying all other charges and performing all of the
covenants and provisions on Tenant's part to be observed and performed under
this Lease, Tenant may peaceably and quietly have, hold and enjoy the Premises
in accordance with this Lease.
38. MISCELLANEOUS.
(a) Conflict of Laws. This Lease shall be governed by and construed solely
pursuant to the laws of the State, without giving effect to choice of law
principles thereunder.
(b) Successors and Assigns. Except as otherwise provided in this Lease, all of
the covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
<PAGE>
(c) Professional Fees and Costs. If either Landlord or Tenant should bring
suit against the other with respect to this Lease, then all costs and expenses,
including without limitation, actual professional fees and costs such as
appraisers', accountants' and attorneys' fees and costs, incurred by the party
which prevails in such action, whether by final judgment or out of court
settlement, shall be paid by the other party, which obligation on the part of
the other party shall be deemed to have accrued on the date of the commencement
of such action and shall be enforceable whether or not the action is prosecuted
to judgment. As used herein, attorneys' fees and costs shall include, without
limitation, attorneys' fees, costs and expenses incurred in connection with any
(i) postjudgment motions; (ii) contempt proceedings; (iii) garnishment, levy,
and debtor and third party examination; (iv) discovery; and (v) bankruptcy
litigation.
(d) Terms and Headings. The words "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular. Words used in any gender include
other genders. The paragraph headings of this Lease are not a part of this Lease
and shall have no effect upon the construction or interpretation of any part
hereof.
(e) Time. Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor.
(f) Prior Agreement; Amendments. This Lease constitutes and is intended by the
parties to be a final, complete and exclusive statement of their entire
agreement with respect to the subject matter of this Lease. This Lease
supersedes any and all prior and contemporaneous agreements and understandings
of any kind relating to the subject matter of this Lease. There are no other
agreements, understandings, representations, warranties, or statements, either
oral or in written form, concerning the subject matter of this Lease. No
alteration, modification, amendment or interpretation of this Lease shall be
binding on the parties unless contained in a writing which is signed by both
parties.
(g) Separability. The provisions of this Lease shall be considered separable
such that if any provision or part of this Lease is ever held to be invalid,
void or illegal under any law or ruling, all remaining provisions of this Lease
shall remain in full force and effect to the maximum extent permitted by law.
(h) Recording. Neither Landlord nor Tenant shall record this Lease nor a short
form memorandum thereof without the consent of the other.
(i) Counterparts. This Lease may be executed in one or more counterparts, each
of which shall constitute an original and all of which shall be one and the same
agreement.
(j) Nondisclosure of Lease Terms. Tenant acknowledges and agrees that the
terms of this Lease are confidential and constitute proprietary information of
Landlord. Disclosure of the terms could adversely affect the ability of Landlord
to negotiate other leases and impair Landlord's relationship with other tenants.
Accordingly, Tenant agrees that it, and its partners, officers, directors,
employees, agents and attorneys, shall not intentionally and voluntarily
disclose the terms and conditions of this Lease to any newspaper or other
publication or any other tenant or apparent prospective tenant of the Building
or other portion of the Development, or real estate
<PAGE>
agent, either directly or indirectly, without the prior written consent of
Landlord, provided, however, that Tenant may disclose the terms to prospective
subtenants or assignees under this Lease.
(k) Non-Discrimination. Tenant acknowledges and agrees that there shall be no
discrimination against, or segregation of, any person, group of persons, or
entity on the basis of race, color, creed, religion, age, sex, marital status,
national origin, or ancestry in the leasing, subleasing, transferring,
assignment, occupancy, tenure, use, or enjoyment of the Premises, or any portion
thereof.
39. EXECUTION OF LEASE.
(a) Joint and Several Obligations. If more than one person executes this Lease
as Tenant, their execution of this Lease will constitute their covenant and
agreement that (i) each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions, provisions
and agreements of this Lease to be kept, observed and performed by Tenant, and
(ii) the term "Tenant" as used in this Lease means and includes each of them
jointly and severally. The act of or notice from, or notice or refund to, or the
signature of any one or more of them, with respect to the tenancy of this Lease,
including, but not limited to, any renewal, extension, expiration, termination
or modification of this Lease, will be binding upon each and all of the persons
executing this Lease as Tenant with the same force and effect as if each and all
of them had so acted or so given or received such notice or refund or so signed.
(b) Tenant as Corporation or Partnership. If Tenant executes this Lease as a
corporation or partnership, then Tenant and the persons executing this Lease on
behalf of Tenant represent and warrant that such entity is duly qualified and in
good standing to do business in California and that the individuals executing
this Lease on Tenant's behalf are duly authorized to execute and deliver this
Lease on its behalf, and in the case of a corporation, in accordance with a duly
adopted resolution of the board of directors of Tenant, a copy of which is to be
delivered to Landlord on execution hereof, if requested by Landlord, and in
accordance with the by-laws of Tenant, and, in the case of a partnership, in
accordance with the partnership agreement and the most current amendments
thereto, if any, copies of which are to be delivered to Landlord on execution
hereof, if requested by Landlord, and that this Lease is binding upon Tenant in
accordance with its terms.
(c) Examination of Lease. Submission of this instrument by Landlord to Tenant
for examination or signature by Tenant does not constitute a reservation of or
option for lease, and it is not effective as a lease or otherwise until
execution by and delivery to both Landlord and Tenant.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed by
their duly authorized representatives as of the date first above written.
<TABLE>
<S> <C>
"TENANT" "LANDLORD"
KOLL MANAGEMENT SERVICES, INC. KOLL CENTER NEWPORT NUMBER 14
a Delaware Corporation a California general partnership
By: /s/ Lynda McMillen By: KOLL MANAGEMENT SERVICES, INC.,
--------------------------------- a Delaware Corporation,
Print Name: Lynda McMillen Its Authorized Agent
------------------------
Print Title: Executive Vice President By: /s/ Jana L. Turner
------------------------ -------------------------------
Print Name: Jana L. Turner
-------------------
By: Print Title: Regional President
--------------------------------- ------------------
Print Name:
------------------------- By: /s/ Richard Koenig
Print Title: -------------------------------
------------------------ Print Name: Richard Koenig
-------------------
Print Title: Senior Manager
------------------
</TABLE>
<PAGE>
ADDENDUM TO OFFICE BUILDING LEASE
DATED 2ND DAY OF OCTOBER, 1995
BY AND BETWEEN KOLL CENTER NEWPORT NUMBER 14,
A CALIFORNIA GENERAL PARTNERSHIP, AS "LANDLORD" AND
KOLL MANAGEMENT SERVICES, INC., A DELAWARE CORPORATION
AS "TENANT"
- --------------------------------------------------------------------------------
40. OPTION TO EXTEND:
----------------
(a) Subject to the terms of this Paragraph 40 and Paragraph 43, entitled
"Options," Landlord hereby grants to Tenant an option (the "Extension Option")
to extend the Term of this Lease with respect to the entire Premises (as
expanded) for one (1) additional period of five (5) years (the "Option Term"),
on the same terms, covenants and conditions as provided for in this Lease during
the initial Lease Term, except that all economic terms such as, without
limitation, Monthly Base Rent, an Operating Expense Allowance, if any, parking
charges, partially abated rent, etc., shall be established based on the "fair
market rental rate" for the Premises for the Option Term as defined and
determined in accordance with the provisions of this Paragraph 40 below.
(b) The Extension Option must be exercised, if at all, by written notice
("Extension Notice") delivered by Tenant to Landlord no earlier than the date
which is two hundred seventy (270) days, and no later than the date which is one
hundred eighty (180) days prior to the expiration of the then current Term of
this Lease.
(c) The term "fair market rental rate" as used in the Lease and any Rider
or Addendum attached thereto shall mean Landlord's reasonable and good faith
determination of the annual amount per rentable square foot, projected during
the relevant period, that a willing, financially comparable, non-equity, non-
renewal tenant (excluding sublease and assignment transactions) would pay, and a
willing, financially comparable landlord of a comparable quality office building
located in the Newport Beach-Irvine-Costa Mesa airport area ("Comparison Area")
would accept, at arm's length (what Landlord is accepting in current
transactions for the Building may be considered), for space comparable size,
quality and floor height as the leased area at issue and taking into account the
age, quality and layout of the existing improvements in the leased area at issue
and taking into account items that professional real estate brokers customarily
consider, including, but not limited to, rental rates, office space
availability, tenant size, tenant improvement allowances, operating expenses and
allowance, parking charges, free rent, free parking and any other lease
concessions, if any, then being charged or granted by Landlord or the lessors of
such similar office buildings. The fair market rental rate will be an effective
rate, not including, but accounting for, the appropriate lease concessions
described above.
(d) Landlord's determination of fair market rental rate shall be delivered
to Tenant in writing not later than thirty (30) days following Landlord's
receipt of Tenant's Extension Notice. Tenant will have thirty (30) days
("Tenant's Review Period") after receipt of Landlord's notice of the fair market
rental rate within which to accept such fair market rental rate or to reasonably
object thereto in writing. Tenant's failure to object to the fair market rental
rate submitted by Landlord in writing within Tenant's Review Period will
conclusively be deemed Tenant's approval and acceptance thereof. If Tenant
reasonably objects to the fair market rental rate submitted by Landlord within
Tenant's Review Period, then Landlord and Tenant will attempt in good faith to
agree upon such fair market rental rate using their best good faith efforts. If
Landlord and Tenant fail to agree upon such fair market rental rate using their
best good faith efforts. If Landlord and Tenant fail to reach agreement on such
fair market rental rate within fifteen (15) days following the expiration of
Tenant's Review Period (the "Outside Agreement Date"), then Tenant's Extension
Option shall be voided unless Tenant notifies Landlord in writing within five
(5) days of the Outside Agreement Date of its election to agree upon a fair
market rental rate pursuant to an appraisal method, in which event each party's
determination will be submitted to appraisal in accordance with the provisions
below.
(e) (i) Landlord and Tenant shall each appoint one appraiser who shall by
profession be a real estate broker who has been active over the five (5) year
period ending on the date of such appointment in the leasing of high-rise office
space in the Comparison Area. Each such appraiser will be appointed within
thirty (30) days after the Outside Agreement Date.
<PAGE>
(ii) The two (2) appraisers so appointed will within fifteen (15) days
of the date of the appointment of the last appointed appraiser agree upon and
appoint a third appraiser who shall be qualified under the same criteria set
forth herein above for qualification of the initial two (2) appraisers.
(iii) The determination of the appraisers shall be limited solely to
the issue of whether Landlord's or Tenant's last proposed (as of the Outside
Agreement Date) new Monthly Base Rent for the Premises is the closest to the
actual new Monthly Base Rent for the Premises as determined by the appraisers,
taking into account the requirements of Paragraph (c) and this Paragraph (e)
regarding same.
(iv) The three (3) appraisers shall within thirty (30) days of the
appointment of the third appraiser reach a decision as to whether the paries
shall use Landlord's or Tenant's submitted new Monthly Base Rent, and shall
notify Landlord and Tenant thereof.
(v) The decision of the majority of the three (3) appraisers shall be
binding upon Landlord and Tenant. The cost of each party's appraiser shall be
the responsibility of the party selecting such appraiser, and the cost of the
third appraiser (or arbitration, if necessary) shall be shared equally by
Landlord and Tenant.
(vi) If either Landlord or Tenant fails to appoint an appraiser within
the time period in Paragraph (f)(i) herein above, the appraiser appointed by one
of them shall reach a decision, notify Landlord and Tenant thereof, and such
appraiser's decision shall be binding upon Landlord and Tenant.
(vii) If the two (2) appraisers fail to agree upon and appoint a third
appraiser, both appraisers shall be dismissed and the matter to be decided shall
be forthwith submitted to arbitration under the provisions of the American
Arbitration Association.
(viii) Landlord and Tenant shall split the cost of the third appraiser
and shall pay for their own appraisers.
41. RIGHT TO LEASE ADDITIONAL SPACE:
-------------------------------
(a) Subject to the terms of this Paragraph 41 and Paragraph 43 below,
entitled "Options," Tenant shall have a continuing right to lease ("Right to
Lease") space on the sixth (6th) floor of the Building, to the extent such space
becomes available for lease to third parties after the expiration of any
existing lease for such space during the Lease Term, including the expiration of
all renewal or extension options under such leases, and after any existing
tenant or occupant vacates such space ("First Offer Space"). Tenant's Right to
Lease is subject and subordinate to the rights of all other existing tenants of
the Building granted prior to the date of this Lease with regard to the First
Offer Space or any portion thereof.
(b) Upon written request from Tenant to Landlord ("Tenant Request"), which
Tenant may not give more than two (2) times per Lease Year, Landlord will give
Tenant written notice of the availability of such First Offer Space and the date
the existing tenant or occupant, if any, is expected to vacate such space
("Landlord's Availability Notice"). Within five (5) business days following
delivery of Landlord's Availability Notice, Tenant will have the right to, in
writing, request from Landlord a written statement setting forth the basic
economic terms, including, but not limited to, Landlord's determination of the
Monthly Base Rent, tenant improvement allowance, if any, and all other economic
terms and conditions (collectively, the "Economic Terms"), upon which Landlord
is willing to lease such First Offer Space, either to Tenant or to a third
party. Such Economic Terms will represent Landlord's reasonable determination of
the fair market rental rate for the First Offer Space determined by Landlord
with reference to the parameters set forth in Subparagraph 40(c) above. The
Lease Term for such First Offer Space shall be coterminous with the initial
Lease Term, subject to extension, in accordance with the terms of Paragraph 40
above.
(c) Within ten (10) days after receipt of the Economic Terms from Landlord,
Tenant must given Landlord written notice pursuant to which Tenant shall elect
to either: (i) lease such First Offer Space upon such Economic Terms and the
same non-Economic Terms as set forth in this Lease with respect to the Premises;
or (ii) refuse to lease such First Offer Space. Tenant's failure to timely
choose either clause (i) or clause (ii) above will be deemed to be Tenant's
choice of clause (ii) above.
<PAGE>
(d) If Tenant chooses (or is deemed to have chosen) clause (c)(ii) above,
Tenant's Right to Lease the First Offer Space will be null and void until
Landlord once again delivers to Tenant Landlord's Availability Notice, in which
event, the procedures and sequences set forth above will be followed. If Tenant
exercises its Right to Lease as provided herein, the parties will promptly
thereafter execute an amendment to the Lease to include the First Offer Space in
the Premises and to document the lease terms thereof.
42. OPTION TO TERMINATE: Subject to the terms of this Paragraph 42 and
-------------------
Paragraph 43 entitled "Options," and notwithstanding anything to the contrary
contained in this Lease, Tenant will have a one-time option to terminate and
cancel this Lease (the "Termination Option"), effective as of the last day of
the thirty-sixth (36th) month of the Lease Term (the "Termination Date"), by
delivering to Landlord, on or before the first day of the thirtieth (30th) month
of the Lease Term, written notice ("Termination Notice") of Tenant's exercise of
its Termination Option. As a condition to the effectiveness of Tenant's
exercise of its Termination Option and in addition to Tenant's obligation to
satisfy all other monetary and non monetary obligations arising under this Lease
through the Termination Date, concurrently with Tenant's delivery to Landlord of
the Termination Notice, Tenant must pay to Landlord cash (or its equivalent) in
the amount of Four Hundred Thousand and 00/100 Dollars ($400,000.00) (the
"Termination Consideration"). If Tenant properly and timely delivers the
Termination Notice and the Termination Consideration to Landlord and satisfies
all other monetary and non monetary obligations under this Lease through the
Termination Date, including, without limitation, the provisions regarding
surrender of the Premises, then this Lease will terminate as of midnight on the
Termination Date.
43. OPTIONS
-------
(a) Definition: As used in this Paragraph, the word "Option" has the
----------
following meaning:
(i) The Option to Extend pursuant to Paragraph 40 herein;
(ii) The Right to Lease Additional Space pursuant to Paragraph 41
herein;
(iii) The Option to Terminate pursuant to Paragraph 42 herein.
(b) Effect of Default on Option: Tenant shall have no right to exercise
---------------------------
any Option, notwithstanding any provision of the grant of Option to the
contrary, and Tenant's exercise of any Option may be nullified by Landlord and
deemed of no further force or effect, if Tenant shall be in default of any
monetary obligation or material non-monetary obligation under the terms of the
Lease (or if Tenant would be in such default under the Lease but for the passage
of time or the giving of notice, or both) as of Tenant's exercise of the Option
in question or at any time after the exercise of any such Option and prior to
the commencement of the Option event.
44. RENT ABATEMENT: Landlord estimates that Tenant will occupy the Premises on
--------------
December 1, 1995. Tenant shall not be required to pay rent through February 29,
1996. In no event shall the monthly basic rent and other charges due under the
Lease commence later than March 1, 1996. Excluding monthly basic rent and
parking rent, during the aforementioned rental abatement period, all other terms
and conditions of this Lease, shall be in full force and effect.
45. AMERICANS WITH DISABILITIES ACT (ADA): Tenant shall be responsible for
-------------------------------------
causing, at Tenant's sole cost and expense, the Premises to comply with the
American With Disabilities Act of 1990, as subsequently amended ("ADA"), and all
similar federal, state and local laws, rules and regulations and subsequent
amendments thereof. Landlord shall be responsible for causing the common areas
of the Building and the Development to comply with the ADA, the costs for which
shall not constitute a component of Operating Expenses (except to the extent
such costs are included in the Operating Expense Allowance).
46. NON-DISTURBANCE AGREEMENT: Landlord shall use its best efforts, prior to
-------------------------
the commencement of the Lease term, cause Tenant to be provided with a
commercially reasonable Non-Disturbance Agreement from existing lender on the
building in the form acceptable to such lender.
<PAGE>
47. MOVING ALLOWANCE: Tenant shall receive a moving allowance (the "Moving
----------------
Allowance") of up to $30,000.00. Landlord shall pay the Moving Allowance to
Tenant within thirty (30) days after Tenant's occupancy of the Premises.
48. PARKING:
-------
(a) Unreserved Employee Parking: So long as this Lease is in effect,
---------------------------
Landlord shall lease to Tenant up to sixty-two (62) unreserved employee parking
spaces. All such unreserved employee parking spaces shall be available to all
tenants on a non-exclusive, in-common basis within the non-visitor portions of
the parking facilities.
Tenant's parking rent shall be as follows for up to sixty-two (62)
unreserved parking spaces for the initial Lease term:
Commencement Date through February 29, 1996:
$0.00 per space per month;
March 1, 1996, through February 28, 1998:
$15.00 per space per month;
March 1, 1998, through February 28, 2000:
$20.00 per space per month;
March 1, 2000, through February 28, 2002:
$25.00 per space per month.
(b) Reserved Parking: So long as this Lease is in effect, Landlord shall
----------------
lease to Tenant up to fifteen (15) reserved parking spaces in the parking
structure adjacent to the Building. The location of such reserved parking
spaces within the parking structure shall be determined by Landlord, in its sole
discretion.
Tenant's parking rent shall be as follows for up to fifteen (15)
reserved parking spaces for the initial Lease term:
Commencement Date through February 28, 2002:
$50.00 per space per month.
(c) Designated Unreserved Parking: So long as this Lease is in effect,
-----------------------------
Landlord shall lease to Tenant up to twenty-eight (28) designated unreserved
employee parking spaces. Tenant's designated unreserved employee parking spaces
may be located, at Landlord's sole option, at a specified area within a
reasonable distance to the building, which for the purposes herein may include
the Koll Center Newport parking facilities on the West side of Von Karman
Avenue. The exact location of the designated unreserved parking spaces shall be
determined by Landlord in its sole discretion. As a material consideration of
the lease, Tenant shall use its best efforts to cause its employees to utilize
the area(s) designated by Landlord for Tenant's designated unreserved parking
spaces. In order to enforce Tenant's compliance with this provision, Landlord
shall have the right to issue stickers or some other visible identification for
Tenant's employee's vehicles which are selected to park in designated unreserved
parking area(s) or Landlord may restrict ingress/egress for such vehicles to
selected areas of the parking facilities. If necessary, after reasonable
notice, Landlord may tow, at Tenant's expense, vehicles which do not utilize
such areas for designated unreserved parking.
Tenant's parking rent shall be as follows for twenty-eight (28)
designated parking spaces for the initial Lease term:
Commencement Date through February 29, 1996:
$0.00 per space per month;
March 1, 1996, through February 28, 1998:
$15.00 per space per month;
March 1, 1998, through February 28, 2000:
$20.00 per space per month;
March 1, 2000, through February 28, 2002:
<PAGE>
$25.00 per space per month.
49. CONFLICT WITH BASIC LEASE: To the extent of any conflict between the
-------------------------
printed portion of this Lease and the provisions of this Addendum Sections 40
through 48, the provisions of this Addendum shall prevail.
"TENANT" "LANDLORD"
KOLL MANAGEMENT SERVICES, INC. KOLL CENTER NEWPORT NUMBER 14,
a Delaware corporation a California general partnership
By: KOLL MANAGEMENT SERVICES, INC., a
By:_____________________________ Delaware corporation as Agent
Print Name:_____________________ By:___________________________________
Title:__________________________ Print Name:___________________________
By:_____________________________ Print Title:__________________________
Print Name:_____________________ By:___________________________________
Print Title:____________________ Print Name:___________________________
Print Title:__________________________
[F:\RM\DUMP\ERH\KOLL\OCT2\ADDENDUM]
<PAGE>
EXHIBIT 10.22
AMENDMENT NO. 1 TO OFFICE BUILDING LEASE
----------------------------------------
THIS AMENDMENT NO. 1 TO OFFICE BUILDING LEASE ("Amendment No. 1") is
made as of this 6th day of June, 1996, by and between Koll Center Newport Number
14, a California limited partnership ("Landlord"), and Koll Management Services,
Inc., a Delaware corporation ("Tenant").
R E C I T A L S
---------------
A. The parties hereto are Landlord and Tenant under that certain
Office Building Lease dated October 2, 1995 (the "Lease") covering space on the
seventh (7th) floor, Suite 7000, and the Second (2nd) floor, Suite 2700 of the
building located at 5000 Birch Street, Newport Beach, California (the
"Building") in the project known as Koll Center Newport (the "Project"). These
Premises consist of approximately 20,481 rentable square feet ("Original
Premises").
B. WHEREAS, Landlord desires to provide modifications to the Lease
agreement to expand the Original Premises to include additional space on the
sixth (6th) floor of the West Tower of the Building and Tenant agrees to same,
the parties hereto mutually desire to amend said Lease as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants, promises,
agreements, terms and conditions set forth hereinafter, and other good and
valuable considerations, receipt of which are hereby acknowledged by the
parties, Landlord and Tenant agree as follows:
1. Description of Premises. Effective as of approximately July 1,
-----------------------
1996, Landlord shall lease to Tenant and Tenant shall lease from Landlord
approximately 9,381 rentable square feet on the sixth (6th) floor (Suite 6000)
of the Building (the "Additional Premises"), making the total leased area of the
premises approximately 29,862 rentable square feet. The Additional Premises is
more particularly described and shown on Exhibit "A", which is attached hereto
and made a part hereof by this reference. The word "Premises" as used herein
shall include the Original Premises and Additional Premises, unless the context
indicates to the contrary. All references in the Lease and Addendum to the
"Premises" shall include the Additional Premises.
2. Term and Commencement Date. Landlord and Tenant agree that the
--------------------------
lease term for the Additional Premises shall be for approximately sixty-eight
(68) months commencing on a date as set forth in the Work Letter Agreement,
attached hereto as Exhibit "B" ("Additional Premises Commencement Date"). The
estimated commencement date for the Additional Premises shall be on or about
July 1, 1996 (the "Additional Premises Estimated Commencement Date") and the
term for the Additional Premises
<PAGE>
shall expire on February 28, 2002 (the "Additional Premises Term").
3. Delivery of Possession of Additional Space to Tenant: Landlord
----------------------------------------------------
shall deliver the Additional Premises to Tenant in accordance with the Work
Letter Agreement attached hereto as Exhibit "B."
4. Annual Basic Rent: Effective upon the Additional Premises
-----------------
Commencement Date, Monthly Basic Rent for the Additional Premises for the
Additional Premises Term shall be as follows:
Months 01 - 68: $1.45/rentable square foot/month;
$13,602.45 per month
Month and Annual Basic Rent for the Original Premises shall not be affected by
this Amendment No. 1.
5. Operating Expenses Allowance: Notwithstanding anything to the
----------------------------
contrary contained in Paragraph 6 of the Original Lease, during the Additional
Premises Term, Tenant's Operating Expense Allowance for the Additional Premises
shall be to equal Tenant's Percentage of actual Operating Expenses for the 1996
calendar year grossed up to reflect a 95% occupancy. All operating Expenses for
all Comparison Years will also be grossed up to reflect a 95% occupancy.
Tenant's Operating Expense Allowance for the Original Premises shall remain the
same as set forth in the Lease.
6. Tenant's Percentage: Upon the Additional Premises Commencement
-------------------
Date, Tenant's Percentage, as defined in the Lease under Paragraph 1(h), shall
be increased from 6.9476% to 10.0902%.
7. Additional Premises - Tenant Improvement Allowance: Tenant will
--------------------------------------------------
receive a tenant improvement allowance ("Allowance") from Landlord of up to
$16.00 per usable square foot (a total of $132,832) to be used by Tenant for the
improvement of the Additional Premises as provided in the Work Letter Agreement
attached hereto as Exhibit "B". Any costs, fees or other amounts in excess of
the Allowance shall be paid by Tenant.
8. Parking: During the Additional Premises Term, Tenant shall be
-------
granted the following parking rights for the Additional Premises:
a) Visitor Parking: Visitor parking will be available within
---------------
the surface parking area adjacent to the Building. These spaces are available to
all tenants on an in-common basis. This parking shall be at a charge to invitees
with the rate being established by Landlord from time to time. Tenant may elect
to validate such parking for their guests.
<PAGE>
b) Unreserved Employee Parking: In addition to Tenant's
---------------------------
existing parking rights for the Original Premises, Landlord shall lease to
Tenant up to twenty-eight (28) unreserved employee parking spaces for the
Additional Premises. All such unreserved parking spaces shall be available to
all tenants on a non-exclusive, in-common basis within the non-visitor portions
of the parking facilities. Tenant's parking rent for the twenty-eight (28)
unreserved parking spaces for the Additional Premises shall be as follows:
Months 01-36: $15.00 per space per month;
Months 37-68: $25.00 per space per month.
c) Reserved Employee Parking: In addition to Tenant's existing
-------------------------
parking rights for the Original Premises, Landlord shall lease to Tenant five
(5) reserved employee parking spaces in the parking structure adjacent to the
Building. Tenant's parking rent for the reserved spaces for the Additional
Premises shall be as follows:
Months 01-36: $50.00 per space per month;
Months 37-68: $75.00 per space per month.
9. Option to Terminate: Subject to the terms of this Paragraph 9
-------------------
and Paragraph 12 of this Amendment No. 1 entitled "Options," and notwithstanding
anything to the contrary contained in this Lease, Tenant will have a one-time
option to terminate and cancel its Lease obligations for the Additional Premises
(the "Termination Option"), effective as of the last day of the thirtieth (30th)
month of the Lease Term (the "Termination Date"), by delivering to Landlord, on
or before the last day of the twenty-fourth (24th) month of the Lease Term,
written notice ("Termination Notice") of Tenant's exercise of its Termination
Option. As a condition to the effectiveness of Tenant's exercise of its
Termination Option and in addition to Tenant's obligation to satisfy all other
monetary and non-monetary obligations arising under this Lease for the
Additional Premises through the Termination Date, concurrently with Tenant's
delivery to Landlord of the Termination Notice, Tenant must pay to Landlord cash
(or its equivalent) in the amount of One Hundred Seventeen Thousand Two Hundred
Sixty-Three Dollars ($117,263) (the "Termination Consideration"). If Tenant
properly and timely delivers the Termination Notice and the Termination
Consideration to Landlord and satisfies all other monetary and non-monetary
obligations under this Lease for the Additional Premises through the Termination
Date, including, without limitation, the provisions regarding surrender of the
Premises, then Tenant's obligations for the Additional Premises will terminate
as of midnight on the Termination Date. The provisions of this paragraph do not
affect Tenant's option to terminate for the Original Premises under Paragraph 42
of the Lease.
10. Option to Extend: Tenant's Option to Extend, as set forth in
----------------
Paragraph 40 of the Lease, shall also apply to the
<PAGE>
Additional Premises. Tenant's Option to extend is subject to Paragraph 12 of
this Amendment No. 1. Notwithstanding anything to the contrary in Paragraph 40
of the Lease, the "fair market rental rate" for the Additional Premises shall
not be less than the last month's Monthly Base Rent for the Additional Premises
under the Lease for the initial Lease term.
11. Right to Lease Additional Space: The first sentence of Paragraph
-------------------------------
41(b) of the Lease, Tenant's Right to Lease Additional Space, is hereby modified
by adding the following language following the words "Lease Year": "and prior
to, or concurrent with, the commencement of lease negotiations with the existing
tenant(s) on the sixth (6th) floor of the West Tower".
12. Options:
-------
a) Definition. As used in this Paragraph, the word "Option"
----------
refers to and includes:
(i) The Option to Extend pursuant to Paragraph 10 herein;
(ii) The Right to Lease Additional Space pursuant to
Paragraph 11 herein;
(iii) The Option to Terminate pursuant to Paragraph 9
herein.
b) Effect of Default on Option: Tenant shall have no right to
---------------------------
exercise any Option, notwithstanding any provision of the grant of Option to the
contrary, and Tenant's exercise of any Option may be nullified by Landlord and
deemed of no further force or effect, if Tenant shall be in default of any
monetary obligation or material non-monetary obligation under the terms of the
Lease (or if Tenant would be in such default under the Lease but for the passage
of time or the giving of notice, or both) as of Tenant's exercise of the Option
in question or at any time after the exercise of any such Option and prior to
the commencement of the Option event.
13. Americans with Disabilities Act (ADA): Tenant shall be
-------------------------------------
responsible for causing, at Tenant's sole cost and expense, the Premises to
comply with the Americans With Disabilities Act of 1990, as subsequently amended
("ADA"), and all similar federal, state and local laws, rules and regulations
and subsequent amendments thereof; provided however that Tenant may utilize all
or some portion of the Allowance to effect such compliance. Landlord shall be
responsible for causing the common areas of the Building and the Development to
comply with the ADA, the costs for which shall not constitute a component of
Operating Expenses (except to the extent such costs are included in the
Operating Expense Allowance).
<PAGE>
14. Brokers: Landlord shall not be responsible for the payment of a
-------
commission based upon the transactions contemplated in this Amendment, except to
the Koll Marketing Group. If any additional claims for brokers' or finders'
fees in connection with the transactions contemplated by this Amendment No. 1,
then Tenant hereby agrees to indemnify, protect, hold harmless and defend
Landlord (with counsel reasonably satisfactory to Landlord) from and against any
such claims if they shall be based upon any statement, representation or
agreement made by Tenant, and Landlord hereby agrees to indemnify, protect, hold
harmless and defend Tenant (with counsel reasonably satisfactory to Tenant) if
such claims are based upon any statement, representation or agreement made by
Landlord.
15. Effectiveness of Lease: Except as set forth in this Amendment
----------------------
No. 1, all of the provisions of the Lease and Addendum to Lease, shall remain
unchanged and in full force and effect. Tenant expressly acknowledges that it
is leasing the Additional Premises subject to the same terms and conditions of
the Lease, except as otherwise set forth herein above. The remaining unaffected
portions of the Lease are hereby ratified and affirmed and incorporated herein
by this reference. All defined terms herein shall have the same meaning as
specified in the Lease and Addendum to Lease unless otherwise indicated.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 to Office Building Lease as of the day and year first above
written.
"LANDLORD" "TENANT"
KOLL CENTER NEWPORT NUMBER 14 KOLL MANAGEMENT SERVICES, INC.,
a California general partnership a Delaware corporation
By: Koll Management Services, Inc.,
a Delaware corporation, By: ____________________________
as Agent
Print Name: _______________
By: __________________________ Print Title: ______________
Print Name: __________________
Title: _______________________
<PAGE>
EXHIBIT 10.23
LEASE GUARANTY
This Lease Guaranty (the "Guaranty") is made as of November 15, 1994 by
Koll Management Services, Inc., a Delaware corporation ("Guarantor"), for the
benefit of Koll Corporate Associates, a California general partnership
("Landlord"), and Aetna Life Insurance Company, a Connecticut corporation
("Aetna").
RECITALS
A. Aetna is the holder of a loan in the original principal amount of
$9,000,000.00 (the "Loan") which is evidenced by a Renewal Promissory Note (the
"Note") dated as of September 28, 1992, executed by Landlord, as amended by that
certain Second Modification Agreement, Amendment to Note and Supplement to Deed
of Trust, Assignment of Rents and Security Agreement, and Assignment of Rents
and Leases, dated as of the date hereof and executed by and between Landlord and
Lender (the "Second Modification Agreement"). (Unless the context requires
otherwise, all references herein to the Note are to the Note as modified by the
Second Modification Agreement.)
B. The Note is secured by a Deed of Trust, Assignment of Rents and
Security Agreement dated August 26, 1986 (the "Deed of Trust"), executed by
TKCC, Inc., a California corporation ("Original Landlord"), as Trustor in favor
of Ticor Title Insurance Company of California as Trustee and Lender as
Beneficiary covering the real property described in Exhibit A
<PAGE>
attached thereto (the "Property"). The Deed of Trust has been amended and
modified pursuant to that certain Modification Agreement and Supplement to Deed
of Trust, Assignment of Rents and Security Agreement, and Assignment of Rents
and Leases dated as of September 28, 1992 by and between Lender and Aetna (the
"First Modification Agreement") and by the Second Modification Agreement.
(Unless the context requires otherwise, all references herein to the Deed of
Trust are to the Deed of Trust as modified by the First Modification Agreement
and by the Second Modification Agreement.
C. Aetna is the Assignee under an Assignment of Rents and Leases dated
August 26, 1986, executed by Original Landlord (the "Assignment"), as modified
by the First Modification Agreement and by the Second Modification Agreement.
(Unless the context requires otherwise, all references herein to the Assignment
are to the Assignment as modified by the First Modification Agreement and by the
Second Modification Agreement.)
D. The Property is leased by Landlord to The Koll Company, a California
corporation ("Tenant"), pursuant to a Lease dated as of September 1, 1992 and
entitled "Koll Business Center Lease" (the "Lease"), as amended by an Amendment
to Lease dated on or about the date hereof (the "Lease Amendment"). (Unless the
context requires otherwise, all references herein to the Lease are to the Lease
as amended by the Lease Amendment.)
2
<PAGE>
E. Until the delivery of this Agreement, Aetna was Pledgee and Tenant was
Pledgor under a Pledge Agreement dated as of September 28, 1992 (the "Pledge
Agreement"). Pursuant to the Pledge Agreement, Tenant granted to Aetna a
security interest in 100,000 shares of common stock of Guarantor (the "Pledged
Shares"). The security interest was granted to secure full and complete payment
and performance by Tenant of all obligations of Tenant to Aetna contained in a
certain Indemnity Agreement dated September 28, 1992, executed by Tenant, and
the full and complete payment and performance by Tenant of those of the
obligations of the Tenant under the Lease as Aetna may become entitled to
enforce pursuant to the Assignment or upon succeeding to ownership of the
Property by foreclosure or otherwise, all upon and subject to the terms and
conditions of the Pledge Agreement.
F. Guarantor, Landlord and Tenant now desire that the Pledged Shares be
released and that the Pledge Agreement be terminated. Aetna has agreed to a
termination of the Pledge Agreement, and a release of the Pledged Shares,
subject to certain terms and conditions, including the execution and delivery of
the Second Modification Agreement, the Lease Amendment and this Lease Guaranty.
AGREEMENT
NOW, THEREFORE, the Guarantor agrees as follows:
3
<PAGE>
1. Guaranty. Guarantor unconditionally guarantees to "Guaranteed Party"
--------
(as hereinafter defined) the timely (whether as scheduled or upon acceleration)
payment and performance by Tenant of the "Guaranteed Obligations" which shall
consist of all of Tenant's obligations under the Lease, including, but not
limited to, the payment when due of all rent and other payments required by the
Lease.
2. Guaranteed Party. "Guaranteed Party" shall mean Landlord, or any
----------------
successor to Landlord as owner of the Property, unless and until Aetna, or a
successor as holder of the Loan, becomes entitled to receive performance of any
of the Guaranteed Obligations pursuant to the Assignment, and/or as a result of
succeeding to the rights of Landlord or its successor as owner of the Property
as a result of the occurrence of an "Event of Default" (as defined in the Note);
following an Event of Default, Aetna (and/or its successors as holder of the
Note or any purchaser at a foreclosure sale, or any successor to Aetna or such a
purchaser as owner of the Property, all of whom shall be included within the
term, "Aetna") shall be the Guaranteed Party to the extent that it succeeds to
the rights of Landlord. Pursuant to the Assignment, Landlord has assigned to
Aetna all of its rights under any guaranty of any lease affecting the Property
and it is hereby agreed and confirmed that the guaranties so assigned include
the Guaranty. However, it is understood and agreed that Aetna's rights
hereunder are not dependent upon such
4
<PAGE>
assignment and that Aetna shall be entitled to require, pursuant to this
Guaranty, that Guarantor perform the Guaranteed Obligations at any time that
there is both an Event of Default and a default in the performance of the
Guaranteed Obligations.
3. Waiver of Unintended Rights. Guarantor confirms and agrees that this
---------------------------
Guaranty is intended to be a guaranty of the obligations of Tenant under the
Lease only and not the equivalent of a guaranty of the payment and other
obligations of Landlord contained in the Note and in the Deed of Trust and other
instruments evidencing or securing the Loan (the "Loan Obligations"),
notwithstanding that the execution and delivery of this Guaranty is a material
inducement to action taken on the part of Aetna relative to the Loan and
notwithstanding that Aetna expects to be able to enforce this Guaranty, if there
is both an Events of Default and a default in performance of the Guaranteed
Obligations. However, if for any reason, at any time, this Guaranty contained
herein or any of Guarantors' obligations hereunder, are considered the legal
equivalent of a guaranty of any of the Loan Obligations, Guarantor intends to
waive, and hereby waives unconditionally, to the maximum extend possible, any
and all defenses which it might have as a guarantor or surety, thereby
eliminating any such defenses, including defenses to the right of Aetna to
exercise all of its rights as the party entitled to performance of the
Guaranteed Obligations and the obligations of Guarantor hereunder. Without
limiting the
5
<PAGE>
foregoing, Guarantor specifically agrees to the succeeding provisions of this
Guaranty, not only as the guarantor of obligations under the Lease, but, if it
is deemed a guarantor of the Loan Obligations, as guarantor of the Loan
Obligations. However, no inference should be drawn from any provisions hereof,
that Guarantor would have any of the rights which a guarantor or surety in
respect of the Loan Obligations might have.
4. Guaranteed party's Direct Rights. This is a guaranty of payment and
--------------------------------
performance and not a guaranty of collection. In the event that Tenant fails
timely to pay or perform the Guaranteed Obligations, Guaranteed Party may
enforce its rights under this Guaranty without first seeking to obtain payment
or performance or recovery from or through:
(i) Tenant;
(ii) Landlord;
(iii) Any collateral Aetna may hold for the Loan Obligations or any
guaranty of the Loan Obligations;
(iv) Exercise of any other remedy or right that Guaranteed Party may
have.
Guarantor waives any rights it may have under California Civil Code Sections
2845 or 2849 to require Guaranteed Party first to take any of the foregoing
actions. If Guaranteed Party decides to proceed first to exercise any other
remedy or right, or to proceed against another person or any collateral,
Guaranteed Party retains all of its rights under this Guaranty.
6
<PAGE>
5. Continuing Guaranty: Effect of Termination of Lease. This is a
----------------------------------------------------
continuing guaranty of the Guaranteed Obligations and may not be terminated. In
the event that the Lease is amended or terminated (for any reason, including,
but not limited to, mutual agreement of Landlord and Tenant or rejection in
bankruptcy) without the written consent of Aetna, then this Guaranty shall
remain in effect and be construed, as though such termination or amendment did
not occur, and the Guaranteed Obligations, for which Guarantor shall be liable
to Guaranteed Party hereunder, shall consist of the Guaranteed Obligations as
they existed and would have continued to exist before giving effect to any such
amendment or termination. In the event of such a termination of the Lease,
Guarantor agrees, if requested by Aetna, to enter into a new lease, for the
balance of the term of the Lease (as it existed prior to any amendment or
termination without the written consent of Aetna), on terms identical to those
contained in the Lease. However, Guarantor's obligations under this Guaranty,
including this Section 5, are not dependent upon the execution of such a new
Lease.
6. No Notice Required. Guaranteed Party does not have to notify
------------------
Guarantor of any of the following events and Guarantor will not be released or
exonerated from its obligations under this Guaranty if it is not notified of:
(i) Any Event of Default or any default in payment or performance of
the Guaranteed Obligations;
7
<PAGE>
(ii) Any adverse change in the financial condition or business of
Landlord or Tenant;
(iv) Any sale or other disposition of any collateral for any of the
Loan or the Guaranteed Obligations, or for any guaranty of any of the Loan or
the Guaranteed Obligations;
(v) The acceptance of this Guaranty;
(vi) Any renewal, extension or other modification of any of the Loan
or the Guaranteed Obligations;
(vii) All other notices to which it might be entitled.
7. Guarantor's Additional Waivers. Guarantor waives any right it may
------------------------------
have to any of the following acts in respect of the Loan or the Guaranteed
Obligations:
(i) Demand;
(ii) Presentment;
(iii) Diligence;
(iv) Protest;
(v) Notice of dishonor; and
(vi) Any other notice to which it may be entitled.
8. No Release of Guarantor. Guaranteed Party may do any of the
-----------------------
following, by action or inaction, without releasing or exonerating Guarantor
from any of its obligations under this Guaranty (including any release or
exoneration that might occur under California Civil Code Sections 2819, 2822,
2845, 2848, 2849, or 2850):
8
<PAGE>
(i) Renew, extend or otherwise modify or alter any of the Loan
Obligations or any of the other Guaranteed Obligations;
(ii) Release any party from any of the Loan Obligations or the
Guaranteed Obligations;
(iii) Sell, release subordinate, impair, waive or otherwise fail to
realize upon any collateral for any of the Loan Obligations or the Guaranteed
Obligations or any guaranty of any of the Loan Obligations or the Guaranteed
Obligations;
(iv) From time to time and without first requiring performance on
the part of Landlord or Tenant and without being required to exhaust any or all
security held by Guaranteed Party, to look to and require performance by
Guarantor of any obligation on the part of Guarantor to be performed pursuant to
the terms hereof, by action at law or in equity or both, and further to collect
in any such action its costs and expenses, including reasonable attorneys' fees
incurred in enforcing its rights hereunder;
(v) Foreclose on any collateral for any of the Loan Obligations or
the Guaranteed Obligations or any guaranty of any of the Loan Obligations or the
Guaranteed Obligations in a manner that diminishes, impairs or precludes the
right of Guarantor to enjoy any rights of subrogation against Landlord or Tenant
or any other person, or to obtain reimbursement, performance, or indemnification
for payment or performance under this Guaranty (including any of the foregoing
that results from the direct or
9
<PAGE>
indirect application of California Code of Civil Procedure Sections 580a, 580b,
580c, 580d, and 726, and Commercial Code Sections 1103 and 9501, et seq.);
(vi) Make an election under Bankruptcy Code Section 1111(b)(2);
(vii) Permit or suffer the creation of secured or unsecured credit
or debt under Bankruptcy Code Section 364;
(viii) Permit or suffer the disallowance, voidance or subordination
of any of the Loan Obligations or the Guaranteed Obligations; or
(ix) Fail to exercise any right or remedy it may have with respect
to the payment or performance of any of the Loan Obligations or the Guaranteed
Obligations.
Guarantor recognizes that, pursuant to Section 580d of the California Code of
Civil Procedure, if this Guaranty is deemed a guaranty of the Loan Obligations,
Guaranteed Party's realization through non-judicial foreclosure upon any real
property constituting security could terminate any right of Guaranteed Party to
recover a deficiency judgment against Landlord, thereby terminating subrogation
rights which Guarantor otherwise might have against Landlord. In the absence of
an adequate waiver, such a termination of subrogation rights could create a
defense to enforcement of this Guaranty against Guarantor. Guarantor hereby
unconditionally and irrevocably waives any such defense.
10
<PAGE>
9. Termination of Guaranty. This Guaranty shall terminate and be of no
-----------------------
further force and effect if and after the Loan Obligations are paid in full,
provided that such payment in full occurs prior to a foreclosure sale, judicial
or non-judicial, conducted to enforce the Loan Obligations and to any deed given
in lieu of such a foreclosure.
10. Guaranteed Party's Other Rights. Guaranteed Party shall have the
-------------------------------
following additional rights:
10.1 Revival of Debt. In the event that Guaranteed Party must return any
---------------
amount paid by Tenant in respect of the Guaranteed Obligations because Tenant
has become subject to a proceeding under the Bankruptcy Code or any similar law,
Guarantor's obligations under this Guaranty shall include that amount.
10.2 No Marshalling. Guaranteed Party has no obligation to marshal any
--------------
assets in favor of Guarantor, or against or in payment of the Guaranteed
Obligations or the Loan Obligations.
10.3 Fees and Costs. Guarantor will pay all of Guaranteed Party's fees and
--------------
costs incurred in enforcing this Guaranty, including Guaranteed Party's
reasonable attorneys' fees and costs.
10.4 Assignment. Guarantor may not assign its obligations or liabilities
----------
under this Guaranty. Subject to the preceding sentence, this Guaranty shall be
binding upon the parties hereto and their respective heirs, executors,
successors,
11
<PAGE>
representatives and assigns and shall inure to the benefit of the parties hereto
and their respective successors and assigns. This Guaranty shall inure to the
benefit of Guaranteed Party and its successors and assigns.
11. Miscellaneous.
-------------
11.1 Applicable Law. The law of the state of California will apply
--------------
to the interpretation and enforcement of this Guaranty.
11.2 Rights Cumulative. All of Guaranteed Party's rights under this
-----------------
Guaranty are cumulative. The exercise of any one right does not exclude the
exercise of any other right given in this Guaranty or any other right of
Guaranteed Party's not set forth in this Guaranty.
11.3 Rules of Construction. The following rules shall apply in
---------------------
interpreting the meaning of this Guaranty:
(i) "Includes" and "including" are not limiting; and
(ii) "Or" is not exclusive.
11.4 Severability. If any provision of this Guaranty is
------------
unenforceable, or otherwise invalid, the remaining provisions of this Guaranty
shall be enforced to the fullest possible extent.
11.5 Notices. Guaranteed Party may give any notice to the Guarantor
-------
at the following address, until changed in writing by notice given by Guarantor
to each of Landlord and Aetna:
12
<PAGE>
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: President
11.6 Headings; Number; Gender. Section headings used in this
------------------------
Guaranty are for convenience only. They are not a part of this Guaranty and
shall not be used in construing it. Wherever appropriate in this Guaranty, the
singular shall be deemed to also refer to the plural, and the plural to the
singular, and pronouns of certain genders shall be deemed to include either or
both of the other genders.
11.7 Review of Documents. Guarantor hereby acknowledges that it
-------------------
has copies of the Lease, including the Lease Amendment, and is fully familiar
with the terms thereof.
11.8 Consent to Subordination Non-Disturbance and Attornment
-------------------------------------------------------
Agreement. Guarantor acknowledges that it has reviewed, and consents to the
- ---------
terms and provisions of that certain Amended and Restated Subordination
Agreement and Agreement of Non-Disturbance and Attornment dated on or about the
date hereof entered into by Aetna, Landlord and Tenant, with respect to the
Lease.
11.9 Acknowledgement of Waivers. Guarantor acknowledges that
--------------------------
certain provisions of this Guaranty operate as waivers of rights that Guarantor
would or may otherwise have under applicable law.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of
the date first above written.
13
<PAGE>
"Guarantor"
KOLL MANAGEMENT SERVICES, INC.
a Delaware corporation
By:
---------------------------------
Its:
---------------------------
14
<PAGE>
EXHIBIT 10.25
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement") dated as of ________, is
made by and between KMS Holding Corporation, a Delaware corporation (the
"Company"), and ____________________ (the "Indemnitee").
R E C I T A L S:
- - - - - - - -
A. The Company recognizes that competent and experienced persons are
increasingly reluctant to serve as directors of corporations unless they are
protected by comprehensive liability insurance or indemnification, or both, due
to increased exposure to litigation costs and risks resulting from their service
to such corporations, and due to the fact that the exposure frequently bears no
reasonable relationship to the compensation of such directors.
B. The statutes and judicial decisions regarding the duties of
directors are often difficult to apply, ambiguous, or conflicting, and therefore
fail to provide such directors with adequate, reliable knowledge of legal risks
to which they are exposed or information regarding the proper course of action
to take.
C. The Company and the Indemnitee recognize that plaintiffs often
seek damages in such large amounts and the costs of litigation may be so
substantial (whether or not the case is meritorious), that the defense and/or
settlement of such litigation is often beyond the personal resources of
directors.
D. The Company believes that it is unfair for its directors to assume
the risk of substantial judgments and other expenses which may occur in cases in
which the director received no personal profit and in cases where the director
acted in good faith.
E. Section 145 of the General Corporation Law of Delaware ("Section
145"), under which the Company is organized, empowers the Company to indemnify
its directors by agreement and to indemnify persons who serve, at the request of
the Company, as the directors of other corporations or enterprises, and
expressly provides that the indemnification provided by Section 145 is not
exclusive.
F. The Board of Directors of the Company has determined that
contractual indemnification as set forth herein is not only reasonable and
prudent but necessary to promote the best interests of the Company and its
stockholder.
G. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director of the Company.
<PAGE>
H. The Indemnitee only is willing to serve, or to continue to serve,
as a director of the Company, provided that the Indemnitee is furnished the
indemnity provided for herein by the Company.
A G R E E M E N T:
- - - - - - - - -
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the parties hereto, intending to be legally bound, hereby agree
as follows:
1. Definitions.
-----------
(a) Agent. For purposes of this Agreement, "agent" of the Company
-----
means any person who: (i) is or was a director of the Company or a subsidiary
of the Company; or (ii) is or was serving at the request of, for the convenience
of, or to represent the interest of the Company or a subsidiary of the Company
as a director of another foreign or domestic corporation, partnership or joint
venture.
(b) Expenses. For purposes of this Agreement, "expenses" includes
--------
all direct and indirect costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements, other out-of-
pocket costs and reasonable compensation for time spent by the Indemnitee for
which he is not otherwise compensated by the Company or any third party,
provided that the rate of compensation and estimated time involved is approved
in advance by the Board of Directors of the Company), actually and reasonably
incurred by the Indemnitee in connection with either the investigation, defense
or appeal of a proceeding or establishing or enforcing a right to
indemnification under this Agreement, Section 145 or otherwise, and amounts paid
in settlement by or on behalf of the Indemnitee, but shall not include any
judgments, fines or penalties actually levied against the Indemnitee.
(c) Proceedings. For the purposes of this Agreement, "proceeding"
-----------
means any threatened, pending, or completed action, suit or other proceeding,
whether civil, criminal, administrative, investigative or any other type
whatsoever.
(d) Subsidiary. For purposes of this Agreement, "subsidiary" means
----------
any corporation of which more than 50% of the outstanding voting securities are
owned directly or indirectly by the Company, by the Company and one or more
other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve and/or
------------------
continue to serve as an agent of the Company, at the will of such corporation
(or under separate
2.
<PAGE>
agreement, if such agreement exists), in the capacity the Indemnitee currently
serves as an agent of such corporation, so long as the Indemnitee is duly
appointed or elected and qualified in accordance with the applicable provisions
of the Bylaws of such corporation or of any subsidiary thereof, or until such
time as the Indemnitee tenders his resignation in writing; provided, however,
that nothing contained in this Agreement is intended to create any right to
continued employment of the Indemnitee in any capacity.
3. Indemnification.
---------------
(a) Indemnification in Third Party Proceedings. Subject to Section
------------------------------------------
10 below, the Company shall indemnify the Indemnitee if the Indemnitee is a
party to or threatened to be made a party to or otherwise involved in any
proceeding (other than a proceeding by or in the name of the Company to procure
a judgment in its favor) by reason of the fact that the Indemnitee is or was an
agent of the Company, or by reason of any act or inaction by him in any such
capacity, against any and all expenses and liabilities of any type whatsoever
(including, but not limited to, judgments, fines and penalties), actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal of such proceeding, but only if the Indemnitee acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Indemnitee's conduct was
unlawful, pursuant to the presumption set forth in subsection (c) below, as
applicable. The termination of any proceeding by judgment, order of court,
settlement, conviction or on plea of nolo contendere, or its equivalent, shall
---- ----------
not, of itself, create a presumption that the Indemnitee did not act in good
faith in a manner which he reasonably believed to be in, or not opposed to, the
best interests of the Company, and with respect to any criminal proceedings,
that such person had reasonable cause to believe that his conduct was unlawful.
(b) Indemnification in Derivative Actions. Subject to Section 10
-------------------------------------
below, the Company shall indemnify the Indemnitee if the Indemnitee is a party
to or threatened to be made a party to or otherwise involved in any proceeding
by or in the name of the Company to procure a judgment in its favor by reason of
the fact that the Indemnitee is or was an agent of the Company, or by reason of
any act or inaction by him in any such capacity, against all expenses actually
and reasonably incurred by the Indemnitee in connection with the investigation,
defense, settlement, or appeal of such proceedings, but only if the Indemnitee
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, pursuant to the presumption set
forth in subsection (c) below; provided, however, that no indemnification under
this Section 3 shall be made in respect of any claim, issue or matter as to
which the Indemnitee shall have been finally adjudged to be liable to the
Company by a court of competent jurisdiction due to willful misconduct of a
culpable nature in the performance of the Indemnitee's duty to the Company,
unless and only to the extent that any court in which such proceeding was
brought
3.
<PAGE>
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as such court shall deem
proper.
(c) Conclusive Presumption Regarding Indemnitee Conduct. With
---------------------------------------------------
respect to Sections 3(a) and 3(b) above, the Indemnitee shall be conclusively
presumed to have acted in good faith and in a manner Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Company, and,
with respect to any criminal action or proceeding, to have had no reasonable
cause to believe Indemnitee's conduct was unlawful, unless a determination is
made that the Indemnitee has not acted in accordance with the standards set
forth above (i) by the Board of Directors by a majority vote of a quorum thereof
consisting of directors who were not parties to the proceeding due to which a
claim is made under this Agreement, (ii) by the stockholders of the Company by a
majority vote of stockholders who were not parties to such a proceeding, or
(iii) in a written opinion of independent legal counsel, selection of whom has
been approved by the Indemnitee in writing or by a panel of arbitrators, one of
whom is selected by the Company, another of whom is selected by the Indemnitee
and the last of whom is selected by the first two arbitrators so selected.
4. Indemnification of Expenses of Successful Party. Notwithstanding
-----------------------------------------------
any other provisions of this Agreement, to the extent that the Indemnitee has
been successful on the merits or otherwise in defense of any proceeding or in
defense of any claim, issue or matter therein, including the dismissal of any
action without prejudice, the Company shall indemnify the Indemnitee against all
expenses actually and reasonably incurred in connection with the investigation,
defense or appeal of such proceeding.
5. Partial Indemnification. If the Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines or penalties) actually and reasonably incurred
by him in the investigation, defense, settlement or appeal of a proceeding but
is not entitled, however, to indemnification for the total amount thereof, the
Company shall nevertheless indemnify the Indemnitee for the portion thereof to
which the Indemnitee is entitled.
6. Advancement of Expenses. Subject to Section 10(b) below, the
-----------------------
Company shall advance all expenses incurred by the Indemnitee in connection with
the investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company. The Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company as authorized by this Agreement. The advances to be
made hereunder shall be paid by the Company to or on behalf of the
4.
<PAGE>
Indemnitee within 30 days following delivery of a written request therefor by
the Indemnitee to the Company.
7. Notice and Other Indemnification Procedures.
-------------------------------------------
(a) Notification of Proceeding. Promptly after receipt by the
--------------------------
Indemnitee of notice of the commencement of or the threat of commencement of any
proceeding, the Indemnitee shall, if the Indemnitee believes that
indemnification with respect thereto may be sought from the Company under this
Agreement, notify the Company of the commencement or threat of commencement
thereof.
(b) Request for Indemnification. Any indemnification requested by
---------------------------
the Indemnitee under Section 3 hereof shall be made no later than 10 days after
receipt of the written request of the Indemnitee, unless a good faith
determination is made within said 10-day period in accordance with one of the
methods set forth in Section 3(c) above that the Indemnitee is not or (subject
to final judgment or other final adjudication as provided in Section 10(a)
below) ultimately will not be entitled to indemnification hereunder.
(c) Application for Enforcement. Notwithstanding a determination
---------------------------
under Section 7(b) above that the Indemnitee is not entitled to indemnification
with respect to any specific proceeding, the Indemnitee shall have the right to
apply to any court of competent jurisdiction for the purpose of enforcing the
Indemnitee's right to indemnification pursuant to this Agreement. In such an
enforcement hearing or proceeding, the burden of proving by clear and convincing
evidence that indemnification or advances are not appropriate shall be on the
Company. Neither the failure of the Company (including its Board of Directors,
stockholders, independent legal counsel or the panel of arbitrators) to have
made a determination prior to the commencement of such action that the
Indemnitee is entitled to indemnification hereunder, nor an actual determination
by the Company (including its Board of Directors or independent legal counsel or
the panel of arbitrators) that the Indemnitee is not entitled to indemnification
hereunder, shall be a defense to the action or create any presumption that the
Indemnitee is not entitled to indemnification hereunder.
(d) Indemnification of Certain Expenses. The Company shall
-----------------------------------
indemnify the Indemnitee against all expenses incurred in connection with any
hearing or proceeding under this Section 7 unless the Company prevails by clear
and convincing evidence in such hearing or proceeding.
8. Assumption of Defense. In the event the Company shall be
---------------------
obligated to pay the expenses of any proceeding against the Indemnitee, the
Company, if appropriate, shall be entitled to assume the defense of such
proceeding, with counsel reasonably acceptable to the Indemnitee, upon the
delivery to the Indemnitee of written notice of its election to do so. After
delivery of such notice, approval of such counsel by the Indemnitee
5.
<PAGE>
and the retention of such counsel by the Company, the Company shall not be
liable to the Indemnitee under this Agreement for any fees of counsel
subsequently incurred by the Indemnitee with respect to the same proceeding,
provided that (a) the Indemnitee shall have the right to employ his counsel in
such proceeding at the Indemnitee's expense; and (b) if (i) the employment of
counsel by the Indemnitee has been previously authorized in writing by the
Company, (ii) the Indemnitee's counsel delivers a written notice to the Company
stating that such counsel has reasonably concluded that there may be a conflict
of interest between the Company and the Indemnitee in the conduct of any such
defense or (iii) the Company shall not, in fact, have employed counsel to assume
the defense of such proceeding within a reasonable time, then in any such event
the fees and expenses of the Indemnitee's counsel shall be at the expense of the
Company.
9. Insurance. The Company may, but is not obligated to, obtain
---------
directors' and officers' liability insurance ("D&O Insurance") as may be or
become available with respect to which the Indemnitee is named as an insured.
Notwithstanding any other provision of this Agreement, the Company shall not be
obligated to indemnify the Indemnitee for expenses, judgments, fines or
penalties which have been paid directly to the Indemnitee by D&O Insurance. If
the Company has D&O Insurance in effect at the time the Company receives from
the Indemnitee any notice of the commencement of a proceeding, the Company shall
give prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the policy. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such proceeding
in accordance with the terms of such policy.
10. Exceptions.
----------
(a) Certain Matters. Any provision herein to the contrary
---------------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee on account of any proceeding with
respect to (i) remuneration paid to the Indemnitee if it is determined by final
judgment or other final adjudication that such remuneration was in violation of
law; (ii) which final judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or similar provisions of any
federal, state or local statute; or (iii) which (but only to the extent that) it
is determined by final judgment or other final adjudication that the
Indemnitee's conduct was in bad faith, knowingly fraudulent or deliberately
dishonest. For purposes of the foregoing sentence, a final judgment or other
adjudication may be reached in either the underlying proceeding or action in
connection with which indemnification is sought or a separate proceeding or
action to establish rights and liabilities under this Agreement.
6.
<PAGE>
(b) Claims Initiated by the Indemnitee. Any provision herein to
----------------------------------
the contrary notwithstanding, the Company shall not be obligated pursuant to the
terms of this Agreement to indemnify or advance expenses to the Indemnitee with
respect to proceedings or claims initiated or brought voluntarily by the
Indemnitee and not by way of defense, except with respect to proceedings brought
to establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 145, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors of the Company finds it to be
appropriate.
(c) Action for Indemnification. Any provision herein to the
--------------------------
contrary notwithstanding, the Company shall be obligated pursuant to the terms
of this Agreement to indemnify the Indemnitee for any expenses incurred by the
Indemnitee with respect to any proceeding instituted by the Indemnitee to
enforce or interpret this Agreement unless the Company prevails in such
proceeding by clear and convincing evidence.
(d) Unauthorized Settlements. Any provision herein to the contrary
------------------------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee under this Agreement for any amounts
paid in settlement of a proceeding effected without the Company's written
consent. Neither the Company nor the Indemnitee shall unreasonably withhold
consent to any proposed settlement; provided, however, that the Company may in
any event decline to consent to (or to otherwise admit or agree to any liability
for indemnification hereunder in respect of) any proposed settlement if the
Company determines in good faith (pursuant to Section 7(b) above) that the
Indemnitee is not or ultimately will not be entitled to indemnification
hereunder.
(e) Securities Act Liabilities. Any provision herein to the
--------------------------
contrary notwithstanding, the Company shall not be obligated pursuant to the
terms of this Agreement to indemnify the Indemnitee or otherwise act in
violation of any undertaking appearing in and required by the rules and
regulations promulgated under the Securities Act of 1933, as amended (the "Act")
in any registration statement filed with the Securities and Exchange Commission
under the Act. The Indemnitee acknowledges that paragraph (h) of Item 512 of
Regulation S-K currently generally requires the Company to undertake in
connection with any registration statement filed under the Act to submit the
issue of the enforceability of the Indemnitee's rights under this Agreement in
connection with any liability under the Act on public policy grounds to a court
of appropriate jurisdiction and to be governed by any final adjudication of such
issue. The Indemnitee specifically agrees that any such undertaking shall
supersede the provisions of this Agreement and to be bound by any such
undertaking.
11. Nonexclusivity. The provisions for indemnification and
--------------
advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee may have under any provision
of law, the Company's Certificate of Incorporation or Bylaws, in any court in
which a proceeding is brought, the vote of the
7.
<PAGE>
Company's stockholders or disinterested directors, other agreements or
otherwise, both as to action in the Indemnitee's official capacity and to action
in another capacity while occupying his position as an agent of the Company, and
the Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee. Any provision herein to the
contrary notwithstanding, the Company may provide, in specific cases, the
Indemnitee with full or partial indemnification if the Board of Directors of the
Company determines that such indemnification is appropriate.
12. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who, at the request and expense of the Company,
shall execute all papers required and shall do everything that may be reasonably
necessary to secure such rights, including the execution of such documents
necessary to enable the Company effectively to bring suit to enforce such
rights.
13. Interpretation of Agreement. It is understood that the parties
---------------------------
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent now or hereafter
permitted by law.
14. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(a) the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 13 hereof.
15. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. The
indemnification rights afforded to the Indemnitee hereby are contract rights and
may not be diminished, eliminated or otherwise affected by amendments to the
Certificate of Incorporation or Bylaws of the Company or by other agreements.
16. Successors and Assigns. The terms of this Agreement shall bind,
----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.
8.
<PAGE>
17. Notice. Except as otherwise provided herein, any notice or
------
demand which, by the provisions hereof, is required or which may be given to or
served upon the parties hereto shall be in writing and, if by telegram, telecopy
or telex, shall be deemed to have been validly served, given or delivered when
sent, if by personal delivery, shall be deemed to have been validly served,
given or delivered upon actual delivery and, if mailed, shall be deemed to have
been validly served, given or delivered three business days after deposit in the
United States mails, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified at the addresses
set forth on the signature page of this Agreement (or such other address(es) as
a party may designate for itself by like notice).
18. Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
9.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement effective as of the date first above written.
THE COMPANY:
KMS Holding Corporation,
a Delaware corporation
By:______________________________
Name:
Title:
Address: 4343 Von Karman Avenue
Newport Beach, California 92660
THE INDEMNITEE:
_________________________________
Address:
<PAGE>
EXHIBIT 10.26
EMPLOYMENT AND NON-COMPETITION AGREEMENT
Koll Management Services, Inc. ("Koll"), a Delaware corporation,
located at 4343 VonKarman Avenue, Newport Beach, California, hereinafter
referred to as the Employer, and Richard G. Wollack, who resides at 3464 Clay
Street, San Francisco, California, hereinafter referred to as the Employee, in
consideration of the mutual promises made herein, agree as follows:
ARTICLE 1. DATE OF EMPLOYMENT
Section 1.01 Employer hereby employs Employee and Employee hereby
accepts employment with Employer. Employment will begin within 15 days if and
after the "Closing" takes place under the Asset Purchase Agreement being signed
by Employer, Liquidity Financial Group, L.P. ("LFG") and certain affiliates of
LFG (the "Asset Purchase Agreement").
ARTICLE 2. DUTIES AND OBLIGATION OF EMPLOYEE
Title and Description of Duties
Section 2.01 Employee shall serve as Executive Vice President and
Chief Financial Officer of Employer. Employee's responsibilities shall include
management of Employer's INDEX business and Employer's T.R.E.E.S. business.
Employee shall do and perform all services, acts, or things necessary or
reasonable to fulfill the duties of a corporate Executive Vice President and
Chief Financial Officer. However, Employee shall at all times be subject to the
direction of the President, and to the policies established by the Board of
Directors, of Employer.
Loyal and Conscientious Performance of Duties
Section 2.02 Employee agrees that to the best of his ability and
experience he will at all times loyally and conscientiously perform all of the
duties and obligations required of him either expressly or implicitly by the
terms of this agreement.
Devotion of Entire Time to Employer's Business
Section 2.03 (a) During the term of this agreement, Employee shall not
engage in any other business duties or pursuits whatsoever. Furthermore, during
the term of this agreement, Employee shall not, whether directly or indirectly,
render any services of a
<PAGE>
commercial, or professional nature to any other person or organization, whether
for compensation or otherwise, without the prior written consent of Employer's
President. However, the expenditure of reasonable amounts of time for
educational, charitable, or professional activities shall not be deemed a breach
of this agreement if those activities do not materially interfere with the
services required under this agreement.
(b) This agreement shall not be interpreted to prohibit Employee from
making passive personal investments or conducting private business affairs if
those activities do not materially interfere with the services required under
this agreement. However, Employee shall not, directly or indirectly, acquire,
hold, or retain any interest in any business competing with or similar in nature
to the business of Employer.
Competitive Activities
Section 2.04 During the term of this agreement and in consideration
for Employers entering into the Asset Purchase Agreement of even date herewith
Employee shall not, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director,
or in any other individual or representative capacity, engage or participate in
any business that is in competition in any manner whatsoever with the business
of Employer. Passive investments in public entities not exceeding two percent of
the total equity of such entities shall be excluded from this prohibition.
Section 2.05 This Section 2.05 relates to Employee's activities after
his employment with Employer terminates. Employee is agreeing to this Section
2.05 as partial consideration for Employer's entering into the Asset Purchase
Agreement.
(a) This Section 2.05 sets forth different rules for each of two types
of employment termination. One type (termination for "cause") means either that
(i) Employer terminates Employee due to Employee's gross negligence or
intentional misconduct or (ii) Employee resigns, but not after Employer
materially reduces Employee's responsibilities, requires that Employee move out
of the San Francisco Bay Area or materially breaches this agreement. The other
type (termination for "other than cause") means either that (i) Employer
terminates Employee other than due to Employee's gross negligence or intentional
misconduct or (ii) Employee resigns after Employer materially reduces Employee's
responsibilities, requires that Employee move out of the San Francisco Bay Area
or materially breaches this agreement.
(b) This Section 2.05 relates to four types of post-employment
activities by Employee, namely: (i) competing with the INDEX business (the
"INDEX Business"); (ii) competing with the T.R.E.E.S. business (the "T.R.E.E.S.
Business"); (iii) organizing new real estate investment trusts using (in whole
or in part) properties contributed by pension
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<PAGE>
funds or similar institutions (the "REIT Amalgamation Business") and (iv)
soliciting employees of Employer to join or otherwise render services to another
entity ("Employee Solicitation").
(c) If Employee's employment terminates for cause:
(i) For one year after that termination, Employee shall not engage
in the INDEX Business, the T.R.E.E.S. Business or the REIT
Amalgamation Business with respect to any entity which is an
investment advisory client of Employer at the time of that
termination. "Investment advisory" services shall not include other
activities of Employer (for example, Employer's property management
activities).
(ii) For an additional two years after that termination (i.e., for a
- -
total of three years after the employment termination), Employee shall
not engage in: (X) the INDEX Business with respect to any entity which
subscribes to the INDEX at the time of that termination; (Y) the
T.R.E.E.S. Business with respect to any entity that is a client of
Employer's T.R.E.E.S. Business at the time of that termination or (Z)
the REIT Amalgamation Business at the time of that termination.
(iii) For three years after that termination, Employee shall not
engage in any Employee Solicitation.
(d) If Employee's employment terminates for other than cause:
(i) For three years after that termination, Employee shall not
engage in the INDEX Business with respect to any entity which
subscribes to the INDEX at the time of that termination.
(ii) For one year after that termination, Employee shall not engage
in: (x) the T.R.E.E.S. Business with respect to any entity that is a
client of Employer's T.R.E.E.S. Business at the time of that
termination or (y) the REIT Amalgamation Business with respect to any
entity that is a client of Employer's REIT Amalgamation Business at
the time of that termination.
(iii) For one year after that termination, Employee shall not engage
in any Employee Solicitation.
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<PAGE>
(e) This Section 2.05 shall not apply to:
(i) The INDEX Business if and after Employer sells or otherwise
disposes of the INDEX Business or otherwise discontinues the INDEX
Business.
(ii) The T.R.E.E.S. Business if and after Employer sells or otherwise
disposes of the T.R.E.E.S. Business or otherwise discontinues the
T.R.E.E.S. Business.
(iii) The REIT Amalgamation Business if and after Employer sells or
otherwise disposes of the REIT Amalgamation Business or otherwise
discontinues the REIT Amalgamation Business.
(iv) Any Employee Solicitation if and after the conditions set forth
in clauses (i), (ii) and (iii) of this Subsection 2.05(e) are all
true.
(f) Except as explained in the next sentence, this Section 2.05 shall
not prohibit Employee from competing with Employer with respect to any entity
which is not now a client of Employer but which, after the date of this
agreement, becomes a client of Employer because Employer or one of its
affiliates acquires an ownership interest in, or any rights or other assets of,
an entity which is not now an affiliate of Employer. However, if, after such an
acquisition, the client in question:
(i) begins subscribing to the INDEX, this paragraph (f) shall have
no effect with respect to Employee's engaging in the INDEX Business;
(ii) becomes a client of Employer's T.R.E.E.S. Business, this
paragraph (f) shall have no effect with respect to Employee's engaging
in the T.R.E.E.S. Business and
(iii) becomes a client of Employer's REIT Amalgamation Business, this
paragraph (f) shall have no effect with respect to Employee's engaging
in the REIT Amalgamation Business.
Section 2.06 In the event any of the provisions of this agreement
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too great a period of time, or over too great a
geographic area, or by reason of its being too extensive in any other respect,
it shall be interpreted to extend only over the maximum period of time for which
it may be enforceable, and/or over the maximum geographical areas as to which it
may be enforceable and/or to the maximum extent in all
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<PAGE>
other respects as to which it may be enforceable, all as determined by such
court in such action.
Section 2.07 Employee hereby represents and agrees that the services
to be performed under the terms of this agreement are of a special, unique,
unusual, extraordinary, and intellectual character that gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. Employee therefore expressly agrees that Employer,
in addition to any other rights or remedies which Employer may possess, shall be
entitled to injunctive and other equitable relief to prevent or remedy a breach
of this agreement by Employee.
Special Rules Respecting LFG and Affiliates
Section 2.08 (a) Before joining Employer, Employee devoted 15 years of
professional efforts to LFG, predecessors of LFG and affiliates of LFG
(collectively the "LFG Entities"). The LFG Entities engaged in a number of
businesses and in the future (but to a lesser extent) will continue to engage in
a number of businesses. Under the Asset Purchase Agreement, Employer is
purchasing certain (but not all) of the assets and businesses of LFG. The Asset
Purchase Agreement contains a non-competition covenant that limits the future
business activities of LFG.
(b) Employee is a general partner of a number of the LFG Entities
which are partnerships and a director or officer (or both director and officer)
of a number of the LFG Entities which are corporations. Employee has and will
continue to have duties in these capacities. In addition, Employee is a major
equity holder in a number of the LFG Entities.
(c) Employer acknowledges and agrees that Employee may continue to
serve in these various roles with the LFG Entities, even while he is employed by
Employer. This means that, from time to time, Employee will devote some of his
professional time to discharging his duties in these roles. In addition,
Employee will remain an equity holder in the LFG Entities that will continue to
engage in various businesses including businesses that may compete with present
or future businesses of Employer, although not businesses that are prohibited by
the non-competition provisions of the Asset Purchase Agreement.
(d) Employee shall cause his activities on behalf of the LFG Entities
not to interfere materially with the services he renders to Employer.
(e) This Section 2.08 shall in all respects prevail over all
inconsistent provisions set forth in Sections 2.03, 2.04, 2.05 and any other
sections of this agreement.
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<PAGE>
Trade Secrets
Section 2.09 (a) The parties acknowledge and agree that during the
term of this agreement and in the course of the performance of his duties
hereunder, Employee will have access to and become acquainted with information
concerning the operations of Employer, including without limitation financial,
personnel, sales, planning, and other information that is owned by Employer and
regularly used in the operation of Employer's business and that this information
constitutes Employer's trade secrets.
(b) Employee agrees that he shall not disclose any such trade secrets,
directly or indirectly, to any other person or use them in any way, either
during the term of this agreement or at any other time thereafter, except as is
required in the course of his employment with Employer.
(c) Employee further agrees that, subject to the other provisions of
this agreement, all files, records, documents, equipment, and similar items
relating to Employer's business, whether prepared by Employee or others, are and
shall remain exclusively the property of Employer and that they shall be removed
from the premises of Employer only with the express prior consent of Employer's
President.
(d) This Section 2.09 is subject to the License Agreement that
Employer and LFG are signing at the closing under the Asset Purchase Agreement
(the "License Agreement").
ARTICLE 3. OBLIGATIONS OF EMPLOYER
General Description
Section 3.01 Employer shall provide Employee with compensation,
incentives, benefits, and business expense reimbursement specified elsewhere in
this agreement.
Office and Staff
Section 3.02 Employer shall provide Employee with a private office in
Newport Beach and, in both Newport Beach and Emeryville, clerical support,
office equipment and supplies, and other facilities and services, suitable to
Employee's position and adequate for the performance of his duties. If Employee
so desires, Employee's Executive Assistant in Emeryville shall be Patti Mervak.
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<PAGE>
Indemnification of Losses of Employee
Section 3.03 To the maximum extent permitted by law, Employer shall
indemnify Employee and hold Employee harmless from and against all losses,
damages, claims, judgments, settlements, costs and expenses (including, without
limitation, all attorneys' fees and costs and other costs of defense, all of
which Employer shall advance to Employee on a current basis) arising out of or
otherwise in connection with Employee's acts or omissions in any capacity in
which Employee, from time to time, serves Employer or serves any of Employer's
affiliates.
ARTICLE 4. COMPENSATION OF EMPLOYEE
Annual Salary
Section 4.01 As compensation for the services to be rendered by
Employee hereunder, Employer shall pay Employee an annual salary at the rate per
annum of $250,000 payable in equal semi-monthly installments of $10,416.66 on
the fifteenth (15th) and final days of each month during the period of
employment, prorated for any partial employment period. (The payday schedule may
be changed in the sole discretion of the Employer.)
Tax Withholding
Section 4.02 Employer shall have the right to deduct or withhold from
the compensation due to Employee hereunder any and all sums required for federal
income and Social Security taxes and all state or local taxes now applicable or
that may be enacted and become applicable in the future.
ARTICLE 5. EMPLOYEE INCENTIVES
Incentive Program
Section 5.01 (a) Employee shall be entitled to incentive compensation
for each of Employer's fiscal years or partial fiscal years during which
Employee is employed by Employer, equal to the greatest of these three elements:
1) 1.5% of Employer's consolidated EBIDTA above $10 Million for such
fiscal year;
2) 25% (but in no case more than $150,000) of profits, if any, from
the INDEX for such fiscal year; and
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<PAGE>
3) 25% (but in no case more than $150,000) of profits, if any, from
the INDEX and TREES (combined) for such fiscal year.
(b) Incentive compensation shall be prorated for partial fiscal years
(both at the beginning and the end of Employee' s employment). EBIDTA and
profits shall be calculated as of March 31 of each year. Incentive compensation
shall be paid no later than June 15 of each year.
(c) For purposes of calculating incentive compensation: (i) EBIDTA
shall mean earnings before interest, depreciation, taxes and amortization; (ii)
profits from the INDEX shall equal Net Operating Income as defined and
calculated in accordance with the Asset Purchase Agreement; (iii) TREES shall
have the meaning set forth in the Asset Purchase Agreement and (iv) profits from
TREES shall equal all revenues from TREES activities minus the direct expenses
associated with those activities and before any taxes. Except (in the case of
profits from the INDEX) as otherwise provided in the Asset Purchase Agreement,
all calculations shall be made in accordance with the accounting principles
normally used by Employer. If, as a result of any reorganization or other
transaction, any entities or businesses that are currently included in
Employer's consolidated financial statements cease to be so included but
continued to be owned or operated by any affiliate of Employer, the financial
results of those entities or businesses shall continue to be included in the
calculations used to determine Employee's incentive compensation.
ARTICLE 6. EMPLOYEE BENEFITS
Annual vacation
Section 6.01 Employer's Vice Presidents and above are not covered by
Employer's standard vacation accrual policy. Employee shall determine his own
vacation schedule subject, however, to approval by Employer's President. That
approval shall not be unreasonably withheld. No vacation pay is payable on
termination.
Illness
Section 6.02 After Employee completes a two-month orientation period,
Employer will provide Employee with ten sick days per calendar year. Each year
thereafter, Employee will be provided with ten sick days. Unused sick days at
the end of each calendar year will be carried over into a medical leave bank for
use during a major illness or injury. The maximum number of sick days in the
bank is 30 days.
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<PAGE>
Group Life Insurance
Section 6.03 Employer agrees to include Employee under Employer's
group life insurance coverage. Employee is eligible for voluntary life insurance
coverage at his election.
Group Medical Insurance
Section 6.04 Employee is eligible to participate in Employer's group
medical coverage.
Dental Coverage
Section 6.05 Employee is eligible to participate in Employer's group
dental coverage.
Long Term Disability Coverage
Section 6.06 Employee is eligible for Long Term Disability (LTD)
insurance coverage. Employee is eligible for additional voluntary LTD at his
election.
Other Fringe Benefits
Section 6.07 Employee shall be eligible for any additional fringe
benefits that Employer chooses to make generally available, from time to time,
to its Vice Presidents or to its other Executive Vice Presidents.
ARTICLE 7. BUSINESS EXPENSES
Business Expenses
Section 7.01 (a) Employer shall reimburse Employee for all reasonable
business expenses incurred by Employee in promoting the business of Employer,
including expenditures for entertainment, gifts, and travel.
(b) Each such expenditure shall be reimbursable only if Employee
furnishes to Employer adequate records and other documentary evidence required
by federal and state
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<PAGE>
statutes and regulations issued by the appropriate taxing authorities for the
substantiation of that expenditure as an income tax deduction.
(c) Employer acknowledges that Employee may reside in the San
Francisco Bay Area. During the first 18 months of Employee's employment,
Employer shall reimburse Employee for his reasonable housing and transportation
expenses incurred in traveling back and forth between San Francisco and
Employer's headquarters and also automobile transportation in Southern
California while Employee is in Southern California. During the initial 18
months, Employer shall also reimburse six round trip airfares for Employee's
spouse. After 18 months, Employer and Employee will agree whether Employee's
primary residence requires his relocation to Employer's headquarters. If
Employee is asked to relocate to Employer's headquarters, he may nevertheless
choose to continue to reside in the San Francisco Bay Area, but in that case
Employer shall no longer be required to reimburse Employee's transportation and
housing expenses associated with travel to and from Employer's headquarters.
ARTICLE 8. TERMINATION OF EMPLOYMENT
Termination at Will
Section 8.01 Employee is employed "at will". That means that either
Employee or Employer may terminate Employee's employment at any time with or
without notice or cause.
Effect on Compensation
Section 8.02 Notwithstanding the above, if Employee's employment
terminates for other than cause (see Section 2.05) at any time during the first
five years after Employee commences employment with Employer, Employee shall be
paid a severance amount equal to the most recent anniversary year's (anniversary
of Employee's hire date) total compensation, but in no event less than $250,000.
Transfer of the INDEX
Section 8.03 If, at any time during the first five years after
Employee's employment with Employer commences, Employee's employment terminates
other than for cause, Employee shall have an opportunity to acquire the assets
and business of the INDEX, as that business may have evolved, unless LFG then
owns those assets and that business. If and when Employee exercises that option,
Employer shall assign to Employee Employer's rights under Section 1.7 of the
Asset Purchase Agreement.
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<PAGE>
Section 8.04 If Employee exercises his right, if any, to acquire the
assets and business of the INDEX, Employee shall pay for the INDEX as follows:
(a) Employee shall assume Employer's obligation to pay LFG the Deferred Portion
(as defined in Section 1.2 of the Asset Purchase Agreement) to the extent not
previously paid; (b) Employee shall assume Employer's obligations to distribute
copies of all INDEX publications that are first required to be distributed after
Employee's acquisition of the assets and business of the INDEX is completed and
(c) if the termination of Employee's employment occurs during the last two years
of the five-year period referred to in Section 8.03 of this agreement, Employee
shall pay Employer an amount in cash equal to (i) $600,000 plus (ii) the total
amount of the Deferred Portion that Employer previously paid LFG minus (iii)
Employer's cash flow from the INDEX that Employer did not pay to LFG.
Section 8.05 After termination of employment under circumstances in
which Employee shall have the right to acquire the INDEX, Employee may select a
business appraiser, reasonably satisfactory to Employer, who shall evaluate the
INDEX assets and business. Within 15 days after that evaluation has been
communicated to Employer and Employee in writing, Employee shall notify Employer
whether he will acquire the assets and business of the INDEX. If he elects to
acquire them, Employer and Employee shall cooperate, in good faith, promptly to
complete the transfer of the assets and business of the INDEX. In reporting the
transaction on their respective income tax returns, both Employer and Employee
shall use the appraiser's valuation of those assets and business.
ARTICLE 9. EQUITY ARRANGEMENTS
Stock Option
Section 9.01 On the day Employee's employment commences, Employer
shall grant Employee a stock option on 20,000 shares of common stock of KMS
Holding Corporation ("KMS"). The option shall: (a) have an exercise price of
$10.00 per share; (b) have such other material terms and conditions (for
example, regarding the duration of the option and the vesting schedule and
vesting criteria) as have been included in options granted to other members of
Employer's senior management team and (c) shall otherwise have the terms and
conditions set forth in, and shall be memorialized in a stock option agreement
in the form of, Exhibit A to this agreement.
---------
Stock Purchase
Section 9.02 During the 90 days after Employee's employment commences,
Employee shall be entitled to purchase up to an additional 10,000 shares of
KMS's common stock for $10 per share under KMS's 1994 Employee Stock
Subscription Plan and in accordance with the form of Stock Subscription
Agreement attached to this agreement as
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<PAGE>
Exhibit B. If Employee chooses to purchase any such shares, he may elect to pay
- ---------
half of the purchase price by means of a Secured Promissory Note in the form of
Exhibit C to this agreement, in which case he will secure that note in
- ---------
accordance with a Stock Pledge Agreement in the form of Exhibit D to this
---------
agreement.
ARTICLE 10. GENERAL PROVISIONS
Assignment
Section 10.01 Neither this agreement nor any of the rights or
obligations hereunder may be assigned by Employee without the prior written
consent of Employer, nor by Employer without the prior written consent of
Employee. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. No other person shall have any right, benefit or obligation hereunder.
Notices
Section 10.02 Any notices to be given by either party to the other
shall be in writing and may be transmitted either by personal delivery or by
mail, registered or certified, postage prepaid with return receipt requested.
Mailed notices shall be addressed to the parties at the addresses appearing in
the introductory paragraph of this agreement, but each party may change that
address by written notice in accordance with this section. Notices delivered
personally shall be deemed communicated as of the date of actual receipt. Mailed
notices shall be deemed communicated as of the date of mailing.
Arbitration
Section 10.03 (a) Any controversy between Employer and Employee
involving the construction or application of any of the terms, provisions, or
conditions of this agreement shall on the written request of either party served
on the other be submitted to arbitration. Arbitration shall comply with and be
governed by the provisions of the California Arbitration Act.
(b) Employer and Employee shall each appoint one person to hear and
determine the dispute. Those two persons shall attempt to appoint a third
arbitrator. If they fail to do so within 15 days after the last of Employer and
Employee has appointed an arbitrator, then, at the request of either party, the
third arbitrator shall be selected by the American Arbitration Association. Any
decision of the majority of the arbitrators shall be final and conclusive upon
both parties.
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<PAGE>
(c) The fees of the arbitrators shall be borne by the losing party or
in such proportions as the arbitrators decide.
Attorneys' Fees and Costs
Section 10.04 In any proceeding brought to enforce or interpret the
terms of this agreement, the party that substantially prevails shall be entitled
to reasonable attorneys' fees, costs, and disbursements in addition to any other
relief to which that party may be entitled. This provision shall be construed as
applicable to the entire agreement.
Entire Agreement
Section 10.05 This agreement (including its four exhibits), the Asset
Purchase Agreement and the License Agreement Supersede any and all other
agreements, whether oral or in writing, with respect to their subject matter,
and contain all of the covenants and agreements with respect to that subject
matter. Each party to this agreement acknowledges that no representations,
inducement, promises, or agreement, orally or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein or
in the Asset Purchase Agreement, and that no other agreement, statement, or
promise not contained in this agreement, the Asset Purchase Agreement or the
License Agreement shall be valid or binding.
Modifications
Section 10.06 Any modification of this agreement will be effective
only if it is in writing signed by the party to be charged.
Effect of waiver
Section 10.07 The failure of either party to insist on strict
compliance with any of the terms, covenants, or conditions of this agreement by
the other party shall not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of any right or power at any
one time or times be deemed a waiver or relinquishment of that right or power at
any other time or times.
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<PAGE>
Partial Invalidity
Section 10.08 If any provision in this agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force without being impaired or
invalidated in any way.
[rest of page intentionally left blank]
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<PAGE>
Law Governing Agreement
Section 10.09 This agreement shall be governed by and construed in
accordance with the laws of the State of California.
EMPLOYER
KOLL MANAGEMENT SERVICES, INC.
By: __________________________________
EMPLOYEE
_______________________________________
Richard G. Wollack
The undersigned agrees to be bound by Sections 9.01 and 9.02 of this
Agreement.
KMS HOLDING CORPORATION
By: __________________________________
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<PAGE>
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
Agreement made this 28th day of October, 1995, between Koll Management
Services, Inc. ("Employer"), a Delaware corporation, with offices at 4343 Von
Karman Avenue, Newport Beach, California, and Richard S. Abraham ("Executive"),
who resides at 6 Woodgate Drive, Burr Ridge, Illinois 60521. In consideration
of the mutual promises made herein, the parties agree as follows:
ARTICLE 1. EMPLOYMENT
Employer hereby agrees to employ Executive and Executive hereby agrees
to serve Employer, commencing on November 1, 1995, on the terms and conditions
set forth herein.
ARTICLE 2. OBLIGATIONS OF EMPLOYEE
Section 2.1 Title and Description of Duties. Executive shall serve
-------------------------------
as President of Employer and as such shall have direct responsibility for
supervising the Property and Corporate Services/Facilities Management Group (as
hereinafter defined) of Employer, as well as fulfilling such other duties
usually incident to the office of President as may be assigned from time to time
by Employer's more senior executive officers or Board of Directors.
<PAGE>
Section 2.2 Performance of Duties. Executive agrees that to the best
---------------------
of his ability and experience he will at all times loyally and conscientiously
perform all of the duties and obligations required of him under the terms of
this Agreement.
Section 2.3 Devotion of Time to Employer's Business. During the
---------------------------------------
term of this Agreement, Executive shall devote substantially all his working
time and effort to the business and affairs of Employer, but nothing in this
Agreement shall preclude Executive from devoting reasonable periods to (i)
educational, charitable or professional activities; (ii) serving as a director
or advisory committee member to noncompetitive entities; or (iii) managing his
personal investments, provided that those activities do not materially interfere
with the services required under this Agreement.
Section 2.4 Competitive Activities.
----------------------
(a) During the term of this Agreement and in consideration for
Employer's entering into this Agreement, Executive shall not, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that is in
substantial competition with any of the
2
<PAGE>
substantial businesses of Employer. Passive investments in public entities not
exceeding two percent of the total equity of such entities shall be excluded
from this prohibition, as shall Executive's participation in preexisting
investments with The John Buck Company and in a pending office building purchase
in Rolling Meadows, Illinois.
(b) In the event any of the provisions of this Article shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time, or over too great a geographic
area, or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable, and/or over the maximum geographic areas as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
(c) Executive hereby represents and agrees that the services to be
performed under the terms of this Agreement are of a special, unique, unusual,
extraordinary, and intellectual character that gives them a peculiar value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law. Executive therefore expressly agrees that Employer, in addition
to any other rights or remedies which
3
<PAGE>
Employer may possess, shall be entitled to injunctive and other equitable relief
to prevent or remedy a breach of this Agreement by Executive.
Section 2.5 Trade Secrets.
-------------
(a) The parties acknowledge and agree that during the term of this
Agreement and in the course of the performance of his duties hereunder,
Executive will have access to and become acquainted with certain confidential
and proprietary information concerning the operations of Employer, including
without limitation customer pricing, acquisition status, strategic planning,
proprietary software and other information that is owned by Employer, treated
confidentially and regularly used in the operation of Employer's business, but
excluding information which was known to Executive prior to his employment, is
or becomes generally known to the public other than through disclosure by
Executive or is required to be disclosed by law. This information constitutes
Employer's Trade Secrets.
(b) Executive agrees that he shall not disclose any such Trade
Secrets, directly or indirectly, to any other person or use them in any way,
either during the term of this Agreement or at any other time thereafter, except
as is appropriate in the course of his employment with Employer.
4
<PAGE>
(c) Executive further agrees that, subject to the other provisions of
this Agreement, all files, records, documents, equipment and similar items
relating to Employer's business, whether prepared by Executive or others, are
and shall remain exclusively the property of Employer and that except as
required in the conduct of business they shall be removed from the premises of
Employer only with the express prior consent of Employer's Chief Executive
Officer.
ARTICLE 3. OBLIGATIONS OF EMPLOYER
Section 3.1 General Description. Employer shall provide Executive
-------------------
with compensation, incentives, benefits and business expense reimbursements as
specified elsewhere in this Agreement.
Section 3.2 Office and Staff. Employer shall provide Executive
----------------
with a private office in the greater Chicago area, and clerical support, office
equipment and supplies and other facilities and services, suitable to
Executive's position and adequate for the performance of his duties. Executive
shall be entitled to at least one Executive Assistant whom he currently expects
to be Lynda Travis.
5
<PAGE>
Section 3.3 Indemnification of Losses of Employee. To the maximum
-------------------------------------
event permitted by law, Employer shall indemnify Executive and hold Executive
harmless from and against all losses, damages, claims, judgments, settlements,
costs and expenses (including, without limitation, all attorneys' fees and costs
and other costs of defense, all of which Employer shall advance to Executive on
a current basis) arising out of or otherwise in connection with Executive's acts
or omissions in any capacity in which Executive, from time to time, serves
Employer or serves any of Employer's affiliates.
ARTICLE 4. COMPENSATION OF EXECUTIVE
Section 4.1 Annual Salary. As compensation for the services to be
-------------
rendered by Executive hereunder, commencing on November 1, 1995, Employer shall
pay Executive an annual salary of no less than $250,000 payable in equal semi-
monthly installments of $10,416.66 on the fifteenth (15th) and final days of
each month during the period of employment, prorated for any partial employment
period. The pay schedule may be changed in the sole discretion of the Employer
but in no event shall it be less than monthly.
Section 4.2 Tax Withholding. Employer shall have the right to
---------------
deduct or withhold from the compensation due to
6
<PAGE>
Executive hereunder any and all sums required for federal income and Social
Security taxes and all state or local taxes now applicable or that may be
enacted and become applicable in the future.
Section 4.3 Bonus.
-----
(a) Commencing with the period beginning November 1, 1995, and for
each year or partial year of Executive's employment thereafter (excepting only
the partial year of Executive's employment termination, as hereinafter
provided), Executive shall be entitled to a bonus equal to five percent (5%) of
the consolidated EBITDA in excess of $7,000,000 for Employer's Property and
Corporate Services/Facilities Management Group.
(b) Employer's "Property and Corporate Services/Facilities Management
Group" shall include all of the following services conducted by Employer and its
affiliates, however organized or constituted, in North America: property
management, product leasing, tenant representation, facilities management and
consulting services related to the foregoing, together with any other products
or services assigned to the general management responsibility of Executive.
7
<PAGE>
(c) "EBITDA" shall mean earnings before interest, taxes, depreciation
and amortization, calculated in accordance with generally accepted accounting
principles consistently applied by Employer and without regard for minority
interests. In arriving at EBITDA for the Property and Corporate
Services/Facilities Management Group, overhead allocations among divisions or
groups shall be made on a basis consistent with that now prevailing and
described in Exhibit A hereto, and in general shall be done fairly, on a basis
which takes into account the usage or application of unallocated services by or
to the various divisions and groups, and to the extent that services are
provided by Employer's affiliates, such services are fairly priced. To the
extent that the Property and Corporate Services/Facilities Management Group
initiates or contributes revenues to other divisions (such as property sales to
investment advisory), an appropriate and reasonable fee or allocation will be
negotiated among the divisions on a case-by-case basis.
(d) Executive's bonuses shall be paid in cash within seventy-five (75)
days after the end of each fiscal year. Employer's independent accountants
shall verify that the bonus calculation was arrived at in accordance with the
provisions of this Agreement. Any dispute regarding this provision shall be
submitted to a mutually agreeable certified public accounting firm unaffiliated
with either party, whose decision shall be
8
<PAGE>
final. In such event, the parties shall equally share the cost of such firm
unless the adjustment in Employer's original bonus calculation exceeds 10%, in
which case Employer shall bear the expense.
Section 4.4 Employee Benefits.
-----------------
(a) Annual Vacation. Employer's Vice Presidents and other senior
---------------
officers are not covered by Employer's standard vacation accrual policy.
Executive shall determine his own reasonable vacation schedule subject, however,
to approval by Employer's Chief Executive Officer, which approval shall not be
unreasonably withheld. No vacation pay shall accrue or be payable upon
termination of employment.
(b) Group Life Insurance. Employer will include Executive in
--------------------
Employer's group life insurance plan. Executive is eligible for additional life
insurance at his election.
(c) Ground Medical Insurance. Executive will participate in
------------------------
Employer's group medical coverage.
(d) Dental Coverage. Executive will participate in Employer's group
---------------
dental coverage.
9
<PAGE>
(e) Long-Term Disability Coverage. Executive will participate in
-----------------------------
Employer's Long-Term Disability (LTD) insurance plan. Executive is eligible for
additional LTD at his election.
(f) Other Fringe Benefits. Executive will participate in any
---------------------
additional fringe benefits that Employer chooses to make generally available,
from time to time, to its senior officers.
Section 4.5 Business Expenses.
-----------------
(a) Employer shall promptly reimburse Executive for all reasonable
business expenses incurred by Executive in performing the business of Employer,
including expenditures for entertainment, gifts and travel, provided that
Executive furnishes such receipts and documentation as Employer may reasonably
request.
(b) Employer will reimburse Executive for costs of Executive's present
suburban Chicago office, which Executive will use his best efforts to mitigate,
and for minor costs of transitioning to Employer's offices.
Section 4.6 Partial Year. Any payments or benefits payable to
------------
Executive under this Article 4 in respect of any fiscal year during which
Executive is employed for less than the
10
<PAGE>
entire year, including bonus (except that no bonus shall accrue for a partial
year in the year of termination of Executive's employment), shall be determined
based upon results for the entire year in question but prorated in accordance
with the number of days in such fiscal year during which he was so employed.
ARTICLE 5. TERMINATION OF EMPLOYMENT
Section 5.1 Termination at Will. Executive is employed "at will,"
-------------------
and as such either Executive or Employer may terminate Executive's employment at
any time upon written notice, with or without or cause.
Section 5.2 Severance Payment. Notwithstanding the foregoing, if
-----------------
Executive's employment is terminated by the Company other than For Cause or by
the Executive with Good Reason on or before October 31, 2000, then Executive
shall receive within thirty (30) days after such termination a lump sum payment
equal to the sum of (i) one year's base salary computed at the annual rate then
in effect, plus (ii) an amount equal to Executive's bonus for the most recently
completed fiscal year, which amount shall be a severance payment and shall not
limit or reduce Employer's obligation for any bonus payments previously earned
or
11
<PAGE>
then accrued or due. In no event shall the aggregate severance payment be less
than $250,000.
Section 5.3 Accrued Bonus. In addition to the foregoing Severance
-------------
Payment, and irrespective of the reason for Executive's termination, Executive
shall be entitled to any unpaid bonus payments accrued during a completed fiscal
year and unpaid at the time of termination of his employment. Conversely,
Executive shall not be entitled to any pro rata bonus accrued and unpaid for any
partial fiscal year during which his employment terminates.
Section 5.4 Definitions. For purposes of this Article 5: (i)
-----------
termination "For Cause" shall mean that Employer terminates Executive due to
Executive's gross negligence or intentional misconduct in the line of business;
and (ii) termination by Executive for "Good Reason" shall mean, without
Executive's written consent, a change of his title from that of "President" of
Employer, a reduction of his compensation (base salary or bonus formula),
assignment or reassignment of responsibilities or duties inconsistent with
Executive's title or position as described herein, change of his principal
office from the greater Chicago area, or other adverse change in the status of
Executive or his conditions of employment or other breach of this Agreement by
Employer.
12
<PAGE>
ARTICLE 6. EQUITY ARRANGEMENTS
Section 6.1 Stock Option. On the day Executive's employment
------------
commences, Employer shall grant Executive a stock option for no less than 35,000
shares of common stock of Employer's parent corporation, KMS Holding Corporation
("KMS"). The option shall: (a) have an exercise price of $12 per share; (b) be
exercisable for a period of up to 10 years; (c) vest on the same terms as
similar options currently in existence for the benefit of Employer's senior
officers; and (d) otherwise have the terms and conditions set forth in, and
shall be memorialized by and in, a stock option plan and agreement in the form
of Exhibit B to this Agreement.
Section 6.2 Stock Purchase. During the first 60 days after
--------------
Executive's employment commences, Executive shall be entitled to purchase up to
an additional 10,000 shares of KMS common stock for $12 per share under
Employer's 1994 Employee Stock Subscription Plan and in accordance with the form
of Stock Subscription Agreement attached to this Agreement as Exhibit C. If
Executive chooses to purchase any such shares, he may elect to pay one-half of
the purchase price by means of a Secured Promissory Note in the form of Exhibit
D to this Agreement, which shall be secured by the shares of stock purchased
hereunder in
13
<PAGE>
accordance with a Stock Pledge Agreement in the form of Exhibit E to this
Agreement.
Section 6.3 Stock Repurchase. As an integral part of the foregoing
----------------
provisions, Employer agrees that if Executive's employment is terminated for any
reason, and there is then no public market for KMS's stock which is readily
available to Executive, then Employer will promptly repurchase KMS's stock held
by Executive at a mutually agreeable price, failing which such stock will be
repurchased at fair market value determined by a mutually agreeable appraiser as
of the time of termination, in either case determined without discount for lack
of liquidity or minority interest.
ARTICLE 7. GENERAL PROVISIONS
Section 7.1 Assignment. Neither this Agreement nor any of the
----------
rights or obligations hereunder may be assigned by Executive without the prior
written consent of Employer nor by Employer without the prior written consent of
Executive. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefits of the parties hereto and their respective successors and
assigns. No other person shall have any right, benefit or obligation hereunder.
14
<PAGE>
Section 7.2 Notices. Any notices to be given by either party to
-------
the other shall be in writing and may be transmitted either by personal delivery
or by mail, registered or certified, postage prepaid with return receipt
requested. Mailed notices shall be addressed to the parties at the addresses
appearing in the introductory paragraph of this Agreement, but each party may
change that address by written notice in accordance with this Section. Notices
delivered personally shall be deemed communicated as of the date of actual
receipt. Mailed notices shall be deemed communicated as of the date of mailing.
Section 7.3 Arbitration.
-----------
(a) Any controversy between Employer and Executive involving the
construction or application of any of the terms, provisions or conditions of
this Agreement shall on the written request of either party served on the other
be submitted to arbitration. Arbitration shall comply with and be governed by
the provisions of the California Arbitration Act.
(b) Employer and Executive shall each promptly appoint one person to
hear and determine the dispute. Those two persons shall promptly attempt to
appoint a neutral and independent third arbitrator. If they fail to do so
within 15 days after the last of Employer and Executive has appointed an
arbitrator, then, at
15
<PAGE>
the request of either party, the arbitrator shall be selected by the American
Arbitration Association. Any decision of the majority of the arbitrators shall
be final and conclusive upon both parties.
(c) The fees of the arbitrators shall be borne by the losing party or
in such proportions as the arbitrators decide.
Section 7.4 Attorneys' Fees and Costs. In any proceeding brought
-------------------------
to enforce or interpret the terms of this Agreement, the party that
substantially prevails shall be entitled to reasonable attorneys' fees, costs
and disbursements in addition to any other relief to which that party may be
entitled. This provision shall be construed as applicable to the entire
agreement.
Section 7.5 Entire Agreement. This Agreement (including its
----------------
exhibits), supersedes any and all other agreements, whether oral or in writing,
with respect to their subject matter, and contain all of the covenants and
agreements with respect to that subject matter. Each party to this Agreement
acknowledges that no representations, inducement, promises or agreement, orally
or otherwise, have been made by any party, or anyone acting on behalf of any
party, which are not embodied herein, and that no other agreement, statement or
16
<PAGE>
promise not contained in this Agreement shall be valid or binding.
Section 7.6 Modifications. Any modification of this Agreement will
-------------
be effective only if it is in writing signed by the party to be charged.
Section 7.7 Effect of Waiver. The failure of either party to
----------------
insist on strict compliance with any of the terms, covenants or conditions of
this Agreement by the other party shall not be deemed a waiver of that term,
covenant or condition, nor shall any waiver or relinquishment of that right or
power at any other time or times.
Section 7.8 Partial Invalidity. If any provision in this Agreement
------------------
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
Section 7.9 Law Governing Agreement. This Agreement shall be
-----------------------
governed by and construed in accordance with the laws of the State of
California.
17
<PAGE>
Section 7.10 Change of Control. In the event a plan or agreement is
-----------------
hereafter put in place for any senior officer of Employer with respect to his or
her rights upon a change of control of Employer, than a similar agreement, with
rights no less advantageous, shall promptly be put in effect for Executive.
KOLL MANAGEMENT SERVICES, INC.
(Employer)
By: /s/ WILLIAM ROTHE
----------------------------
William Rothe
Attest:
------------------------
Secretary
/s/ RICHARD S. ABRAHAM
-------------------------------
Richard S. Abraham (Executive)
18
<PAGE>
EXHIBIT 10.28
KMS HOLDING CORPORATION
AMENDED 1994 EMPLOYEE STOCK SUBSCRIPTION PLAN
Section 1. Description of Plan. This is the Amended 1994 Employee
-------------------
Stock Subscription Plan, dated November 23, 1994, as amended May 26, 1995 (the
"Plan"), of KMS Holding Corporation, a Delaware corporation (the "Company").
Under the Plan, certain directors, officers, key employees and consultants of
the Company or any of the directly or indirectly owned subsidiaries of the
Company (individually, a "Subsidiary," and collectively, the "Subsidiaries"), to
be selected as set forth below, may be issued shares of the Common Stock, $.01
par value per share, of the Company (the "Common Stock").
Section 2. Purpose of Plan. The purpose of the Plan and the issuance
---------------
and sale of the shares of Common Stock to specified persons is to further the
growth, development and financial success of the Company and the Subsidiaries by
providing additional incentives to certain directors, officers, key employees
and consultants. By assisting such persons in acquiring shares of Common Stock,
the Company can ensure that such persons will themselves benefit directly from
the Company's and the Subsidiaries' growth, development and financial success.
Section 3. Eligibility. The persons who shall be eligible to receive
-----------
shares of Common Stock under the Plan shall be the directors who are designated
as "independent" members of the company's Board of Directors (the "Board") and
the officers, key employees and consultants of the Company and the Subsidiaries,
including those directors of the Company and the Subsidiaries who are also
officers, key employees and/or consultants (each, a "Participant").
Section 4. Administration. The Plan shall be administered by the
--------------
Board or, at the Board's option, by a compensation committee established by the
Board (the Board and such committee, the "Committee") who shall be empowered to
interpret and administer the Plan in its sole discretion.
Section 5. Shares Subject to the Plan. The number of shares of
--------------------------
Common Stock which may be issued pursuant to the Plan shall not exceed 340,296
subject to adjustment to reflect any distribution of shares of capital stock or
other securities of the Company or any successor or assign of the Company which
is made in respect of, in exchange for or in substitution of the shares of
Common Stock by reason of any stock dividend, stock split, reverse split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. In the event that any shares of Common Stock issued pursuant to the
Plan are reacquired by the Company, such shares of Common Stock shall again
become available for issuance under the Plan.
Section 6. Issuance of Shares of Common Stock. The Company's
----------------------------------
obligation to issue shares of Common Stock pursuant to the Plan is expressly
conditioned upon the
<PAGE>
completion by the Company of any registration or other qualification of such
shares of Common Stock under any state and/or federal law or rulings and
regulations of any government regulatory body and the making of such investment
representations or other representations and undertakings by a Participant (or
such person's legal representative, heir or legatee, as the case may be) in
order to comply with the requirements of any exemption from any such
registration or other qualification of such shares of Common Stock which the
Company in its sole discretion shall deem necessary or advisable.
Section 7. Stock Subscription Agreement. The shares of Common Stock
----------------------------
issued and sold pursuant to the Plan shall be evidenced by a written stock
subscription agreement (the "Stock Subscription Agreement"). The Stock
Subscription Agreement shall contain such terms and conditions as the Committee
deems desirable and which are not inconsistent with the Plan.
Section 8. Withholding of Taxes. The Company or a Subsidiary, as
--------------------
the case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to a Participant the requisite tax
upon the amount of taxable income, if any, recognized by such person in
connection with the issuance of shares of Common Stock, as may be required from
time to time under any federal or state tax laws and regulations. This
withholding of tax shall be made from the Company's (or such Subsidiary's)
concurrent or next payment of wages, salary, bonus or other income to a
Participant or by payment to the Company (or such Subsidiary) by the such person
of the required withholding tax, as the Committee may determine.
Section 9. Effectiveness and Termination of Plan. The Plan shall be
-------------------------------------
effective on the date on which it is adopted by the Board and the Board may in
its sole discretion terminate the Plan at any time.
Section 10. Amendment of Plan. The Committee may make such
-----------------
amendments to the Plan and, with the consent of each Participant affected, to
the terms and conditions of the Stock Subscription Agreement as it shall deem
advisable.
Section 11. Indemnification. In addition to such other rights of
----------------
indemnification as they may have as directors, the members of the Board and the
Committee shall be indemnified by the Company against the reasonable expenses,
including attorneys' fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
thereof, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Board or Committee member is liable
for negligence or misconduct in the performance of his or her duties; provided
that within 60 days after institution of any such action, suit or proceeding
such Board or Committee member shall in writing offer the Company the
opportunity, at the Company's expense, to handle and defend the same.
2
<PAGE>
Section 12. Governing Law. The Plan shall be construed under and
-------------
governed by the laws of the State of Delaware without regard to conflict of law
provisions thereof.
Section 13. Not an Employment or Other Agreement. Nothing contained
------------------------------------
in the Plan or in any Stock Subscription Agreement shall confer, intend to
confer or imply any rights of employment or rights to any other relationship or
rights to continued employment by, or rights to a continued relationship with,
the Company or any Subsidiary in favor of any Participant or limit the ability
of the Company or any Subsidiary to terminate, with or without cause, in its
sole and absolute discretion, the employment of, or relationship with, any
Participant subject to the terms of any written employment or other agreement to
which a Participant is a party.
3
<PAGE>
EXHIBIT 10.29
KMS HOLDING CORPORATION
AMENDED 1994 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN
Section 1. Description of Plan. This is the Amended 1994
-------------------
Nonqualified Performance Stock Option Plan, dated November 23, 1994, as amended
May 26, 1995, and April 15, 1996 (the "Plan"), of KMS Holding Corporation, a
Delaware corporation (the "Company"). Under the Plan, officers, certain
directors, key employees and consultants of the Company or any of the directly
or indirectly owned subsidiaries of the Company (individually, a "Subsidiary,"
and collectively, the "Subsidiaries"), to be selected as set forth below, may be
granted options ("Options") to purchase shares of the Common Stock, $.01 par
value per share, of the Company (the "Common Stock"). It is intended that
Options under the Plan will not qualify for treatment as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and will thus be designated "Nonqualified Stock Options."
Section 2. Purpose of Plan. The purpose of the Plan and of
---------------
granting Options to specified persons is to further the growth, development and
financial success of the Company and its Subsidiaries by providing additional
incentives to certain officers, certain directors, key employees and
consultants. By assisting such persons in acquiring shares of the Common Stock,
the Company can ensure that such persons will themselves benefit directly from
the Company's and the Subsidiaries' growth, development and financial success.
Section 3. Eligibility. The persons who shall be eligible to
-----------
receive grants of Options under the Plan shall be the officers and key employees
and consultants of the Company and the Subsidiaries, directors who are
designated as "independent" members of the Company's Board of Directors (the
"Board"), and the other directors, including those directors of the Company and
the Subsidiaries who are also officers, key employees and/or consultants. A
person who holds an Option is herein referred to as a "Participant," and more
than one Option may be granted to any Participant. Notwithstanding the
foregoing, the Board may at any time or from time to time designate one or more
directors as ineligible for selection as a Participant under the Plan for any
period or periods of time. The designation by the Board of a director as
ineligible for selection as a Participant under the Plan shall not affect
Options previously granted to such director under the Plan.
Section 4. Administration.
--------------
(a) The Plan shall be administered by the Board or, at the Board's
option, by a compensation committee established by the Board (the Board and such
committee, collectively, the "Committee").
<PAGE>
(b) The Committee is authorized and empowered to administer the Plan
and, subject to the Plan (i) to select the Participants, to specify the number
of shares of Common Stock with respect to which Options are granted to each
Participant, to specify the terms of the Options, and in general to grant
Options; (ii) to determine the dates upon which Options shall be granted and the
terms and conditions thereof in a manner consistent with the Plan, which terms
and conditions need not be identical as to the various Options granted; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules relating to the
Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
the Committee; (vi) to determine the rights and obligations of Participants
under the Plan; (vii) to specify the Option Price (as defined in Section 6);
(viii) to accelerate the time during which an Option may be exercised in
accordance with the provisions of Section 15 hereof, and to otherwise accelerate
the time during which an Option may be exercised, in each case notwithstanding
the provisions in the Option Agreement (as defined in Section 12) stating the
time during which it may be exercised; (ix) to make determinations as to whether
a Participant has engaged in an activity warranting rescission of an Option or a
gain realized upon exercise of an Option under the terms of an Option Agreement
(as defined in Section 12) and (x) to make all other determinations deemed
necessary or advisable for the administration of the Plan. The good faith
interpretation and construction by the Committee of any provision of the Plan or
of any Option granted under it shall be final, conclusive and binding. No
member of the Committee shall be liable for any action or determination made
with respect to the Plan or any Option granted hereunder.
Section 5. Shares Subject to the Plan. The number of shares of
--------------------------
Common Stock which may be purchased pursuant to the exercise of Options granted
under the Plan shall not exceed 590,000 subject to adjustment as provided in
Section 11 hereof. Upon the expiration or termination, in whole or in part, for
any reason of an outstanding Option or any portion thereof which shall not have
vested or shall not have been exercised in full or in the event that any shares
of Common Stock acquired pursuant to the Plan are reacquired by the Company, (a)
any shares of Common Stock then remaining unissued which shall have been
reserved for issuance upon such exercise or (b) the shares reacquired, as the
case may be, shall again become available for the granting of additional Options
under the Plan.
Section 6. Option Price. The purchase price per share (the "Option
------------
Price") of the shares of Common Stock underlying each Option shall be determined
by the Committee, and shall be subject to adjustment as provided herein.
Section 7. Restrictions on Grants; Vesting of Options.
------------------------------------------
Notwithstanding any other provisions set forth herein or in any Option
Agreement, no Options may be granted under the Plan subsequent to 10 years from
the date hereof. The vesting of all Options may be based on the Company's
attaining of performance criteria as specified at the time of the granting
thereof and may also be based on the passage of time. The Committee shall
determine the performance criteria, the performance measurement period and
2
<PAGE>
the vesting schedule applicable to each Option or group of Options in a
schedule, a copy of which shall be filed with the records of the Committee and
attached to each Option Agreement to which the same applies. The performance
criteria, the performance measurement period and the vesting schedule need not
be identical for all Options granted hereunder. Following the conclusion of each
applicable performance measurement period, the Committee shall determine the
extent, if at all, that each Option subject thereto shall have vested based upon
the applicable performance criteria and vesting schedule. To the extent each
such Option shall not have vested, and does not also vest based on the passage
of time, it shall, to that extent, automatically terminate and cease to be
exercisable to such extent notwithstanding the stated term during which it may
be exercised. The Committee shall promptly notify each affected Participant of
such determination. The Committee may periodically review the performance
criteria applicable to any Option or Options and, in its sole good faith
judgment, may adjust the same to reflect unanticipated major events, such as
catastrophic occurrences, mergers, acquisitions and the like.
Section 8. Exercise of Options. Once vested, an Option may be
-------------------
exercised by the Participant by giving written notice to the Company specifying
the number of full shares to be purchased and accompanied by payment of the full
purchase price therefor in cash, by check or in such other form of lawful
consideration as the Committee may approve from time to time, including, without
limitation and in the sole discretion of the Committee, the assignment and
transfer by the Participant to the Company of outstanding shares of Common Stock
theretofore held by the Participant in a manner intended to comply with the
provisions of Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
if applicable. Once vested, an Option may only be exercised by the Participant
or in the event of death of the Participant, by the person or persons (including
the deceased Participant's estate) to whom the deceased Participant's rights
under such Option shall have passed by will or the laws of descent and
distribution or the terms of the Participant's inter vivos trust.
Notwithstanding the foregoing in the immediately preceding sentence, in the
event of disability (within the meaning of Section 22(e)(3) of the Code) of a
Participant, a designee, or if the Participant has no designee, the legal
representative, of such Participant may exercise the Option on behalf of such
Participant (provided such Option would have been exercisable by such
Participant) until the right to exercise such Option expires, as set forth in
such Participant's particular Option Agreement.
Section 9. Issuance of Common Stock. The Company's obligation to
------------------------
issue shares of its Common Stock upon exercise of an Option is expressly
conditioned upon the compliance by the Company with any registration or other
qualification obligations with respect to such shares under any state and/or
federal law or rulings and regulations of any government regulatory body and/or
the making of such investment representations or other representations and
undertakings by the Participant (or the Participant's legal representative, heir
or legatee, as the case may be) in order to comply with the requirements of any
exemption from any such registration or other qualification obligations with
respect to such
3
<PAGE>
shares which the Company in its sole discretion shall deem necessary or
advisable. Such required representations and undertakings may include
representations and agreements that such Participant (or the Participant's legal
representative, heir or legatee): (a) is purchasing such shares for investment
and not with any present intention of selling or otherwise disposing of such
shares; and (b) agrees to have a legend placed upon the face and reverse of any
certificates evidencing such shares (or, if applicable, an appropriate data
entry made in the ownership records of the Company) setting forth (i) any
representations and undertakings which such Participant has given to the Company
or a reference thereto, and (ii) that, prior to effecting any sale or other
disposition of any such shares, the Participant must furnish to the Company an
opinion of counsel, satisfactory to the Company and its counsel, to the effect
that such sale or disposition will not violate the applicable requirements of
state and federal laws and regulatory agencies; provided, however, that any such
legend or data entry shall be removed when no longer applicable. Inability of
the Company to obtain, from any regulatory body having jurisdiction, authority
reasonably deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect of the nonissuance or sale of such shares as to which such
requisite authority shall not have been obtained. Any shares of Common Stock
issued by the Company upon exercise of an Option granted hereunder shall be
subject to a right of first refusal of the Company with respect to all shares
proposed to be transferred by Participant, as described in Section 12 hereof and
as more fully described in each particular Option Agreement.
Section 10. Nontransferability. An Option may not be sold, pledged,
------------------
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or inter vivos to a trust for the
benefit of the Participant or the Participant and the Participant's spouse. Any
permitted transferee shall be required prior to any transfer of an Option or
shares of Common Stock acquired pursuant to the exercise of an Option to execute
a written undertaking to be bound by the provisions of the applicable Option
Agreement.
Section 11. Adjustments To Capitalization. Subject to Section 14(b)
-----------------------------
hereof, if the outstanding shares of the Common Stock of the Company are changed
into, or exchanged for, a different number or kind of shares or securities of
the Company through reorganization, recapitalization or reclassification, or if
the number of outstanding shares is changed through a stock split, stock
dividend, stock consolidation or like capital adjustment, or if the Company
makes a distribution in partial liquidation or any other comparable
extraordinary distribution with respect to its Common Stock, an appropriate
adjustment shall be made by the Committee in the number, kind or exercise price
of shares as to which Options may be granted. A corresponding adjustment shall
likewise be made in the number, kind or exercise price of shares with respect to
which unexercised Options have theretofore been granted. Any such adjustment in
an outstanding Option, however, shall be made without change in the total price
applicable to the unexercised portion of the Option but with a corresponding
adjustment in the price for each share covered by the Option. In making such
4
<PAGE>
adjustments, or in determining that no such adjustments are necessary, the
Committee may rely upon the advice of counsel and accountants to the Company,
and the good faith determination of the Committee shall be final, conclusive and
binding. No fractional shares of stock shall be issued under the Plan on account
of any such adjustment.
Section 12. Option Agreement. Each Option granted under the Plan
----------------
shall be evidenced by a written nonqualified performance stock option agreement
(an "Option Agreement") executed by the Company and the Participant which (a)
shall contain each of the provisions and agreements herein specifically required
to be contained therein; (b) shall contain provisions which give the Company a
right of first refusal to purchase any Common Stock issued pursuant to the
exercise of Options granted under the Plan which a Participant proposes to sell;
and (c) may contain such other terms and conditions as the Committee deems
desirable and which are not inconsistent with the Plan.
Section 13. Rights as a Stockholder. A Participant shall have no
-----------------------
rights as a stockholder with respect to any shares covered by an Option until
the date (the "Exercise Date") an entry evidencing such ownership is made in the
stock transfer books of the Company. Except as otherwise provided in Section 11
hereof, no adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the Exercise Date.
Section 14. Termination of Options.
----------------------
(a) Each Option granted under the Plan shall set forth a termination
date thereof, which shall be not later than ten (10) years from the date such
Option is granted subject to earlier termination or forfeiture as set forth in
Section 7, Section 14(b) or Section 15 hereof, or as otherwise set forth in each
particular Option Agreement. The termination of employment of, or of a
consulting relationship with, or service as a director of the Company by, a
Participant for any reason shall not accelerate or otherwise affect the number
of shares with respect to which an Option may be exercised; provided, however,
that the Option may only be exercised with respect to that number of shares
which could have been purchased under the Option had the Option been exercised
by the Participant on the date of such termination, and provided, further, that
such a termination in connection with the Participant's engaging in any activity
which may result under an Option Agreement in rescission of an Option or an
obligation to repay any gain upon exercise shall not affect such rescission or
obligation.
(b) Subject to Section 15 hereof, upon the dissolution, liquidation
or sale of all or substantially all of the business, properties and assets of
the Company, or upon any reorganization, merger or consolidation in which the
Company does not survive, or upon any reorganization, merger or consolidation in
which the Company does survive and the Company's stockholders have the
opportunity to receive cash, securities of another
5
<PAGE>
corporation and/or other property in exchange for their capital stock of the
Company, the Plan and each outstanding Option shall terminate; provided that in
such event each Participant who is not tendered an option by the surviving
corporation in accordance with all of the terms of the immediately succeeding
sentence, or who does not accept any such substituted option which is so
tendered, shall have the right until 10 days before the effective date of such
dissolution, liquidation, reorganization, merger or consolidation to exercise,
in whole or in part, any unexpired Option or Options issued to the Participant,
to the extent that said Option is then vested and exercisable pursuant to the
provisions of said Option or Options and of Section 7 of the Plan. In its sole
and absolute discretion, the surviving corporation in any reorganization, merger
or consolidation may, but shall not be so obligated to, tender to any
Participant an option or options to purchase shares of the surviving
corporation, and such new option or options shall contain such terms and
provisions as shall be required to substantially preserve the rights and
benefits of any Option then outstanding under the Plan and, if accepted by such
Participant, such new option shall replace the Option under the Plan.
Section 15. Acceleration of Options. Notwithstanding the provisions
-----------------------
of Section 7 or Section 14 hereof, or any provision to the contrary contained in
a particular Option Agreement, the Committee, in its sole discretion, at any
time, or from time to time, may elect to accelerate the vesting of all or any
portion of any Option then outstanding. The decision by the Committee to
accelerate an Option or to decline to accelerate an Option shall be final,
conclusive and binding. In the event of the acceleration of the exercisability
of Options as the result of a decision by the Committee pursuant to this Section
15, each outstanding Option so accelerated shall be exercisable for a period
from and after the date of such acceleration and upon such other terms and
conditions as the Committee may determine in its sole discretion provided that
such terms and conditions (other than terms and conditions relating solely to
the acceleration of exercisability and the related termination of an Option) may
not adversely affect the rights of any Participant without the consent of the
Participant so adversely affected. Any outstanding Option which has not been
exercised by the holder at the end of such period shall terminate automatically
and become null and void.
Section 16. Withholding of Taxes. The Company, or a Subsidiary, as
--------------------
the case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to the Participant the requisite
tax upon the amount of taxable income, if any, recognized by the Participant in
connection with the exercise in whole or in part of any Option, or the sale of
Common Stock issued to the Participant upon the exercise of an Option, as may be
required from time to time under any federal or state tax laws and regulations.
This withholding of tax shall be made from the Company's (or such Subsidiary's)
concurrent or next payment of wages, salary, bonus or other income to the
Participant or by payment to the Company (or such Subsidiary) by the Participant
of the required withholding tax, as the Committee may determine; provided,
however, that, in the sole discretion of the Committee, the Participant may pay
such tax by reducing the number of shares of Common Stock issued upon exercise
of an Option (for which purpose such shares
6
<PAGE>
shall be valued at fair market value as determined in good faith by the
Committee, which determination shall be final, conclusive and binding).
Section 17. Effectiveness and Termination of the Plan. The Plan
-----------------------------------------
shall be effective on the date on which it is adopted by the Board. The Plan
shall terminate at the earliest of the time when all shares of Common Stock
which may be issued hereunder have been so issued or at such other time as set
forth in Section 14(b) hereof; provided, however, that the Board may in its sole
discretion terminate the Plan at any other time. Subject to Section 14(b)
hereof, no such termination shall in any way affect any Option then outstanding.
Section 18. Time of Granting Options. The date of grant of an
------------------------
Option shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Notice of the determination shall be given
to each Participant to whom an Option is so granted within a reasonable time
after the date of such grant.
Section 19. Amendment of Plan. The Committee may make such
-----------------
amendments to the Plan and, with the consent of each Participant affected, in
the terms and conditions of granted Options as it shall deem advisable,
including, without limitation, accelerating the time at which an Option may be
exercised. No amendment shall in any way adversely affect any Option then
outstanding, without the consent of the Participant so adversely affected.
Section 20. Transfers and Leaves of Absence. For purposes of the
-------------------------------
Plan, (a) a transfer of a Participant's employment or consulting relationship,
without an intervening period, between the Company and a Subsidiary shall not be
deemed a termination of employment or a termination of a consulting relationship
and (b) a Participant who is granted in writing a leave of absence shall be
deemed to have remained in the employ of, or in a consulting relationship with,
the Company (or a Subsidiary, whichever is applicable) during such leave of
absence.
Section 21. No Obligation to Exercise Option. The granting of an
--------------------------------
Option shall impose no obligation on the Participant to exercise such Option.
Section 22. Indemnification. In addition to such other rights of
----------------
indemnification as they may have as directors, the members of the Board or
Committee shall be indemnified by the Company to the fullest extent permitted by
law against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding.
7
<PAGE>
Section 23. Governing Law. The Plan and any Option granted pursuant
-------------
to the Plan shall be construed under and governed by the laws of the State of
Delaware without regard to conflict of law provisions thereof.
Section 24. Not an Employment or Other Agreement. Nothing contained
------------------------------------
in the Plan or in any Option Agreement shall confer, intend to confer or imply
any rights of employment or any rights to any other relationship or rights to
continued employment by, or rights to a continued relationship with or service
as a director of, the Company or any Subsidiary in favor of any Participant or
limit the ability of the Company or any Subsidiary to terminate, with or without
cause, in its sole and absolute discretion, the employment of, or relationship
with, any Participant, subject to the terms of any written employment or other
agreement to which a Participant is a party, or to remove Participant as a
director of the Company or any Subsidiary, subject to the Company's or
Subsidiary's Certificate of Incorporation, as amended, or Bylaws, as amended.
8
<PAGE>
EXHIBIT 10.30
AMENDED AND RESTATED
OPTION AGREEMENT
THIS AMENDED AND RESTATED OPTION AGREEMENT (this "Agreement") is made
and entered into as of the 23rd day of November 1994, by and among The Koll
Company, a California corporation ("TKC"), The Koll Holding Company, a
California corporation ("Optionor") and a wholly-owned subsidiary of TKC,
William S. Rothe ("Optionee"), KMS Holding Corporation, a Delaware corporation
("Holding"), and Ray Wirta ("Wirta").
BACKGROUND
A. On May 30, 1991, TKC, Optionee and Wirta entered into that
certain Option Agreement (the "KMS Option Agreement") pursuant to which TKC
granted to Optionee an option to purchase from TKC, at an exercise price of
$7.25 per share, up to 63,000 shares of common stock, $.01 par value ("KMS
Common Stock"), of Koll Management Services, Inc., a Delaware corporation
("KMS").
B. Under the terms of the KMS Option Agreement, the Optionee's
options on the 63,000 shares of KMS Common Stock became fully exercisable on May
30, 1994.
C. On July 26, 1994, KMS entered into an Agreement and Plan of
Merger (the "Merger Agreement"), which provides for the merger (the "Merger") of
KMS Acquisition Corporation ("Acquisition Corp."), a Delaware corporation and a
wholly-owned subsidiary of Holding, with and into KMS, with the result that KMS
will become a wholly-owned subsidiary of Holding.
D. To effect the Merger, the Merger Agreement provides that all
shares of KMS Common Stock (other than shares owned by Holding or Acquisition
Corp. or shares as to which statutory appraisal rights are perfected) will be
converted into the right to receive $16.00 in cash and then will be cancelled.
E. In connection with the Merger, on July 26, 1994, TKC, Holding, FS
Equity Partners III, L.P., a Delaware limited partnership ("FSEP III"), FS
Equity Partners International, L.P., a Delaware limited partnership ("FS
International" and together with FSEP III, "FS"), Optionee and Wirta entered
into an Exchange Agreement (the "Exchange Agreement") pursuant to which TKC
agreed that upon the consummation of the Merger, TKC will transfer, pursuant to
the terms of a Stock Subscription Agreement (the "Stock Subscription
Agreement"), 1,576,470 shares of KMS Common Stock to Holding in exchange for
2,522,352 (or approximately 50%) of the outstanding shares of common stock of
Holding
<PAGE>
("Holding Common Stock"), which will be issued at a value of $10.00 per share.
I. In connection with the consummation of the transactions
contemplated by the Merger Agreement and upon the terms and conditions
hereinafter set forth, TKC, Optionor and Optionee desire to revise and amend the
KMS Option Agreement so that Optionee's option to purchase from TKC 63,000
shares of KMS Common Stock will be converted into the option to purchase from
Optionor 100,800 shares of Holding Common Stock.
AGREEMENT
In consideration of the mutual promises and covenants made herein and
the mutual benefits to be derived herefrom, the parties hereto agree as follows:
1. CONTINUATION OF OPTION. Effective upon the consummation of the
----------------------
Merger, Optionee's option to purchase 63,000 shares of KMS Common Stock from
Optionor shall be converted into the right and option (the "Option") to
purchase, on the terms and conditions hereinafter set forth, all or any part of
an aggregate of 100,800 shares of Holding Common Stock from Optionor at an
exercise price of $4.53 per share (the "Price"), exercisable from time to time
prior to May 30, 2001. Optionor hereby agrees not to sell any shares of Holding
Common Stock if, as a result of such sale, Optionor will not continue to hold a
sufficient number of shares of Holding Common Stock to enable Optionee to
exercise the Option in full immediately after such sale, as adjusted by Section
5 of this Agreement.
2. EXERCISABILITY OF OPTION. Except as otherwise provided in this
------------------------
Agreement, the Option may be exercised from time to time to purchase all or any
part of 100,800 shares of Holding Common Stock owned by Optionor, provided,
however, that the Option may not be exercised as to fewer than 100 shares at any
one time unless the number of shares purchased is the total number available at
that time for purchase. If Optionee does not purchase all of the shares of
Holding Common Stock which he is entitled to purchase, Optionee's right to
purchase any shares not so purchased shall continue until May 30, 2001, unless,
prior to such time, the Option is terminated in accordance with the provisions
hereof. In no event may the Option be exercised after May 30, 2001. The Option
may be exercised only as to whole shares (fractional share interests shall be
disregarded except that they may be accumulated).
3. METHOD OF EXERCISE AND PAYMENT. Each exercise of the Option
------------------------------
shall be by means of written notice of exercise delivered to Optionor,
specifying the number of
2
<PAGE>
whole shares with respect to which the Option is being exercised, together with
any written statements required pursuant to Section 6 of this Agreement and a
payment, in cash or by check payable to the order of Optionor, in an amount
equal to the Price multiplied by the number of shares with respect to which the
Option is being exercised.
4. NON-ASSIGNABILITY OF OPTION. The Option and all other rights and
---------------------------
privileges conferred hereby are not transferable or assignable, may not be
offered, sold, pledged, hypothecated or otherwise disposed of in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment, garnishment, levy or similar process and any such
attempted action shall be void. During Optionee's lifetime, the Option may be
exercised only by Optionee or his Personal Representative (as defined below).
After Optionee's death, the Option may be exercised by Optionee's transferees by
will or under the laws of descent and distribution, and not otherwise.
"Personal Representative" shall mean the person or persons who, upon the
disability or incompetence of Optionee, shall have acquired on behalf of
Optionee, by legal proceeding or otherwise, the power to exercise the rights and
receive the benefits specified in this Agreement.
5. ADJUSTMENTS AND OTHER RIGHTS.
----------------------------
a. If the shares of Holding Common Stock owned by Optionor are
increased, decreased or changed into, or exchanged for, a different number or
kind of shares or securities of Holding through a reorganization or merger in
which Holding is the surviving entity, or through a combination,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation or otherwise, then, except to the extent that any such adjustment
or change is a result of additional consideration being given by Optionor, a
similar and pro rata adjustment shall be made in the number and kind of shares
that are subject to the Option and an appropriate adjustment shall be made to
the Price.
b. If the Board of Directors of Holding takes action to (i) dissolve
or liquidate Holding or (ii) reorganize, merge or consolidate Holding with one
or more corporations which will result in Holding not being the surviving
corporation, then the Option shall terminate and be forfeited to the extent it
is not exercised prior to the effective date of such dissolution, liquidation,
reorganization, merger or consolidation.
c. If Holding pays a special and nonrecurring cash dividend on the
Holding Common Stock (the "Special Dividend") as described by the Financial
Accounting
3
<PAGE>
Standards Board's Emerging Issues Task Force Issue 90-9 ("EITF 90-9") and the
adjustments set forth in this Section 5(c) may be made without causing a new
measurement date (as described in EITF 90-9) to occur for purposes of
determining compensation expense in connection with the Option, then the Price
per share shall be adjusted downward by an amount which shall be necessary in
order to make the ratio of the Price to the Fair Market Value of a share of
Holding Common Stock on the day prior to the record date for the Special
Dividend equal to the same ratio five business days after the record date for
the Special Dividend. For purposes of this Section 5(c), "Fair Market Value" on
a specific date shall mean (i) if the Holding Common Stock is listed or admitted
to trade on a national securities exchange, the average closing price of the
Holding Common Stock on the Composite Tape, as published in the Western Edition
of The Wall Street Journal, of the principal national securities exchange on
-----------------------
which the Holding Common Stock is so listed or admitted to trade, on the five
trading days immediately preceding such date; (ii) if the Holding Common Stock
is not listed or admitted to trade on a national securities exchange, the
average closing price for the Holding Common Stock on the five trading days
immediately preceding such date, as furnished by the National Association of
Securities Dealers, Inc. (the "NASD") through the NASDAQ National Market
Reporting System or a similar organization if the NASD is no longer reporting
such information; (iii) if the Holding Common Stock is not listed or admitted to
trade on a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for the
Holding Common Stock on the five trading days immediately preceding such date,
as furnished by the NASD; or (iv) if the Holding Common Stock is not listed or
admitted to trade on a national securities exchange, is not reported on the
National Market Reporting System and if bid and asked prices for the Holding
Common Stock are not furnished by the NASD or a similar organization, the value
determined by the Board of Directors of the Optionor.
6. APPLICATION OF SECURITIES LAWS. The transfer of shares of
------------------------------
Holding Common Stock pursuant to this Agreement is subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
regulatory or governmental agency, including, without limitation, "no action"
positions of the Securities and Exchange Commission (the "Commission"), which
may, in the opinion of counsel for Holding, be necessary or advisable in
connection therewith. Without limiting the generality of the foregoing, no
shares of Holding Common Stock may be purchased pursuant to the Option unless
and until any then applicable requirements of the Commission, the California
Department of Corporations and any other regulatory agencies (including any
other state
4
<PAGE>
securities law commissioners having jurisdiction over the transfer) and any
exchanges upon which the Holding Common Stock may be listed, shall have been
fully satisfied. In connection with any stock transfer, Optionee shall notify
Holding and give satisfactory written assurances to counsel to Holding in
respect of such matters as Holding may deem desirable to assure compliance with
all applicable legal requirements.
7. STOCKHOLDERS AGREEMENT. Upon any acquisition of Holding Common
----------------------
Stock by Optionee pursuant to an exercise by Optionee of the Option, Optionee
shall execute a written undertaking to be, and will become, bound by that
certain Stockholders Agreement, dated of even date herewith, by and among
Holding, FS, Optionor, TKC and Donald M. Koll (a copy of which is attached
hereto as Exhibit A), in the same manner and to the same extent as Optionor.
8. WIRTA RIGHTS. Wirta hereby acknowledges and agrees that all of
------------
his rights under the KMS Option Agreement are hereby terminated.
9. NOTICES. Any notice to be given to Optionor or TKC under the
-------
terms of this Agreement shall be in writing and addressed to the Secretary of
Optionor at its principal office located at 4343 Von Karman Avenue, Newport
Beach, California 92660 and any notice to be given to Optionee shall be
addressed to him at the address given beneath his signature hereto, or at such
other address as either party may hereafter designate in writing to the other
party.
10. ENDORSEMENT ON STOCK CERTIFICATE. Each certificate representing
---------------------------------
shares of Holding Common Stock now or hereafter held by Optionor or Optionee
shall be stamped with legends in substantially the following forms:
"This certificate is transferable only upon compliance with the
provisions of that certain Amended and Restated Option Agreement,
dated as of November 23, 1994, by and among The Koll Company, The Koll
Holding Company, William S. Rothe, KMS Holding Corporation and Ray
Wirta, a copy of which is on file in the office of KMS Holding
Corporation."
"The securities evidenced by this certificate are subject to
restrictions upon transfer and may not be sold, transferred, assigned,
pledged, hypothecated or otherwise disposed of, except in accordance
with the terms and conditions of that certain Stockholders Agreement
dated as of November 23, 1994, a copy of which agreement is on
5
<PAGE>
file at the principal executive offices of KMS Holding Corporation."
11. LAWS APPLICABLE TO CONSTRUCTION. This Agreement shall be
-------------------------------
governed by, and construed and enforced in accordance with, the laws of the
State of California.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire
----------------
agreement and understanding among the parties hereto pertaining to the subject
matter hereof and supersedes any and all prior agreements, whether written or
oral, relating hereto.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
THE KOLL COMPANY,
a California corporation
By: ___________________________
Donald M. Koll
Chairman of the Board and
Chief Executive Officer
THE KOLL HOLDING COMPANY,
a California corporation
By: ___________________________
Donald M. Koll
President
WILLIAM S. ROTHE
_______________________________
William S. Rothe
1633 Santiago Drive
Newport Beach, California 92663
KMS HOLDING CORPORATION,
a Delaware corporation
By:_____________________________
Name:___________________________
Title:__________________________
RAY WIRTA
_______________________________
Ray Wirta
49 Emerald Bay
Laguna Beach, California 92651
Accepted and Agreed:
The Koll Company Stock Trust
By: ________________________
Donald M. Koll
Trustee
_____________________________
Donald M. Koll
7
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Amended and
Restated Option Agreement by The Koll Company and The Koll Holding Company, I,
Nannette Rothe, the spouse of William S. Rothe, do hereby join with my spouse in
executing the foregoing Amended and Restated Option Agreement and do hereby
agree to be bound by all of the terms and provisions thereof.
Dated as of November 23, 1994. ________________________
Nannette Rothe
8
<PAGE>
EXHIBIT 10.31
AMENDED AND RESTATED
OPTION AGREEMENT
THIS AMENDED AND RESTATED OPTION AGREEMENT (this "Agreement") is made and
entered into as of the 23rd day of November 1994, by and among The Koll Company,
a California corporation ("TKC"), The Koll Holding Company, a California
corporation ("Optionor") and a wholly-owned subsidiary of TKC, Ray Wirta
("Optionee") and KMS Holding Corporation, a Delaware corporation ("Holding").
BACKGROUND
A. On May 30, 1991, TKC and Optionee entered into that certain Option
Agreement (the "KMS Option Agreement") pursuant to which TKC granted to Optionee
an option to purchase from TKC, at an exercise price of $7.25 per share, up to
420,000 shares of common stock, $.01 par value ("KMS Common Stock"), of Koll
Management Services, Inc., a Delaware corporation ("KMS").
B. Under the terms of the KMS Option Agreement, the Optionee's options on
the 420,000 shares of KMS Common Stock became fully exercisable on May 30, 1994.
C. On July 26, 1994, KMS entered into an Agreement and Plan of Merger (the
"Merger Agreement"), which provides for the merger (the "Merger") of KMS
Acquisition Corporation ("Acquisition Corp."), a Delaware corporation and a
wholly-owned subsidiary of Holding, with and into KMS, with the result that KMS
will become a wholly-owned subsidiary of Holding.
D. To effect the Merger, the Merger Agreement provides that all shares of
KMS Common Stock (other than shares owned by Holding or Acquisition Corp. or
shares as to which statutory appraisal rights are perfected) will be converted
into the right to receive $16.00 in cash and then will be cancelled.
E. In connection with the Merger, on July 26, 1994, TKC, Holding, FS Equity
Partners III, L.P., a Delaware limited partnership ("FSEP III"), FS Equity
Partners International, L.P., a Delaware limited partnership ("FS International"
and together with FSEP III, "FS"), Optionee and William S. Rothe entered into an
Exchange Agreement (the "Exchange Agreement") pursuant to which TKC agreed that
upon the consummation of the Merger, TKC will transfer, pursuant to the terms of
a Stock Subscription Agreement (the "Stock Subscription Agreement"), 1,576,470
shares of KMS Common Stock to Holding in exchange for 2,522,352 (or
approximately 50%) of the outstanding shares of common stock of Holding
("Holding Common Stock"), which will be issued at a value of $10.00 per share.
<PAGE>
I. In connection with the consummation of the transactions contemplated by
the Merger Agreement and upon the terms and conditions hereinafter set forth,
TKC, Optionor and Optionee desire to revise and amend the KMS Option Agreement
so that Optionee's option to purchase from TKC 420,000 shares of KMS Common
Stock will be converted into the option to purchase from Optionor 672,000 shares
of Holding Common Stock.
AGREEMENT
In consideration of the mutual promises and covenants made herein and the
mutual benefits to be derived herefrom, the parties hereto agree as follows:
1. CONTINUATION OF OPTION. Effective upon the consummation of the Merger,
----------------------
Optionee's option to purchase 420,000 shares of KMS Common Stock from Optionor
shall be converted into the right and option (the "Option") to purchase, on the
terms and conditions hereinafter set forth, all or any part of an aggregate of
672,000 shares of Holding Common Stock from Optionor at an exercise price of
$4.53 per share (the "Price"), exercisable from time to time prior to May 30,
2001. Optionor hereby agrees not to sell any shares of Holding Common Stock if,
as a result of such sale, Optionor will not continue to hold a sufficient number
of shares of Holding Common Stock to enable Optionee to exercise the Option in
full immediately after such sale, as adjusted by Section 5 of this Agreement.
2. EXERCISABILITY OF OPTION. Except as otherwise provided in this
------------------------
Agreement, the Option may be exercised from time to time to purchase all or any
part of 672,000 shares of Holding Common Stock owned by Optionor, provided,
however, that the Option may not be exercised as to fewer than 100 shares at any
one time unless the number of shares purchased is the total number available at
that time for purchase. If Optionee does not purchase all of the shares of
Holding Common Stock which he is entitled to purchase, Optionee's right to
purchase any shares not so purchased shall continue until May 30, 2001, unless,
prior to such time, the Option is terminated in accordance with the provisions
hereof. In no event may the Option be exercised after May 30, 2001. The Option
may be exercised only as to whole shares (fractional share interests shall be
disregarded except that they may be accumulated).
3. METHOD OF EXERCISE AND PAYMENT. Each exercise of the Option shall be by
------------------------------
means of written notice of exercise delivered to Optionor, specifying the number
of whole shares with respect to which the Option is being exercised, together
with any written statements required pursuant to Section 6 of this Agreement and
a payment, in cash or by check payable to the order of Optionor, in an amount
equal to the Price multiplied by the number of shares with respect to which the
Option is being exercised.
2
<PAGE>
4. NON-ASSIGNABILITY OF OPTION. The Option and all other rights and
---------------------------
privileges conferred hereby are not transferable or assignable, may not be
offered, sold, pledged, hypothecated or otherwise disposed of in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment, garnishment, levy or similar process and any such
attempted action shall be void. During Optionee's lifetime, the Option may be
exercised only by Optionee or his Personal Representative (as defined below).
After Optionee's death, the Option may be exercised by Optionee's transferees by
will or under the laws of descent and distribution, and not otherwise.
"Personal Representative" shall mean the person or persons who, upon the
disability or incompetence of Optionee, shall have acquired on behalf of
Optionee, by legal proceeding or otherwise, the power to exercise the rights and
receive the benefits specified in this Agreement.
5. ADJUSTMENTS AND OTHER RIGHTS.
----------------------------
a. If the shares of Holding Common Stock owned by Optionor are increased,
decreased or changed into, or exchanged for, a different number or kind of
shares or securities of Holding through a reorganization or merger in which
Holding is the surviving entity, or through a combination, recapitalization,
reclassification, stock split, stock dividend, stock consolidation or otherwise,
then, except to the extent that any such adjustment or change is a result of
additional consideration being given by Optionor, a similar and pro rata
adjustment shall be made in the number and kind of shares that are subject to
the Option and an appropriate adjustment shall be made to the Price.
b. If the Board of Directors of Holding takes action to (i) dissolve or
liquidate Holding or (ii) reorganize, merge or consolidate Holding with one or
more corporations which will result in Holding not being the surviving
corporation, then the Option shall terminate and be forfeited to the extent it
is not exercised prior to the effective date of such dissolution, liquidation,
reorganization, merger or consolidation.
c. If Holding pays a special and nonrecurring cash dividend on the Holding
Common Stock (the "Special Dividend") as described by the Financial Accounting
Standards Board's Emerging Issues Task Force Issue 90-9 ("EITF 90-9") and the
adjustments set forth in this Section 5(c) may be made without causing a new
measurement date (as described in EITF 90-9) to occur for purposes of
determining compensation expense in connection with the Option, then the Price
per share shall be adjusted downward by an amount which shall be necessary in
order to make the ratio of the Price to the Fair Market Value of a share of
Holding Common Stock on the day prior to the record date for the Special
Dividend equal to the same ratio five business days after the record date for
the Special Dividend. For purposes of this Section 5(c), "Fair Market Value" on
a specific date shall mean
3
<PAGE>
(i) if the Holding Common Stock is listed or admitted to trade on a national
securities exchange, the average closing price of the Holding Common Stock on
the Composite Tape, as published in the Western Edition of The Wall Street
---------------
Journal, of the principal national securities exchange on which the Holding
- -------
Common Stock is so listed or admitted to trade, on the five trading days
immediately preceding such date; (ii) if the Holding Common Stock is not listed
or admitted to trade on a national securities exchange, the average closing
price for the Holding Common Stock on the five trading days immediately
preceding such date, as furnished by the National Association of Securities
Dealers, Inc. (the "NASD") through the NASDAQ National Market Reporting System
or a similar organization if the NASD is no longer reporting such information;
(iii) if the Holding Common Stock is not listed or admitted to trade on a
national securities exchange and is not reported on the National Market
Reporting System, the mean between the bid and asked price for the Holding
Common Stock on the five trading days immediately preceding such date, as
furnished by the NASD; or (iv) if the Holding Common Stock is not listed or
admitted to trade on a national securities exchange, is not reported on the
National Market Reporting System and if bid and asked prices for the Holding
Common Stock are not furnished by the NASD or a similar organization, the value
determined by the Board of Directors of the Optionor.
6. APPLICATION OF SECURITIES LAWS. The transfer of shares of Holding
------------------------------
Common Stock pursuant to this Agreement is subject to all applicable federal and
state laws, rules and regulations and to such approvals by any regulatory or
governmental agency, including, without limitation, "no action" positions of the
Securities and Exchange Commission (the "Commission"), which may, in the opinion
of counsel for Holding, be necessary or advisable in connection therewith.
Without limiting the generality of the foregoing, no shares of Holding Common
Stock may be purchased pursuant to the Option unless and until any then
applicable requirements of the Commission, the California Department of
Corporations and any other regulatory agencies (including any other state
securities law commissioners having jurisdiction over the transfer) and any
exchanges upon which the Holding Common Stock may be listed, shall have been
fully satisfied. In connection with any stock transfer, Optionee shall notify
Holding and give satisfactory written assurances to counsel to Holding in
respect of such matters as Holding may deem desirable to assure compliance with
all applicable legal requirements.
7. STOCKHOLDERS AGREEMENT. Upon any acquisition of Holding Common Stock by
----------------------
Optionee pursuant to an exercise by Optionee of the Option, Optionee shall
execute a written undertaking to be, and will become, bound by that certain
Stockholders Agreement, dated of even date herewith, by and among Holding, FS,
Optionor, TKC and Donald M. Koll (a copy of which is
4
<PAGE>
attached hereto as Exhibit A), in the same manner and to the same extent as
Optionor.
8. NOTICES. Any notice to be given to Optionor or TKC under the terms of
-------
this Agreement shall be in writing and addressed to the Secretary of Optionor at
its principal office located at 4343 Von Karman Avenue, Newport Beach,
California 92660 and any notice to be given to Optionee shall be addressed to
him at the address given beneath his signature hereto, or at such other address
as either party may hereafter designate in writing to the other party.
9. ENDORSEMENT ON STOCK CERTIFICATE. Each certificate representing shares
---------------------------------
of Holding Common Stock now or hereafter held by Optionor or Optionee shall be
stamped with legends in substantially the following forms:
"This certificate is transferable only upon compliance with the
provisions of that certain Amended and Restated Option Agreement,
dated as of November 23, 1994, by and among The Koll Company, The Koll
Holding Company, Ray Wirta and KMS Holding Corporation, a copy of
which is on file in the office of KMS Holding Corporation."
"The securities evidenced by this certificate are subject to
restrictions upon transfer and may not be sold, transferred, assigned,
pledged, hypothecated or otherwise disposed of, except in accordance
with the terms and conditions of that certain Stockholders Agreement
dated as of November 23, 1994, a copy of which agreement is on file at
the principal executive offices of KMS Holding Corporation."
10. LAWS APPLICABLE TO CONSTRUCTION. This Agreement shall be governed by,
-------------------------------
and construed and enforced in accordance with, the laws of the State of
California.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
----------------
understanding among the parties hereto pertaining to the subject matter hereof
and supersedes any and all prior agreements, whether written or oral, relating
hereto.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
THE KOLL COMPANY,
a California corporation
By: ___________________________
Name: _________________________
Title: ________________________
THE KOLL HOLDING COMPANY,
a California corporation
By: ___________________________
Name: _________________________
Title: ________________________
RAY WIRTA
_______________________________
Ray Wirta
49 Emerald Bay
Laguna Beach, California 92651
KMS HOLDING CORPORATION,
a Delaware corporation
By:_____________________________
Name:___________________________
Title:__________________________
Accepted and Agreed:
The Koll Company Stock Trust
By:_____________________________
Donald M. Koll
Trustee
_____________________________
Donald M. Koll
6
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Amended and Restated
Option Agreement by The Koll Company and The Koll Holding Company, I, Sandy
Wirta, the spouse of Ray Wirta, do hereby join with my spouse in executing the
foregoing Amended and Restated Option Agreement and do hereby agree to be bound
by all of the terms and provisions thereof.
Dated as of November 23, 1994. _________________________
Sandy Wirta
7
<PAGE>
EXHIBIT 10.32
NONCOMPETITION AND CONFIDENTIALITY AGREEMENT
THIS NONCOMPETITION AND CONFIDENTIALITY AGREEMENT ("Agreement") is
made as of this 1st day of April, 1996 by and among KMS Holding Corporation,
a Delaware corporation ("Company"), FS Equity Partners III, L.P., a Delaware
limited partnership, FS Equity Partners International, L.P., a Delaware limited
partnership (collectively, "FS"), and Donald M. Koll (the "Stockholder").
R E C I T A L S :
A. Pursuant to that certain Stock Purchase Agreement dated as of
March 29, 1996 (the "Stock Purchase Agreement") by and among FS, The Koll
Holding Company, a California corporation ("KHC"), The Koll Company, a
California corporation ("TKC"), KHC will sell to FS 751,790 shares of the
Company's common stock ("Company Common Stock") at a price of $14.00 per share
for a total purchase price payable by FS of $10,525,100. This Agreement will
become effective upon consummation of the Second Closing as defined in the Stock
Purchase Agreement. Concurrently, pursuant to a separate Stock Purchase
Agreement dated as of April 1, 1996 (the "Apollo Purchase Agreement") by and
among KHC, TKC and AP KMS Partners, L.P., a Delaware limited partnership
("Apollo"). KHC will sell to Apollo 189,323 shares of Company Common Stock, at
a price of $14.00 per share for a total purchase price payable by Apollo of
$2,650,522 (cumulatively, the shares of Company Common Stock to be sold to FS
and Apollo will be referred to as the "Unencumbered Shares").
B. As sole trustee and co-beneficiary with his spouse of The Koll
Company Stock Trust which owns 100% of the issued and outstanding shares of TKC,
which in turn owns 100% of the issued and outstanding capital stock of KHC, the
Stockholder exercises Control (as hereinafter defined) over the Unencumbered
Shares. Stockholder is in addition a director and officer of the Company.
C. After consummation of the transactions contemplated by the Stock
Purchase Agreement, KHC will own of record, in addition to the Unencumbered
Shares, 946,037 shares of Company Common Stock (the "Encumbered Shares") of
which (i) 672,000 shares will be subject to an option in favor of Ray Wirta
("Wirta") under that Amended and Restated Option Agreement dated November 23,
1994 by and among TKC, KHC, the Company and Wirta, which option may be exercised
at any time through May 30, 2001 at a price of $4.53 per share; (ii) 100,800
shares will be subject to an option in favor of William S. Rothe ("Rothe") under
that certain Amended and Restated Option Agreement dated November 23, 1994 by
and among TKC, KHC, Wirta and Rothe which option may be exercised at any time
through May 30, 2001 at a price of $4.53 per share; (iii) 173,237
1
<PAGE>
shares will be held in escrow pursuant to that certain Escrow and Security
Agreement, dated the date hereof, among KHC, Apollo and First Interstate Bank of
California, N.A. (the "Escrow and Security Agreement"); (iv) all 946,037 shares
will be subject to a lien in favor of Apollo pursuant to that certain Pledge
Agreement dated as of October 18, 1995 by and between KHC and Apollo; and all
946,037 shares will be subject to a lien in favor of Safeco Insurance Company of
America ("Safeco") dated November 13, 1995 by and among TKC, KHC, Safeco and
Wirta.
D. The Company's wholly-owned subsidiary, Koll Management Services,
Inc. ("KMS"), is a nation-wide and international provider of property, facility,
asset and investment management services presently being conducted by Koll
Management Services and its Consolidated Subsidiary (collectively, the
"Business"). The definition of "Business" does not include the real estate
business presently being conducted by Koll Real Estate Group, The Koll Company,
The Koll Construction Company, Koll International and any Investment Entity (as
defined in the Stock Purchase Agreement) in which KMS has an interest which is
not in the property, facility, asset or investment management services business.
E. Stockholder possesses significant knowledge and information
about and expertise in the business which is extremely valuable to competitors
of KMS, and FS is unwilling to purchase its portion of the Unencumbered Shares
unless Stockholder enters into this Agreement, which is a material inducement to
FS to purchase such Unencumbered Shares.
F. Each of the Stockholder, the Company and FS are sophisticated
parties experienced in business transactions of this type, and fully understand
(i) the ramifications of the noncompetition, non-solicitation and
confidentiality provisions of this Agreement and (ii) that the laws of each
state with respect to the enforceability of such provisions vary. The parties
are specifically selecting the internal laws of the state of New York to govern
this Agreement in order that it be enforceable against all of them.
G. To provide FS with the full value of its acquisition of its
portion of the Unencumbered Shares, particularly the goodwill of the Company
represented thereby, and as a material inducement to the Company to enter into
this Agreement and to consummate the transactions contemplated hereby, the Stock
Purchase Agreement requires that the Stockholder execute and deliver a
noncompetition, non-solicitation and confidentiality agreement with the Company
immediately upon execution of the Stock Purchase Agreement and that the
obligation of FS to consummate the stock purchase is conditioned upon the
Stockholder entering into this Agreement.
H. The parties therefore desire to enter into this Agreement in
order to implement the requirements of the Stock Purchase Agreement and to
confirm in FS the goodwill of the Company's business represented by the
Unencumbered Shares and all of the benefits to be derived therefrom.
I. Likewise, for reasons similar to those described above, the
Company, the Stockholder and Apollo intend to enter into a separate
noncompetition and confidentiality
2
<PAGE>
agreement ("Apollo Noncompetition Agreement") in identical form to this
Agreement in order to implement the requirements of the Apollo Purchase
Agreement and to confirm in Apollo the goodwill of the Company's business
represented by its portion of the Unencumbered Shares and all of the benefits to
be derived therefrom. Thus, the sale of all of the Unencumbered Shares by KHC
shall be conditioned on the execution of this Agreement and the Apollo
Noncompetition Agreement.
A G R E E M E N T :
THEREFORE, in consideration of the purchase of FS' portion of the
Unencumbered Shares, the consideration to be received by Stockholder as a result
of said stock purchase, the mutual covenants herein contained and other
consideration (the receipt and adequacy of which are hereby acknowledged by
Stockholder), the parties hereby agree as follows:
1. Agreement Not to Compete.
------------------------
(a) During the Covenant Period (defined below) Stockholder shall
not directly or indirectly carry on or participate in any business similar to or
in competition with the Business (or any subsidiary or affiliate of KMS or any
person, corporation, partnership, trust or other organization or entity deriving
title from the Company or KMS to the goodwill of the Business, all of whom
together with KMS and FS are sometimes collectively called the "Protected
Entities"). The "Business" as used in this Section 1 means the nation-wide and
international provision of real estate services including property, facility,
asset and investment management services. The definition of "Business" does not
include the real estate business presently being conducted by Koll Real Estate
Group, The Koll Company, The Koll Construction Company, Koll International and
any Investment Entity (as defined in the Stock Purchase Agreement) in which KMS
has an interest which is not in the property, facility, asset or investment
management services business.
(b) Covenant Area. The parties agree that due to the nature of
-------------
KMS's Business operations as a real estate service provider throughout all of
North America, due to the fact that such services can be performed throughout
the world and due to the Company's intention to cause KMS to extend the Business
throughout the world, in order for this Agreement to be meaningful it must
restrict Stockholder from competing with the Business throughout all of North
America and the world. Therefore, the parties agree that for the purposes of
this Agreement, "Covenant Area" means the following:
(i) Each and every county with a population on the date
hereof of more than 50,000 in the 48 continental states, Alaska, Hawaii and the
District of Columbia;
(ii) Each and every county of each and every state,
commonwealth and territory of the United States;
3
<PAGE>
(iii) The countries of the United States of America, Canada
and Mexico; and
(iv) Each and every country and territory throughout the
world.
(c) Prohibited Activities. The term "directly or indirectly
---------------------
carry on or participate in a business similar to or in competition with the
Business as currently conducted or planned to be conducted by KMS or any
Subsidiary or Affiliate of KMS" shall include the Stockholder, directly or
indirectly, doing any of the following listed acts:
(i) Whether or not for compensation, directly or indirectly
engaging in any such business, or any part thereof, in the Covenant Area or
assist any other Person (defined below) in such Person's conduct of the
Business, or any part thereof, in the Covenant Area, whether as a director,
officer, employee, consultant, adviser, independent contractor or otherwise; or
(ii) Holding legal or beneficial interest in any Person
that is engaged in any such business, or any part thereof, in the Covenant Area,
whether such interest is as an owner, investor, partner, creditor, joint
venturer or otherwise; provided, however, that the Stockholder may acquire and
own up to two percent (2%) of the outstanding securities of any corporation
which is a publicly traded reporting corporation under the Securities Exchange
Act of 1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"); or
(iii) As agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition or the disposition of
any such business; or
(iv) Giving advice to any other Person, firm or association
engaging in any such business; or
(v) Lending or allowing his name or reputation to be used
in any such business; or
(vi) Soliciting, diverting or attempting to divert from the
Protected Entities any business constituting, or any customer of, any part of
the Business then conducted by KMS or its affiliates; or
(vii) Allowing his or her skill, knowledge or experience to
be used in any such business; provided, however, Stockholder will not be liable
for immaterial violations of Sections 1(c)(iii)-(vii) if he can sustain the
burden of proof that such violation was immaterial, inadvertent and was not
intentional.
4
<PAGE>
(d) Non-Solicitation. In addition to the foregoing, Stockholder
----------------
shall not during the Covenant Period, induce or attempt to induce any Person (i)
engaged or employed currently or within the prior 12 months (whether part-time
or full-time) by the Company or KMS (an "Employee"), or their affiliates,
whether as an officer, employee, consultant, agent, adviser or independent
contractor, to leave the employ of or engagement with the Company, KMS or its
affiliates, as the case may be, or to cease providing the services to or on
behalf of the Company or KMS or their affiliates, as the case may be, then
provided by such Person, or in any other manner seek to engage or employ any
such Person (whether or not for compensation) as an officer, employee,
consultant, agent, adviser or independent contractor such that such Person would
thereafter be unable to devote his or her full attention to the Business then
conducted by the Company or KMS or their affiliates, as the case may be, or (ii)
that is then or has been within the prior 12 months a customer with respect to
the Business to do business with any other Person or to interfere, in any way,
directly or indirectly, with the business relationship between the Company or
KMS or their affiliates and any such customer. This Section 1(d) will not be
violated if Koll Real Estate Group hires an Employee of KMS or its Affiliates in
the ordinary course of its business provided Stockholder did not encourage or
participate in the decision to solicit the Employee for employment by Koll Real
Estate Group.
(e) Covenant Period. The term of the covenants contained in
---------------
Section 1 (the "Covenant Period") shall extend for a period of four (4) years
commencing at the consummation of the transactions contemplated by the Stock
Purchase Agreement.
2. Noncompetition Consideration. The parties agree that, for the
----------------------------
reasons set forth in the Recitals hereto, this Agreement represents a material
inducement to FS to enter into the Stock Purchase Agreement and to consummate
the transactions contemplated thereby and the consideration to be received by
the Stockholder (or the corporations Controlled by him or Affiliated with him)
pursuant to the Stock Purchase Agreement includes consideration payable to
Stockholder for Stockholder's covenants, agreements, representations and
warranties as set forth in this Agreement.
3. Other Definitions. For the purpose of this Agreement:
-----------------
(a) "Affiliate" shall mean an affiliate as such term is defined
---------
in Rule 12b-2 under the Exchange Act.
(b) "Person" means any corporation, partnership, joint venture,
------
trust, sole proprietorship, limited liability company, unincorporated business
association, natural person and any other entity that may be treated as a person
under applicable law; and
(c) "Control" has the meaning assigned that term in Rule 12b-2
-------
under the Exchange Act.
4. Representation and Warranties. Stockholder represents and
-----------------------------
warrants to, and agrees with, Company and its affiliates that:
5
<PAGE>
(a) Stockholder has carefully reviewed this Agreement and
considered all of its terms, and agrees that its scope, duration and terms are
reasonable;
(b) The Unencumbered Shares constitutes all of the Company
Common Stock Controlled by Stockholder which has not been transferred, pledged,
hypothecated, escrowed, made subject to an option or warrant or otherwise
encumbered; and
(c) This Agreement constitutes the legal, valid and binding
obligation of Stockholder enforceable in accordance with its terms.
5. Scope and Reasonableness. The parties agree that it is not their
------------------------
intention to violate any public policy or statutory or common law. The parties
intend that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. The parties intend that the noncompetition
covenants contained in Section 1 be construed as a series of separate covenants
by Stockholder, one covenant for each area, or portion thereof, included in the
Covenant Area, and for each year, or portion thereof, included in the Covenant
Period. Accordingly, to the extent that the covenants hereunder shall be
adjudicated to be invalid or unenforceable in any one such jurisdiction, this
Agreement shall be deemed amended to delete therefrom or reform the portion thus
adjudicated to be invalid or unenforceable, such deletion or reformation to
apply only with respect to the operation of the particular section or provision
of this Agreement in the particular jurisdiction in which such adjudication is
made.
6. Injunctive Relief. Stockholder acknowledges that it would be
-----------------
impossible to determine the amount of damages that would result from any breach
of any of the provisions of this Agreement and that the remedy at law for any
breach, or threatened breach, of any of the provisions of this Agreement would
likely be inadequate and, accordingly, agrees that the Protected Entities shall,
in addition to any other rights or remedies which they may have, be entitled to
seek such equitable and injunctive relief as may be available from any court of
competent jurisdiction to restrain Stockholder from violating any of the
provisions of this Agreement. In connection with any action or proceeding for
injunctive relief, Stockholder hereby waives the claim or defense that a remedy
at law alone is adequate and agrees, to the maximum extent permitted by law, to
have each provision of this Agreement specifically enforced against him, without
the necessity of posting bond or other security against him, and consents to the
entry of injunctive relief against him enjoining or restraining any breach or
threatened breach of this Agreement.
7. Proprietary Information. Stockholder shall for a period of four
-----------------------
(4) years after the date of this Agreement keep confidential and not communicate
or disclose to any Person any proprietary, confidential or non-public
information or material concerning the business, affairs, services, customers or
employees of or relating to the Business or the business of the Protected
Entities (including, without limitation, the identities, location or other
information concerning past, present or potential customers of KMS's or its
subsidiaries' or Affiliates' Business); provided, however, that the foregoing
-------- -------
obligation of Stockholder shall not apply to the extent that (a) Stockholder is,
in the written opinion of legal counsel, required to disclose any of the
foregoing pursuant to the provisions of
6
<PAGE>
applicable law or (b) any such information or material becomes generally known
and available to the public otherwise than by reason of a disclosure or
communication of such information or material by Stockholder.
8. Covenants Independent. The covenants of Stockholder hereunder
---------------------
shall be construed as and shall be independent of the covenants,
representations, warranties and obligations of the Company and FS under the
Stock Purchase Agreement or under any agreement or instrument delivered pursuant
to the transactions contemplated thereby, and accordingly any default by the
Company or FS with respect to any such representation, warranty, covenant or
obligation shall not constitute an excuse for Stockholder failing to perform
hereunder.
9. Governing Law.
-------------
(a) The validity of this Agreement, the construction of its
terms and the determination of the rights and duties of the parties hereto shall
be governed by the internal substantive laws of the State of New York without
regard to conflicts of laws principles. The parties are familiar with provisions
of California law prohibiting noncompetition arrangements in some circumstances,
and in particular with California business Professions Code (S)16600, and hereby
expressly declare that they do not wish to have California law govern this
Agreement.
(b) The parties agree that should any court find the foregoing
clause (a) invalid, the court shall apply the law of the jurisdiction in which
it sits.
(c) On such date as Stockholder no longer owns of record the
Encumbered Shares, Stockholder agrees to enter into a Noncompetition and
Confidentiality Agreement with the Company and FS (or their respective
successors and assigns) substantially identical to this Agreement, except that
the Covenant Period shall expire March 31, 2000. In addition, by his signature
hereon, Stockholder's covenants herein in favor of the Company and FS are deemed
to be entered into on the date Stockholder no longer owns of record the
Encumbered Shares as if made on that date.
10. Miscellaneous.
-------------
(a) Notices. All notices required or desired to be given
-------
hereunder shall be in writing and signed by the party so giving notice, and
shall be effective when personally delivered or deposited in the United States
mail, as certified or registered mail, return receipt requested, first class
postage and fees prepaid, addressed as set forth below, or when deposited into
custody of an established courier guaranteeing overnight delivery. Any
7
<PAGE>
party may from time to time change such party's address for giving notice by
giving notice thereof in the manner outlined above:
If to the Company:
-----------------
KMS Holding Corporation
c/o Freeman Spogli & Co. Incorporated
11100 Santa Monica Boulevard, Suite 1900
Los Angeles, CA 90025
Facsimile: (310) 444-1870
Attention: William M. Wardlaw
If to Stockholder:
-----------------
Donald M. Koll
The Koll Company
4343 Von Karman Avenue
Newport Beach, CA 92660
Facsimile: (714) 250-4344
(b) Enforcement. Should any party hereto retain counsel for the
-----------
purpose of enforcing, or preventing the breach of, any provision hereof,
including, but not limited to, by instituting any action or proceeding in court
to enforce any provision hereof or to enjoin a breach of any provision hereof,
or for a declaration of such party's rights or obligations hereunder, or for any
other judicial remedy, then the prevailing party shall be entitled to be
reimbursed by the losing party for all costs and expenses incurred thereby,
including, but not limited to, attorneys' fees (including costs of appeal).
(c) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of the Company, FS, and their respective successors and assigns. The
Stockholder's obligation hereunder is non-assignable, irrespective of any
assignment by KHC of its rights or obligations under the Stock Purchase
Agreement. The Company and FS may assign their rights and obligations hereunder
to any beneficial owner of 10% or more of Company covenant or any other
Protected Entity.
(d) No Waiver; Amendment. The failure by a Protected Entity to
--------------------
enforce any of its rights hereunder shall not be deemed to be a waiver of such
rights, unless such waiver is in writing and signed by the waiving party, and,
in the case of any corporation, approved by its Board of Directors, or in the
case of a partnership, approved by the Board of Directors of its corporate
general partner. Waiver of any one breach shall not be deemed to be a waiver of
any other breach of the same or any other provision hereof. This Agreement can
be amended only by a written agreement executed by each party hereto.
(e) Gender. All pronouns and any variations thereof shall be
------
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person, persons, entity or entities may require.
8
<PAGE>
(f) Definitions; Headings. A term defined in any part of this
---------------------
Agreement shall have the defined meaning wherever such term is used herein. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any manner the meaning or interpretation of this Agreement.
(g) No Construction Against Any Party. This Agreement was
---------------------------------
reviewed by legal counsel for Stockholder, the Company and FS. This Agreement
is the product of informed negotiations among Stockholder, the Company and FS
and if any part of this Agreement is deemed to be unclear or ambiguous, it shall
be construed as if it were drafted jointly by all parties. Moreover,
Stockholder, the Company and FS each acknowledge that no party was in a superior
bargaining position regarding the substantive terms of this Agreement.
(h) Entire Agreement. This Agreement contains the sole and
----------------
entire agreement and understanding of the parties with respect to the entire
subject matter hereof and thereof and any and all prior discussions,
negotiations, commitments, letters of intent, memoranda, writings and
understandings related hereto and thereto are hereby and thereby superseded.
(i) Effectiveness. This Agreement shall become effective upon
-------------
consummation of the Second Closing as defined in the Stock Purchase Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
KMS HOLDING CORPORATION
By:
-----------------------------
Its:
-----------------------------
FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By:
-----------------------------
J. Frederick Simmons
Vice President and Treasurer
FS EQUITY PARTNERS INTERNATIONAL, L.P.
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By:
-----------------------------
J. Frederick Simmons
Vice President and Treasurer
STOCKHOLDER:
DONALD M. KOLL
-----------------------------
10
<PAGE>
EXHIBIT 10.33
NONCOMPETITION AND CONFIDENTIALITY AGREEMENT
THIS NONCOMPETITION AND CONFIDENTIALITY AGREEMENT ("Agreement") is
made as of this 1st day of April, 1996 by and among KMS Holding Corporation,
a Delaware corporation ("Company"), AP KMS Partners, L.P., a Delaware limited
partnership ("Apollo") and Donald M. Koll (the "Stockholder").
R E C I T A L S :
A. Pursuant to that certain Stock Purchase Agreement dated as of
March 29, 1996 (the "Stock Purchase Agreement") by and among FS, The Koll
Holding Company, a California corporation ("KHC"), The Koll Company, a
California corporation ("TKC"), KHC will sell to Apollo 189,123 shares of the
Company's common stock ("Company Common Stock") at a price of $14.00 per share
for a total purchase price payable by FS of $2,650,522. This Agreement will
become effective upon consummation of the Second Closing as defined in the Stock
Purchase Agreement. Concurrently, pursuant to a separate Stock Purchase
Agreement dated as of March 29, 1996 (the "FS Purchase Agreement") by and among
KHC, TKC, FS Equity Partners III, L.P., a Delaware limited partnership and FS
Equity Partners International, L.P., a Delaware limited partnership
(collectively, "FS") KHC will sell to FS 751,790 shares of Company Common
Stock, at a price of $14.00 per share for a total purchase price payable by FS
of $10,525,000 (cumulatively, the shares of Company Common Stock to be sold to
Apollo and FS will be referred to as the "Unencumbered Shares").
B. As sole trustee and co-beneficiary with his spouse of The Koll
Company Stock Trust which owns 100% of the issued and outstanding shares of TKC,
which in turn owns 100% of the issued and outstanding capital stock of KHC, the
Stockholder exercises Control (as hereinafter defined) over the Unencumbered
Shares. Stockholder is in addition a director and officer of the Company.
C. After consummation of the transactions contemplated by the Stock
Purchase Agreement, KHC will own of record, in addition to the Unencumbered
Shares, 946,037 shares of Company Common Stock (the "Encumbered Shares") of
which (i) 672,000 shares will be subject to an option in favor of Ray Wirta
("Wirta") under that Amended and Restated Option Agreement dated November 23,
1994 by and among TKC, KHC, the Company and Wirta, which option may be exercised
at any time through May 30, 2001 at a price of $4.53 per share; (ii) 100,800
shares will be subject to an option in favor of William S. Rothe ("Rothe") under
that certain Amended and Restated Option Agreement dated November 23, 1994 by
and among TKC, KHC, Wirta and Rothe which option may be exercised at any time
through May 30, 2001 at a price of $4.53 per share; (iii) 173,237
<PAGE>
shares will be held in escrow pursuant to that certain Escrow and Security
Agreement, dated the date hereof, among KHC, Apollo and First Interstate Bank of
California, N.A. (the "Escrow and Security Agreement"); (iv) all 946,037 shares
will be subject to a lien in favor of Apollo pursuant to that certain Pledge
Agreement dated as of October 18, 1995 by and between KHC and Apollo; and all
946,037 shares will be subject to a lien in favor of Safeco Insurance Company of
America ("Safeco") dated November 13, 1995 by and among TKC, KHC, Safeco and
Wirta.
D. The Company's wholly-owned subsidiary, Koll Management Services,
Inc. ("KMS"), is a nation-wide and international provider of property, facility,
asset and investment management services presently being conducted by Koll
Management Services and its Consolidated Subsidiary (collectively, the
"Business"). The definition of "Business" does not include the real estate
business presently being conducted by Koll Real Estate Group, The Koll Company,
The Koll Construction Company, Koll International and any Investment Entity (as
defined in the Stock Purchase Agreement) in which KMS has an interest which is
not in the property, facility, asset or investment management services business.
E. Stockholder possesses significant knowledge and information about
and expertise in the business which is extremely valuable to competitors of KMS,
and Apollo is unwilling to purchase its portion of the Unencumbered Shares
unless Stockholder enters into this Agreement, which is a material inducement to
Apollo to purchase such Unencumbered Shares.
F. Each of the Stockholder, the Company and Apollo are sophisticated
parties experienced in business transactions of this type, and fully understand
(i) the ramifications of the noncompetition, non-solicitation and
confidentiality provisions of this Agreement and (ii) that the laws of each
state with respect to the enforceability of such provisions vary. The parties
are specifically selecting the internal laws of the state of New York to govern
this Agreement in order that it be enforceable against all of them.
G. To provide Apollo with the full value of its acquisition of its
portion of the Unencumbered Shares, particularly the goodwill of the Company
represented thereby, and as a material inducement to the Company to enter into
this Agreement and to consummate the transactions contemplated hereby, the Stock
Purchase Agreement requires that the Stockholder execute and deliver a
noncompetition, non-solicitation and confidentiality agreement with the Company
immediately upon execution of the Stock Purchase Agreement and that the
obligation of Apollo to consummate the stock purchase is conditioned upon the
Stockholder entering into this Agreement.
H. The parties therefore desire to enter into this Agreement in
order to implement the requirements of the Stock Purchase Agreement and to
confirm in Apollo the goodwill of the Company's business represented by the
Unencumbered Shares and all of the benefits to be derived therefrom.
I. Likewise, for reasons similar to those described above, the
Company, the Stockholder and FS intend to enter into a separate noncompetition
and confidentiality
2.
<PAGE>
agreement ("FS Noncompetition Agreement") in identical form to this Agreement in
order to implement the requirements of the FS Purchase Agreement and to confirm
in FS the goodwill of the Company's business represented by its portion of the
Unencumbered Shares and all of the benefits to be derived therefrom. Thus, the
sale of all of the Unencumbered Shares by KHC shall be conditioned on the
execution of this Agreement and the FS Noncompetition Agreement.
A G R E E M E N T :
THEREFORE, in consideration of the purchase of Apollo portion of the
Unencumbered Shares, the consideration to be received by Stockholder as a result
of said stock purchase, the mutual covenants herein contained and other
consideration (the receipt and adequacy of which are hereby acknowledged by
Stockholder), the parties hereby agree as follows:
1. Agreement Not to Compete.
------------------------
(a) During the Covenant Period (defined below) Stockholder shall
not directly or indirectly carry on or participate in any business similar to or
in competition with the Business (or any subsidiary or affiliate of KMS or any
person, corporation, partnership, trust or other organization or entity deriving
title from the Company or KMS to the goodwill of the Business, all of whom
together with KMS and Apollo are sometimes collectively called the "Protected
Entities"). The "Business" as used in this Section 1 means the nation-wide and
international provision of real estate services including property, facility,
asset and investment management services. The definition of "Business" does not
include the real estate business presently being conducted by Koll Real Estate
Group, The Koll Company, The Koll Construction Company, Koll International and
any Investment Entity (as defined in the Stock Purchase Agreement) in which KMS
has an interest which is not in the property, facility, asset or investment
management services business.
(b) Covenant Area. The parties agree that due to the nature of
-------------
KMS's Business operations as a real estate service provider throughout all of
North America, due to the fact that such services can be performed throughout
the world and due to the Company's intention to cause KMS to extend the Business
throughout the world, in order for this Agreement to be meaningful it must
restrict Stockholder from competing with the Business throughout all of North
America and the world. Therefore, the parties agree that for the purposes of
this Agreement, "Covenant Area" means the following:
(i) Each and every county with a population on the date
hereof of more than 50,000 in the 48 continental states, Alaska, Hawaii and the
District of Columbia;
(ii) Each and every county of each and every state,
commonwealth and territory of the United States;
3.
<PAGE>
(iii) The countries of the United States of America, Canada
and Mexico; and
(iv) Each and every country and territory throughout the
world.
(c) Prohibited Activities. The term "directly or indirectly
---------------------
carry on or participate in a business similar to or in competition with the
Business as currently conducted or planned to be conducted by KMS or any
Subsidiary or Affiliate of KMS" shall include the Stockholder, directly or
indirectly, doing any of the following listed acts:
(i) Whether or not for compensation, directly or indirectly
engaging in any such business, or any part thereof, in the Covenant Area or
assist any other Person (defined below) in such Person's conduct of the
Business, or any part thereof, in the Covenant Area, whether as a director,
officer, employee, consultant, adviser, independent contractor or otherwise; or
(ii) Holding legal or beneficial interest in any Person that
is engaged in any such business, or any part thereof, in the Covenant Area,
whether such interest is as an owner, investor, partner, creditor, joint
venturer or otherwise; provided, however, that the Stockholder may acquire and
own up to two percent (2%) of the outstanding securities of any corporation
which is a publicly traded reporting corporation under the Securities Exchange
Act of 1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"); or
(iii) As agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition or the disposition of
any such business; or
(iv) Giving advice to any other Person, firm or association
engaging in any such business; or
(v) Lending or allowing his name or reputation to be used
in any such business; or
(vi) Soliciting, diverting or attempting to divert from the
Protected Entities any business constituting, or any customer of, any part of
the Business then conducted by KMS or its affiliates; or
(vii) Allowing his or her skill, knowledge or experience to
be used in any such business; provided, however, Stockholder will not be liable
for immaterial violations of Sections 1(c)(iii)-(vii) if he can sustain the
burden of proof that such violation was immaterial, inadvertent and was not
intentional.
4.
<PAGE>
(d) Non-Solicitation. In addition to the foregoing, Stockholder
----------------
shall not during the Covenant Period, induce or attempt to induce any Person (i)
engaged or employed currently or within the prior 12 months (whether part-time
or full-time) by the Company or KMS (an "Employee"), or their affiliates,
whether as an officer, employee, consultant, agent, adviser or independent
contractor, to leave the employ of or engagement with the Company, KMS or its
affiliates, as the case may be, or to cease providing the services to or on
behalf of the Company or KMS or their affiliates, as the case may be, then
provided by such Person, or in any other manner seek to engage or employ any
such Person (whether or not for compensation) as an officer, employee,
consultant, agent, adviser or independent contractor such that such Person would
thereafter be unable to devote his or her full attention to the Business then
conducted by the Company or KMS or their affiliates, as the case may be, or (ii)
that is then or has been within the prior 12 months a customer with respect to
the Business to do business with any other Person or to interfere, in any way,
directly or indirectly, with the business relationship between the Company or
KMS or their affiliates and any such customer. This Section 1(d) will not be
violated if Koll Real Estate Group hires an Employee of KMS or its Affiliates in
the ordinary course of its business provided Stockholder did not encourage or
participate in the decision to solicit the Employee for employment by Koll Real
Estate Group.
(e) Covenant Period. The term of the covenants contained in
---------------
Section 1 (the "Covenant Period") shall extend for a period of four (4) years
commencing at the consummation of the transactions contemplated by the Stock
Purchase Agreement.
2. Noncompetition Consideration. The parties agree that, for the
----------------------------
reasons set forth in the Recitals hereto, this Agreement represents a material
inducement to Apollo to enter into the Stock Purchase Agreement and to
consummate the transactions contemplated thereby and the consideration to be
received by the Stockholder (or the corporations Controlled by him or Affiliated
with him) pursuant to the Stock Purchase Agreement includes consideration
payable to Stockholder for Stockholder's covenants, agreements, representations
and warranties as set forth in this Agreement.
3. Other Definitions. For the purpose of this Agreement:
-----------------
(a) "Affiliate" shall mean an affiliate as such term is defined
---------
in Rule 12b-2 under the Exchange Act.
(b) "Person" means any corporation, partnership, joint venture,
------
trust, sole proprietorship, limited liability company, unincorporated business
association, natural person and any other entity that may be treated as a person
under applicable law; and
(c) "Control" has the meaning assigned that term in Rule 12b-2
-------
under the Exchange Act.
4. Representation and Warranties. Stockholder represents and
-----------------------------
warrants to, and agrees with, Company and its affiliates that:
5.
<PAGE>
(a) Stockholder has carefully reviewed this Agreement and
considered all of its terms, and agrees that its scope, duration and terms are
reasonable;
(b) The Unencumbered Shares constitutes all of the Company
Common Stock Controlled by Stockholder which has not been transferred, pledged,
hypothecated, escrowed, made subject to an option or warrant or otherwise
encumbered; and
(c) This Agreement constitutes the legal, valid and binding
obligation of Stockholder enforceable in accordance with its terms.
5. Scope and Reasonableness. The parties agree that it is not their
------------------------
intention to violate any public policy or statutory or common law. The parties
intend that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. The parties intend that the noncompetition
covenants contained in Section 1 be construed as a series of separate covenants
by Stockholder, one covenant for each area, or portion thereof, included in the
Covenant Area, and for each year, or portion thereof, included in the Covenant
Period. Accordingly, to the extent that the covenants hereunder shall be
adjudicated to be invalid or unenforceable in any one such jurisdiction, this
Agreement shall be deemed amended to delete therefrom or reform the portion thus
adjudicated to be invalid or unenforceable, such deletion or reformation to
apply only with respect to the operation of the particular section or provision
of this Agreement in the particular jurisdiction in which such adjudication is
made.
6. Injunctive Relief. Stockholder acknowledges that it would be
-----------------
impossible to determine the amount of damages that would result from any breach
of any of the provisions of this Agreement and that the remedy at law for any
breach, or threatened breach, of any of the provisions of this Agreement would
likely be inadequate and, accordingly, agrees that the Protected Entities shall,
in addition to any other rights or remedies which they may have, be entitled to
seek such equitable and injunctive relief as may be available from any court of
competent jurisdiction to restrain Stockholder from violating any of the
provisions of this Agreement. In connection with any action or proceeding for
injunctive relief, Stockholder hereby waives the claim or defense that a remedy
at law alone is adequate and agrees, to the maximum extent permitted by law, to
have each provision of this Agreement specifically enforced against him, without
the necessity of posting bond or other security against him, and consents to the
entry of injunctive relief against him enjoining or restraining any breach or
threatened breach of this Agreement.
7. Proprietary Information. Stockholder shall for a period of four
-----------------------
(4) years after the date of this Agreement keep confidential and not communicate
or disclose to any Person any proprietary, confidential or non-public
information or material concerning the business, affairs, services, customers or
employees of or relating to the Business or the business of the Protected
Entities (including, without limitation, the identities, location or other
information concerning past, present or potential customers of KMS's or its
subsidiaries' or Affiliates' Business); provided, however, that the foregoing
-------- -------
obligation of Stockholder shall not apply to the extent that (a) Stockholder is,
in the written opinion of legal counsel, required to disclose any of the
foregoing pursuant to the provisions of
6.
<PAGE>
applicable law or (b) any such information or material becomes generally known
and available to the public otherwise than by reason of a disclosure or
communication of such information or material by Stockholder.
8. Covenants Independent. The covenants of Stockholder hereunder
---------------------
shall be construed as and shall be independent of the covenants,
representations, warranties and obligations of the Company and Apollo under the
Stock Purchase Agreement or under any agreement or instrument delivered pursuant
to the transactions contemplated thereby, and accordingly any default by the
Company or Apollo with respect to any such representation, warranty, covenant or
obligation shall not constitute an excuse for Stockholder failing to perform
hereunder.
9. Governing Law.
-------------
(a) The validity of this Agreement, the construction of its terms
and the determination of the rights and duties of the parties hereto shall be
governed by the internal substantive laws of the State of New York without
regard to conflicts of laws principles. The parties are familiar with provisions
of California law prohibiting noncompetition arrangements in some circumstances,
and in particular with California business Professions Code (S)16600, and hereby
expressly declare that they do not wish to have California law govern this
Agreement.
(b) The parties agree that should any court find the foregoing
clause (a) invalid, the court shall apply the law of the jurisdiction in which
it sits.
(c) On such date as Stockholder no longer owns of record the
Encumbered Shares, Stockholder agrees to enter into a Noncompetition and
Confidentiality Agreement with the Company and Apollo (or their respective
successors and assigns) substantially identical to this Agreement, except that
the Covenant Period shall expire March 31, 2000. In addition, by his signature
hereon, Stockholder's covenants herein in favor of the Company and Apollo are
deemed to be entered into on the date Stockholder no longer owns of record the
Encumbered Shares as if made on that date.
10. Miscellaneous.
-------------
(a) Notices. All notices required or desired to be given
-------
hereunder shall be in writing and signed by the party so giving notice, and
shall be effective when personally delivered or deposited in the United States
mail, as certified or registered mail, return receipt requested, first class
postage and fees prepaid, addressed as set forth below, or when deposited into
custody of an established courier guaranteeing overnight delivery. Any
7.
<PAGE>
party may from time to time change such party's address for giving notice by
giving notice thereof in the manner outlined above:
If to the Company:
-----------------
KMS Holding Corporation
c/o Freeman Spogli & Co. Incorporated
11100 Santa Monica Boulevard, Suite 1900
Los Angeles, CA 90025
Facsimile: (310) 444-1870
Attention: William M. Wardlaw
If to Stockholder:
-----------------
Donald M. Koll
The Koll Company
4343 Von Karman Avenue
Newport Beach, CA 92660
Facsimile: (714) 250-4344
If to Apollo:
------------
Apollo Real Estate Advisors, L.P.
38th Floor
New York, NY 10019
Facsimile: ( ) -
Attention: Rick Koenigsberger
(b) Enforcement. Should any party hereto retain counsel for the
-----------
purpose of enforcing, or preventing the breach of, any provision hereof,
including, but not limited to, by instituting any action or proceeding in court
to enforce any provision hereof or to enjoin a breach of any provision hereof,
or for a declaration of such party's rights or obligations hereunder, or for any
other judicial remedy, then the prevailing party shall be entitled to be
reimbursed by the losing party for all costs and expenses incurred thereby,
including, but not limited to, attorneys' fees (including costs of appeal).
(c) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of the Company, Apollo, and their respective successors and assigns.
The Stockholder's obligation hereunder is non-assignable, irrespective of any
assignment by KHC of its rights or obligations under the Stock Purchase
Agreement. The Company and Apollo may assign their rights and obligations
hereunder to any beneficial owner of 10% or more of Company covenant or any
other Protected Entity.
(d) No Waiver; Amendment. The failure by a Protected Entity to
--------------------
enforce any of its rights hereunder shall not be deemed to be a waiver of such
rights, unless such waiver is in writing and signed by the waiving party, and,
in the case of any corporation, approved by its Board of Directors, or in the
case of a partnership, approved by
8.
<PAGE>
the Board of Directors of its corporate general partner. Waiver of any one
breach shall not be deemed to be a waiver of any other breach of the same or any
other provision hereof. This Agreement can be amended only by a written
agreement executed by each party hereto.
(e) Gender. All pronouns and any variations thereof shall be
------
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person, persons, entity or entities may require.
(f) Definitions; Headings. A term defined in any part of this
---------------------
Agreement shall have the defined meaning wherever such term is used herein. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any manner the meaning or interpretation of this Agreement.
(g) No Construction Against Any Party. This Agreement was
---------------------------------
reviewed by legal counsel for Stockholder, the Company and Apollo. This
Agreement is the product of informed negotiations among Stockholder, the Company
and Apollo and if any part of this Agreement is deemed to be unclear or
ambiguous, it shall be construed as if it were drafted jointly by all parties.
Moreover, Stockholder, the Company and Apollo each acknowledge that no party was
in a superior bargaining position regarding the substantive terms of this
Agreement.
(h) Entire Agreement. This Agreement contains the sole and
----------------
entire agreement and understanding of the parties with respect to the entire
subject matter hereof and thereof and any and all prior discussions,
negotiations, commitments, letters of intent, memoranda, writings and
understandings related hereto and thereto are hereby and thereby superseded.
(i) Effectiveness. This Agreement shall become effective upon
-------------
consummation of the Second Closing as defined in the Stock Purchase Agreement.
9.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
KMS HOLDING CORPORATION
By: /s/
------------------------------
Its:
-----------------------------
AP KMS PARTNERS, L.P.
By: AP-GP KMS Partners, L.P.
Its: General Partner
By: AP KMS Acquisition Corporation
Its: General Partner
By:
-----------------------------
Its:
-----------------------------
STOCKHOLDER:
DONALD M. KOLL
----------------------------------
10.
<PAGE>
Its: General Partner
By:
-----------------------------
Its:
-----------------------------
STOCKHOLDER:
DONALD M. KOLL
/s/ Donald M. Koll
-------------------------------
11.
<PAGE>
EXHIBIT 10.35
* Confidential Treatment
Requested
FIRST AMENDMENT TO AGREEMENT OF GENERAL
PARTNERSHIP OF KOLL/CC&F MANAGEMENT SERVICES
--------------------------------------------
THIS FIRST AMENDMENT TO AGREEMENT OF GENERAL PARTNERSHIP OF KOLL/CC&F
MANAGEMENT SERVICES ("Amendment") is entered into effective as of November 1,
---------
1993, by and between KOLL MANAGEMENT SERVICES, INC., a Delaware corporation
("Koll"), and CC&F ASSET MANAGEMENT CO., INC., a Delaware corporation
("CC&FAM"). Except where otherwise defined herein, capitalized terms in this
Amendment shall have the meanings assigned to them in the Agreement (as defined
in Recital A below).
R E C I T A L S:
- - - - - - - -
A. Koll/CC&F Management Services, a California general partnership
(the "Partnership") was formed pursuant to that certain Agreement of General
-----------
Partnership of Koll/CC&F Management Services dated effective as of January 1,
1992 (the "Agreement").
---------
B. Concurrently herewith, Koll has assigned certain assets acquired
from Rubloff Inc., a Delaware corporation ("Rubloff"), pursuant to that certain
Asset Purchase Agreement dated June 11, 1993 and that certain Master Consulting
Agreement dated June 30, 1993 (the "Consulting Agreement"), to the Partnership.
C. The Partners now desire to amend the Agreement (i) to modify the
Put/Call provisions in certain respects, and (ii) to provide for such other
changes to the Agreement as the Partners deem appropriate.
NOW, THEREFORE, with respect to the foregoing Recitals, and in
consideration of the mutual covenants 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:
A G R E E M E N T:
- - - - - - - - -
<PAGE>
1. The defined term "Project Territory" defined in Section 1.06 is
hereby modified to mean the New England area (including, without limitation, the
Boston metropolitan area), the metropolitan areas of New York, New York,
Chicago, Illinois, Baltimore, Maryland, Philadelphia, Pennsylvania and
Washington, D.C., and the states of New York and New Jersey. The metropolitan
area of Chicago, Illinois shall hereinafter be referred to as the "Chicago
Region."
2. New Section 2.01(d) is hereby added to the Agreement to read as
follows:
"(d) From and after the effective date of the First Amendment to
the Agreement, a committee (the "Planning Committee") composed of one of
------------------
the Designated Representatives of CC&FAM, one of the Designated
Representatives of Koll, the President of the Rubloff division of Koll and
the President of the Chicago Region of the Partnership shall be responsible
for reviewing, and making recommendations to the President of the Chicago
Region with respect to, budgets and financial and/or strategic plans for
the Chicago Region. The Planning Committee shall meet at such regularly
scheduled intervals as may be determined by the Planning Committee but not
less often than semi-annually, unless such meeting shall be waived in
writing by both Partners. Dates, times and places of such meetings shall be
determined by the Planning Committee."
3. The first and second sentences of Section 7.01 of the Agreement
are hereby deleted and revised sentences are substituted in their stead to read
as follows:
"At any time during the thirty (30) day period immediately following March
1, 1997 (or the thirty (30) day period immediately following March 1, 1998
if CC&FAM fails to elect to put its Partnership Interest during the thirty
(30) day period immediately following March 1, 1997) (such date, whether it
be March 1, 1997, or March 1, 1998, shall hereinafter be referred to as the
"Put/Call Date"), CC&FAM shall have the exclusive right, but not the
obligation, to put its entire Partnership Interest to Koll for the Purchase
Price determined pursuant to Section 7.02 below. In the event CC&FAM fails
to so elect within both such thirty (30) day periods, then for a period of
ten (10) business days following the expiration of the thirty (30) day
period immediately following March 1, 1998, Koll shall have the right, but
not the obligation, to call the
2
<PAGE>
entire Partnership Interest of CC&FAM for the Purchase Price determined
pursuant to Section 7.02 below."
4. Clause (i) of the first sentence of Section 7.02 is hereby deleted
and revised clause (i) is substituted in its stead to read as follows:
"(i) dividing the daily average share price of the publicly-
traded shares of Koll for the most recent twelve (12) calendar month period
ending prior to the Put/Call Date by Koll's total Net Income per share for
the four (4) calendar quarters of the most recent calendar year ending
prior to the Put/Call Date as set forth on the applicable filed Quarterly
Reports (Forms 10-Q) (and for one such calendar quarter, the applicable
filed Annual Report (Form 10-K)) (the "Determination Period"). . . ."
5. Clause (ii) of the second sentence of Section 7.02 relating to the
definition of the term "Net Income" as it relates to the Partnership and the
sentence which immediately follows such clause (ii) are hereby deleted and a
revised clause (ii) and the following sentence are substituted in their stead to
read as follows:
"(ii) in the case of the Partnership, the net income (determined by
the accountants regularly employed by the Partnership using generally
accepted accounting principles, consistently applied) of the Partnership
for the Determination Period plus interest, depreciation, amortization, and
state and federal taxes for the Determination Period, and plus any payment
of the Consultant's Fee (as defined in the Consulting Agreement) to Rubloff
which payment was an adjustment to such net income for the Determination
Period. No later than the Put/Call Date, the independent certified public
accountants regularly employed by the Partnership shall determine the Net
Income per share of Koll for the period described in clause (i) of the
first sentence of this Section 7.02 and deliver notice thereof to the
Partners."
6. Notwithstanding anything to the contrary contained in Sections
7.02 and 7.04, the Purchase Price and Designated Purchase Price as of any
relevant date of determination shall not be less than CC&FAM's Unrecovered
Acquisition Contribution Account associated with the acquisition of the Rubloff
division (i.e., * ) and the
Purchase Price and Designated Purchase Price as each relates to the Chicago
Region only as of any relevant date of determination shall be no more than the
sum of (i) the positive balance, if any, in CC&FAM's Unrecovered Acquisition
Contribution
3
* Confidential Treatment
Requested
<PAGE>
Account associated with the Chicago Region as of such date, (ii) outstanding
advances associated with the Chicago Region made to the Partnership by CC&FAM
pursuant to Section 3.06 and unpaid as of such date and (iii) a twenty-five
percent (25%) per annum return (compounded annually) on (A) the positive balance
in CC&FAM's Unrecovered Acquisition Contribution Account associated with the
Chicago Region from the date capital was initially contributed to the
Partnership by CC&FAM until returned to CC&FAM pursuant to the provisions of the
Partnership Agreement and (B) advances associated with the Chicago Region made
to the Partnership by CC&FAM pursuant to Section 3.06 from the date any such
advance was initially made to the Partnership by CC&FAM until such advance was
repaid by the Partnership to CC&FAM pursuant to the provisions of the
Partnership Agreement.
7. Each Partner's Unrecovered Acquisition Contribution Account shall
be calculated on a first in, first out basis.
8. In the event that on Liquidation of the Partnership pursuant to
Section 8.02, CC&FAM has a positive balance in its Unrecovered Acquisition
Contribution Account associated with the acquisition of the Rubloff division
following contributions by the Partners to restore any negative Capital Accounts
pursuant to Section 8.03 and following distribution of the proceeds of such
Liquidation pursuant to Section 8.02(c), Koll shall be obligated to contribute
an amount to the capital of the Partnership equal to the positive balance in
CC&FAM's Unrecovered Acquisition Contribution Account associated with the
acquisition of the Rubloff division, which amount shall be distributed by the
Partnership to CC&FAM immediately upon its receipt from Koll.
9. In the event of a put or call of CC&FAM's Partnership Interest
pursuant to the provisions of Article VII, Koll shall be obligated to repay any
outstanding principal of, and accrued and unpaid interest on, any loan made by
CC&FAM to the Partnership pursuant to Section 3.06 during the term of the
Partnership.
10. Each party to this Amendment hereby agrees to perform any further
acts and execute and deliver any further documents and instruments as may be
reasonably necessary to implement the provisions of this Amendment and the
transactions contemplated herein.
4
<PAGE>
11. Except as expressly modified hereby, all other terms and
provisions of the Agreement shall remain in full force and effect, are
incorporated herein by this reference and shall govern the conduct of the
parties hereto; provided, however, to the extent of any inconsistency between
the provisions of the Agreement and the provisions of this Amendment, the
provisions of this Amendment shall control.
12. This Amendment may be executed in multiple counterparts, each of
which shall be deemed an original instrument, and all of which, taken together,
shall constitute one and the same instrument. The signature of any party hereto
to any counterpart hereof shall be deemed a signature to, and may be appended
to, any other counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first set forth above.
KOLL MANAGEMENT SERVICES, INC., a Delaware
corporation
By:
Its:
CC&F ASSET MANAGEMENT CO., INC., a Delaware
corporation
By:
Its:
5
<PAGE>
EXHIBIT 10.36
*Confidential Treatment Requested
STOCK PURCHASE AGREEMENT
by and among
DANIEL M. ARDELL
and
DAVID B. ARDELL, as Trustee of
the David Barclay Ardell and Cynthia Sieling Ardell
Family Trust dated January 18, 1985
as "Sellers,"
KOLL MANAGEMENT SERVICES, INC.,
as "Buyer,"
and
D.A. MANAGEMENT, INC.,
as the "Company" being sold
Dated: Effective as of March 31, 1993
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE AND SALE OF STOCK........................... 1
1.1 Transfer of Stock.................................... 1
1.2 Consideration for Stock.............................. 2
1.3 Excluded Assets...................................... 2
ARTICLE II CLOSING.............................................. 3
2.1 Closing.............................................. 3
2.2 Documents to be Delivered............................ 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE
COMPANY............................................. 3
3.1 Organization and Qualification....................... 3
3.2 Capitalization....................................... 4
3.3 Ownership of Shares.................................. 4
3.4 Authorization........................................ 4
3.5 No Conflict or Violation............................. 5
3.6 Consents and Approvals............................... 5
3.7 Financial Statements................................. 5
3.8 Books and Records.................................... 5
3.9 Litigation........................................... 6
3.10 Compliance with Law.................................. 6
3.11 Permits.............................................. 6
3.12 Liabilities.......................................... 6
3.13 Labor Matters........................................ 7
3.14 Benefit Arrangements................................. 7
3.15 Brokers and Finders.................................. 7
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.16 No Other Agreements to Sell the Company.............. 7
3.17 Indebtedness of Sellers.............................. 8
3.18 Distributions........................................ 8
3.19 Material Misstatements or Omissions.................. 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.............. 8
4.1 Organization of Buyer................................ 8
4.2 Authorization........................................ 8
4.3 Brokerage/Finders Fees............................... 9
4.4 No Conflict or Violation............................. 9
ARTICLE V ACTIONS BY SELLERS, THE COMPANY AND BUYER
PRIOR TO THE CLOSING................................ 9
5.1 Maintenance of Business.............................. 9
5.2 Investigation by Buyer............................... 10
5.3 Notification of Certain Matters...................... 10
ARTICLE VI CONDITIONS TO SELLERS' OBLIGATIONS................... 10
6.1 Representations, Warranties and Covenants............ 10
6.2 No Governmental Proceeding or Litigation............. 10
6.3 Employment Agreement................................. 10
ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS.................... 11
7.1 Representations, Warranties and Covenants............ 11
7.2 No Governmental Proceeding or Litigation............. 11
7.3 Corporate Documents.................................. 11
7.4 Employment Agreements................................ 11
ARTICLE VIII COVENANT NOT TO COMPETE.............................. 11
</TABLE>
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TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.1 Covenant 11
8.2 Injunctive Relief.................................... 12
ARTICLE IX INDEMNIFICATION...................................... 12
9.1 Survival of Representations, Etc..................... 12
9.2 Indemnification...................................... 13
ARTICLE X COMPANY OPERATIONS................................... 14
10.1 Day-to-Day Management................................ 14
10.2 Approval by Board of Directors....................... 14
10.3 Working Capital...................................... 15
ARTICLE XI MISCELLANEOUS........................................ 15
11.1 Termination.......................................... 15
11.2 Assignment........................................... 16
11.3 Notices.............................................. 16
11.4 Choice of Law........................................ 17
11.5 Entire Agreement; Amendments and Waivers............. 17
11.6 Counterparts......................................... 18
11.7 Invalidity........................................... 18
11.8 Headings............................................. 18
11.9 Further Assurances................................... 18
11.10 Expenses............................................. 18
11.11 Attorneys Fees....................................... 18
11.12 Publicity............................................ 18
11.13 Confidential Information............................. 19
11.14 Trading Stock of Buyer............................... 19
</TABLE>
-iii-
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
11.15 Grant of Buyer Stock Options......................... 19
11.16 Books and Records of the Company..................... 19
11.17 Health Insurance..................................... 20
11.18 Miscellaneous........................................ 20
ARTICLE XII DEFINITIONS.......................................... 20
12.1 Affiliate............................................ 20
12.2 Ardell Trust......................................... 21
12.3 Benefit Arrangement.................................. 21
12.4 Business............................................. 21
12.5 Buyer................................................ 21
12.6 Closing.............................................. 21
12.7 Closing Date......................................... 21
12.8 Company.............................................. 21
12.9 Damages.............................................. 21
12.10 Down Payment......................................... 21
12.11 Effective Date....................................... 21
12.12 Employment Agreement................................. 21
12.13 Excluded Assets...................................... 21
12.14 Non-OCERS Expenses................................... 22
12.15 OCERS................................................ 22
12.16 Purchase Price....................................... 22
12.17 Representative....................................... 22
12.18 SBCERA............................................... 22
12.19 Sellers.............................................. 22
</TABLE>
-iv-
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TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
12.20 Stock................................................ 22
</TABLE>
-v-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT, dated effective as of March 31, 1993,
is made by and among DANIEL M. ARDELL and DAVID B. ARDELL, as Trustee of the
David Barclay Ardell and Cynthia Sieling Ardell Family Trust dated January 18,
1985 ("Ardell Trust") (collectively, "Sellers"), KOLL MANAGEMENT SERVICES, INC.,
a Delaware corporation ("Buyer"), and D.A. MANAGEMENT, INC., a California
corporation (the "Company"). A glossary of defined terms used herein is set
forth in Article XI.
R E C I T A L S :
- - - - - - - -
A. Sellers each own one thousand (1,000) shares of common stock,
$1.00 par value, of the Company (collectively, the "Stock"), constituting all of
the issued and outstanding capital stock of the Company. The Company currently
engages in the business of (i) providing pension advisory services to the Orange
County Employee Retirement System ("OCERS") and (ii) providing property
management services to OCERS with respect to certain office buildings,
industrial buildings and neighborhood shopping centers owned by OCERS and
located in Riverside, Orange and Los Angeles Counties and two (2) apartment
buildings and a specialty shopping center owned by OCERS and located in and
around Phoenix, Arizona (collectively, the "Business").
B. Buyer desires to purchase from Sellers, and Sellers desire to
transfer to Buyer, all of the Stock upon the terms and subject to the conditions
set forth in this Agreement.
A G R E E M E N T :
- - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
PURCHASE AND SALE OF STOCK
--------------------------
1.1 Transfer of Stock
-----------------
Upon the terms and subject to the conditions contained herein, Sellers
shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall
acquire on the Closing Date, the Stock free and clear of all liens and
encumbrances.
<PAGE>
*Confidential Treatment Requested
1.2 Consideration for Stock
-----------------------
(a) Upon the terms and subject to the conditions contained herein,
as consideration for the purchase of the Stock and Sellers' covenant not
to compete set forth in Article VIII hereof, Buyer shall pay to Sellers
* Dollars ($ * ), as adjusted pursuant to
Section 1.2(b) (the "Purchase Price"). The Purchase Price shall be paid
* Dollars ($ * ) (the "Down Payment") on the
Closing Date, with the balance payable as set forth in Section 1.2(b).
(b) The Purchase Price shall be increased by the amount by which
the current account receivables (to the extent ultimately collected by the
Company) and prepaid operating expenses of the Company as of the Effective
Date exceed the current account payables of the Company as of the Effective
Date. Attached hereto as Exhibit "A" is a schedule of the current account
-----------
receivables, prepaid operating expenses and current account payables of the
Company as of the Effective Date. The Company is authorized to satisfy the
Company's outstanding line of credit with Union Bank from the proceeds of
such account receivables as received by the Company, which amounts shall be
deemed payments of the Purchase Price to the Sellers. The increase to the
Purchase Price referenced in this Section 1.2(b) shall be payable as the
account receivables set forth on Exhibit "A" which have not been collected
-----------
by the Company as of the Closing Date are collected by the Company. To the
extent any account receivables set forth on Exhibit "A" have been collected
-----------
as of the Closing Date, such amount plus an amount equal to the prepaid
operating expenses set forth on Exhibit "A" less an amount equal to the
account payables set forth on Exhibit "A" shall be paid to Sellers on the
Closing Date.
1.3 Excluded Assets
---------------
Prior to the Closing, the Company shall distribute or assign to
Sellers (a) all rights to receive payments, including both principal and accrued
interest, pursuant to that certain * Dollars ($ * )
promissory note executed by Sellers in favor of the Company, (b) the 1991 Toyota
Supra and the 1990 Acura automobiles, (c) shares of stock in Los Arbolitos,
S.A., a Dominican Republic corporation, (d) refund of federal income taxes paid
in years previous to the fiscal year ended March 31, 1993 by reason of the
application of a net operating loss carryback from the fiscal year ended March
31, 1993, and (e) any and all right, title and interest in and to any
compensation currently owed or which may be owed in the future to the Company by
the San Bernardino County Employees Retirement Association ("SBCERA"), together
with any and all claims and/or causes of action which the Company may have
against SBCERA, resulting from or in connection with the rendition by the
Company of pension advisory services and/or asset, property or facilities
management services to SBCERA prior to the Closing. Prior to the Closing, the
Company shall terminate its existing defined contribution profit sharing plan
and distribute the benefits to, or roll-over the benefits for, the participants,
as provided in such profit sharing plan. The assets described in subparagraphs
(a), (b), (c), (d) and (e) of this Section 1.4 and the Company's existing
defined contribution profit sharing plan shall hereinafter be referred to as
"Excluded Assets."
-2-
<PAGE>
ARTICLE II
----------
CLOSING
-------
2.1 Closing
-------
The closing of the transactions contemplated herein (the "Closing")
shall be held at 10:00 a.m. local time on May 21, 1993, or such other date as
may be mutually agreed upon in writing by Sellers and Buyer (the "Closing
Date"), at the offices of Buyer, 4343 Von Karman Avenue, Newport Beach,
California 92660.
2.2 Documents to be Delivered
-------------------------
To effect the transfer of the Stock referred to in Section 1.1 and the
delivery of the consideration described in Section 1.2 hereof, Sellers and Buyer
shall, on the Closing Date, deliver the following:
(a) Sellers shall deliver to Buyer certificate(s) evidencing the
Stock, free and clear of any liens and encumbrances of any nature
whatsoever, duly endorsed in blank for transfer or accompanied by stock
powers duly executed in blank.
(b) Buyer and Sellers shall each deliver all documents required
to be delivered by them, respectively, pursuant to Articles VI and VII,
respectively.
(c) Buyer shall deliver the Down Payment to Sellers by certified
check or wire transfer of readily available funds.
(d) All instruments and documents executed and delivered to Buyer
pursuant hereto shall be in form and substance, and shall be executed in a
manner, reasonably satisfactory to Buyer. All instruments and documents
executed and delivered to Sellers pursuant hereto shall be in form and
substance, and shall be executed in a manner, reasonably satisfactory to
Sellers.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
OF SELLERS AND THE COMPANY
--------------------------
Sellers, David B. Ardell and the Company hereby, jointly and
severally, represent and warrant to Buyer, except as set forth on the Disclosure
Schedule attached hereto as Exhibit "B", the following:
-----------
3.1 Organization and Qualification
------------------------------
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has the requisite
power and authority to conduct its business as it is now being conducted.
-3-
<PAGE>
3.2 Capitalization
--------------
The Company has authorized one million (1,000,000) shares of common
stock, $1.00 par value, two thousand (2,000) shares of which are validly issued
and outstanding, fully paid and nonassessable. No shares of common stock are
held in the treasury of the Company. All of the shares of common stock of the
Company are owned by Sellers. There are no other shares of capital stock or
other equity securities of the Company outstanding, and no other outstanding
options, warrants, rights to subscribe (including any preemptive rights), calls
or commitments of any character whatsoever to which the Company is a party or
may be bound, requiring the issuance or sale of shares of any capital stock or
other equity securities of the Company or securities or rights convertible into
or exchangeable for such shares or other equity securities, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to issue additional shares of its capital stock or other
equity securities or options, warrants or rights to purchase or acquire any
additional shares of its capital stock or other equity securities or securities
convertible into or exchangeable for such shares or other equity securities.
3.3 Ownership of Shares
-------------------
Sellers (a) are the record and beneficial owners of all of the
outstanding capital stock of the Company, (b) have good and marketable title to
all of the Stock and (c) have the absolute right, power and authority to sell,
transfer and deliver the Stock, in each case free and clear of all encumbrances.
Except for the Stock, Sellers do not own any, and there are no, additional
shares of capital stock of the Company issued and outstanding. There are no
options, warrants, rights,' calls, commitments or other agreements of any
character whatsoever relating to the Stock owned by either Seller.
3.4 Authorization
-------------
The Company, each Seller and David B. Ardell have the requisite power
and authority to enter into this Agreement, to perform their respective
obligations hereunder, and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been duly approved
by the Board of Directors and the shareholders of the Company. No other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company, each Seller and David B. Ardell and
constitutes a legal, valid and binding obligation of the Company, each Seller
and David B. Ardell, enforceable against the Company, each Seller and David B.
Ardell in accordance with its terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws, or by equitable principles, relating to or limiting the rights of
creditors generally and, (b) limitations imposed by law or equitable principles
upon the availability of specific performance, injunctive relief or other
equitable remedies.
-4-
<PAGE>
3.5 No Conflict or Violation
------------------------
Neither the execution and delivery of this Agreement by the Company,
each Seller and David B. Ardell, nor the consummation of the transactions
contemplated hereby, nor compliance by the Company, the Sellers and David B.
Ardell with any of the provisions hereof will (a) violate, conflict with, or
result in a breach of any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any encumbrance upon any of the properties or assets of the Company
under, any of the terms, conditions or provisions of (i) the Articles of
Incorporation or Bylaws of the Company or (ii) any note, bond, mortgage,
indenture, deed of trust, security or pledge agreement, license, lease,
franchise, permit, agreement or other instrument or obligation to which the
Company, either Seller or David B. Ardell is a party or to which the Company,
either Seller, David B. Ardell or any of the properties or assets of the Company
may be subject, (b) violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, either Seller,
David B. Ardell or any of the properties or assets of the Company.
3.6 Consents and Approvals
----------------------
No notice to, declaration, filing or registration with, or
authorization, consent or approval of, or permit from, any domestic or foreign
governmental or regulatory body or authority, or any other person or entity, is
necessary in connection with the execution and delivery of this Agreement by the
Sellers, David B. Ardell and the Company and the consummation by the Sellers,
David B. Ardell and the Company of the transactions contemplated by this
Agreement other than notice to the Securities and Exchange Commission of the
change in the Company's ownership in connection with the Company's status as a
registered investment advisor.
3.7 Financial Statements
--------------------
The balance sheet and related statement of earnings and retained
earnings and cash flows for the Company as of March 31, 1993 (the "Financial
Statements") attached hereto as Exhibit "C" have been prepared in conformity
----------
with generally accepted accounting principles (except for the absence of
footnotes thereto) consistently applied throughout the periods covered thereby.
The Financial Statements fairly and accurately present in all material respects
the assets, liabilities and financial position of the Company as of the date
thereof and the results of operations and changes in shareholders' equity and
cash flows for the periods then ended. There have been no payments to third
parties since the date of the Financial Statements except in the ordinary course
of business and consistent with the Company's past practice.
3.8 Books and Records
-----------------
The books and records to which access was given Buyer prior to the
date hereof are the actual books and records of the Company and accurately and
fairly reflect the activities, transactions, revenues and expenses of the
Company, and the budget for the fiscal year ending
-5-
<PAGE>
March 31, 1994 attached hereto as Exhibit "D" was prepared in good faith and
----------
with reasonable diligence. Buyer understands and agrees, however, that such
budget is not a guarantee of future performance of the Company, and that it is
based on a variety of assumptions which may or may not occur, and many of which
are outside the control of the Company and its officers and directors.
3.9 Litigation
----------
To the best of their knowledge, there are no actions, suits,
investigations or proceedings by, against, involving or relating to the Company,
at law or in equity, or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality in
which any claim has been made or asserted against the Company. There is
outstanding no garnishment, attachment or writ of execution issued with
reference to the Company or any of the assets of the Company. The Company is not
a party or subject to any judgment, decree or order enjoining it in respect of
any business practice or the conduct of business in any area.
3.10 Compliance with Law
-------------------
The Company has not violated or failed to materially comply with any
statute, law, ordinance, regulation, rule, decree or order of any foreign,
federal, state or local government or any other governmental department or
agency, or any judgment, decree or order of any court, applicable to its
Business or operations. The conduct of the Company's Business is in material
conformity with all building code, health and environmental requirements. The
conduct of the Company's Business is in material conformity with all energy,
public utility, zoning and OSHA requirements and all other foreign, federal,
state and local governmental and regulatory requirements except where the
aggregate of all such non-conformities would not have a material adverse effect
on the Company. The Company has not received any notice to the effect that, or
otherwise been advised that, it is not in compliance with, and the Company has
no reason to anticipate that any presently existing circumstances are likely to
result in the violation of, any such statute, law, ordinance, regulation, rule,
judgment, decree or order.
3.11 Permits
-------
The Company has all permits from governmental agencies required to
conduct its present Business as now being conducted, except such permits the
failure of which to obtain would not have a material adverse effect on the
Company.
3.12 Liabilities
-----------
The Company has no liabilities, obligations or commitments of any
nature (whether accrued, absolute, contingent or otherwise and whether matured
or unmatured), due or to become due, except (a) liabilities reflected or
provided for in the Financial Statements and (b) liabilities incurred since the
date of the Financial Statements in the ordinary course of business and
consistent with the Company's past practice.
-6-
<PAGE>
3.13 Labor Matters
-------------
The Company has not entered into any written employment agreement with any
employees. Except as provided by law, the employment of all persons presently
employed or retained by the Company is terminable at will. The Company is not a
party to any collective bargaining agreement, nor is the Company subject to any
organizing efforts of any labor union, organization, local or subdivision. There
are no labor grievances, or investigations, claims or suits concerning
employment pending or threatened against the Company. The Company has not
entered into any agreement, oral or written, with any present or former employee
of the Company that will result in a commitment or obligation (absolute or
contingent) of the Company and/or Buyer to make any payment to any present or
former employee of the Company following his or her termination of employment.
The Company does not maintain, participate in or contribute to, has never
maintained, participated in or contributed to, and has not announced plans or
legally binding commitments to maintain, participate in or contribute to, any
qualified or non-qualified pension or profit-sharing plan and/or other form of
deferred compensation and/or post-retirement insurance, compensation or benefits
which covers or has covered any employees or former employees of the Company
exclusive of Benefit Arrangements (as defined below).
3.14 Benefit Arrangements
--------------------
Each written plan, arrangement, program, agreement or commitment providing
for insurance coverage (including any self-insured arrangement), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, and life, health, disability or accident benefits which covers or has
covered any employees of the Company (collectively, "Benefit Arrangements"), has
been maintained in compliance with its terms and with the requirements described
by any and all statutes, orders, rules and regulations which are applicable to
such Benefit Arrangement. Set forth on Exhibit "E" is a complete and accurate
-----------
description of each Benefit Arrangement of the Company. True, complete and
correct copies of each Benefit Arrangement including written interpretations
thereof and written descriptions thereof which have been distributed to the
Company's employees or former employees and a complete description of any such
Benefit Arrangement which is not in writing, have been delivered by the Company
to Buyer.
3.15 Brokers and Finders
-------------------
Neither of the Sellers, the Company nor any of the Company's officers,
directors, employees or agents have employed any broker, finder or similar agent
or incurred any liability for any brokerage fees, commissions, finder's fees or
similar payments in connection with the transactions contemplated by this
Agreement, except for certain finder's fees due Ted Ardell and Mark Poochigian,
which fees shall be the sole responsibility of the Sellers.
3.16 No Other Agreements to Sell the Company
---------------------------------------
Neither the Company nor either Seller has any commitment or legal
obligation, absolute or contingent, to any person or firm other than Buyer to
(a) sell, assign or transfer any material portion of the assets of the Company,
any assets of the Company not in the ordinary
-7-
<PAGE>
course of business or a majority of the capital stock of the Company, (b) effect
any merger, consolidation or other reorganization of the Company or (c) enter
into an agreement to do any of the foregoing.
3.17 Indebtedness of Sellers
-----------------------
Neither David B. Ardell nor either Seller has obtained any loans or
incurred any indebtedness for which any property, assets or securities of the
Company is pledged as collateral and there are no encumbrances on any of the
properties, assets or securities of the Company imposed in connection with any
indebtedness or other obligations of either Seller or David B. Ardell.
3.18 Distributions
-------------
There have been no distributions from the Company to the Sellers since
the date of the Financial Statements and no compensation paid to the Sellers
since the date of the Financial Statements except a distribution of the cash
account set forth on the Financial Statements and payments of base salary to
Daniel M. Ardell consistent with an annualized salary of One Hundred Seventy-
Five Thousand Dollars ($175,000).
3.19 Material Misstatements or Omissions
-----------------------------------
No representation or warranty by the Company, either Seller or David
B. Ardell in this Agreement, or in any document, exhibit, statement, certificate
or schedule heretofore or hereinafter furnished or made available to the Buyer
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement, including, without limitation, the Disclosure Schedule,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements or facts
contained therein not misleading.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Sellers as follows:
4.1 Organization of Buyer
---------------------
Buyer is duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the requisite power and authority to
conduct its business as it is now being conducted.
4.2 Authorization
-------------
Buyer has the requisite power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Buyer and the consummation by Buyer of the
-8-
<PAGE>
transactions contemplated hereby have been duly approved by the Board of
Directors of Buyer. No other corporate proceedings on apart of Buyer are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Buyer and constitutes a
legal, valid and binding obligation of Buyer, enforceable against it in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium and other similar laws, or by
equitable principles, relating to or limiting the rights of creditors generally
and (b) limitations imposed by law or equitable principles upon the availability
of specific performance, injunctive relief or other equitable remedies.
4.3 Brokerage/Finders Fees
----------------------
Neither Buyer nor any of its officers, directors, employees or agents
have employed any broker, finder or similar agent or incurred any liability for
any brokerage fees, commissions, finder's fees or similar payments in connection
with the transactions contemplated by this Agreement.
4.4 No Conflict or Violation
------------------------
Neither the execution and delivery of this Agreement by Buyer, nor the
consummation of the transactions contemplated hereby, nor compliance by Buyer
with any of the provisions hereby will result in (a) a violation of or a
conflict with any provision of the Articles of Incorporation or Bylaws of Buyer,
(b) a breach of, or a default under, any term or provision of any contract,
agreement, indebtedness, lease, commitment, license, franchise, permit,
authorization or concession to which Buyer is a party which breach or default
would have a material adverse effect on the business or financial condition of
Buyer or its ability to consummate the transactions contemplated hereby or (c) a
violation by Buyer of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree or award, which violation would have a
material adverse effect on the business or financial condition of Buyer or its
ability to consummate the transactions contemplated hereby.
ARTICLE V
---------
ACTIONS BY SELLERS, THE COMPANY
-------------------------------
AND BUYER PRIOR TO THE CLOSING
------------------------------
Sellers, the Company and Buyer covenant as follows for the period from
the date hereof through the Closing Date:
5.1 Maintenance of Business
-----------------------
The Business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of business and
consistent with past practice, and the Company shall use its best efforts to
maintain and preserve its Business, assets, prospects, employees, suppliers,
customers and other advantageous business relationships.
-9-
<PAGE>
5.2 Investigation by Buyer
----------------------
Sellers and the Company shall allow Buyer during regular business
hours through Buyer's Representatives, to make such investigation of the
Business, properties, books and records of the Company, and to conduct such
examination of the condition of the Company, as Buyer deems necessary or
advisable to familiarize itself with such Business, properties, books, records,
condition and other matters, and to verify the representations and warranties of
Sellers and the Company hereunder.
5.3 Notification of Certain Matters
-------------------------------
Sellers shall give prompt notice to Buyer, and Buyer shall give prompt
notice to Sellers, of (a) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect any time from the date hereof to the Closing Date and (b) any material
failure of Sellers, the Company or Buyer, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, and each party shall use all reasonable efforts to remedy same.
ARTICLE VI
----------
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
The obligation of Sellers to transfer the Stock to Buyer on the
Closing Date is subject, in the mutual discretion of Sellers, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
6.1 Representations, Warranties and Covenants
-----------------------------------------
All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if such representations and warranties were made at and as of
the Closing Date, and Buyer shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date.
6.2 No Governmental Proceeding or Litigation
----------------------------------------
No suit, action, investigation, inquiry or other proceeding by any
governmental authority or other person shall have been instituted which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected materially to damage either Seller if the
transactions contemplated hereunder are consummated.
6.3 Employment Agreement
--------------------
Buyer shall have entered into an employment agreement with Daniel M.
Ardell in the form of Exhibit "F" attached hereto (the "Employment Agreement").
-----------
-10-
<PAGE>
ARTICLE VII
-----------
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligation of Buyer to purchase the Stock as provided hereby is
subject, in the discretion of Buyer, to the satisfaction, on or prior to the
Closing Date, of each of the following conditions:
7.1 Representations, Warranties and Covenants
-----------------------------------------
All representations and warranties of Sellers, David B. Ardell and the
Company contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date as if such representations and warranties
were made at and as of the Closing Date, and Sellers and the Company shall have
performed in all material respects all agreements and covenants required hereby
to be performed by them prior to or at the Closing Date.
7.2 No Governmental Proceeding or Litigation
----------------------------------------
No suit, action, investigation, inquiry or other proceeding by any
governmental authority or other person shall have been instituted which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected materially and adversely to affect the value
of the Stock, the financial condition and/or Business of the Company or
otherwise reasonably be expected to materially damage Buyer if the transactions
contemplated hereunder are consummated.
7.3 Corporate Documents
-------------------
Buyer shall have received from the Company resolutions adopted by the Board
of Directors of the Company approving this Agreement and the transactions
contemplated hereby, certified by the corporate secretary of the Company. Buyer
shall have also received the corporate minute books, Articles of Incorporation,
Bylaws and stock transfer books of the Company.
7.4 Employment Agreements
---------------------
Daniel M. Ardell shall have entered into the Employment Agreement with
Buyer. In addition, Buyer shall have entered into employment agreements in such
form and with such key personnel as Buyer in its sole discretion determines are
necessary or desirable for the continued successful operation of the Business of
the Company.
ARTICLE VIII
------------
COVENANT NOT TO COMPETE
-----------------------
8.1 Covenant
--------
In addition to the Purchase Price, since David B. Ardell will not be
employed by Buyer following the Closing, as additional consideration for David
B. Ardell's covenant not to
-11-
<PAGE>
*Confidential Treatment Requested
compete set forth in this Article VIII, David B. Ardell shall be paid an
additional amount equal to * Dollars ($ * ) in
five (5) quarterly installments of * Thousand Dollars
($ * ) for the five (5) fiscal quarters ending June 30, 1993,
September 30, 1993, December 31, 1993, March 31, 1994 and June 30, 1994 within
the later of forty-five (45) days following the end of each such fiscal quarter
or ten (10) days following receipt of fees due the Company from OCERS for such
fiscal quarter. For such consideration, and as an inducement for Buyer to enter
into this Agreement, David B. Ardell individually shall not, following the
Closing, directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, shareholder, corporate officer, director, or in any
other individual representative capacity, other than as an officer and employee
of Buyer and/or the Company, engage in any asset, property or facilities
management services on behalf of OCERS for a period of nine (9) years following
the Effective Date. Notwithstanding the foregoing, the provisions of this
Section 8.1 shall terminate on the earlier of (a) a material breach by Buyer
under the Employment Agreement or (b) the date upon which Daniel M. Ardell is no
longer employed by Buyer and Buyer no longer provides asset, property or
facilities management services to OCERS if such date occurs prior to the earlier
of receipt by Sellers of all of the Purchase Price or six (6) years following
the Effective Date. Any termination of the restrictions contained in this
Section 8.1 shall not reduce or terminate Buyer's obligation to pay to David B.
Ardell the consideration specified above. In the event the covenant in this
Article VIII shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too great a period of time or over
too great a geographical area or by reason of its being too extensive in any
other respect, it shall be interpreted to extend only over the maximum period of
time for which it may be enforceable, and/or over the maximum geographical area
as to which it may be enforceable and/or to the maximum extent in all other
respects as to which it may be enforceable, all as determined by such court in
such action.
8.2 Injunctive Relief
-----------------
David B. Ardell acknowledges that a breach of the covenant contained
in this Article VIII will cause irreparable damage to Buyer and the Company, the
exact amount of which will be difficult to ascertain, and that the remedies at
law for any such breach will be inadequate. Accordingly, David B. Ardell agrees
that if he breaches the covenant contained in this Article VIII in addition to
any other remedy which may be available at law or in equity, Buyer or the
Company shall be entitled to specific performance and injunctive relief, without
posting a bond or other security.
ARTICLE IX
----------
INDEMNIFICATION
---------------
9.1 Survival of Representations, Etc.
--------------------------------
All statements contained in the Disclosure Schedule or in the
certificates delivered at the Closing pursuant to Sections 6.1 and 7.1 shall be
deemed to be representations and warranties by the parties hereunder. The
representations and warranties of each of the Company,
-12-
<PAGE>
Sellers and Buyer contained herein shall survive the Effective Date regardless
of any investigation made by any of the parties hereto for a period of six (6)
years.
9.2 Indemnification
---------------
(a) By Sellers. Sellers and David B. Ardell shall jointly and
----------
severally indemnify, defend and hold harmless Buyer and its Representatives
from and against any and all costs, losses, liabilities, damages, lawsuits,
deficiencies, claims and expenses, including without limitation, interest,
penalties, attorneys' fees and all amounts paid in investigation, defense
or settlement of any of the foregoing (collectively, "Damages"), incurred
in connection with, arising out of, resulting from or incident to (i) any
breach of any covenant or warranty, or the inaccuracy of any
representation, made by the Company, Sellers or David B. Ardell in or
pursuant to this Agreement, (ii) advisory and/or asset, property or
facilities management services rendered to SBCERA by the Company prior to
the Closing, (iii) the Excluded Assets, (iv) that certain indebtedness of
the Company to Union Bank, the outstanding principal balance of which as of
March 31, 1993 was One Hundred Thirty Thousand Dollars ($130,000), and (v)
the Company's liability as a general partner with respect to that certain
loan by Union Bank to Sky Harbor Commerce Center, the outstanding principal
balance of which as of March 31, 1993 was One Million One Hundred Six
Thousand Seven Hundred Twenty-Four Dollars and Ninety-One Cents
($1,106,724.91). The liability of Sellers and David B. Ardell for Damages
incurred in connection with, arising out of, resulting from or incident to
any breach of any covenant or warranty, or the inaccuracy of any
representation, made by the Company, Sellers or David B. Ardell in or
pursuant to this Agreement shall be limited to the portion of the Purchase
Price paid to each; provided, however, for purposes of this liability
limitation, David B. Ardell shall have liability exposure to the extent of
payments of the Purchase Price to Ardell Trust but the aggregate liability
exposure of David B. Ardell and Ardell Trust shall not exceed such payments
of the Purchase Price to Ardell Trust.
(b) By Buyer. Buyer shall indemnify, defend and hold harmless Sellers
--------
and their Representatives from and against any and all Damages incurred in
connection with, arising out of, resulting from or incident to any breach
of any covenant or warranty, or the inaccuracy of any representation, made
by Buyer in or pursuant to this Agreement.
(c) Damages. The term "Damages" as used in this Section 9.2 is not
-------
limited to matters asserted by third parties against the indemnified party
but includes Damages incurred or sustained by the indemnified party in the
absence of third party claims. Payment by the indemnified party of amounts
for which the indemnified party is entitled to be indemnified hereunder
shall not be a condition precedent to the right of the indemnified party to
enforce its indemnity rights hereunder.
-13-
<PAGE>
ARTICLE X
---------
COMPANY OPERATIONS
------------------
10.1 Day-to-Day Management
---------------------
From and after the Closing Date and until the cessation of Daniel M.
Ardell's employment with Buyer for any reason other than breach by Buyer of the
Employment Agreement, Daniel M. Ardell shall be President of the Company and a
member of the Company's Board of Directors. Immediately following the Closing,
Daniel M. Ardell shall also be the Chairman of the Board of Directors of the
Company but may be replaced in that capacity by Buyer, in Buyer's sole
discretion, provided Daniel M. Ardell remains as a member of the Board of
Directors subject to the time limitations set forth in the first sentence of
this Section 10.1. Subject to the provisions of Section 10.2, in his capacity as
President, Daniel M. Ardell shall be responsible for the day-to-day operations
of the Company. In conducting the day-to-day operations of the Company, Daniel
M. Ardell shall operate within the then operative operating budget, the then
operative annual business plan and the then operative annual marketing plan.
Without limiting the generality of the foregoing, Daniel M. Ardell shall have
the authority to hire and fire employees including, without limitation, Mark
Poochigian, to retain professionals and consultants and to disapprove, in the
sole and absolute discretion of Daniel M. Ardell, any proposed contract or
agreement with Buyer and/or an Affiliate of Buyer for the rendition of services
to the Company.
10.2 Approval by Board of Directors
------------------------------
Notwithstanding the foregoing provisions of Section 10.1, Daniel M.
Ardell, in his capacity as President of the Company, shall not undertake,
implement or otherwise engage in any of the following without the prior approval
of the Board of Directors of the Company:
(a) The annual operating budget commencing with the operating budget
for the fiscal year ending March 31, 1995, which operating budgets shall
include a contingency line item as the same percentage of the total budget
as the operating budget for the fiscal year ending March 31, 1994. The
operating budget for the fiscal year ending March 31, 1994 has been
approved by Buyer.
(b) The annual business plan.
(c) The annual marketing plan.
(d) Significant changes in the business of the Company.
(e) Recommendations to owners of property (other than OCERS) to whom
asset, property or facilities management services are rendered by the
Company with respect to acquisition, sale or refinance.
-14-
<PAGE>
(f) Recommendations to OCERS with respect to acquisition, sale or
refinance if such recommendation would expose the Company or Buyer to
liability in excess of liability exposure customarily associated with
asset, property or facilities management agreements.
(g) Recommendations to owners of property (other than OCERS) to whom
asset, property or facilities management services are rendered by the
Company with respect to capital improvements which would be capitalized
(rather than expensed) pursuant to generally accepted accounting
principles.
(h) Any contract committing or potentially committing the Company to
any liability or obligation if such liability or obligation is not
specifically included in the then operative operating budget or the
satisfaction of such liability or obligation would cause expenditures for
the relevant fiscal year to exceed budgeted amounts in the applicable line
item or in the then operative operating budget in the aggregate.
(i) Incurrence of any liability or obligation or the' payment of any
cost or expense that is not specifically included in the then operative
operating budget including, without limitation, the contingency line item,
or would cause expenditures for the relevant fiscal year to exceed budgeted
amounts in the applicable line item or in the then operative operating
budget in the aggregate (taking into account in each instance the
contingency line item).
(j) Pledge or encumbrance of any asset of the Company.
(k) Any proposed bonus to be paid to any employee of the Company
and/or Buyer other than the profit participation to which Daniel M. Ardell
may be entitled as provided in the Employment Agreement.
10.3 Working Capital
---------------
From and after the Closing, Buyer agrees to advance working capital to
the Company from time to time sufficient to support the operations of the
Company not to exceed budgeted working capital in the then operative operating
budget. Any such working capital advance shall accrue interest at the prevailing
prime commercial lending rate of Wells Fargo Bank plus one (1) percentage point
adjusted and compounded on the first day of each month.
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.1 Termination
-----------
This Agreement may be terminated and the transactions contemplated
hereby abandoned by the mutual written consent of each of the parties hereto or
by any party hereto if the conditions to such party's obligations set forth in
Articles VI and VII, respectively, have not
-15-
<PAGE>
been satisfied on or before May 21, 1993 (unless waived by the party entitled to
the benefit thereof), without liability of any party hereto; provided, however,
-----------------
that Buyer may, by notice to Seller, extend the term of this Agreement until May
31, 1993; and provided further that no party will be released from liability
hereunder if this Agreement is terminated and the transactions abandoned by
reason of (a) willful failure of any party to have performed its obligations
hereunder, or (b) any knowing misrepresentation made by any party of any matter
set forth herein. This Agreement shall terminate automatically if the Closing
Date has not occurred on or prior to May 21, 1993 (or May 31, 1993, if the term'
of this Agreement is extended thereto by Buyer as provided above). In the event
that a condition precedent to its obligations is not satisfied, nothing
contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
transactions contemplated hereby.
11.2 Assignment
----------
Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by either Seller without the prior written consent of Buyer, nor
by Buyer without the prior written consent of Sellers. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their, respective successors and assigns, and no other person shall
have any right, benefit or obligation hereunder.
11.3 Notices
-------
Unless otherwise provided herein, any notice, request, instruction or
other document to be given hereunder by any party to the others shall be in
writing and delivered in person or by commercial courier, telegraph, telex or by
facsimile transmission or mailed by certified mail, postage prepaid, return
receipt requested, as follows:
If to Sellers: Daniel M. Ardell
c/o D. A. Management, Inc.
7777 Center Avenue
Suite 500
Huntington Beach, California 92647
David B. Ardell, Trustee of the David Barclay
Ardell and Cynthia Sieling Ardell Family Trust
dated January 18, 1985
10516 La Maida Street
North Hollywood, California 91601
With a copy to: Rutan & Tucker
611 Anton Boulevard
Suite 1400
Costa Mesa, California 92626
Attn: Randall M. Babbush, Esq.
-16-
<PAGE>
If to Buyer: Koll Management Services, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: D. Glen Raiger
With a copy to: Allen, Matkins, Leck, Gamble & Mallory
18400 Von Karman Avenue
4th Floor
Irvine, California 92715
Attn: Thomas C. Foster, Esq.
If to Company: D.A. Management, Inc.
7777 Center Avenue
Suite 500
Huntington Beach, California 92647
Attention: Daniel M. Ardell
Any such notice or other communication shall be deemed received and
effective upon the earlier of (a) if personally delivered, the date of delivery
to the address of the person to receive such notice; (b) if delivered by
commercial carrier, one day following the receipt of such communication by such
carrier from the sender, as shown on the sender's delivery invoice from such
carrier; (c) if mailed, forty-eight (48) hours after the date of posting by the
United States Post Office as shown by the sender's registry or certification
receipt, as the case may be; (d) if given by telegraph or cable, when delivered
to the telegraph company with charges prepaid; or (e) if given by telex or
telecopy, when sent. Any reference herein to the date of receipt, delivery, or
giving, as the case may be, of any notice or other communication shall refer to
the date such communication becomes effective under the terms of this Section
11.3. Any notice or other communication sent by cable, telex, or telecopy must
be confirmed within forty-eight (48) hours by letter mailed or delivered in
accordance with the foregoing. Notice of change of address shall be given by
written notice in the manner detailed in this Section 11.3. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to constitute receipt of the notice or
other communication sent.
11.4 Choice of Law
-------------
This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of California.
11.5 Entire Agreement; Amendments and Waivers
----------------------------------------
This Agreement, together with all Exhibits and schedules hereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. No supplement,
amendment, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof
-17-
<PAGE>
(whether or not similar, nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
11.6 Counterparts
------------
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
11.7 Invalidity
----------
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.8 Headings
--------
The headings of the Articles and Sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
11.9 Further Assurances
------------------
On and after the Closing Date, Sellers, the Company and Buyer shall
take all appropriate action and execute all documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the provisions hereof, including without limitation, putting Buyer in
possession and operating control of the Business of the Company and filing
notices of change of ownership with the Securities and Exchange Commission in
connection with the Company's status as a registered investment advisor.
11.10 Expenses
--------
Sellers, the Company and Buyer will each be liable for their own costs
and expenses incurred in connection with the negotiation, preparation, execution
and performance of this Agreement; provided, however, that if the transactions
contemplated by this Agreement are consummated then Sellers shall pay all such
costs and expenses incurred by the Company, including, without limitation, legal
fees.
11.11 Attorneys Fees
--------------
The parties agree that if it be determined by any court that any party
has failed to perform its obligations herein, then the prevailing party or
parties shall be entitled to recover reasonable attorney fees, court costs and
other reasonable expenses incurred in the enforcement of the rights and
obligations set forth in this Agreement or any claim for damages based on any
breach of this Agreement.
-18-
<PAGE>
11.12 Publicity
---------
Neither the Company, Sellers nor Buyer shall issue any press release
or make any public statement regarding the transactions contemplated hereby
(including, but not limited to, any press release or public statement announcing
the execution of this Agreement, the termination of this Agreement or the
consummation of the transactions contemplated hereby), without the prior
approval of the other parties hereto save and except for any disclosures,
notices or public filings which Buyer is required to make pursuant to the
statutes and regulations of the Securities and Exchange Commission of the United
States and/or the equivalent entities at the state level, the content of which
shall be the sole responsibility and at the sole discretion of Buyer. The
parties hereto shall issue a mutually acceptable press release as soon as
practicable after the Closing Date announcing the consummation of the
transactions contemplated hereby.
11.13 Confidential Information
------------------------
The parties acknowledge that the transaction described herein is of a
confidential nature and shall not be disclosed except to consultants, advisors,
affiliates and Representatives, or as required by law, until such time as the
parties make a public announcement regarding the transaction as provided in
Section 11.12. In connection with the negotiation of this Agreement and the
preparation for the consummation of the transactions contemplated hereby, each
party acknowledges that it will have access to confidential information relating
to the other parties. Each party shall treat such information as confidential,
preserve the confidentiality thereof and not duplicate or use such information,
except to advisors, consultants, affiliates and Representatives in connection
with the transactions contemplated hereby. Employees of the Company shall be
notified of the fact of the subject transaction in a joint communication from
Sellers and Buyer mutually approved by Sellers and Buyer. In the event of the
termination of this Agreement for any reason whatsoever, each party shall return
to the other all documents, work papers and other material (including all copies
thereof) obtained in connection with the transactions contemplated hereby and
shall use all reasonable efforts, including instructing its employees and others
who have had access to such information, to keep confidential and not to use any
such information, unless such information is now, or is hereafter disclosed,
through no act or omission of such party, in any manner making it available to
the general public.
11.14 Trading Stock of Buyer
----------------------
Sellers and the Company shall not purchase or sell any shares of the
common stock of Buyer until there has been a public disclosure of Buyer's
acquisition of the Stock.
11.15 Grant of Buyer Stock Options
----------------------------
Subject to approval of the Compensation Committee of Buyer, Buyer
shall grant to Daniel M. Ardell and Mark Poochigian, as soon as practicable
following such approval, the option to purchase six thousand (6,000) shares and
three thousand (3,000) shares, respectively, of the common stock of Buyer, for
an option price set forth in, and pursuant to the other terms of, Buyer's
existing Stock Award Plan.
-19-
<PAGE>
11.16 Books and Records of the Company
--------------------------------
From and after the Closing and until the earlier to occur of payment
in full by Buyer to Sellers of the Purchase Price or one hundred and eighty
(180) days following the sixth (6th) anniversary of the Effective Date, Buyer
hall maintain separate books and records for the operations of the Company. Such
books and records shall be available during regular business hours for
inspection, audit and duplication by either Seller and/or any Representative of
either Seller, at the expense of such Seller. Within forty-five (45) days
following the end of each fiscal quarter of Buyer (sixty (60) days following the
fourth (4th) fiscal quarter of Buyer), at the expense of Buyer, Buyer shall
prepare and distribute to Sellers quarterly reports, which report shall include
an unaudited income or loss statement for such quarter and a statement as to
cash receipts and disbursements.
11.17 Health Insurance
----------------
From and after the Closing and until the earlier to occur of payment
in full by Buyer to Sellers of the Purchase Price or the sixth (6th) anniversary
of the Closing Date, Buyer shall provide health insurance coverage for David B.
Ardell and his dependents consistent with health insurance coverage provided by
Buyer to its employees and their dependents, the cost for which shall be borne
by David B. Ardell.
11.18 Miscellaneous
-------------
Each of the Exhibits attached hereto is incorporated herein by
reference and expressly made a part of this Agreement for all purposes.
References to any Exhibit made in this Agreement shall be deemed to include this
reference and incorporation. Where the context so requires, the use of the
neuter gender shall include the masculine and feminine genders, the masculine
gender shall include the feminine and neuter genders, and the singular number
shall include the plural and vice versa. Time is of the essence of this
Agreement. There are no third party beneficiaries to this Agreement. Each party
hereto acknowledges that (i) each party hereto is of equal bargaining strength;
(ii) each such party has actively participated in the drafting, preparation, and
negotiation of this Agreement; and (iii) any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not apply
in the interpretation of this Agreement, any portion hereof, any amendments
hereto, or any Exhibits attached hereto. The Sellers' recourse for deferred
payments in consideration of David B. Ardell's covenant not to compete pursuant
to Section 8.1 shall be limited to the Net Operating Income (as defined in the
Employment Agreement) of the Company.
ARTICLE XII
-----------
DEFINITIONS
-----------
12.1 Affiliate
---------
The term "Affiliate" means any person or entity which, directly or
--------
indirectly, through one or more intermediaries, controls ;r is controlled by or
is under common control with
-20-
<PAGE>
another person or entity. The term "control" as used herein (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to vote fifty percent (50%) or more
of the outstanding voting securities of such person or entity.
12.2 Ardell Trust
------------
The term "Ardell Trust" means the David Barclay Ardell and Cynthia
------------
Sieling Ardell Family Trust dated January 18, 1985.
12.3 Benefit Arrangement
-------------------
The term "Benefit Arrangement" is defined in Section 3.14.
-------------------
12.4 Business
--------
The term "Business" is defined in Recital A.
12.5 Buyer
-----
The term "Buyer" means Koll Management Services, Inc., a Delaware
-----
corporation.
12.6 Closing
-------
The term "Closing" is defined in Section 2.1.
12.7 Closing Date
------------
The term "Closing Date" is defined in Section 2.1.
------------
12.8 Company
-------
The term "Company" means D.A. Management, Inc., a California
-------
corporation.
12.9 Damages
-------
The term "Damages" is defined in Section 9.2.
-------
12.10 Down Payment
------------
The term "Down Payment" is defined in Section 1.2.
------------
12.11 Effective Date
--------------
The term "Effective Date" means March 31, 1993.
-21-
<PAGE>
12.12 Employment Agreement
--------------------
The term "Employment Agreement" is defined in Section 6.3.
--------------------
12.13 Excluded Assets
---------------
The term "Excluded Assets" is defined in Section 1.3.
---------------
12.14 Non-OCERS Expenses
------------------
The term "Non-OCERS Expenses" is defined in Section 1.3.
------------------
12.15 OCERS
-----
The term "OCERS" is defined in Recital A.
-----
12.16 Purchase Price
--------------
The term "Purchase Price" is defined in Section 1.
--------------
12.17 Representative
--------------
The term "Representative" means any officer, director, principal,
--------------
attorney, accountant, agent, employee or other representative.
12.18 SBCERA
------
The term "SBCERA" is defined in Section 1.4.
------
12.19 Sellers
-------
The term "Sellers" means Daniel M. Ardell and David B. Ardell, as
-------
Trustee of the David Barclay Ardell and Cynthia Sieling Ardell Family Trust
dated January 18, 1985, collectively; the term "Seller" means either of the
------
Sellers.
12.20 Stock
-----
The term "Stock" is defined in Recital A.
-----
IN WITNESS WHEREOF, the parties hereby have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
"Sellers" ______________________________________
DANIEL M. ARDELL
-22-
<PAGE>
______________________________________
DAVID B. ARDELL, as Trustee of the
David Barclay Ardell and Cynthia Sieling
Ardell Family Trust dated January 18,
1985, and in his individual capacity
[SIGNATURES CONTINUED]
"Buyer" KOLL MANAGEMENT SERVICES, INC.,
a Delaware corporation
By: ___________________________________
D. Glen Raiger,
Executive Vice President
"Company" D.A. MANAGEMENT, INC., a California
corporation
By: ___________________________________
Name: _____________________________
Title: ____________________________
-23-
<PAGE>
EXHIBIT 10.37
* Confidential Treatment
Requested
STOCK PURCHASE AGREEMENT
by and among
JOHN A. BONUTTO and HAROLD C. HOFER,
as "Benefitted Parties",
JOHN A. BONUTTO and TERESA L. BONUTTO,
as Trustees of the J&T Bonutto Revocable Trust u/d/t dated
October 12, 1990, and HAROLD C. HOFER and LISA ANNE HOFER,
as Trustees of the H&L Hofer Revocable Trust u/d/t dated March 1, 1990,
as "Sellers,"
KOLL PARTNERSHIPS I, INC.,
as "Buyer,"
INTERSTAR MANAGEMENT, INC.,
as "Interstar,"
and
BONUTTO-HOFER INVESTMENTS,
as the "Company" being sold
Dated: January 28, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
RECITALS...... 1
ARTICLE I PURCHASE AND SALE OF STOCK.................................... 2
1.1 Transfer of Stock............................................. 2
1.2 Consideration for Stock....................................... 2
ARTICLE II CLOSING....................................................... 3
2.1 Closing....................................................... 3
2.2 Documents to be Delivered..................................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY..... 3
3.1 Organization and Qualification................................ 4
3.2 Capitalization................................................ 4
3.3 Ownership of Shares........................................... 4
3.4 Title to Interstar Receivables................................ 4
3.5 Authorization................................................. 4
3.6 No Conflict or Violation...................................... 5
3.7 Consents and Approvals........................................ 5
3.8 Financial Statements.......................................... 5
</TABLE>
-i-
<PAGE>
<TABLE>
<C> <S> <C>
3.9 Books and Records............................................. 5
3.10 Litigation.................................................... 6
3.11 Compliance with Law........................................... 6
3.12 Permits....................................................... 6
3.13 Liabilities................................................... 6
3.14 Labor Matters................................................. 6
3.15 Benefit Arrangements.......................................... 7
3.16 Brokers and Finders........................................... 7
3.17 No Other Agreements to Sell the Company....................... 7
3.18 Indebtedness of Sellers and Affiliates........................ 7
3.19 Distributions................................................. 7
3.20 Material Misstatements or Omissions........................... 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER....................... 8
4.1 Organization of Buyer......................................... 8
4.2 Authorization................................................. 8
4.3 Brokerage/Finders Fees........................................ 8
4.4 No Conflict or Violation...................................... 8
ARTICLE V COVENANT NOT TO COMPETE....................................... 11
5.1 Covenant...................................................... 11
5.2 Injunctive Relief............................................. 11
</TABLE>
-ii-
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE VI INDEMNIFICATION............................................... 12
6.1 Survival of Representations, Etc.............................. 12
6.2 Indemnification............................................... 12
ARTICLE VII MISCELLANEOUS................................................. 13
7.1 Termination................................................... 13
7.2 Assignment.................................................... 13
7.3 Notices....................................................... 13
7.4 Choice of Law................................................. 15
7.5 Entire Agreement; Amendments and Waivers...................... 15
7.6 Counterparts.................................................. 16
7.7 Invalidity.................................................... 16
7.8 Headings...................................................... 16
7.9 Further Assurances............................................ 16
7.10 Expenses...................................................... 16
7.11 Attorneys Fees................................................ 16
7.12 Publicity..................................................... 16
7.13 Confidential Information...................................... 16
7.14 Trading Stock of Buyer........................................ 17
7.15 Miscellaneous................................................. 17
ARTICLE VIII DEFINITIONS................................................... 17
</TABLE>
-iii-
<PAGE>
<TABLE>
<C> <S> <C>
8.1 Affiliate..................................................... 17
8.2 Affiliate Partnerships; Affiliate Partnership................. 18
8.3 Benefit Arrangements.......................................... 18
8.4 Benefitted Parties............................................ 18
8.5 Bonutto....................................................... 18
8.6 Business...................................................... 18
8.7 Buyer......................................................... 18
8.8 Closing....................................................... 18
8.9 Closing Date.................................................. 18
8.10 Company....................................................... 18
8.11 Damages....................................................... 18
8.12 Down Payment.................................................. 18
8.13 Effective Date................................................ 18
8.14 Excluded Partnership.......................................... 18
8.15 First Installment............................................. 18
8.16 Hofer......................................................... 18
8.17 Interstar..................................................... 18
8.18 Interstar Receivables......................................... 18
8.19 Projected Gross Revenues...................................... 18
8.20 Property Partnerships; Property Partnership................... 19
8.21 Purchase Price................................................ 19
8.22 Purchase Price Discount....................................... 19
</TABLE>
-iv-
<PAGE>
<TABLE>
<C> <S> <C>
8.23 Representative................................................ 19
8.24 Second Installment............................................ 19
8.25 Sellers; Seller............................................... 19
8.26 Stock......................................................... 19
SIGNATURE PAGES................................................................. 18-19
</TABLE>
EXHIBIT "A" SCHEDULE OF PROJECTED GROSS REVENUES FOR PROPERTY PARTNERSHIPS
EXHIBIT "B" DISCLOSURE SCHEDULE
EXHIBIT "C" FINANCIAL STATEMENTS
EXHIBIT "D" 1994 BUDGET
EXHIBIT "E" BENEFIT ARRANGEMENTS
EXHIBIT "F" INTERSTAR RECEIVABLES
-v-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
__________THIS STOCK PURCHASE AGREEMENT is made and entered into as of January
28, 1994, by and among JOHN A. BONUTTO ("Bonutto") and HAROLD C. HOFER ("Hofer")
------- -----
(collectively, the "Benefitted Parties"), JOHN A. BONUTTO and TERESA L. BONUTTO,
------------------
as Trustees of the J&T Bonutto Revocable Trust u/d/t dated October 12, 1990, and
HAROLD C. HOFER and LISA ANNE HOFER, as Trustees of the H&L Hofer Revocable
Trust u/d/t dated March 1, 1990 (individually, "Seller" and collectively,
------
"Sellers"), KOLL PARTNERSHIPS I, INC., a Delaware corporation ("Buyer"),
- -------- -----
INTERSTAR MANAGEMENT, INC., a California corporation ("Interstar"), and BONUTTO-
---------
HOFER INVESTMENTS, a California corporation (the "Company"). A glossary of
-------
defined terms used herein is set forth in Article VIII.
R E C I T A L S:
----------------
A. Sellers each own sixteen thousand two hundred fifty (16,250)
shares of common stock, no par value, of the Company (collectively, the
"Stock"), constituting all of the issued and outstanding capital stock of the
-----
Company. The Company currently engages in the business of (i) holding a general
partnership interest in BHI-Dover Ltd. Fund V, a California limited partnership,
BHI-Dover VII, a California limited partnership, BHI-Dover VIII, a California
limited partnership, BHI-Dover XI, a California limited partnership, and BHI
Dover XVI, a California limited partnership (collectively, the "Property
--------
Partnerships"); and (ii) rendering such other services as are necessary or
- ------------
appropriate to carry out its duties and obligations as a general partner of each
of the Property Partnerships (collectively, the "Business").
--------
B. Interstar holds receivables from the Property Partnerships and
the Affiliated Partnerships set forth on Exhibit "F" attached hereto (the
----------
"Interstar Receivables").
---------------------
C. Buyer desires to purchase from Sellers, and Sellers desire to
transfer to Buyer, all of the Stock, and Buyer desires to purchase from
Interstar, and Interstar desires to transfer to Buyer, all of the Interstar
Receivables, upon the terms and subject to the conditions set forth in this
Agreement.
<PAGE>
A G R E E M E N T:
------------------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK AND INTERSTAR RECEIVABLES
- ----------------------------------------------------
1.1 Transfer of Stock. Upon the terms and subject to the conditions
-----------------
contained herein, Sellers shall sell, convey, transfer, assign and deliver to
Buyer, and Buyer shall acquire on the Closing Date, the Stock free and clear of
all liens and encumbrances.
1.2 Transfer of Interstar Receivables. Upon the terms and subject to
---------------------------------
the conditions contained herein, Interstar shall sell, convey, transfer, assign
and deliver to Buyer, and Buyer shall acquire on the Closing Date, the Interstar
Receivables free and clear of all liens and encumbrances without recourse.
1.3 Consideration.
(a) Upon the terms and subject to the conditions contained
herein, as consideration for the purchase of the Stock and the Interstar
Receivables, Buyer shall pay to Sellers and Interstar *
Dollars ($ * ), as adjusted pursuant to Section 1.3(b) (the
"Purchase Price"). The Purchase Price shall be paid *
--------------
Dollars ($ * ) (the "Down Payment") on the Closing Date, with the balance
------------
payable as set forth in Section 1.3(b).
-2-
* Confidential Treatment
Requested
<PAGE>
(b) The remaining portion of the Purchase Price, if any, shall be
paid in two (2) annual installments. The first installment (the "First
-----
Installment") shall equal the amount, if any, by which *
-----------
Dollars ($ * ) exceeds the Purchase Price Discount (computed as of
the due date of the First Installment). The second installment (the
"Second Installment") shall equal the amount, if any, by which
-------------------
* Dollars ($ * ) exceeds the Purchase Price
Discount (computed as of the due date of the Second Installment). The
"Purchase Price Discount" (i) as of the due date of the First Installment
------------------------
shall equal the product of *
Dollars ($ * ) multiplied by a fraction the numerator of which is
the amount by which (A) the Projected Gross Revenues for any Excluded
Partnership for the year ending January 31, 1995 exceeds (B) the actual
gross revenues earned by such Excluded Partnership(s) for the year ending
January 31, 1995 and the denominator of which is the Project Gross Revenues
for all of the Project Partnerships for the year ending January 31, 1995,
and (ii) as of the due date of the Second Installment shall equal the
product of * Dollars ($
* ) multiplied by a fraction the numerator of which is the amount by
which (A) the Projected Gross Revenues for any Excluded Partnership for the
year ending January 31, 1996 exceeds (B) the actual gross revenues earned
by such Excluded Partnership(s) for the year ending January 31, 1996, and
the denominator of which is the Projected Gross Revenues for all the
Property Partnerships for the year ending January 31, 1996. The "Projected
---------
Gross Revenues" for each Property Partnership means the amount set forth
--------------
opposite the name of each such Property Partnership on Exhibit "A" attached
-----------
hereto. The term "Excluded Partnership" means any Property Partnership in
--------------------
which the Company is removed as the general partner thereof, whether or not
reinstated, provided that an Excluded Partnership for purposes of computing
the First Installent shall only be an Excluded Partnership for purposes of
computing the Second Installment if the Company is not acting as the
General Partner thereof during some portion of the year ending January 31,
1996. The First Installment shall be computed and paid on February 1,
1995, and the Second Installment shall be computed and paid on February 1,
1996. The First Installment and the Second Installment shall be paid on
their due dates by certified check or wire transfer of readily available
funds.
(c) The consideration in Section 1.3(a) shall be allocated ten
percent (10%) to Interstar. All remaining consideration under Section
1.3(a) and 1.3(b) shall be allocated to the Sellers.
-3-
* Confidential
Requested
<PAGE>
ARTICLE II
CLOSING
- -------
2.1 Closing. The closing of the transactions contemplated herein
-------
(the "Closing") shall be held at 4:00 p.m. local time on January 28, 1994, or
such other date as may be mutually agreed upon in writing by Sellers and Buyer
(the "Closing Date"), at the offices of Buyer, 4343 Von Karman Avenue, Newport
------------
Beach, California 92660.
2.2 Documents to be Delivered. To effect the transfer of the Stock
-------------------------
and the Interstar Receivables referred to in Sections 1.1 and 1.2 and the
delivery of the consideration described in Section 1.3 hereof, Sellers,
Interstar and Buyer shall, on the Closing Date, deliver the following:
(a) Sellers shall deliver to Buyer certificate(s) evidencing the
Stock, free and clear of any liens and encumbrances of any nature
whatsoever, duly endorsed in blank for transfer or accompanied by stock
powers duly executed in blank.
(b) Interstar shall deliver to Buyer an assignment of the
Interstar Receivables duly executed by Interstar.
(c) Buyer and Sellers shall each deliver all documents required
to be delivered by them, respectively, pursuant to Articles VI and VII,
respectively.
(d) Buyer shall deliver the Down Payment to Sellers by certified
check or wire transfer of readily available funds.
(e) Buyer shall deliver the sum of Twelve Thousand Five Hundred
Dollars ($12,500) to each of Bonutto and Hofer in accordance with the terms
of Section 5.1 hereof by certified check or wire transfer of readily
available funds.
-4-
<PAGE>
(f) All instruments and documents executed and delivered to
Buyer pursuant hereto shall be in form and substance, and shall be executed
in a manner, reasonably satisfactory to Buyer. All instruments and
documents executed and delivered to Sellers pursuant hereto shall be in
form and substance, and shall be executed in a manner, reasonably
satisfactory to Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLERS AND THE COMPANY
- ------------------------------
Sellers, Bonutto, Hofer, Interstar and the Company hereby, jointly and
severally, represent and warrant to Buyer, except as set forth on the Disclosure
Schedule attached hereto as Exhibit "B", the following:
-----------
3.1 Organization and Qualification. The Company and Interstar are
------------------------------
each corporations duly organized, validly existing and in good standing under
the laws of the State of California and each has the requisite power and
authority to conduct its business as it is now being conducted. Copies of the
Articles of Incorporation and the Bylaws of the Company delivered to Buyer are
accurate and complete as of the date hereof.
3.2 Capitalization. The Company has authorized one million
--------------
(1,000,000) shares of common stock, no par value, thirty two thousand five
hundred (32,500) shares of which are validly issued and outstanding, fully paid
and nonassessable. No shares of common stock are held in the treasury of the
Company. All of the shares of common stock of the Company are owned by Sellers.
There are no other shares of capital stock or other equity securities of the
Company outstanding, and no other outstanding options, warrants, rights to
subscribe (including any preemptive rights), calls or commitments of any
character whatsoever to which the Company is a party or may be bound, requiring
the issuance or sale of shares of any capital stock or other equity securities
of the Company or securities or rights convertible into or exchangeable for such
shares or other equity securities, and there are no contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of its capital stock or other
-5-
<PAGE>
equity securities or options, warrants or rights to purchase or acquire any
additional shares of its capital stock or other equity securities or securities
convertible into or exchangeable for such shares or other equity securities.
3.3 Ownership of Shares. Sellers (a) are the record and beneficial
-------------------
owners of all of the outstanding capital stock of the Company, (b) have good and
marketable title to all of the Stock and (c) have the absolute right, power and
authority to sell, transfer and deliver the Stock, in each case free and clear
of all encumbrances. Except for the Stock, Sellers do not own any, and there are
no, additional shares of capital stock of the Company issued and outstanding.
There are no options, warrants, rights, calls, commitments or other agreements
of any character whatsoever relating to the Stock owned by either Seller.
3.4 Title to Interstar Receivables. Interstar has good and
------------------------------
marketable title to the Interstar Receivables and has possession thereof and
there is no lien or encumbrance against any such Interstar Receivable.
3.5 Authorization. The Company, Interstar, each Seller, Bonutto
-------------
and Hofer have the requisite power and authority to enter into this Agreement,
to perform their respective obligations hereunder, and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and Interstar and the consummation by the Company and Interstar
of the transactions contemplated hereby have been duly approved by the Board of
Directors and the shareholders of each of the Company and Interstar. No other
corporate proceedings on the part of the Company or Interstar are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company, Interstar, each
Seller, Bonutto and Hofer and constitutes a legal, valid and binding obligation
of the Company, Interstar, each Seller, Bonutto and Hofer, enforceable against
the Company, Interstar, each Seller, Bonutto and Hofer in accordance with its
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws, or by equitable
principles, relating to or limiting the rights of creditors generally and, (b)
limitations imposed by law or equitable principles upon the availability of
specific performance, injunctive relief or other equitable remedies.
3.6 No Conflict or Violation. Neither the execution and delivery
------------------------
of this Agreement by the Company, Interstar, each Seller, Bonutto and Hofer, nor
the consummation of the transactions contemplated hereby, nor compliance by the
Company, Interstar, the
-6-
<PAGE>
Sellers, Bonutto and Hofer with any of the provisions hereof will (a) violate,
conflict with, or result in a breach of any provisions of, or constitute a
material default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any encumbrance upon any of the properties
or assets of the Company or Interstar under, any of the terms, conditions or
provisions of (i) the Articles of Incorporation or Bylaws of the Company or
Interstar or (ii) any note, bond, mortgage, indenture, deed of trust, security
or pledge agreement, partnership agreement, license, lease, franchise, permit,
agreement or other instrument or obligation to which the Company, Interstar,
either Seller, Bonutto or Hofer is a party or to which the Company, Interstar,
either Seller, Bonutto, Hofer or any of the properties or assets of the Company
or Interstar may be subject, (b) violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to the Company,
Interstar, either Seller, Bonutto, Hofer or any of the properties or assets of
the Company or Interstar.
3.7 Consents and Approvals. No notice to, declaration, filing or
----------------------
registration with, or authorization, consent or approval of, or permit from, any
domestic or foreign governmental or regulatory body or authority, or any other
person or entity, is necessary in connection with the execution and delivery of
this Agreement by the Sellers, Bonutto, Hofer, Interstar and the Company and the
consummation by the Sellers, Bonutto, Hofer, Interstar and the Company of the
transactions contemplated by this Agreement.
3.8 Financial Statements. The proforma balance sheet for the
--------------------
Company as of December 31, 1993 (the "Financial Statements") attached hereto as
--------------------
Exhibit "C" fairly and accurately present in all material respects the assets,
- ----------
liabilities and financial position of the Company as of the date thereof and the
results of operations and changes in shareholders' equity and cash flows for the
periods then ended. There have been no payments to third parties since the date
of the Financial Statements except in the ordinary course of business and
consistent with the Company's past practice. In addition, there has been no
material adverse change in the financial condition, working capital,
shareholders' equity, assets, liabilities, revenues, income or condition of the
Company from and after the period covered by the Financial Statements.
3.9 Books and Records. The books and records to which access was
-----------------
given Buyer prior to the date hereof are the actual books and records of the
Company and accurately and fairly reflect in all material respects the
activities, transactions, revenues and
-7-
<PAGE>
expenses of the Company, and the budget for the calendar year ending December
31, 1994, attached hereto as Exhibit "D" was prepared in good faith and with
----------
reasonable diligence.
3.10 Litigation. To the best knowledge of Bonutto and Hofer,
----------
there are no actions, suits, investigations or proceedings by, against,
involving or relating to the Company, at law or in equity, or before any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality in which any material claim has been made or
asserted against the Company. There is outstanding no garnishment, attachment or
writ of execution issued with reference to the Company or any of the assets of
the Company. The Company is not a party or subject to any judgment, decree or
order enjoining it in respect of any business practice or the conduct of
business in any area.
3.11 Compliance with Law. The Company has not violated or failed
-------------------
to comply in any material respect with any statute, law, ordinance, regulation,
rule, decree or order of any foreign, federal, state or local government or any
other governmental department or agency, or any judgment, decree or order of any
court, applicable to its Business or operations. The conduct of the Company's
Business is in material conformity with all building code, health and
environmental requirements. The conduct of the Company's Business is in material
conformity with all energy, public utility, zoning and OSHA requirements and all
other foreign, federal, state and local governmental and regulatory requirements
except where the aggregate of all such non-conformities would not have a
material adverse effect on the Company. The Company has not received any notice
to the effect that it is not in compliance with, and the Company has no reason
to anticipate that any presently existing circumstances are likely to result in
the violation of, any such statute, law, ordinance, regulation, rule, judgment,
decree or order.
3.12 Permits. The Company has all permits from governmental
-------
agencies required to conduct its present Business as now being conducted, except
such permits the failure of which to obtain would not have a material adverse
effect on the Company.
3.13 Liabilities. The Company has no liabilities, obligations or
-----------
commitments of any nature (whether accrued, absolute, contingent or otherwise
and whether matured or unmatured), due or to become due, except (a) liabilities
reflected or provided for in the Financial Statements and (b) liabilities
incurred since the date of the Financial Statements in the ordinary course of
business and consistent with the Company's past practice.
-8-
<PAGE>
3.14 Labor Matters. The Company has not entered into any written
-------------
employment agreement with any employees. Except as provided by law, the
employment of all persons presently employed or retained by the Company is
terminable at will. The Company is not a party to any collective bargaining
agreement, nor is the Company subject to any organizing efforts of any labor
union, organization, local or subdivision. There are no labor grievances, or
investigations, claims or suits concerning employment pending or threatened
against the Company. The Company has not entered into any agreement, oral or
written, with any present or former employee of the Company that will result in
a commitment or obligation (absolute or contingent) of the Company and/or Buyer
to make any payment to any present or former employee of the Company following
his or her termination of employment. The Company does not maintain, participate
in or contribute to, has never maintained, participated in or contributed to,
and has not announced plans or legally binding commitments to maintain,
participate in or contribute to, any qualified or non-qualified pension or
profit-sharing plan and/or other form of deferred compensation and/or post-
retirement insurance, compensation or benefits which covers or has covered any
employees or former employees of the Company exclusive of Benefit Arrangements
(as defined below).
3.15 Benefit Arrangements. Each written plan, arrangement,
--------------------
program, agreement or commitment providing for insurance coverage (including any
self-insured arrangement), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, and life, health,
disability or accident benefits which covers or has covered any employees of the
Company (collectively, "Benefit Arrangements"), has been maintained in
--------------------
compliance with its terms and with the requirements described by any and all
statutes, orders, rules and regulations which are applicable to such Benefit
Arrangement. Set forth on Exhibit "E" is a complete and accurate description of
----------
each Benefit Arrangement of the Company. True, complete and correct copies of
each Benefit Arrangement including written interpretations thereof and written
descriptions thereof which have been distributed to the Company's employees or
former employees and a complete description of any such Benefit Arrangement
which is not in writing, have been delivered by the Company to Buyer.
3.16 Brokers and Finders. Neither of the Sellers, Bonutto, Hofer,
-------------------
Interstar, the Company nor any of the Company's or Interstar's officers,
directors, employees or agents have employed any broker, finder or similar agent
or incurred any liability for any brokerage fees, commissions, finder's fees or
similar payments in connection with the transactions contemplated by this
Agreement.
-9-
<PAGE>
3.17 No Other Agreements to Sell the Company. Neither the Company
---------------------------------------
nor either Seller has any commitment or legal obligation, absolute or
contingent, to any person or firm other than Buyer to (a) sell, assign or
transfer any material portion of the assets of the Company, any assets of the
Company not in the ordinary course of business or a majority of the capital
stock of the Company, (b) effect any merger, consolidation or other
reorganization of the Company or (c) enter into an agreement to do any of the
foregoing.
3.18 Indebtedness of Sellers and Affiliates. Bonutto, Hofer and
--------------------------------------
Sellers have not obtained any loans or incurred any indebtedness for which any
property, assets or securities of the Company is pledged as collateral and there
are no encumbrances on any of the properties, assets or securities of the
Company imposed in connection with any indebtedness or other obligations of
either Seller, Bonutto or Hofer.
3.19 Distributions. There have been no distributions from the
-------------
Company to Sellers since the date of the Financial Statements and no
compensation paid to Sellers, Bonutto or Hofer since the date of the Financial
Statements, except a payment of Seventy-Five Thousand Dollars ($75,000)to
Bonutto.
3.20 Material Misstatements or Omissions. No representation or
-----------------------------------
warranty by the Company, Interstar, either Seller, Bonutto or Hofer in this
Agreement, or in any document, exhibit, statement, certificate or schedule
heretofore or hereinafter furnished or made available to the Buyer pursuant to
this Agreement or in connection with the transactions contemplated by this
Agreement, including, without limitation, the Disclosure Schedule, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary to make the statements or facts contained
therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
- ---------------------------------------
Buyer hereby represents and warrants to Sellers as follows:
-10-
<PAGE>
4.1 Organization of Buyer. Buyer is duly organized, validly
---------------------
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to conduct its business as it is now being
conducted.
4.2 Authorization. Buyer has the requisite power and authority to
-------------
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby have been duly approved by the Board of Directors of Buyer.
No other corporate proceedings on the part of Buyer are necessary to authorize
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable against it in accordance with its terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium and other similar laws, or by equitable principles,
relating to or limiting the rights of creditors generally and (b) limitations
imposed by law or equitable principles upon the availability of specific
performance, injunctive relief or other equitable remedies.
4.3 Brokerage/Finders Fees. Neither Buyer nor any of its officers,
----------------------
directors, employees or agents have employed any broker, finder or similar agent
or incurred any liability for any brokerage fees, commissions, finder's fees or
similar payments in connection with the transactions contemplated by this
Agreement.
4.4 No Conflict or Violation. Neither the execution and delivery
------------------------
of this Agreement by Buyer, nor the consummation of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions hereby
will result in (a) a violation of or a conflict with any provision of the
Articles of Incorporation or Bylaws of Buyer, (b) a breach of, or a default
under, any term or provision of any contract, agreement, indebtedness, lease,
commitment, license, franchise, permit, authorization or concession to which
Buyer is a party which breach or default would have a material adverse effect on
the business or financial condition of Buyer or its ability to consummate the
transactions contemplated hereby or (c) a violation by Buyer of any statute,
rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or
award, which violation would have a material adverse effect on the business or
financial condition of Buyer or its ability to consummate the transactions
contemplated hereby.
-11-
<PAGE>
ARTICLE V
COVENANT NOT TO COMPETE
- -----------------------
5.1 Covenant. As additional consideration for Bonutto's and
Hofer's covenant not to compete set forth in this Article V, Bonutto and Hofer
shall each be paid * Dollars ($ * ) on the Closing Date in accordance
with Section 2.2(e) hereof. For such consideration, and as an inducement for
Buyer to enter into this Agreement, Bonutto and Hofer individually shall not,
for a period equal to the longer of three (3) years after the date upon which
Bonutto or Hofer, as the case may be, is no longer employed by Buyer or the
Company, or five (5) years following the Effective Date, directly or indirectly,
either as an employee, employer, consultant, agent, principal, partner,
shareholder, corporate officer, director, or in any other individual or
representative capacity, other than as an officer and employee of Buyer and/or
the Company, (i) engage in any asset, property or facilities management services
on behalf of any Property Partnership or Affiliate Partnership or (ii) solicit
or request any limited partner in any of the Property Partnerships or the
Affiliate Partnerships to vote to cause Buyer and/or the Company to be removed
as a general partner of any such Property Partnership or Affiliate Partnership.
If the covenants in this Article V shall be determined by any court of competent
jurisdiction to be unenforceable by reason of their extending for too great a
period of time or over too great a geographical area or by reason of its being
too extensive in any other respect, they shall be interpreted to extend only
over the maximum period of time for which they may be enforceable, and/or over
the maximum geographical area as to which they may be enforceable and/or to the
maximum extent in all other respects as to which they may be enforceable, all as
determined by such court in such action.
5.2 Injunctive Relief. Bonutto and Hofer each acknowledge that a
-----------------
breach of the covenant contained in this Article V will cause irreparable damage
to Buyer and the Company, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such breach will be inadequate.
Accordingly, Bonutto and Hofer each agree that if such individual breaches the
covenant contained in this Article V in addition to any other remedy which may
be available at law or in equity, Buyer or the Company shall be entitled to
specific performance and injunctive relief, without posting a bond or other
security.
-12-
* Confidential Treatment
Requested
<PAGE>
ARTICLE VI
INDEMNIFICATION
- ---------------
6.1 Survival of Representations, Etc. All statements contained in
--------------------------------
the Disclosure Schedule shall be deemed to be representations and warranties by
the parties hereunder. The representations and warranties of each of the
Company, Interstar, Sellers, Bonutto, Hofer and Buyer contained herein shall
survive the Closing Date regardless of any investigation made by any of the
parties hereto for a period of three (3) years, after which time they shall be
of no further force or effect.
6.2 Indemnification.
---------------
(a) By Sellers. Sellers, Bonutto and Hofer hereby agree to
jointly and severally indemnify, protect, defend and hold harmless Buyer
and its Representatives from and against any and all costs, losses,
liabilities, damages, lawsuits, deficiencies, claims and expenses,
including without limitation, interest, penalties, attorneys' fees and all
amounts paid in investigation, defense or settlement of any of the
foregoing (collectively, "Damages"), incurred in connection with, arising
-------
out of, resulting from or to any breach of any covenant or
warranty, or the inaccuracy of any representation, made by the Company,
Interstar, Sellers, Bonutto or Hofer in or pursuant to this Agreement.
(b) By Buyer. Buyer shall indemnify, defend and hold harmless
--------
Sellers and their Representatives from and against any and all Damages
incurred in connection with, arising out of, resulting from or incident to
any breach of any covenant or warranty, or the inaccuracy of any
representation, made by Buyer in or pursuant to this Agreement.
(c) Indemnification Limitations. The liability of Bonutto and
---------------------------
John A. Bonutto and Teresa L. Bonutto, as Trustees of the J&T Bonutto
Revocable Trust u/d/t dated October 12, 1990, incurred in connection with
their indemnification obligations set forth in this Section 6.2 shall not
in any event exceed an amount equal
-13-
<PAGE>
to the aggregate amounts received by them under this Agreement. The
liability of Hofer and Harold C. Hofer and Lisa Anne Hofer, as Trustees of
the H&L Hofer Revocable Trust u/d/t dated March 1, 1990, incurred in
connection with their indemnification obligations set forth in this Section
6.2 shall not in any event exceed an amount equal to the aggregate amounts
received by them under this Agreement.
(d) Damages. The term "Damages" as used in this Section 6.2 is
------- -------
not limited to matters asserted by third parties against the indemnified
party but includes Damages incurred or sustained by the indemnified party
in the absence of third party claims. Payment by the indemnified party of
amounts for which the indemnified party is entitled to be indemnified
hereunder shall not be a condition precedent to the right of the
indemnified party to enforce its indemnity rights hereunder.
ARTICLE VII
MISCELLANEOUS
- -------------
7.1 Assignment. Buyer may assign any of its rights or obligations
----------
under this Agreement to any of its Affiliates, without the prior consent of any
party hereto. Except as set forth above in this Section 7.1, neither this
Agreement, nor any of the rights or obligations hereunder, may be assigned by
either Seller without the prior written consent of Buyer, nor by Buyer without
the prior written consent of Sellers. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their,
respective successors and assigns, and no other person shall have any right,
benefit or obligation hereunder.
7.2 Notices. Unless otherwise provided herein, any notice,
-------
request, instruction or other document to be given hereunder by any party to the
others shall be in writing and delivered in person or by commercial courier,
telegraph, telex or by facsimile transmission or mailed by certified mail,
postage prepaid, return receipt requested, as follows :
If to Bonutto: John A. Bonutto
200 East Sandpointe Avenue
Suite 750
-14-
<PAGE>
Santa Ana, California 92707
Telephone No.:(714) 432-0700
Facsimile No.:(714) 432-7415
If to Hofer: Harold C. Hofer
200 East Sandpointe Avenue
Suite 750
Santa Ana, California 92707
Telephone No.:(714) 432-0700
Facsimile No.:(714) 432-7415
If to Sellers: John A. Bonutto and
Teresa L. Bonutto, as Trustees of
the J&T Bonutto Revocable Trust
200 East Sandpointe Avenue
Suite 750
Santa Ana, California 92707
Telephone No.:(714) 432-0700
Facsimile No.:(714) 432-7415
Harold C. Hofer and
Lisa Anne Hofer, as Trustees of the
H&L Hofer Revocable Trust
200 East Sandpointe Avenue
Suite 750
Santa Ana, California 92707
Telephone No.:(714) 432-0700
Facsimile No.:(714) 432-7415
With a copy to: Rutan & Tucker
611 Anton Boulevard
Suite 1400
Costa Mesa, California 92626-9990
Attn: Richard P. Sims, Esq.
Telephone No.:(714) 641-5100
Facsimile No.:(714) 546-9035
-15-
<PAGE>
If to Buyer: Koll Management Services, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: President
Telephone No.:(714) 833-3030
Facsimile No.:(714) 833-8635
With a copy to: Allen, Matkins, Leck, Gamble &
Mallory
18400 Von Karman Avenue
4th Floor
Irvine, California 92715
Attn: Thomas C. Foster, Esq.
Telephone No.:(714) 553-1313
Facsimile No.:(714) 553-8354
If to Company: Bonutto-Hofer Investment
200 East Sandpointe Avenue
Suite 750
Santa Ana, California 92707
Telephone No.:(714) 432-0700
Facsimile No.:(714) 432-7415
If to Interstar: Interstar Management, Inc.
200 East Sandpointe Avenue
Suite 750
Santa Ana, California 92707
Telephone No.: (714) 432-0700
Facsimile No.: (714) 432-7415
Any such notice or other communication shall be deemed received and effective
upon the earlier of (a) if personally delivered, the date of delivery to the
address of the person to receive such notice; (b) if delivered by commercial
carrier, one (1) day following the receipt of such communication by such carrier
from the sender, as shown on the sender's delivery invoice from such carrier;
(c) if mailed, forty-eight (48) hours after the date of posting by the United
States Post Office as shown by the sender's registry or certification receipt,
as the case may be; (d) if given by telegraph or cable, when delivered to the
telegraph company with charges prepaid; or (e) if given by telex or telecopy,
when sent. Any reference herein to the date of receipt, delivery, or giving, as
the case may be, of any notice or other communication
-16-
<PAGE>
shall refer to the date such communication becomes effective under the terms of
this Section 7.2. Any notice or other communication sent by cable, telex, or
telecopy must be confirmed within forty-eight (48) hours by letter mailed or
delivered in accordance with the foregoing. Notice of change of address shall be
given by written notice in the manner detailed in this Section 7.2. Rejection or
other refusal to accept or the inability to deliver because of changed address
of which no notice was given shall be deemed to constitute receipt of the notice
or other communication sent.
7.3 Choice of Law. This Agreement shall be construed, interpreted
-------------
and the rights of the parties determined in accordance with the laws of the
State of California.
7.4 Entire Agreement; Amendments and Waivers. This Agreement,
----------------------------------------
together with all Exhibits and schedules hereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, amendment, modification
or waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
7.5 Counterparts. This Agreement may be executed in one (1) or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one (1) and the same instrument.
7.6 Invalidity. In the event that any one (1) or more of the
----------
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
7.7 Headings. The headings of the Articles and Sections herein are
--------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
-17-
<PAGE>
7.8 Further Assurances. On and after the Closing Date, Sellers, the
------------------
Company, Interstar and Buyer shall take all appropriate action and execute all
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof, including
without limitation, putting Buyer in possession and operating control of the
Business of the Company and in possession of the Interstar Receivables.
7.9 Expenses. Sellers, Bonutto, Hofer, the Company, Interstar and
--------
Buyer will each be liable for their own costs and expenses incurred in
connection with the negotiation, preparation, execution and performance of this
Agreement.
7.10 Attorneys Fees. The parties agree that if it be determined by
--------------
any court that any party has failed to perform its obligations herein, then the
prevailing party or parties shall be entitled to recover reasonable attorney
fees, court costs and other reasonable expenses incurred in the enforcement of
the rights and obligations set forth in this Agreement or any claim for damages
based on any breach of this Agreement.
7.11 Publicity. Neither the Company, Interstar, Sellers, Bonutto,
---------
Hofer nor Buyer shall issue any press release or make any public statement
regarding the transactions contemplated hereby (including, but not limited to,
any press release or public statement announcing the execution of this
Agreement, the termination of this Agreement or the consummation of the
transactions contemplated hereby), without the prior approval of the other
parties hereto save and except for any disclosures, notices or public filings
which Buyer is required to make pursuant to the statutes and regulations of the
Securities and Exchange Commission of the United States and/or the equivalent
entities at the state level, the content of which shall be the sole
responsibility and at the sole discretion of Buyer. The parties hereto shall
issue a mutually acceptable press release as soon as practicable after the
Closing Date announcing the consummation of the transactions contemplated
hereby.
7.12 Confidential Information. The parties acknowledge that the
------------------------
transaction described herein is of a confidential nature and shall not be
disclosed except to consultants, advisors, affiliates and Representatives, or as
required by law, until such time as the parties make a public announcement
regarding the transaction as provided in Section 7.11. In connection with the
negotiation of this Agreement and the preparation for the consummation
-18-
<PAGE>
of the transactions contemplated hereby, each party acknowledges that it will
have access to confidential information relating to the other parties. Each
party shall treat such information as confidential, preserve the confidentiality
thereof and not duplicate or use such information, except to advisors,
consultants, affiliates and Representatives in connection with the transactions
contemplated hereby. Employees of the Company shall be notified of the fact of
the subject transaction in a joint communication from Sellers and Buyer mutually
approved by Sellers and Buyer. In the event of the termination of this Agreement
for any reason whatsoever, each party shall return to the other all documents,
work papers and other material (including all copies thereof) obtained in
connection with the transactions contemplated hereby and shall use all
reasonable efforts, including instructing its employees and others who have had
access to such information, to keep confidential and not to use any such
information, unless such information is now, or is hereafter disclosed, through
no act or omission of such party, in any manner making it available to the
general public.
7.13 Trading Stock of Buyer. Sellers, Bonutto, Hofer, Interstar,
----------------------
and the Company shall not purchase or sell any shares of the common stock of
Buyer until there has been a public disclosure of Buyer's acquisition of the
Stock.
7.14 Miscellaneous. Each of the Exhibits attached hereto is
-------------
incorporated herein by reference and expressly made a part of this Agreement for
all purposes. References to any Exhibit made in this Agreement shall be deemed
to include this reference and incorporation. Where the context so requires, the
use of the neuter gender shall include the masculine and feminine genders, the
masculine gender shall include the feminine and neuter genders, and the singular
number shall include the plural and vice versa. Time is of the essence of this
Agreement. There are no third party beneficiaries to this Agreement. Each party
hereto acknowledges that (i) each party hereto is of equal bargaining strength;
(ii) each such party has actively participated in the drafting, preparation, and
negotiation of this Agreement; and (iii) any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not apply
in the interpretation of this Agreement, any portion hereof, any amendments
hereto, or any Exhibits attached hereto.
ARTICLE VIII
DEFINITIONS
-19-
<PAGE>
8.1 The term "Affiliate" means any person or entity which, directly
---------
or indirectly, through one (1) or more intermediaries, controls or is controlled
by or is under common control with another person or entity. The term "control"
as used herein (including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
vote fifty percent (50%) or more of the outstanding voting securities of such
person or entity.
8.2 The term "Affiliate Partnerships" means BHI-Dover VI, a
----------------------
California limited partnership, BHI Dover IX, a California limited partnerships,
BHI-Dover X, a California limited partnership, BHI-Dover XII, a California
limited partnership, BHI-Dover XVII, a California limited partnership, BHI-Dover
XIV, a California limited partnership, and BHI-Dover XV, a California limited
partnership, collectively; the term "Affiliate Partnership" means any one (1) of
---------------------
the Affiliate Partnerships.
8.3 The term "Benefit Arrangements" is defined in Section 3.15.
--------------------
8.4 The term "Benefitted Parties" means Bonutto and Hofer,
------------------
collectively.
8.5 The term "Bonutto" means John A. Bonutto.
-------
8.6 The term "Business" is defined in Recital A.
--------
8.7 The term "Buyer" means Koll Partnerships I, Inc., a Delaware
-----
corporation.
8.8 The term "Closing" is defined in Section 2.1.
-------
8.9 The term "Closing Date" is defined in Section 2.1.
------------
8.10 The term "Company" means Bonutto-Hofer Investments, a California
-------
corporation.
-20-
<PAGE>
8.11 The term "Damages" is defined in Section 6.2.
-------
8.12 The term "Down Payment" is defined in Section 1.3(a).
------------
8.13 The term "Effective Date" means January 28, 1994.
--------------
8.14 The term "Excluded Partnership" is defined in Section 1.3(b).
--------------------
8.15 The term "First Installment" is defined in Section 1.3(b).
-----------------
8.16 The term "Hofer" means Harold C. Hofer.
-----
8.17 The term "Interstar" means Interstar Management, Inc., a
---------
California corporation.
8.18 The term "Interstar Receivables" is defined in Recital B.
---------------------
8.19 The term "Projected Gross Revenues" is defined in Section 2.1(b).
------------------------
8.20 The term "Property Partnerships" is defined in Recital A; the
---------------------
term "Property Partnership" means any one (1) of the Property Partnerships.
---------------------
8.21 The term "Purchase Price" is defined in Section 1.3(a).
--------------
8.22 The term "Purchase Price Discount" is defined in Section 1.3(b).
-----------------------
8.23 The term "Representative" means any officer, director, principal,
--------------
attorney,accountant, agent, employee or other representative.
-21-
<PAGE>
8.24 The term "Second Installment" is defined in Section 1.3(b).
------------------
8.25 The term "Sellers" manes John A. Bonutto and Teresa L. Bonutto,
-------
as Trustees of the J&T Bonutto Revocable Trust u/d/t dated October 12, 1990,
and Harold C. Hofer and Lisa Anne Hofer, as Trustees of the H&L Hofer
Revocable Trust u/d/t dated March 1, 1990, collectively; the term "Seller"
------
means either one (1) of the Sellers.
8.26 The term "Stock" is defined in Recital A.
-----
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
"Benefitted Parties"
JOHN A. BONUTTO
HAROLD C. HOFER
"Sellers"
JOHN A. BONUTTO, as Co-Trustee of
the J&T Bonutto Revocable Trust
u/d/t dated October 12, 1990
TERESA L. BONUTTO, as Co-Trustee
of the J&T Bonutto Revocable Trust
u/d/t dated October 12, 1990
-22-
<PAGE>
HAROLD C. HOFER, as Co-Trustee of
the H&L Hofer Revocable Trust
u/d/t dated March 1, 1990
LISA ANNE HOFER, as Co-Trustee of
the H&L Hofer Revocable Trust
u/d/t dated March 1, 1990
"Buyer" KOLL PARTNERSHIPS I, INC., a
Delaware corporation
By:
Name:
Title:
"Company" BONUTTO-HOFER INVESTMENTS,
a California corporation
By:
Name:
Title:
"Interstar" INTERSTAR MANAGEMENT, INC.,
a California corporation
By:
Name:
Title:
-23-
<PAGE>
EXHIBIT 10.38
* Confidential Treatment
Requested
ASSET PURCHASE AGREEMENT
OF CERTAIN GENERAL PARTNERSHIP INTERESTS
- ----------------------------------------
by and among
DOVER RETAIL PROPERTIES, INC.,
as "Seller"
and
KOLL PARTNERSHIPS II, INC.,
as "Buyer"
Dated: May 10, 1994
<PAGE>
ASSET PURCHASE AGREEMENT
OF CERTAIN GENERAL PARTNERSHIP INTERESTS
----------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE AND SALE OF GP INTERESTS.................................. 2
1.1 Transfer Of GP Interests and Personal Property.................... 2
1.2 Consideration for GP Interests and Personal Property.............. 2
1.3 Additional Payments............................................... 2
1.4 Certain Closing Adjustments....................................... 3
1.5 Retained Interest................................................. 3
1.6 Assumption of Liabilities......................................... 6
ARTICLE II CLOSING........................................................... 7
2.1 Closing........................................................... 7
2.2 Documents to be Delivered......................................... 7
2.3 Prorations........................................................ 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.......................... 8
3.1 Organization and Qualification.................................... 8
3.2 Property Partnerships............................................. 8
3.3 Ownership of GP Interests......................................... 8
3.4 Authorization..................................................... 9
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.5 No Conflict or Violation.......................................... 9
3.6 Consents and Approvals............................................ 9
3.7 Financial Statements.............................................. 10
3.8 Books and Records................................................. 10
3.9 Litigation........................................................ 10
3.10 Compliance with Law............................................... 10
3.11 Property Partnership Agreements................................... 11
3.12 Permits........................................................... 11
3.13 Liabilities....................................................... 11
3.14 Labor Matters..................................................... 11
3.15 Brokers and Finders............................................... 12
3.16 No Other Agreements to Sell the GP Interests...................... 12
3.17 Indebtedness of Seller............................................ 12
3.18 Distributions..................................................... 12
3.19 Material Misstatements and Omissions.............................. 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................... 13
4.1 Organization of Buyer............................................. 13
4.2 Authorization..................................................... 13
4.3 Brokerage/Finders Fees............................................ 13
4.4 No Conflict or Violation.......................................... 13
ARTICLE V ACTIONS BY SELLER AND BUYER PRIOR TO THE CLOSING.................. 14
5.1 Maintenance of Business........................................... 14
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
5.2 Investigation by Buyer............................................ 14
5.3 Notification of Certain Matters................................... 14
ARTICLE VI CONDITIONS TO SELLER'S OBLIGATIONS................................ 15
6.1 Representations, Warranties and Covenants......................... 15
6.2 No Governmental Proceeding or Litigation.......................... 15
6.3 Partner Consents.................................................. 15
6.4 Third-Party Consents.............................................. 16
6.5 Waiver by Seller.................................................. 16
ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS................................. 16
7.1 Representations, Warranties and Covenants......................... 16
7.2 No Governmental Proceeding or Litigation.......................... 16
7.3 Partner Consents.................................................. 17
7.4 Third Party Consents.............................................. 17
7.5 Disapproval of Monetary Liens..................................... 17
7.6 Dispute Resolution................................................ 17
7.7 Waiver by Buyer................................................... 18
ARTICLE VIII POST-CLOSING COVENANTS............................................ 18
8.1 Covenant Not to Solicit........................................... 18
8.2 Property Manager.................................................. 19
8.3 Asset Manager..................................................... 19
8.4 Equity Capital.................................................... 19
8.5 Legal Expenses.................................................... 19
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
8.6 Indemnification Reimbursement..................................... 19
8.7 Prorata Creditor Payments......................................... 20
ARTICLE IX INDEMNIFICATION................................................... 20
9.1 Survival of Representations, Etc.................................. 20
9.2 Indemnification................................................... 20
ARTICLE X MISCELLANEOUS..................................................... 21
10.1 Termination....................................................... 21
10.2 Assignment........................................................ 21
10.3 Notices........................................................... 22
10.4 Choice of Law..................................................... 23
10.5 Entire Agreement; Amendments and Waivers.......................... 23
10.6 Counterparts...................................................... 23
10.7 Invalidity........................................................ 23
10.8 Headings.......................................................... 23
10.9 Further Assurances................................................ 23
10.10 Expenses.......................................................... 24
10.11 Attorneys' Fees................................................... 24
10.12 Publicity......................................................... 24
10.13 Confidential Information.......................................... 24
10.14 Miscellaneous..................................................... 25
ARTICLE XI DEFINITIONS....................................................... 25
11.1 Affiliate......................................................... 25
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
11.2 Affiliate Partnerships............................................ 25
11.3 AMLGM............................................................. 25
11.4 BHI............................................................... 25
11.5 Business.......................................................... 25
11.6 Buyer............................................................. 26
11.7 Capital Contribution Notes........................................ 26
11.8 Closing........................................................... 26
11.9 Closing Date...................................................... 26
11.10 Damages........................................................... 26
11.11 Financial Statements.............................................. 26
11.12 Fund IX........................................................... 26
11.13 Fund IX and Fund XII Disposition Revenue.......................... 26
11.14 Fund XII.......................................................... 26
11.15 GP Interests; GP Interest......................................... 26
11.16 Indemnitee........................................................ 26
11.17 Indemnitor........................................................ 26
11.18 KMS............................................................... 27
11.19 Legal Expenses.................................................... 27
11.20 Net Operating Income.............................................. 27
11.21 Net Operating Loss................................................ 27
11.22 Operating Expenses................................................ 27
11.23 Personal Property................................................. 27
11.25 Property Partnership Agreements; Property Partnership Agreement... 27
</TABLE>
-v-
<PAGE>
<TABLE>
<S> <C>
11.26 Purchase Price.................................................... 27
11.27 Representative.................................................... 27
11.28 Retained Interest................................................. 27
11.29 Revenues.......................................................... 28
11.30 Seller............................................................ 28
</TABLE>
EXHIBITS
- ----------
EXHIBIT "A" PROPERTY PARTNERSHIP AGREEMENTS
EXHIBIT "B" TANGIBLE PERSONAL PROPERTY
EXHIBIT "C: PURCHASE PRICE ALLOCATION
EXHIBIT "D" PROJECTED ADDITIONAL PAYMENTS
EXHIBIT "E" CAPITAL CONTRIBUTION NOTES
EXHIBIT "F" MASTER ASSIGNMENT OF PARTNERSHIP INTERESTS
EXHIBIT "G" AMENDMENT TO PROPERTY PARTNERSHIP AGREEMENT
EXHIBIT "H" DISCLOSURE SCHEDULE
EXHIBIT "I" THIRD PARTY CONSENTS
EXHIBIT "J" FINANCIAL STATEMENTS OF EACH PROPERTY PARTNERSHIP
EXHIBIT "K" THIRD PARTY BACK END SHARING
-vi-
<PAGE>
ASSET PURCHASE AGREEMENT
OF CERTAIN GENERAL PARTNERSHIP INTERESTS
- ----------------------------------------
THIS ASSET PURCHASE AGREEMENT OF CERTAIN GENERAL PARTNERSHIP
------------------------------------------------------------
INTERESTS, dated as of May 10, 1994, is made by and among KOLL PARTNERSHIPS II,
- -------------------------------------------------------------------------------
INC., a Delaware corporation ("Buyer"), and DOVER RETAIL PROPERTIES, INC., a
- ----------------------------------------------------------------------------
California corporation ("Seller"). A glossary of defined terms used herein is
- -----------------------------------------------------------------------------
set forth in Article XI.
- ------------------------
R E C I T A L S :
-----------------
A. Seller currently engages in the business of (i) holding a general
partnership interest in BHI-Dover VI, a California limited partnership, BHI-
Dover IX, a California limited partnership ("Fund IX"), BHI-Dover X, a
California limited partnership, BHI-Dover XII, a California limited partnership
("Fund XII"), BHI-Dover XIV, a California limited partnership, BHI-Dover XV, a
California limited partnership, and BHI-Dover XVII, a California limited
partnership, (collectively, the "Property Partnerships" and sometimes separately
referred to as a "Property Partnership"); and (ii) rendering such other services
as are necessary or appropriate to carry out its duties and obligations as a
general partner of each of the Property Partnerships (collectively, the
"Business"). The Property Partnerships are presently governed by the
partnership agreements (as the same may have been amended and/or restated)
listed on Exhibit "A" attached hereto (collectively, the "Property Partnership
Agreements" and sometimes separately referred to as a "Property Partnership
Agreement").
B. Buyer desires to purchase from Seller, and Seller desires to
transfer to Buyer, its general partnership interest in each of the Property
Partnerships exclusive of any rights as a creditor of the Property Partnerships
(collectively, the "GP Interests" and sometimes separately referred to as a "GP
Interest") and certain tangible personal property in the possession of Seller
and third parties set forth on Exhibit "B" attached hereto (the "Personal
Property") upon the terms and subject to the conditions set forth in this
Agreement. Notwithstanding the foregoing, Seller shall retain that certain
interest (the "Retained Interest") in the Net Operating Income and Fund IX and
Fund XII Disposition Revenue of Buyer as described in Section 1.5.
A G R E E M E N T :
- - - - - - - - - -
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
PURCHASE AND SALE OF GP INTERESTS
- ---------------------------------
1.1 Transfer Of GP Interests and Personal Property
--- ----------------------------------------------
Upon the terms and subject to the conditions contained herein at the
Closing, Seller shall sell, convey, transfer, assign and deliver to Buyer, and
Buyer shall acquire on the Closing Date, the GP Interests and the Personal
Property free and clear of all liens and encumbrances.
1.2 Consideration for GP Interests and Personal Property
--- ----------------------------------------------------
Upon the terms and subject to the conditions contained herein, as
consideration for the purchase of the GP Interests and the Personal Property,
Buyer shall pay to Seller * Dollars ($ * ) (the "Purchase Price"). The Purchase
Price, less certain closing adjustments provided for in Section 1.4, shall be
paid to Seller by Buyer at the Closing Date. The Purchase Price shall be
allocated to the GP Interests and the Personal Property as set forth on Exhibit
"C".
1.3 Additional Payments
--- -------------------
(a) In addition to the Purchase Price, Buyer shall collect on
behalf of Seller and shall pay to Seller the following amounts: (i) the
amount of all accrued and unpaid management fees and leasing commissions
with respect to the properties owned by each of the Property Partnerships
due Seller and/or Affiliates of Seller and commissions and fees payable to
Seller as the general partner of each of the Property Partnerships covering
any period through and including the Closing Date, which, without limiting
the foregoing, shall include, if the Closing Date occurs prior to the last
day of a calendar month, an amount calculated ratably according to the
number of
-2-
* Confidential Treatment
Requested
<PAGE>
days elapsed during the calendar month in which the Closing occurs, through
the Closing Date; and (ii) (A) the amount of all declared (whether before
or after the Closing Date) but unpaid distributions due Seller on account
of its residual profits interests covering any period through and including
the calendar month prior to the calendar month in which the Closing Date
occurs and (B) with respect to any distributions on account of Seller's
residual profits interests declared with respect to the calendar month in
which the Closing Date occurs, an amount calculated ratably based on the
number of days elapsed during the calendar month in which the Closing
occurs, through the Closing Date. The payments due to Seller pursuant to
this Section 1.3(a) shall be paid to Seller as set forth in Section 1.3(c).
Set forth on Exhibit "D" attached hereto are the projected additional
-----------
payments which shall have accrued as of the Closing Date, as estimated by
Seller in good faith.
(b) The amounts payable under Section 1.3(a) shall be shown on a
schedule delivered by Seller to Buyer five (5) days prior to the Closing
Date and, to the extent necessary, updated at the Closing. Such schedule,
as updated, if applicable, shall be accompanied by Seller's certificate
representing and warranting to Buyer that the amounts set forth on such
schedule are duly payable by Buyer.
(c) If Buyer receives any of the payments due Seller pursuant to
Section 1.3(a), Buyer shall pay such amounts to Seller by certified check
or wire transfer of readily available funds within five (5) business days
following the date all or any portion of such amounts are received.
1.4 Certain Closing Adjustments
---------------------------
At the Closing, Seller shall pay to Buyer, by credit against the
Purchase Price payable at Closing, the aggregate amount of all fees or
commissions of any nature whatsoever, paid to Seller and/or Affiliates of Seller
prior to the Closing Date, to the extent such fees or commissions are in respect
of any period of time from and after the Closing Date. Within five (5) days
prior to the Closing, Seller shall provide to Buyer a schedule of all such
amounts as of such date and shall provide to Buyer at the Closing an update of
such schedule, if necessary.
1.5 Retained Interest
-----------------
-3-
<PAGE>
(a) Upon the terms and subject to the conditions contained
herein, Buyer shall be obligated to pay to Seller the amount of the
Retained Interest (if any) for each calendar year (the seven (7) month
period commencing June 1, 1994, for the calendar year 1994) during the term
of this Agreement within sixty (60) days following the end of the
applicable period by certified check or wire transfer of readily available
funds. The Retained Interest for any applicable period shall be equal to
the sum of * percent ( * %) of Fund IX and Fund XII Disposition Revenue (if
any) for such period and Seller's percentage of Net Operating Income (if
any) for such period calculated in the manner set forth below:
(i) Until Net Operating Income from and after the Closing
Date equals * Dollars ($ * ) plus simple interest thereon from the
Closing Date at eight percent (8%) per annum, Seller shall be entitled
to * percent ( * %) of Net Operating Income as its Retained Interest;
(ii) Once Net Operating Income from and after the Closing
Date exceeds * Dollars ($ * ) plus simple interest thereon from the
Closing Date at eight percent (8%) per annum and until Seller has
received payments on account of its Retained Interest pursuant to
Section 1.5(a)(i) and this Section 1.5(a)(ii) equal to * Dollars
($ * ) plus interest thereon from the Closing Date at eight percent
(8%) per annum, Seller shall be entitled to * percent ( * %) of Net
Operating Income as its Retained Interest; and
(iii) Thereafter, Seller shall be entitled to * percent
( *%) of Net Operating Income as its Retained Interest.
(b) The term "Net Operating Income" for any relevant period
means the Revenues during such period less the items in subsections (i),
(ii), (iii), (iv) and (v) below:
(i) The Operating Expenses during such period;
-4-
* Confidential Treatment
Requested
<PAGE>
(ii) Legal Expenses paid or reimbursed during such period;
(iii) A reasonable allocation of KMS' corporate overhead and
cost of information services during such period consistent with
allocations made by KMS to its operating divisions not to exceed *
percent ( * %) of Revenues for such period to the extent and only to
the extent such corporate overhead allocation is reimbursable by the
Project Partnership(s);
(iv) Payments of principal of and interest on the Capital
Contribution Notes during such period; and
(v) Any Net Operating Loss incurred in a calendar year
(after calendar year 1993 and for the seven (7) month period
commencing June 1, 1994, for the calendar year 1994) previous to such
relevant period to the extent same has not been an offset in the
calculation of Net Operating Income for a calendar year previous to
such relevant period.
(c) The term "Net Operating Loss" for any relevant period means
------------------
the items specified in subsections (i), (ii), (iii) and (iv) of this
Section 1.5(b) for such period in excess of the Revenues for such period.
(d) The term "Revenues" for any relevant period means the gross
--------
revenues, net of profit participation by third party lenders, partners
and/or independent contractors (including, without limitation, amounts
payable to the third parties set forth on Exhibit "K" attached hereto) and
-----------
any amounts paid to Seller pursuant to Section 1.3, of Buyer and/or KMS for
such period from (i) management fees, leasing commissions and expense
reimbursements with respect to the properties owned by each of the Property
Partnerships; (ii) commissions and fees including, without limitation,
disposition fees, refinancing and/or loan restructure fees, payable to
Buyer as the general partner of each of the Property Partnerships
(exclusive of net sales commissions and/or disposition fees payable to
Buyer from Fund IX and Fund XII); (iii) operating profits interests held by
Buyer as general partner in each of the Property Partnerships; and (iv)
residual profits interests held by Buyer as general partner in each of the
Property Partnerships (exclusive of residual profits interests held by
Buyer as general partner in Fund IX and Fund XII).
-5-
* Confidential Treatment
Requested
<PAGE>
(e) The term "Operating Expenses" for any relevant period means
------------------
all operating expenses incurred by Buyer and/or KMS during such period
associated with the Property Partnerships as reasonably allocated by Buyer,
including, without limitation, the following:
(i) office expenses;
(ii) labor and benefits costs;
(iii) real property rent expense for such period;
(iv) travel and entertainment expenses;
(v) insurance costs, including, without limitation, errors
and omissions/professional liability insurance costs payable by Buyer
and/or reimbursement of same by Buyer to KMS and the cost of including
Buyer under KMS' umbrella liability coverage;
(vi) professional fees;
(vii) all taxes (except income taxes);
(viii) marketing expenses;
(ix) personal property rent expenses payable to third party
lessors and debt service on personal property financing arrangements
payable to third party lenders;
(x) depreciation on any depreciable property owned for use
by Buyer and a reasonable allocation of depreciation (based on use) on
any depreciable property owned by KMS and used by Buyer;
-6-
<PAGE>
(xi) a reasonable allocation of KMS' accounting costs
consistent with allocations by KMS to its operating divisions;
(xii) interest at KMS' cost of funds on any outstanding
working capital advances required for the Business made by KMS to
Buyer; and
(xiii) all costs and expenses associated with obtaining the
consent of the limited partners referenced in Sections 6.3 and 7.3.
(f) The term "Fund IX and Fund XII Disposition Revenue" for any
----------------------------------------
relevant period means the gross revenues, net of profit participation by
third party lenders, partners and/or independent contractors, of Buyer for
such period from (i) sale commissions and/or disposition fees payable to
Buyer from Fund IX and Fund XII and (ii) residual profits interests held by
Buyer as general partner in Fund IX and Fund XII.
(g) For purposes of the foregoing, Revenues, Operating Expenses
and Net Operating Income for any relevant computation period shall be
calculated under the accrual method of accounting (except that the items
set forth in subsections (ii) and (iv) of Section 1.5(b) shall be
considered a deduction against Revenues in the calculation of Net Operating
Income only when paid) and in accordance with generally accepted accounting
principles but shall be payable from, and recourse shall be limited to,
cash received by Buyer from the Project Partnerships.
(h) Payments on account of Seller's Retained Interest shall be
subordinate to repayment to KMS of all principal of, and accrued interest
on, working capital advances made by KMS to Buyer.
(i) Within thirty (30) days following the end of each calendar
month during the term of this Agreement, Buyer shall prepare (or cause to
be prepared) and distribute to Seller a monthly report of cash receipts and
disbursements for Buyer for such month. Within sixty (60) days following
the end of each calendar year during the term of this Agreement, Buyer
shall prepare (or cause to be prepared) and distribute to Seller an annual
report setting forth the calculation of Net Operating
-7-
<PAGE>
Income for the relevant calendar year and the calculation of Seller's
Retained Interest certified as true and correct by the Chief Financial
Officer of Buyer, in his capacity as an officer of Buyer and without
personal liability.
(j) Notwithstanding the provisions of Section 1.5(a) with
respect to the timing of payment of the Retained Interest to Seller, in the
event of the sale or other disposition of a substantial portion of the
assets of a Property Partnership from which sale or other disposition Buyer
is entitled to Revenues of at least * Dollars ($ * ), then, within ninety
(90) days of receipt by Buyer of such Revenues, Buyer shall have an interim
closing of its books and shall be obligated to pay to Seller the amount of
the Retained Interest (if any) for the period commencing with January 1 of
the year in which such sale or other disposition occurs (June 1, 1994, if
the sale or other disposition occurs in 1994) and ending on the last day of
the calendar month in which such sale or other disposition occurs.
(k) When appropriate and consistent with the Property
Partnership Agreements, Buyer, as general partner of the Property
Partnerships, shall reimburse itself for Operating Expenses incurred on
behalf of the Property Partnerships.
1.6 Assumption of Liabilities
-------------------------
Upon the terms and subject to the conditions contained herein, at the
Closing, Buyer shall assume (i) liability for principal and interest under the
promissory notes (the "Capital Contribution Notes") made by Seller in favor of
each Property Partnership representing Seller's initial capital contribution to
each such Property Partnership which principal amounts, and accrued and unpaid
interest thereon, are set forth on Exhibit "E" attached hereto, (ii) liability
for a percentage of residual profits interests and disposition fees associated
with the GP Interests in the percentages and payable to the third parties set
forth on Exhibit "K" attached hereto, which liability is limited to the Revenues
-----------
derived by Buyer from each Property Partnership on account of such disposition
fees and/or residual profits interests, (iii) all obligations and liabilities
associated with the GP Interests accruing, arising out of, or relating to,
events or occurrences happening after the Closing Date and (iv) any obligations
and liabilities associated with the GP Interests reflected or provided for in
the Financial Statements or incurred since the date of the Financial Statements
in the ordinary course of business and consistent with the past practice of the
Property Partnerships. Otherwise, Buyer shall not assume any obligations or
liabilities of Seller not specifically described in this Section 1.6. In this
regard, Buyer shall assume no liability or obligations with respect to any
litigation between Seller and BHI or any of their Affiliates.
-8-
* Confidential Treatment
Requested
<PAGE>
ARTICLE II
----------
CLOSING
- -------
2.1 Closing
--- -------
The closing of the transactions contemplated herein (the "Closing")
shall be held at 10:00 a.m. local time on May 31, 1994, or such other date as
may be mutually agreed upon in writing by Seller and Buyer (the "Closing Date"),
at the offices of Buyer's counsel, Allen, Matkins, Leck, Gamble & Mallory
("AMLGM"), 18400 Von Karman Avenue, Fourth Floor, Irvine, California 92715.
2.2 Documents to be Delivered
--- -------------------------
To effect the transfer of the GP Interests referred to in Section 1.1
and the delivery of the consideration described in Section 1.2 hereof, Seller
and Buyer shall, on the Closing Date, deliver the following:
(a) Buyer and Seller each shall deliver to the other one (1)
counterpart of a Master Assignment of Partnership Interests for the
Property Partnerships in the form of Exhibit "F" attached hereto
effectuating the assignment and transfer of the GP Interests from Seller to
Buyer, duly executed by Seller, as assignor, and Buyer, as assignee.
(b) Seller shall deliver to Buyer a bill of sale effectuating
the transfer of the Personal Property from Seller to Buyer, duly executed
by Seller.
(c) Buyer and Seller each shall deliver to AMLGM for filing with
the California Secretary of State, one (1) duly executed counterpart of an
Amendment to Certificate of Limited Partnership (Form LP-2) for each
Property Partnership reflecting the admission of the Buyer into each
Property Partnership as a substituted general partner therein and the
withdrawal of Seller as a general partner therein.
-9-
<PAGE>
(d) Buyer and Seller shall each deliver all documents required
to be delivered by them pursuant to Articles VI and VII, as applicable.
(e) Buyer shall deliver to Seller the Purchase Price, less any
adjustments made pursuant to Section 1.4, by certified check or wire
transfer of readily available funds.
(f) Seller, for itself and as attorney-in-fact for the
constituent limited partners of each Property Partnership, and Buyer shall
each deliver one (1) duly executed counterpart of an amendment to each of
the Property Partnership Agreements in the form of Exhibit "G" attached
hereto for each Property Partnership reflecting the admission of Buyer into
each Property Partnership as a substituted general partner therein, the
withdrawal of Seller as a general partner therein, and waives the
contractual consequences of a general partner withdrawal as well as all
other matters described in Sections 6.3(b) and 7.3(b).
(g) All instruments and documents executed and delivered to
Buyer pursuant hereto shall be in form and substance, and shall be executed
in a manner, reasonably satisfactory to Buyer. All instruments and
documents executed and delivered to Seller pursuant hereto shall be in form
and substance, and shall be executed in a manner, reasonably satisfactory
to Seller.
2.3 Prorations
--- ----------
Income, gain, losses, deductions and credit that are attributable to
the GP Interests shall be allocated between Seller and Buyer based upon an
interim closing of the books of each Property Partnership as of the Closing Date
in accordance with the provisions of Section 706 of the Internal Revenue Code of
1986, as amended, and Treasury Regulation Section 1.706-1(c)(2).
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF SELLER
- ----------------------------------------
-10-
<PAGE>
Seller hereby represents and warrants to Buyer, except as set forth on
----------------------------------------------------------------------
the Disclosure Schedule attached hereto as Exhibit "H", the following:
- ----------------------------------------------------------------------
3.1 Organization and Qualification
--- ------------------------------
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has the requisite power
and authority to conduct its business as it is now being conducted. Copies of
the Articles of Incorporation and the Bylaws of Seller delivered to Buyer are
accurate and complete as of the date hereof.
3.2 Property Partnerships
--- ---------------------
Each Property Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of California
and has the requisite power and authority to conduct its business as it is now
being conducted. Copies of the Property Partnership Agreements delivered to
Buyer are accurate and complete as of the date hereof.
3.3 Ownership of GP Interests
--- -------------------------
Seller (i) is the record and beneficial owner of all of the GP
Interests, (ii) has good and marketable title to all of the GP Interests, and
(iii) subject to the consent of a majority in interest of the limited partners
in each of the Property Partnerships, has the absolute right, power and
authority to sell, transfer and deliver the GP Interests, in each case free and
clear of all encumbrances. Except for the GP Interests, Seller does not own any,
and there are no, general partnership interests in any of the Property
Partnerships. Upon consummation of the Closing, Buyer shall be the sole general
partner of each of the Property Partnerships. There are no options, rights of
first refusal, puts, call, commitments or other agreements of any character
whatsoever relating to the GP Interests.
3.4 Authorization
--- -------------
Seller has the requisite power and authority to enter into this
Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby.
-11-
<PAGE>
The execution and delivery of this Agreement by Seller and the consummation by
Seller of the transactions contemplated hereby have been duly approved by the
Board of Directors and the shareholders of Seller. No other corporate
proceedings on the part of Seller are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and constitutes a legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws, or by equitable principles, relating to or
limiting the rights of creditors generally and (b) limitations imposed by law or
equitable principles upon the availability of specific performance, injunctive
relief or other equitable remedies.
3.5 No Conflict or Violation
--- ------------------------
Neither the execution and delivery of this Agreement by Seller, nor
the consummation by Seller of the transactions contemplated hereby, nor
compliance by Seller with any of the provisions hereof will (a) violate,
conflict with, or result in a breach of any provisions of, or constitute a
material default (or an event which, with notice or lapse of time or both, would
constitute a material default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any encumbrance upon any of the
GP Interests under, any of the terms, conditions or provisions of (i) the
Articles of Incorporation or Bylaws of Seller, (ii) any of the Property
Partnership Agreements or (iii) any note, bond, mortgage, indenture, deed of
trust, security or pledge agreement, license, lease, franchise, permit,
agreement or other instrument or obligation to which Seller or any of the
Property Partnerships is a party or to which Seller, the Property Partnerships
or the GP Interests or any of the properties or assets of Seller or the Property
Partnerships may be subject, which violation, conflict, breach or default would
have a material adverse effect on the GP Interests, the Property Partnerships or
Seller's ability to consummate the transactions contemplated hereby, or (b)
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Seller, the GP Interests or any Property Partnership or
any of the properties or assets of Seller or any Property Partnership, which
violation would have a material adverse effect on the GP Interests or Seller's
ability to consummate the transactions contemplated hereby.
3.6 Consents and Approvals
--- ----------------------
Except for the consent of a majority in interest of the limited
partners of each of the Property Partnerships which have been or will be
obtained by the Closing Date and the consent of the third-party lenders, lessors
and other parties set forth on Exhibit "I" attached
-12-
<PAGE>
hereto, no notice to, declaration, filing or registration with, or
authorization, consent or approval of, or permit from, any domestic or foreign
governmental or regulatory body or authority, or any other person or entity, is
necessary in connection with the execution and delivery of this Agreement by the
Seller and the consummation by the Seller of the transactions contemplated by
this Agreement. There are no fees or commissions due any third party by reason
of the transfer of the GP Interests from Seller to Buyer.
3.7 Financial Statements
--- --------------------
To the best knowledge of Seller, the unaudited balance sheet as of
December 31, 1993, and the related unaudited statements of operations, owner's
equity and cash flows for the twelve (12) months then ended (collectively, the
"Financial Statements") for each Property Partnership attached hereto as Exhibit
"J" fairly and accurately present in all material respects the assets,
liabilities and financial position of each of the Property Partnerships as of
the date thereof and the results of operations and cash flows for the period
then ended and have been prepared in conformity with generally accepted
accounting principles consistently applied throughout the period covered. There
have been no payments to third parties since the date of the Financial
Statements except in the ordinary course of business and consistent with each
Property Partnership's past practice. In addition, there has been no material
adverse change in the financial condition, working capital, capital, assets,
liabilities, revenues, income, cash flow or condition of any of the Property
Partnerships from and after the period covered by the Financial Statements.
3.8 Books and Records
--- -----------------
The books and records to which access was given Buyer prior to the
date hereof are the actual books and records of the Property Partnerships and,
to the best knowledge of Seller, accurately and fairly reflect, in all material
respects, the activities, transactions, revenues and expenses of the Property
Partnerships.
3.9 Litigation
--- ----------
Except for Bonutto-Hofer Investments, et al v. Dover Retail
Properties, Inc., et al., Orange County Superior Court, Case No. 709826, which
shall be dismissed, with prejudice, prior to the Closing Date, there are no
actions, suits, proceedings or, to the best knowledge of Seller, investigations
by, against, involving or relating to any GP Interest or any Property
Partnership, at law or in equity, or before any federal, state, municipal or
other
-13-
<PAGE>
governmental department, commission, board, bureau, agency or instrumentality in
which any material claim has been made or asserted against any such Property
Partnership or against Seller with respect to any GP Interest. There is
outstanding no garnishment, attachment or writ of execution issued with
reference to the Property Partnerships, the GP Interests or any of the assets of
the Property Partnerships. None of the Property Partnerships is a party or
subject to any judgment, decree or order enjoining it in respect of any business
practice or the conduct of business in any area.
3.10 Compliance with Law
---- -------------------
To the best knowledge of Seller, none of the Property Partnerships nor
Seller has violated or failed to comply in any material respect with any
statute, law, ordinance, regulation, rule, decree or order of any foreign,
federal, state or local government or any other governmental department or
agency, or any judgment, decree or order of any court, applicable to the
business or operations of the Property Partnerships. To the best knowledge of
Seller, the conduct of the businesses of the Property Partnerships is in
material conformity with all building code, health and environmental
requirements. To the best knowledge of Seller, the conduct of the businesses of
the Property Partnerships is in material conformity with all energy, public
utility, zoning and OSHA requirements and all other foreign, federal, state and
local governmental and regulatory requirements except where the aggregate of all
such non-conformities would not have a material adverse effect on the Property
Partnerships, taken as a whole, and where any non-conformity in the conduct of
the business of any Property Partnership would not have a material adverse
effect on the relevant Property Partnership. None of the Property Partnerships
nor Seller has received any notice to the effect that any of the Property
Partnerships is not in compliance with, and none of the Property Partnerships
nor Seller has any reason to anticipate that any presently existing
circumstances are likely to result in the violation of, any such statute, law,
ordinance, regulation, rule, judgment, decree or order.
3.11 Property Partnership Agreements
---- -------------------------------
To the best knowledge of Seller, there is no current default or breach
under the terms and provisions of the Property Partnership Agreements or any
loan document or other contract to which a Property Partnership is a contracting
party, which in the case of such other contract, such default of breach would
have a material adverse effect on the relevant Property Partnership. The
Property Partnership Agreements are in full force and effect and there have been
no modifications or amendments thereto except as set forth on Exhibit "A"
attached hereto.
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<PAGE>
3.12 Permits
---- -------
To the best knowledge of Seller, Seller and each of the Property
Partnerships has all permits from governmental agencies required to conduct the
respective present businesses of the Property Partnerships as now being
conducted, except such permits the failure of which to obtain would not have a
material adverse effect on any of the Property Partnerships, taken as a whole,
and where any failure to obtain a permit with respect to a Property Partnership
would not have a material adverse effect on the relevant Property Partnership.
3.13 Liabilities
---- -----------
To the best knowledge of Seller, none of the Property Partnerships has
any liabilities, obligations or commitments of any nature (whether accrued,
absolute, contingent or otherwise and whether matured or unmatured), due or to
become due, except (a) liabilities reflected or provided for in the Financial
Statements and (b) liabilities incurred since the date of the Financial
Statements in the ordinary course of business and consistent with the past
practice of the Property Partnerships.
3.14 Labor Matters
---- -------------
The Property Partnerships have no employees. None of the Property
Partnerships is a party to any collective bargaining agreement, nor, to the best
knowledge of Seller, is any Property Partnership subject to any organizing
efforts of any labor union, organization, local or subdivision. There are no
labor suits or, to the best knowledge of Seller, grievances, claims or
investigations concerning employment pending or, to the best knowledge of
Seller, threatened against any of the Property Partnerships.
3.15 Brokers and Finders
---- -------------------
Neither Seller nor any of Seller's officers, directors, employees or
agents have employed any broker, finder or similar agent or incurred any
liability for any brokerage fees, commissions, finder's fees or similar payments
in connection with the transactions contemplated by this Agreement.
-15-
<PAGE>
3.16 No Other Agreements to Sell the GP Interests
---- --------------------------------------------
Seller does not have any commitment or legal obligation, absolute or
contingent, to any person or entity other than Buyer to (i) sell, assign or
transfer the GP Interests and/or any material portion of the assets of any
Property Partnership, or (ii) enter into an agreement to do any of the
foregoing.
3.17 Indebtedness of Seller
---- ----------------------
Seller has not obtained any loans or incurred any indebtedness for
which any property, assets or securities of any of the Property Partnerships,
including, without limitation, the GP Interests, is pledged as collateral and
there are no encumbrances on any of the properties, assets or securities of any
of the Property Partnerships, including, without limitation, the GP Interests,
imposed in connection with any indebtedness or other obligations of Seller.
3.18 Distributions
---- -------------
There have been no distributions from any of the Property Partnerships
to Seller or any affiliate or representative thereof or to any other partner of
the Property Partnerships since the date of the Financial Statements. There have
been no fees, guaranteed payments, interest or other compensation of any nature
whatsoever other than in the ordinary course of business paid to Seller or any
affiliate or representative thereof since the date of the Financial Statements.
3.19 Material Misstatements and Omissions
---- ------------------------------------
To the best knowledge of Seller, no representation or warranty by
Seller, or in any document, exhibit, statement, certificate or schedule
heretofore or hereinafter furnished or made available to the Buyer pursuant to
this Agreement or in connection with the transactions contemplated by this
Agreement, including, without limitation, the Disclosure Schedule, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary to make the statements or facts contained
therein not misleading.
-16-
<PAGE>
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
- ---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
----------------------------------------------------------
4.1 Organization of Buyer
--- ---------------------
Buyer is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite power and
authority to conduct its business as it is now being conducted.
4.2 Authorization
--- -------------
Buyer has the requisite power and authority to enter into this
Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby
have been duly approved by the Board of Directors of Buyer. No other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable against it in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium and other similar laws, or by equitable principles, relating to or
limiting the rights of creditors generally and (b) limitations imposed by law or
equitable principles upon the availability of specific performance, injunctive
relief or other equitable remedies.
4.3 Brokerage/Finders Fees
--- ----------------------
Neither Buyer nor any of its officers, directors, employees or agents
have employed any broker, finder or similar agent or incurred any liability for
any brokerage fees, commissions, finder's fees or similar payments in connection
with the transactions contemplated by this Agreement.
-17-
<PAGE>
4.4 No Conflict or Violation
--- ------------------------
Neither the execution and delivery of this Agreement by Buyer, nor the
consummation of the transactions contemplated hereby, nor compliance by Buyer
with any of the provisions hereof will result in (a) a violation of or a
conflict with any provision of the Articles of Incorporation or Bylaws of Buyer,
(b) a breach of, or a default under, any term or provision of any contract,
agreement, indebtedness, lease, commitment, license, franchise, permit,
authorization or concession to which Buyer is a party which breach or default
would have a material adverse effect on the business or financial condition of
Buyer or its ability to consummate the transactions contemplated hereby or (c) a
violation by Buyer of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree or award, which violation would have a
material adverse effect on the business or financial condition of Buyer or its
ability to consummate the transactions contemplated hereby.
ARTICLE V
---------
ACTIONS BY SELLER AND BUYER PRIOR TO THE CLOSING
- ------------------------------------------------
During the period from the date hereof through the Closing Date:
----------------------------------------------------------------
5.1 Maintenance of Business
--- -----------------------
(a) The Business of Seller and the businesses of the Property
Partnerships shall be conducted only in, and Seller and each of the
Property Partnerships shall not take any action except in, the ordinary
course of business and consistent with past practice, and Seller and each
of the Property Partnerships shall use its best efforts to maintain and
preserve its business, assets, prospects, suppliers, customers and other
advantageous business relationships.
(b) From and after the date of this Agreement, Seller shall not,
without the prior written consent of Buyer, enter into any contracts or
other agreements that arise out of or relate to the Property Partnerships.
5.2 Investigation by Buyer
--- ----------------------
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<PAGE>
Seller shall allow Buyer during regular business hours through Buyer's
Representatives, to make such investigation of the business, properties, books
and records of each of the Property Partnerships, and to conduct such
examination of the condition of the Property Partnerships, as Buyer deems
necessary or advisable to familiarize itself with such business, properties,
books, records, condition and other matters, and to verify the representations
and warranties of Seller hereunder.
5.3 Notification of Certain Matters
--- -------------------------------
(a) Seller shall give prompt notice to Buyer, and Buyer shall give
prompt notice to Seller, of (i) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect any time from the date hereof to the
Closing Date and (ii) any material failure of Seller or Buyer, as the case
may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder, and each party shall use all
reasonable efforts to remedy same.
(b) Seller shall notify Buyer of any and all material information
concerning any of the Property Partnerships, about which Seller learns on
or before the Closing promptly upon Seller's obtaining knowledge of the
same.
ARTICLE VI
----------
CONDITIONS TO SELLER'S OBLIGATIONS
- ----------------------------------
The obligation of Seller to transfer the GP Interests to Buyer and to
---------------------------------------------------------------------
consummate the other transactions contemplated hereby on the Closing Date is
- ----------------------------------------------------------------------------
subject, in the discretion of Seller, to the satisfaction, on or prior to the
- -----------------------------------------------------------------------------
Closing Date, of each of the following conditions:
- --------------------------------------------------
6.1 Representations, Warranties and Covenants
--- -----------------------------------------
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<PAGE>
All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if such representations and warranties were made at and as of
the Closing Date except to the extent such representations and warranties are
expressly stated to be true as of another date, and Buyer shall have performed
in all material respects all agreements and covenants required hereby to be
performed by it prior to or at the Closing Date. There shall be delivered to
Seller at the Closing a certificate executed by Buyer, in form and substance and
executed in a manner reasonably satisfactory to Seller, to the foregoing effect.
6.2 No Governmental Proceeding or Litigation
--- ----------------------------------------
No suit, action, investigation, inquiry or other proceeding by any governmental
authority or other person shall have been instituted which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to materially damage Seller if the transactions
contemplated hereunder are consummated.
6.3 Partner Consents
--- ----------------
There shall have been obtained all consents (the cost of which shall
be borne by the Buyer as an Operating Expense) required from the limited
partners of each Property Partnership to approve an amendment to each Property
Partnership Agreement which:
(a) Approves the admission of Buyer into each Property Partnership as
a substituted general partner therein and the withdrawal of Seller as a
general partner therein;
(b) Approves the payment of financing or restructuring fees of one and
one-half (1 1/2) points to the general partner of each such Property
Partnership upon the successful completion of a refinancing or
restructuring of existing indebtedness of such Property Partnership;
(c) Confirms that the indemnification provisions of each Property
Partnership Agreement for the actions of Seller as a general partner of
each Property Partnership survive the Closing; and
-20-
<PAGE>
(d) Appoints Seller as the attorney-in-fact for each limited partner
of each Property Partnership to execute, record, file and publish any and
all instruments and documents to effectuate such amendment to each Property
Partnership Agreement.
6.4 Third-Party Consents
--- --------------------
There shall have been obtained all consents (and agreement not to
accelerate Property Partnership indebtedness by reason of the transfer of the GP
Interests) from any third-party lenders (exclusive of Travelers Real Estate
Corporation and US West Realty Advisors with respect to BHI-Dover X, a
California limited partnership), lessors or other parties required to consent to
the admission of Buyer into each Property Partnership as a substituted general
partner therein, the withdrawal of Seller as a general partner therein, and to
the other matters set forth in the amendments to the Property Partnership
Agreements referenced in Section 6.3.
6.5 Waiver by Seller
--- ----------------
Seller may unilaterally waive any of Seller's conditions described in
this Agreement. Except as otherwise provided in this Agreement, any such waiver
shall be effective only if the same is (i) in writing, (ii) signed by Seller,
and (iii) delivered to Buyer on or before the date such condition is to be
satisfied.
ARTICLE VII
-----------
CONDITIONS TO BUYER'S OBLIGATIONS
- ---------------------------------
The obligation of Buyer to purchase the GP Interests and to consummate
----------------------------------------------------------------------
the other transactions contemplated hereby is subject, in the discretion of
- ---------------------------------------------------------------------------
Buyer, to the satisfaction, on or prior to the Closing Date, of each of the
- ---------------------------------------------------------------------------
following conditions:
- ---------------------
7.1 Representations, Warranties and Covenants
--- -----------------------------------------
All representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if such
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<PAGE>
representations and warranties were made at and as of the Closing Date except to
the extent such representations and warranties are expressly stated to be true
as of another date, and Seller shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date. There shall be delivered to Buyer at the Closing a certificate
executed by Seller, in form and substance and executed in a manner reasonably
satisfactory to Buyer, to the foregoing effect.
7.2 No Governmental Proceeding or Litigation
--- ----------------------------------------
No suit, action, investigation, inquiry or other proceeding by any
governmental authority or other person shall have been instituted which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected materially and adversely to affect the value
of the GP Interests, the financial condition and/or business of Seller or
otherwise reasonably be expected to materially damage Buyer if the transactions
contemplated hereunder are consummated.
7.3 Partner Consents
--- ----------------
There shall have been obtained all consents (the cost of which shall
be borne by the Buyer as an Operating Expense) required from the limited
partners of each Property Partnership to approve an amendment to each Property
Partnership Agreement which:
(a) Approves the admission of Buyer into each Property Partnership as
a substituted general partner therein and the withdrawal of Seller as a
general partner therein;
(b) Approves the payment of financing or restructuring fees of one and
one-half (1 1/2) points to the general partner of each such Property
Partnership upon the successful completion of a refinancing or
restructuring of existing indebtedness of such Property Partnership;
(c) Confirms that the indemnification provisions of each Property
Partnership Agreement for the actions of Seller as a general partner of
each Property Partnership survive the Closing; and
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<PAGE>
(d) Appoints Seller as the attorney-in-fact for each limited partner
of each Property Partnership to execute, record, file and publish any and
all instruments and documents to effectuate such amendment to each Property
Partnership Agreement.
7.4 Third Party Consents
--- --------------------
There shall have been obtained all consents (and agreement not to
accelerate Property Partnership indebtedness by reason of the transfer of the GP
Interests) from any third-party lenders (exclusive of Travelers Real Estate
Corporation and US West Realty Advisors with respect to BHI-Dover X, a
California limited partnership), lessors or other parties required to consent to
the admission of Buyer into each Property Partnership as a substituted general
partner therein, the withdrawal of Seller as a general partner therein, and to
the other matters set forth in the amendments to the Property Partnership
Agreements referenced in Section 7.3.
7.5 Disapproval of Monetary Liens
--- -----------------------------
Buyer hereby notifies Seller of Buyer's disapproval of any and all
monetary liens and/or encumbrances (if any) encumbering all or any portion of
the GP Interests, and Seller shall be obligated to assign and transfer the GP
Interests to Buyer at the Closing free and clear of all such disapproved
monetary liens or monetary encumbrances (if any).
7.6 Dispute Resolution
--- ------------------
Seller shall enter into a settlement agreement with BHI in order to
resolve all current and past disputes relating to, or arising out of, Seller's
solicitation or request of the limited partners of the Property Partnerships and
the Affiliated Partnerships to vote to remove BHI as general partner therefrom
and to admit Seller as general partner thereto including, without limitation,
that certain pending litigation, Bonutto-Hofer Investments, et al. v. Dover
Retail Properties. Inc., et al., Orange County Superior Court, Case No. 709826,
which shall be dismissed, with prejudice. Such settlement agreement shall be
subject to Buyer's approval and shall provide that no actions, suits,
investigations or proceedings by, against, involving or relating to the
admission, substitution, withdrawal or termination of a general partner in any
Property Partnership or any Affiliate Partnership from and after the date of
such settlement agreement shall be initiated by Seller or BHI or any of their
Affiliates.
-23-
<PAGE>
7.7 Waiver by Buyer
--- ---------------
Buyer may unilaterally waive any of Buyer's conditions described in
this Agreement. Except as otherwise provided in this Agreement, any such waiver
shall be effective only if the same is (i) in writing, (ii) signed by Buyer, and
(iii) delivered to Seller on or before the date such condition is to be
satisfied.
ARTICLE VIII
------------
POST-CLOSING COVENANTS
- ----------------------
8.1 Covenant Not to Solicit
--- -----------------------
(a) Seller hereby agrees that it and its Affiliates shall not, for a
period of eight (8) years following the Closing Date, solicit or request
any limited partner, including those admitted after the date of this
Agreement, in any of the Property Partnerships to vote to cause Buyer to be
removed as a general partner of any such Property Partnership. If the
covenants in this Section 8.1 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of their extending for too great
a period of time or by reason of its being too extensive in any other
respect, they shall be interpreted to extend only over the maximum period
of time for which they may be enforceable and/or to the maximum extent in
all other respects as to which they may be enforceable, all as determined
by such court in such action.
(b) Seller acknowledges that a breach of the covenant contained in
this Section will cause irreparable damage to Buyer and the relevant
Property Partnership, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such breach will be
inadequate. Accordingly, Seller agrees that if it breaches the covenant
contained in this Section in addition to any other remedy which may be
available at law or in equity, Buyer or the relevant Property Partnership
shall be entitled to specific performance and injunctive relief, without
posting a bond or other security.
(c) The covenants contained in this Section 8.1 shall terminate and be
of no further force or effect in the event Buyer is in breach of this
Agreement by
-24-
<PAGE>
reason of either (i) the failure to pay Seller any sums due Seller under
this Agreement by the due date thereof where such failure continues for ten
(10) days after written notice thereof to Buyer from Seller specifying such
failure and/or (ii) a material breach by Buyer under this Agreement other
than that specified in clause (i) of this Section 8.1(c) where such breach
continues for thirty (30) days after written notice thereof to Buyer from
Seller specifying such breach.
8.2 Property Manager
--- ----------------
Buyer shall retain Hollis & Associates as the property manager of each
of the Property Partnerships for a period of no less than six (6) months from
the Closing Date on the same terms and conditions as were in place prior to the
Closing pursuant to a property management agreement by and between the Buyer, on
behalf of the Property Partnerships, and Hollis & Associates.
8.3 Asset Manager
--- -------------
Buyer shall retain George L. Triano as a third party asset management
and financing/restructure consultant for a period of no less than six (6) months
from the Closing Date. Buyer shall pay George L. Triano, as a non-refundable
retainer, the sum of Ten Thousand Dollars ($10,000) each month while he is so
retained as a consultant. Upon the successful completion of each refinancing or
restructuring of existing indebtedness of a Property Partnership, Buyer shall be
obligated to pay George L. Triano a refinancing fee equal to the amount that
one-half of one percent (.5%) of the face amount of such indebtedness exceeds
Twenty-Three Thousand Dollars ($23,000), as such refinancing fee shall be
reduced by the amount of previously paid retainers to George L. Triano not
previously offset against refinancing fees otherwise due.
8.4 Equity Capital
--- --------------
If Buyer retains Seller to raise additional capital for a Property
Partnership, Buyer shall pay Seller competitive market fees for Seller's
services upon the contribution of such capital to such Property Partnership.
8.5 Legal Expenses
--- --------------
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<PAGE>
As and when Buyer receives payment of financing or restructuring fees
from a Property Partnership for the successful completion of a refinancing or
restructuring of existing indebtedness of such Property Partnership, to the
extent of such financing or restructuring fees, Buyer shall be obligated
immediately upon receipt of such financing or restructuring fees to pay, or
reimburse Seller for, Legal Expenses incurred by Seller on behalf of each such
Property Partnership in an amount equal to Sixty-Nine Thousand Dollars ($69,000)
per Property Partnership.
8.6 Indemnification Reimbursement
--- -----------------------------
In the event that upon termination of this Agreement pursuant to the
last sentence of Section 10.1, the provisions of Section 1.5(a)(ii) were never
applicable because the benchmark set forth in Section 1.5(a)(i) was not
attained, then Seller shall be obligated, within fifteen (15) days following
such termination of this Agreement, to pay Buyer an amount equal to the lesser
of (a) amounts expended by the Property Partnerships from and after the Closing
on behalf of or to Seller by reason of the general partner indemnification
provisions of the Property Partnership Agreements or (b) seventy-five percent
(75%) of the amount that Net Operating Income during the term of this Agreement
was less than the benchmark set forth in Section 1.5(a)(i).
8.7 Prorata Creditor Payments
--- -------------------------
Consistent with the settlement agreement between Seller and BHI
referenced in Section 7.6, Buyer, as general partner of each Property
Partnership, shall cause each Property Partnership to make each payment to BHI
and Seller in their respective capacities as creditors of each Property
Partnership in proportion to the aggregate indebtedness of each such Property
Partnership to BHI and Seller, respectively.
ARTICLE IX
----------
INDEMNIFICATION
- ---------------
9.1 Survival of Representations, Etc.
--- ---------------------------------
-26-
<PAGE>
All statements contained in the Disclosure Schedule or in the
certificates delivered at the Closing pursuant to Sections 6.1 and 7.1 shall be
deemed to be representations and warranties by the parties hereunder. The
representations and warranties of Seller and Buyer contained herein shall
survive the Closing Date regardless of any investigation made by any of the
parties hereto.
9.2 Indemnification
--- ---------------
(a) Seller hereby agrees to indemnify, defend (subject to the
provisions of Section 9.2(d)) and hold harmless Buyer and its
Representatives from and against any and all costs, losses, liabilities,
damages, lawsuits, deficiencies, claims and expenses, including without
limitation, interest, penalties, attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (collectively,
"Damages"), incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any covenant or warranty, or the inaccuracy
of any representation, made by Seller in or pursuant to this Agreement, or
(ii) any claim by any third party brought against Buyer arising from the
actions or inactions of Seller or the operation of Seller's Business prior
to the Closing Date.
(b) Buyer shall indemnify, defend (subject to the provisions of Section
9.2(d)) and hold harmless, Seller and Seller's Representatives from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any covenant or warranty,
or the inaccuracy of any representation, made by Buyer in or pursuant to
this Agreement, or (ii) any claim by any third party brought against Seller
arising from the actions or inactions of Buyer or the operation of Buyer's
business on or after the Closing Date.
(c) The term "Damages" as used in this Section 9.2 is not limited to
matters asserted by third parties against the indemnified party but
includes Damages incurred or sustained by the indemnified party in the
absence of third party claims. Payment by the indemnified party of amounts
for which the indemnified party is entitled to be indemnified hereunder
shall not be a condition precedent to the right of the indemnified party to
enforce its indemnity rights hereunder.
(d) If any party ("Indemnitee") hereto desires to make a claim against
any other party ("Indemnitor") pursuant to the provisions of this Article
IX, then Indemnitee shall notify Indemnitor of the claim, demand, action or
right of action which is the basis of
-27-
<PAGE>
such claim and the provision or provisions of this Agreement alleged to
have been breached or to be inaccurate, and shall give the Indemnitor a
reasonable opportunity to participate in the defense thereof. Indemnitee
shall provide Indemnitor with all information available to it regarding
such claim, demand, action or right of action (whether or not it involves a
third party). In addition, with respect to any claim brought by a third
party against an Indemnitee, each such Indemnitor shall have the right to
approve the counsel selected by Indemnitee, which approval shall not be
unreasonably withheld or delayed. All settlements of third party claims
proposed by an Indemnitee shall be subject to the approval of Indemnitor,
which approval shall not be unreasonably withheld or delayed.
ARTICLE X
---------
MISCELLANEOUS
- -------------
10.1 Termination
---- -----------
This Agreement may be terminated and the transactions contemplated
hereby abandoned by the mutual written consent of each of the parties hereto or
by Seller or Buyer if the conditions to such party's obligations set forth in
Articles VI and VII, respectively, have not been satisfied on or before May 31,
1994 (unless waived by the party entitled to the benefit thereof), without
liability of any party hereto; provided, however, that no party will be released
from liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of (a) willful failure of such party to have performed its
obligations hereunder, or (b) any knowing misrepresentation made by such party
of any matter set forth herein. In the event that a condition precedent to its
obligations is not satisfied, nothing contained herein shall be deemed to
require any party to terminate this Agreement, rather than to waive such
condition precedent and proceed with the transactions contemplated hereby.
Following the Closing, this Agreement (exclusive of the provisions of Section
8.6 and Article IX) shall terminate and be of no further force and effect at
such time as all of the Property Partnerships have disposed of their respective
assets and have finally liquidated.
10.2 Assignment
---- ----------
Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by Seller without the prior written consent of Buyer or by Buyer
without the prior written consent of Seller. Subject to the foregoing, this
Agreement shall be binding upon and
-28-
<PAGE>
inure to the benefit of the parties hereto and their, respective successors and
assigns, and no other person shall have any right, benefit or obligation
hereunder.
10.3 Notices
---- -------
Unless otherwise provided herein, any notice, request, instruction or
other document to be given hereunder by any party to the others shall be in
writing and delivered in person or by commercial overnight courier, telegraph,
telex or by facsimile transmission or mailed by certified mail, postage prepaid,
return receipt requested, as follows:
If to Buyer: Koll Partnerships II, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: President
Telephone No.: (714) 833-3030
Facsimile No.: (714) 833-8635
With a copy to: Allen, Matkins, Leck, Gamble
& Mallory
18400 Von Karman Avenue, 4th Floor
Irvine, California 92715
Attn: Thomas C. Foster, Esq.
Telephone No.: (714)553-1313
Facsimile No.: (714)553-8354
If to Seller: Dover Retail Properties, Inc.
5055 Avenida Encinas, Suite 210
Carlsbad, California 92008
Attn: Anthony W. Esernia
Telephone No.: (619) 431-5400
Facsimile No.: (619) 431-5401
With a copy to: Barger & Wolen
19800 MacArthur Boulevard
Eighth Floor
Irvine, California 92715
Attention: Edwin A. Oster, Esq.
Telephone No.: (714) 757-2800
-29-
<PAGE>
Facsimile No.: (714) 752-6313
Any such notice or other communication shall be deemed received and effective
upon the earlier of (a) if personally delivered, the date of delivery to the
address of the person to receive such notice; (b) if delivered by commercial
overnight carrier, one (1) day following the receipt of such communication by
such carrier from the sender, as shown on the sender's delivery invoice from
such carrier; (c) if mailed, forty-eight (48) hours after the date of posting by
the United States Post Office as shown by the sender's registry or certification
receipt, as the case may be; (d) if given by telegraph or cable, when delivered
to the telegraph company with charges prepaid; or (e) if given by telex or
telecopy, when sent. Any reference herein to the date of receipt, delivery, or
giving, as the case may be, of any notice or other communication shall refer to
the date such communication becomes effective under the terms of this Section
10.3. Any notice or other communication sent by cable, telex, or telecopy must
be confirmed within forty-eight (48) hours by letter mailed or delivered in
accordance with the foregoing. Notice of change of address shall be given by
written notice in the manner detailed in this Section 10.3. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to constitute receipt of the notice or
other communication sent.
10.4 Choice of Law
---- -------------
This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of California.
10.5 Entire Agreement; Amendments and Waivers
---- ----------------------------------------
This Agreement, together with all Exhibits and schedules hereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. No supplement,
amendment, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
10.6 Counterparts
---- ------------
-30-
<PAGE>
This Agreement may be executed in one (1) or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
10.7 Invalidity
---- ----------
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10.8 Headings
---- --------
The headings of the Articles and Sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
10.9 Further Assurances
---- ------------------
On and after the Closing Date, Seller and Buyer shall take all
appropriate action and execute all documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
provisions hereof.
10.10 Expenses
----- --------
Seller and Buyer will each be liable for their own costs and expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Agreement.
10.11 Attorneys' Fees
----- ---------------
The parties agree that if it be determined by any court that any party
has failed to perform its obligations herein, then the prevailing party or
parties shall be entitled to
-31-
<PAGE>
recover reasonable attorneys' fees, court costs and other reasonable expenses
incurred in the enforcement of the rights and obligations set forth in this
Agreement or any claim for damages based on any breach of this Agreement.
10.12 Publicity
----- ----------
Neither Seller nor Buyer shall issue any press release or make any
public statement regarding the transactions contemplated hereby (including, but
not limited to, any press release or public statement announcing the execution
of this Agreement, the termination of this Agreement or the consummation of the
transactions contemplated hereby), without the prior approval of the other party
hereto save and except for any disclosures, notices or public filings required
by law. The parties hereto shall issue a mutually acceptable press release as
soon as practicable after the execution of this Agreement announcing such
execution and as soon as practicable after the Closing Date announcing the
consummation of the transactions contemplated hereby.
10.13 Confidential Information
----- ------------------------
The parties acknowledge that the transaction described herein is of a
confidential nature and shall not be disclosed except to Harold C. Hofer, John
A. Bonutto, employees of Seller, Buyer or KMS, attorneys, accountants, or as
required by law, until such time as the parties make a public announcement
regarding the transaction as provided in Section 10.12. In connection with the
negotiation of this Agreement and the preparation for the consummation of the
transactions contemplated hereby, each party acknowledges that it will have
access to confidential information relating to the other parties. Each party
shall treat such information as confidential, preserve the confidentiality
thereof and not duplicate or use such information, except to Harold C. Hofer,
John A. Bonutto, employees of Seller, Buyer or KMS, attorneys and accountants in
connection with the transactions contemplated hereby. In the event of the
termination of this Agreement for any reason whatsoever, each party shall return
to the other all documents, work papers and other material (including all copies
thereof) obtained in connection with the transactions contemplated hereby and
shall use all reasonable efforts, including instructing its employees and others
who have had access to such information, to keep confidential and not to use any
such information, unless such information is now, or is hereafter disclosed,
through no act or omission of such party, in any manner making it available to
the general public.
10.14 Miscellaneous
----- -------------
-32-
<PAGE>
Each of the Exhibits attached hereto is incorporated herein by reference
and expressly made a part of this Agreement for all purposes. References to any
Exhibit made in this Agreement shall be deemed to include this reference and
incorporation. Where the context so requires, the use of the neuter gender shall
include the masculine and feminine genders, the masculine gender shall include
the feminine and neuter genders, and the singular number shall include the
plural and vice versa. Time is of the essence of this Agreement. There are no
third party beneficiaries to this Agreement. Each party hereto acknowledges that
(i) each party hereto is of equal bargaining strength; and (ii) each such party
has actively participated in the drafting, preparation, and negotiation of this
Agreement; and (iii) any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not apply in the interpretation
of this Agreement, any portion hereof, any amendments hereto, or any Exhibits
attached hereto.
ARTICLE XI
----------
DEFINITIONS
- -----------
11.1 Affiliate
---- ---------
The term "Affiliate" means any person or entity which, directly or
indirectly, through one (1) or more intermediaries, controls or is controlled by
or is under common control with another person or entity. The term "control" as
used herein (including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
vote fifty percent (50%) or more of the outstanding voting securities of such
person or entity.
11.2 Affiliate Partnerships
---- ----------------------
The term "Affiliate Partnerships" means BHI-Dover Ltd. Fund V, a
California limited partnership, BHI-Dover VII, a California limited partnership,
BHI-Dover VIII, a California limited partnership, BHI-Dover XI, a California
limited partnership, and BHI-Dover XVI, a California limited partnership,
collectively; the term "Affiliate Partnership" means any one (1) of the
Affiliated Partnerships.
11.3 AMLGM
---- -----
-33-
<PAGE>
The term "AMLGM" is defined in Section 2.1.
11.4 BHI
---- ---
The term "BHI" means Bonutto-Hofer Investments, a California
---
corporation.
11.5 Business
--------
The term "Business" is defined in Recital A.
11.6 Buyer
-----
The term "Buyer" means Koll Partnerships II, Inc., a Delaware
corporation.
11.7 Capital Contribution Notes
--------------------------
The term "Capital Contribution Notes" is defined in Section 1.6.
11.8 Closing
-------
The term "Closing" is defined in Section 2.1.
11.9 Closing Date
------------
The term "Closing Date" is defined in Section 2.1.
11.10 Damages
-------
The term "Damages" is defined in Section 9.2(a).
-34-
<PAGE>
11.11 Financial Statements
--------------------
The term "Financial Statements" is defined in Section 3.7.
11.12 Fund IX
-------
The term "Fund IX" is defined in Recital A.
11.13 Fund IX and Fund XII Disposition Revenue
----------------------------------------
The term "Fund IX and Fund XII Disposition Revenue" is defined in
Section 1.5(f).
11.14 Fund XII
--------
The term "Fund XII" is defined in Recital A.
11.15 GP Interests; GP Interest
-------------------------
The terms "GP Interests" and "GP Interest" are defined in Recital B.
-----------
11.16 Indemnitee
----------
The term "Indemnitee" is defined in Section 9.2(d).
11.17 Indemnitor
----------
The term "Indemnitor" is defined in Section 9.2(d).
-35-
<PAGE>
11.18 KMS
---
The term "KMS" means Koll Management Services, Inc., a Delaware
corporation.
11.19 Legal Expenses
--------------
The term "Legal Expenses" means the attorneys' fees and court costs
--------------
incurred by Seller on behalf of each Property Partnership in defending the
election of Seller as the general partner of each such Property Partnership by
the constituent limited partners thereof.
11.20 Net Operating Income
--------------------
The term "Net Operating Income" is defined in Section 1.5(b).
11.21 Net Operating Loss
------------------
The term "Net Operating Loss" is defined in Section 1.5(c).
11.22 Operating Expenses
------------------
The term "Operating Expenses" is defined in Section 1.5(e).
11.23 Personal Property
-----------------
The term "Personal Property" is defined in Recital B.
11.24 Property Partnerships; Property Partnership
-------------------------------------------
-36-
<PAGE>
The terms "Property Partnerships" and "Property Partnership" are
--------------------
defined in Recital A.
11.25 Property Partnership Agreements; Property Partnership Agreement
---------------------------------------------------------------
The terms "Property Partnership Agreements" and "Property Partnership
--------------------
Agreement" are defined in Recital A.
- ---------
11.26 Purchase Price
--------------
The term "Purchase Price" is defined in Section 1.2.
11.27 Representative
--------------
The term "Representative" means any officer, director, principal,
attorney, accountant, agent, employee or other representative.
11.28 Retained Interest.
------------------
The term "Retained Interest" is defined in Recital B.
11.29 Revenues
--------
The term "Revenues" is defined in Section 1.5(d).
11.30 Seller
------
-37-
<PAGE>
The term "Seller" means Dover Investment Properties, Inc. a California
corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
"Seller" DOVER INVESTMENT PROPERTIES,
INC., a California corporation
By:
Name:
Title:
"Buyer" KOLL PARTNERSHIPS II, INC.,
- -------------------------- a Delaware corporation
By:
Name:
Title:
-38-
<PAGE>
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
-------------------------------------------
OF CERTAIN GENERAL PARTNERSHIP INTERESTS
----------------------------------------
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT OF between DOVER
- --------
RETAIL PROPERTIES, INC., a California corporation ("Seller"), and
KOLL PARTNERSHIPS II, INC., a Delaware corporation ("Buyer"). Capitalized terms
not otherwise defined herein shall have the meanings assigned them in the Asset
Purchase Agreement (defined below).
R E C I T A L S:
- - - - - - - -
A. Seller and Buyer have entered into an Asset Purchase Agreement of
Certain General Partnership Interests dated as of May 10, 1994 (the "Asset
Purchase Agreement").
B. Seller and Buyer desire to amend the Asset Purchase Agreement by
extending the effective date of the Closing Date and to provide for certain
insurance premium refunds.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. The Closing shall occur on June 20, 1994, but the Closing Date for all
purposes of the Asset Purchase Agreement, as amended hereby, except for the date
of delivery of the Purchase Price, shall mean July 1, 1994. The Purchase Price
shall be delivered by Buyer to Seller at the Closing on June 20, 1994.
<PAGE>
2. The Property Partnerships have procured casualty and liability
insurance with respect to each of their properties under Seller's Fireman's Fund
Insurance Company package policy and various insurance policies financed through
A.I. Credit Corp. Following the Closing, Buyer intends to insure the properties
owned by the Property Partnerships under its blanket insurance policy and,
therefore, Seller shall be obligated to cancel its insurance coverage of the
Property Partnerships immediately following the Closing. Immediately upon
receipt by Seller of any insurance premium refunds with respect to the
aforementioned insurance coverage, Seller shall be obligated to pay such refund
to the applicable Property Partnership. Buyer shall have the right to offset any
amounts due Seller under the Asset Purchase Agreement in satisfaction of
Seller's obligation to pay any insurance premium refund to the applicable
Property Partnership.
3. Buyer understand that the underlying assets of the Property
Partnerships are encumbered by loans from third party lenders, the documentation
for which in varying degrees, provide for default, acceleration, and/or required
consents in regard to the sale or transfer of the GP Interests. Buyer has
reviewed and satisfied itself in regard to each of the loans encumbering the
assets of the Property Partnerships affected by the GP Interests and has applied
for, but not necessarily received, unconditional consents with respect to the
sale or transfer of the GP Interests from some or all such third party lenders.
Buyer hereby releases and discharges Seller and its respective officers,
directors, shareholders, partners and agents, including their attorneys, from
any and all claims, rights, demands, liabilities, omissions, obligations or
indebtedness in connection with any breach of the Property Partnerships' or
Seller's obligations or duties with respect to the loans or loan documents which
may arise from the sale or transfer of the GP Interests from Seller to Buyer.
4. Seller hereby warrants and represents that the consents of the limited
partners in the Property Partnerships to the transfer of the GP Interests from
Seller to Buyer previously delivered to Buyer are genuine and that a majority in
interest of the limited partners in each of the Property Partnerships have
consented to the transfer of the GP Interests from Seller to Buyer.
5. This Amendment may be executed in multiple counterparts, each of which
shall be deemed an original Amendment, but all of which, taken together, shall
constitute one (1) and the same Amendment, binding on the parties hereto. The
signature of any party hereto to any counterpart hereof shall be deemed a
signature to, and may be appended to, any other counterpart hereof.
-2-
<PAGE>
6. Except as expressly modified hereby, all other terms and provisions of
the Asset Purchase Agreement shall remain in full force and effect, are
incorporated herein by this reference, and shall govern the conduct of the
parties hereto; provided, however, to the extent of any inconsistency between
the provisions of the Asset Purchase Agreement and the provisions of this
Amendment, the provisions of this Amendment shall control.
DOVER RETAIL PROPERTIES,
INC., a California corporation
By:
Name:
Title:
------------
KOLL PARTNERSHIPS II, INC.,a
---------
Delaware corporation
By:
Name:
Title:
-3-
<PAGE>
EXHIBIT 10.39
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
-------------------------------------------
OF CERTAIN GENERAL PARTNERSHIP INTERESTS
----------------------------------------
__________THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT OF between DOVER
RETAIL PROPERTIES, INC., a California corporation ("Seller"), and KOLL
PARTNERSHIPS II, INC., a Delaware corporation ("Buyer"). Capitalized terms not
otherwise defined herein shall have the meanings assigned them in the Asset
Purchase Agreement (defined below).
R E C I T A L S :
----------------
A. Seller and Buyer have entered into an Asset Purchase Agreement of
Certain General Partnership Interests dated as of May 10, 1994 (the "Asset
Purchase Agreement").
B. Seller and Buyer desire to amend the Asset Purchase Agreement by
extending the effective date of the Closing Date and to provide for certain
insurance premium refunds.
A G R E E M E N T :
------------------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. The Closing shall occur on June 20, 1994, but the Closing Date
for all purposes of the Asset Purchase Agreement, as amended hereby, except for
the date of delivery of the Purchase Price, shall mean July 1, 1994. The
Purchase Price shall be delivered by Buyer to Seller at the Closing on June 20,
1994.
<PAGE>
2. The Property Partnerships have procured casualty and liability
insurance with respect to each of their properties under Seller's Fireman's Fund
Insurance Company package policy and various insurance policies financed through
A.I. Credit Corp. Following the Closing, Buyer intends to insure the properties
owned by the Property Partnerships under its blanket insurance policy and,
therefore, Seller shall be obligated to cancel its insurance coverage of the
Property Partnerships immediately following the Closing. Immediately upon
receipt by Seller of any insurance premium refunds with respect to the
aforementioned insurance coverage, Seller shall be obligated to pay such refund
to the applicable Property Partnership. Buyer shall have the right to offset any
amounts due Seller under the Asset Purchase Agreement in satisfaction of
Seller's obligation to pay any insurance premium refund to the applicable
Property Partnership.
3. Buyer understands that the underlying assets of the Property
Partnerships are encumbered by loans from third party lenders, the documentation
for which in varying degrees, provide for default, acceleration, and/or required
consents in regard to the sale or transfer of the GP Interests. Buyer has
reviewed and satisfied itself in regard to each of the loans encumbering the
assets of the Property Partnerships affected by the GP Interests and has applied
for, but not necessarily received, unconditional consents with respect to the
sale or transfer of the GP Interests from some or all such third party lenders.
Buyer hereby releases and discharges Seller and its respective officers,
directors, shareholders, partners and agents, including their attorneys, from
any and all claims, rights, demands, liabilities, omissions, obligations or
indebtedness in connection with any breach of the Property Partnerships' or
Seller's obligations or duties with respect to the loans or loan documents which
may arise from the sale or transfer of the GP Interests from Seller to Buyer.
4. Seller hereby warrants and represents that the consents of the
limited partners in the Property Partnerships to the transfer of the GP
Interests from Seller to Buyer previously delivered to Buyer are genuine and
that a majority in interest of the limited partners in each of the Property
Partnerships have consented to the transfer of the GP Interests from Seller to
Buyer.
5. This Amendment may be executed in multiple counterparts, each of
which shall be deemed an original Amendment, but all of which, taken together,
shall constitute one (1) and the same Amendment, binding on the parties hereto.
The signature of any party hereto to any counterpart hereof shall be deemed a
signature to, and may be appended to, any other counterpart hereof.
-2-
<PAGE>
6. Except as expressly modified hereby, all other terms and
provisions of the Asset Purchase Agreement shall remain in full force and
effect, are incorporated herein by this reference, and shall govern the conduct
of the parties hereto; provided, however, to the extent of any inconsistency
between the provisions of the Asset Purchase Agreement and the provisions of
this Amendment, the provisions of this Amendment shall control.
DOVER RETAIL PROPERTIES, INC.,
a California corporation
By:
--------------------------
Name:
-------------------------
Title:
------------------------
KOLL PARTNERSHIPS II, INC., a
Delaware corporation
By:
---------------------------
Name:
-------------------------
Title:
------------------------
-3-
<PAGE>
EXHIBIT 10.40
* Confidential Treatment
Requested
ASSET PURCHASE AGREEMENT
------------------------
by and among
STEVEN M. PAGNOTTA and DAVID A. PETERSEN,
as "Shareholders,"
MIDSTATES MANAGEMENT CO., INC.,
as "Seller"
and
KOLL MANAGEMENT SERVICES, INC.,
as "Buyer"
Dated: September 14, 1994
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
- ------------------
<S> <C> <C>
ARTICLE I PURCHASE AND SALE OF ASSETS................................. 2
1.1 Transfer Of Assets.......................................... 2
1.2 Consideration for Assets.................................... 2
1.3 Adjustments to Purchase Price............................... 2
1.4 Assumption of Liabilities................................... 5
1.5 Covenant Not to Compete..................................... 6
ARTICLE II CLOSING..................................................... 7
2.1 Closing..................................................... 7
2.2 Documents to be Delivered................................... 7
2.3 Transfer Taxes.............................................. 8
2.4 Prorations.................................................. 8
2.5 Employment.................................................. 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
SELLER AND THE SHAREHOLDERS................................. 9
3.1 Organization and Qualification.............................. 9
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
3.2 Authorization............................................... 9
3.3 No Conflict or Violation.................................... 9
3.4 Consents and Approvals...................................... 10
3.5 Financial Statements........................................ 10
3.6 Books and Records........................................... 10
3.7 Litigation.................................................. 10
3.8 Compliance with Law......................................... 11
3.9 Permits..................................................... 11
3.10 Liabilities................................................. 11
3.11 Labor Matters............................................... 11
3.12 Benefit Arrangements........................................ 12
3.13 Brokers and Finders......................................... 12
3.14 Title....................................................... 12
3.15 Tenant Lease................................................ 12
3.16 Material Misstatements or Omissions......................... 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..................... 13
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
4.1 Organization of Buyer....................................... 13
4.2 Authorization............................................... 13
4.3 Brokerage/Finders Fees...................................... 13
4.4 No Conflict or Violation.................................... 13
4.5 Consents and Approvals...................................... 14
ARTICLE V ACTIONS BY SELLER, THE SHAREHOLDERS AND BUYER
PRIOR TO THE CLOSING........................................ 14
5.1 Maintenance of Business..................................... 14
5.2 Investigation by Buyer...................................... 14
5.3 Notification of Certain Matters............................. 14
ARTICLE VI CONDITIONS TO SELLER'S OBLIGATIONS.......................... 15
6.1 Representations, Warranties and Covenants................... 15
6.2 No Governmental Proceeding or Litigation.................... 15
6.3 Waiver by Seller............................................ 15
6.4 Employment Agreements....................................... 15
ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS........................... 16
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C> <C>
7.1 Representations, Warranties and Covenants................... 16
7.2 No Governmental Proceeding or Litigation.................... 16
7.3 Due Diligence............................................... 16
7.4 Existing Client Consents.................................... 16
7.5 Employment Agreements....................................... 17
7.6 Waiver by Buyer............................................. 17
ARTICLE VIII INDEMNIFICATION............................................. 17
8.1 Survival of Representations, Etc............................ 17
8.2 Indemnification............................................. 17
ARTICLE IX MISCELLANEOUS............................................... 19
9.1 Termination................................................. 19
9.2 Assignment.................................................. 19
9.3 Notices..................................................... 19
9.4 Choice of Law............................................... 21
9.5 Entire Agreement; Amendments and Waivers.................... 21
9.6 Counterparts................................................ 22
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C> <C>
9.7 Invalidity.................................................. 22
9.8 Headings.................................................... 22
9.9 Further Assurances.......................................... 22
9.10 Expenses.................................................... 22
9.11 Attorneys Fees.............................................. 22
9.12 Publicity................................................... 22
9.13 Confidential Information.................................... 23
9.14 Trading Stock of Buyer...................................... 23
9.15 Miscellaneous............................................... 23
9.16 Right of Offset............................................. 23
ARTICLE X DEFINITIONS................................................. 24
10.1 Affiliate................................................... 24
10.2 Assets...................................................... 24
10.3 Benefit Arrangement......................................... 24
10.4 Buyer....................................................... 24
10.5 Closing..................................................... 24
</TABLE>
-v-
<PAGE>
<TABLE>
<S> <C> <C>
10.6 Closing Date................................................ 24
10.7 Damages..................................................... 24
10.8 Existing Brokerage Agreement; Existing Brokerage
Agreements.................................................. 25
10.9 Existing Client; Existing Clients........................... 25
10.10 Existing Managed Building; Existing Managed Buildings....... 25
10.11 Existing Management Agreement; Existing Management
Agreements................................................... 25
10.12 Indemnitee.................................................. 25
10.13 Indemnitor.................................................. 25
10.14 Net New Business Income..................................... 25
10.15 Net Operating Income........................................ 25
10.16 New Business Expenses....................................... 25
10.17 New Business Revenues....................................... 25
10.18 Operating Expenses.......................................... 25
10.19 Purchase Price.............................................. 26
10.20 Representative.............................................. 26
</TABLE>
-vi-
<PAGE>
<TABLE>
<S> <C> <C>
10.21 Revenues.................................................... 26
10.22 Seller...................................................... 26
10.23 Shareholders; Shareholder................................... 26
</TABLE>
EXHIBITS
- --------
EXHIBIT "A" EXISTING CLIENTS; EXISTING MANAGED BUILDINGS
EXHIBIT "B" EXISTING BROKERAGE AGREEMENTS
EXHIBIT "C" PERSONAL PROPERTY LEASES AND FINANCING ARRANGEMENTS
EXHIBIT "D" TANGIBLE PERSONAL PROPERTY
EXHIBIT "E" PURCHASE PRICE ALLOCATION
EXHIBIT "F" DISCLOSURE SCHEDULE
EXHIBIT "G" FINANCIAL STATEMENTS OF SELLER
EXHIBIT "H" 1994 BUDGET
EXHIBIT "I" EMPLOYEES OF SELLER
EXHIBIT "J" BENEFIT ARRANGEMENTS
EXHIBIT "K" PROMISSORY NOTE
EXHIBIT "L" NET NEW BUSINESS INCOME BUILDINGS
-vii-
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT, dated as of September 14, 1994, is made by
and among STEVEN M. PAGNOTTA and DAVID A. PETERSEN (collectively,
"Shareholders"), KOLL MANAGEMENT SERVICES, INC., a Delaware corporation
("Buyer"), and MIDSTATES MANAGEMENT CO., INC., an Illinois corporation
("Seller"). A glossary of defined terms used herein is set forth in Article X.
R E C I T A L S :
----------------
A. Seller currently engages in the business of providing retail and
commercial property management and leasing services with respect to the
buildings (collectively, the "Existing Managed Buildings" and sometimes
separately referred to as an "Existing Managed Building") owned or controlled by
third parties set forth on Exhibit "A" (collectively, the "Existing Clients" and
----------
sometimes separately referred to as an "Existing Client") pursuant to written
agreements (collectively, the "Existing Management Agreements" and sometimes
------------------------------
separately referred to as an "Existing Management Agreement") entered into by
-----------------------------
Seller and each such Existing Client.
B. Seller currently engages in the business of providing retail and
commercial real estate brokerage services to third parties pursuant to written
agreements entered into by Seller and each such third party, which are
identified on Exhibit "B" attached hereto (collectively, the "Existing Brokerage
---------- ------------------
Agreements" and sometimes separately referred to as an "Existing Brokerage
- ---------- ------------------
Agreement").
- ---------
C. Buyer desires to purchase from Seller, and Seller desires to transfer
to Buyer, the Existing Management Agreements, the Existing Brokerage Agreements
and certain other assets of Seller upon the terms and subject to the conditions
set forth in this Agreement.
A G R E E M E N T :
------------------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
<PAGE>
PURCHASE AND SALE OF ASSETS
- ---------------------------
1.1 Transfer Of Assets
-------------------
Upon the terms and subject to the conditions contained herein at the
Closing, Seller agrees to (a) transfer and convey to Buyer all of its Existing
Management Agreements and Existing Brokerage Agreements; (b) assist Buyer, to
the extent permitted by state and federal law, in hiring Seller employees
designated by Buyer that are presently employed by Seller in connection with its
management operations; (c) assign to Buyer the personal property leases and
personal property financing arrangements of Seller set forth on Exhibit "C"; (d)
-----------
transfer to Buyer the tangible personal property of Seller set forth on Exhibit
-------
"D"; and (e) subject to the provisions of Section 1.4, assign to Buyer the real
- ---
property lease of Seller with respect to office space located at 1420 Kensington
Road, Suite 103, Oak Brook, Illinois 60521. The foregoing assets to be
transferred to Buyer pursuant to this Agreement shall hereinafter be referred to
as the "Assets."
1.2 Consideration for Assets
-------------------------
Upon the terms and subject to the conditions contained herein, as
consideration for the purchase of the Assets, Buyer shall pay to Seller *
Dollars ($ * ), as adjusted pursuant to Section 1.3 (the "Purchase
--------
Price"). The Purchase Price shall be paid in three (3) installments on the
- -----
Closing Date, on the sixtieth (60th) day following the first anniversary of the
Closing Date and on the sixtieth (60th) day following the second anniversary of
the Closing Date in the amount of * Dollars ($ * ) for each such
installment, as the second and third installments may be adjusted pursuant to
Section 1.3. The second and third installments shall be evidenced by a
Promissory Note in the form of Exhibit "K" attached hereto. The Purchase Price
----------
shall be allocated to the Assets as set forth on Exhibit "E".
-----------
1.3 Adjustments to Purchase Price
------------------------------
(a) The installment payment due on the sixtieth (60th) day
following the first anniversary of the Closing Date shall be decreased (but
not below zero) dollar for dollar by the product of the amount that Net
Operating Income for the year ending
2
* Confidential Treatment
Requested
<PAGE>
on the first anniversary of the Closing Date is less than * Dollars ($ * )
multiplied by * percent ( * %). The installment payment due on the sixtieth
(60th) day following the second anniversary of the Closing Date shall be
decreased (but not below zero) dollar for dollar by the product of the
amount that Net Operating Income for the year ending on the second
anniversary of the Closing Date is less than * Dollars ($ * ) multiplied by
* percent ( * %) or shall be increased dollar for dollar by the product of
the amount that Net Operating Income for the year ending on the second
anniversary of the Closing Date is more than * Dollars ($ * ) (not to
exceed the amount that Net Operating Income for the year ending on the
first anniversary of the Closing Date was less than * Dollars ($ * ))
multiplied by * percent ( * %).
(1) The term "Net Operating Income" for any relevant
computation period means the Revenues during such period less
(i) The Operating Expenses during such period,
(ii) The cost of any employees of Buyer associated
with the Existing Management Agreements and the Existing
Brokerage Agreements training at "Koll college," which training
was approved by Seller, and
(iii) A reasonable allocation of Buyer's corporate
overhead during such period consistent with allocations made by
Buyer to its operating divisions not to exceed * percent ( * %)
of Revenues for such period.
(2) The term "Revenues" for any relevant computation
period means the gross revenues, net of any third party commission or
fee, of Buyer during such period from the Existing Management
Agreements and the Existing Brokerage Agreements exclusive of any
reimbursement from a client
3
* Confidential Treatment
Requested
<PAGE>
of Buyer of the cost of employee training at "Koll College" which
training was not approved by Seller.
(3) The term "Operating Expenses" for any relevant
computation period means all operating expenses (exclusive of the
expenses referenced or included in subsections (ii) and (iii) of
Section 1.3(a)(1)) incurred by Buyer during such period associated
with the Existing Management Agreements and the Existing Brokerage
Agreements reasonably allocated by Buyer including, without limitation
except as otherwise specified herein, the following:
(i) office expenses,
(ii) labor and benefits costs, including, without
limitation, all compensation and benefits payable to any
Shareholder,
(iii) real property rent expense for such year,
(iv) travel and entertainment expenses,
(v) insurance costs, including, without limitation,
errors and omissions/professional liability insurance costs,
(vi) professional fees,
(vii) all taxes (except income taxes),
(viii) marketing expenses
4
<PAGE>
(ix) personal property rent expenses payable to
third party lessors and interest on personal property financing
arrangements payable to third party lenders,
(x) P.C. and existing network based computer
maintenance and software costs for all personnel used in
connection with the Existing Management Agreements and the
Existing Brokerage Agreements,
(xi) depreciation on any depreciable property used
in connection with the Existing Management Agreements and the
Existing Brokerage Agreements, and
(xii) a reasonable allocation of Buyer's accounting
costs consistent with allocations by Buyer to its operating
divisions.
(b) The installment payment due on the sixtieth (60th) day
following the first anniversary of the Closing Date shall be increased by
the Net New Business Income for the year ending on the first anniversary of
the Closing Date. The installment payment due on the sixtieth (60th) day
following the second anniversary of the Closing Date shall be increased by
the Net New Business Income for the year ending on the second anniversary
of the Closing Date.
(1) The term "Net New Business Income" for any relevant
computation period means the New Business Revenues during such period
less
(i) The New Business Expenses during such period,
and
5
<PAGE>
(ii) A reasonable allocation of Buyer's corporate
overhead during such period consistent with allocations made by
Buyer to its operating divisions not to exceed two and one-half
percent (2-1/2%) of New Business Revenues for such period.
(2) The term "New Business Revenues" for any relevant
computation period means the gross revenues, net of any third party
commission or fee, of Buyer from new management agreements and/or new
retail and/or commercial real estate brokerage agreements procured
after the Closing Date with respect to buildings set forth on Exhibit
-------
"L" attached hereto, fifty percent (50%) of the excess of the gross
---
revenues of Buyer over any third party commission or fee from new
management agreements and/or new retail and/or commercial real estate
brokerage agreements procured after the Closing Date with Existing
Clients with respect to buildings other than the Existing Managed
Buildings and the buildings set forth on Exhibit "L" attached hereto,
-----------
and fifty percent (50%) of the excess of the gross revenues of Buyer
over any third party commission or fee from new management agreements
and/or new retail and/or commercial real estate brokerage agreements
procured by either of the Shareholders on behalf of Buyer after the
Closing Date with clients other than Existing Clients and clients
which are then a client of Buyer and not identified on Exhibit "L"
-----------
attached hereto.
(3) The term "New Business Expenses" for any relevant
computation period means all operating expenses of the type set forth
in Section 1.3(a)(3) incurred by Buyer during such period associated
with new management agreements and/or new retail and/or commercial
real estate brokerage agreements procured after the Closing Date with
respect to buildings set forth on Exhibit "L" attached hereto, fifty
-----------
percent (50%) of the operating expenses of the type set forth in
Section 1.3(a)(3) incurred by Buyer during such period associated with
new management agreements and/or new retail and/or commercial real
estate brokerage agreements procured after the Closing Date with
Existing Clients with respect to buildings other than Existing Managed
Buildings and the buildings set forth on Exhibit "L" attached hereto
-----------
and fifty percent (50%) of the operating expenses of the type set
forth in Section 1.3(a)(3) incurred by Buyer during such period
associated with new management agreements and/or new retail and/or
commercial real estate
6
<PAGE>
brokerage agreements procured by either of the Shareholders on behalf
of Buyer after the Closing Date with clients other than Existing
Clients and clients which are then a client of Buyer, all as
reasonably allocated by Buyer and not identified on Exhibit "L"
-----------
attached hereto.
(c) For purposes of the foregoing, Net Operating Income and Net
New Business Income for any relevant computation period shall be calculated
under the accrual method of accounting and in accordance with generally
accepted accounting principles, consistently applied.
(d) Within sixty (60) days following the first and second
anniversary of the Closing Date, Buyer shall prepare and distribute to
Seller an annual report setting forth the calculation of Net Operating
Income and Net New Business Income for the years ending on the first and
second anniversary of the Closing Date, as applicable, certified as true
and correct by the Chief Financial Officer of Buyer, in his capacity as an
officer of Buyer.
1.4 Assumption of Liabilities
--------------------------
Upon the terms and subject to the conditions contained herein, at the
Closing, Buyer shall assume all obligations and liabilities accruing, arising
out of, or relating to, events or occurrences happening after the Closing Date
(a) under any Existing Management Agreements, Existing Brokerage Agreements,
personal property leases and personal property financing arrangements assigned
to Buyer pursuant to the terms of this Agreement, but not including any
obligation or liability for any breach of any such contract occurring prior to
the Closing Date, (b) under the tenant lease for office space located at 1420
Kensington Road, Suite 103, Oak Brook, Illinois 60521, but not including any
obligation or liability for any breach of such lease occurring prior to the
Closing Date and (c) in respect of any employees of Seller employed by Buyer on
and after the Closing Date with respect to events occurring after the Closing
Date. Buyer shall not assume any obligations or liabilities of Seller not
specifically described in this Section 1.4.
1.5 Covenant Not to Compete
------------------------
7
<PAGE>
(a) Seller hereby agrees that it shall not, for a period of
three (3) years following the Closing Date, contact, solicit or contract
with (1) any Existing Client for the rendering of property management
services, (2) any client of Buyer for the rendering of property management
services with respect to any building then currently being managed by Buyer
or (3) any client of Buyer for the rendering of retail and/or commercial
real estate brokerage services of the type then currently being rendered by
Buyer to such client.
(b) Each Shareholder hereby agrees that he shall not, for a
period expiring on the later of the third (3rd) anniversary of the Closing
Date or the termination of such Shareholder's employment with Buyer, either
as an employee, employer, consultant, agent, principal, partner,
shareholder, corporate officer, director or in any other individual or
representative capacity, solicit or contract with, or acquire, individually
or in the aggregate with one or more of the other Shareholders, controlling
interest in any entity or organization which solicits or contracts with,
(1) any Existing Client for the rendering of property management services
exclusive of any Existing Client in which such Shareholder holds an
ownership interest, directly or indirectly, of five percent (5%) or more,
(2) any client of Buyer for the rendering of property management services
with respect to any building then currently being managed by Buyer or (3)
any client of Buyer for the rendering of retail and/or commercial real
estate brokerage services of the type then currently being rendered by
Buyer to such client. Notwithstanding the foregoing, Steven M. Pagnotta
shall be entitled to engage in tenant representation brokerage services as
the same may be restricted by the General Partnership Agreement for
Koll/Bradford Joint Venture.
(c) Seller and each Shareholder agree not to hire any of the
employees of Buyer in connection with the rendition by Seller and/or any
Shareholder of property management services and/or retail or commercial
real estate brokerage services of the type then currently being rendered by
Buyer for a period of one 1 year following any such employee's termination,
for any reason, of employment with Buyer.
(d) In the event any of the covenants in this Section 1.5 shall
be determined by any court of competent jurisdiction to be unenforceable by
reason of its extending for too great a period of time, or over too great a
geographical area, or by
8
<PAGE>
reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may
be enforceable, and/or over the maximum geographical area as to which it
may be enforceable and/or to the maximum extent in all other respects as to
which it may be enforceable, all as determined by such court in such
action.
(e) Seller and each Shareholder acknowledge that a breach of
the covenants contained in this Section 1.5 will cause irreparable damage
to Buyer, the exact amount of which will be difficult to ascertain, and
that the remedies at law for any such breach will be inadequate.
Accordingly, Seller and each Shareholder agree that if Seller and/or any
Shareholder breaches the covenants contained in this Section 1.5 in
addition to any other remedy which may be available at law or in equity,
Buyer shall be entitled to specific performance and injunctive relief,
without, in the event of a final judgment, posting a bond or other
security.
ARTICLE II
----------
CLOSING
- -------
2.1 Closing
--------
The closing of the transactions contemplated herein (the "Closing")
shall be held at 10:00 a.m. local time on October 1, 1994, or such other date as
may be mutually agreed upon in writing by Seller and Buyer (the "Closing Date"),
at the Chicago offices of Buyer, 10 South La Salle, Suite 2600, Chicago,
Illinois 60603.
2.2 Documents to be Delivered
--------------------------
To effect the transfer of the Assets referred to in Section 1.1 and
the delivery of the consideration described in Section 1.2 hereof, Seller and
Buyer shall, on the Closing Date, deliver the following:
9
<PAGE>
(a) Seller shall assign to Buyer all of its rights and
obligations with respect to each Existing Management Agreement and each
Existing Brokerage Agreement, to the extent each such Existing Management
Agreement and each such Existing Brokerage Agreement is assignable without
consent of the other party thereto. If any such Existing Management
Agreement and/or any such Existing Brokerage Agreement is not assignable
without consent of the other party thereto and Seller does not obtain the
consent of the other party to such contract of the proposed assignment to
Buyer, then such contract shall only be assigned to Buyer upon the written
request of Buyer delivered to Seller. In any event, Seller shall provide
Buyer with any consideration received by Seller with respect to any such
Existing Management Agreement and/or any such Existing Brokerage Agreement
in the exact form received, and as and when received, by Seller. Seller
shall assign to Buyer all of its rights and obligations as lessee or
borrower, as applicable, under the personal property leases and personal
property financing arrangements described on Exhibit "C" attached hereto
-----------
and, subject to the provisions of Section 1.4, as lessee under the tenant
lease for office space located at 1420 Kensington Road, Suite 103, Oak
Brook, Illinois 60521. Seller shall transfer to Buyer all of the tangible
personal property in the nature of furniture, fixtures, office equipment,
computers, calculators, office supplies and the like listed on Exhibit "D"
-----------
attached hereto. Seller shall deliver to Buyer at the Closing such
assignment documentation and conveyancing instruments as shall be
reasonably requested by Buyer, in form and substance and in a manner
reasonably satisfactory to Buyer and Seller, to vest in Buyer title in and
to the Assets of Seller assigned to Buyer in accordance with the provisions
of this Agreement.
(b) Buyer shall deliver to Seller the first installment of the
Purchase Price in the amount of Three Hundred Fifty-Seven Thousand Three
Hundred Fifty-Six Dollars ($357,356), by certified check or wire transfer
of funds.
(c) Buyer and Seller shall each deliver all documents required
to be delivered by them, respectively, pursuant to Articles VI and VII,
respectively.
(d) All instruments and documents executed and delivered to
Buyer pursuant hereto shall be in form and substance, and shall be executed
in a manner, reasonably satisfactory to Buyer. All instruments and
10
<PAGE>
documents executed and delivered to Seller pursuant hereto shall be in form
and substance, and shall be executed in a manner, reasonably satisfactory
to Seller.
2.3 Transfer Taxes
---------------
Seller shall be responsible for any documentary transfer taxes and any
sales, use or other taxes, duties, fees and governmental exactions imposed by
reason of the transfer of the assets of Seller provided hereunder and any
deficiency, interest or penalty asserted with respect thereto.
2.4 Prorations
-----------
Except as otherwise set forth below, there shall not be any proration
of expenses or income with respect to any of the Assets acquired by Buyer. All
revenue of Seller accrued prior to the Closing Date shall be the property of
Seller and paid by Buyer to Seller upon its receipt and all revenue accrued with
respect to the Assets from and after the Closing Date shall be the property of
Buyer.
2.5 Employment
-----------
Immediately following the Closing, Buyer shall offer employment to all
of the employees of Seller who are listed on Exhibit "I". The salaries offered
-----------
to such employees shall be market competitive as of the Closing Date in the
reasonable discretion of the Buyer after consultation with Seller and other
employee benefits offered to such employees shall be consistent with employee
benefits provided such employees by Seller as of the Closing Date for a period
of no less than six (6) months (nine (9) months for Deborah Gallet, Jim Otto and
John Rosenberg) following the Closing Date. Such employees shall be notified of
the transfer of the management functions to Buyer in a joint communication from
Seller and Buyer mutually approved by Seller and Buyer.
ARTICLE III
-----------
11
<PAGE>
REPRESENTATIONS AND WARRANTIES
- -------------------------------
OF SELLER AND THE SHAREHOLDERS
- ------------------------------
Seller and each of the Shareholders as to himself, hereby represents
and warrants to Buyer, except as set forth on the Disclosure Schedule attached
hereto as Exhibit "F", the following:
-----------
3.1 Organization and Qualification
-------------------------------
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois and has the requisite power and
authority to conduct its business as it is now being conducted.
3.2 Authorization
--------------
Seller and each respective Shareholder has the requisite power and
authority to enter into this Agreement, to perform their respective obligations
hereunder, and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Seller and each respective
Shareholder and constitutes a legal, valid and binding obligation of Seller and
each such Shareholder, enforceable against Seller and each such Shareholder in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws, or by
equitable principles, relating to or limiting the rights of creditors generally
and (b) limitations imposed by law or equitable principles upon the availability
of specific performance, injunctive relief or other equitable remedies.
3.3 No Conflict or Violation
-------------------------
Neither the execution and delivery of this Agreement by Seller and
each respective Shareholder, nor the consummation by Seller and each respective
Shareholder of the transactions contemplated hereby, nor compliance by Seller
and the respective Shareholders with any of the provisions hereof will (a)
violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result
12
<PAGE>
in the creation of any encumbrance upon any of the Assets of Seller under, any
of the terms, conditions or provisions of (i) the Articles of Incorporation or
Bylaws of Seller or (ii) any note, bond, mortgage, indenture, deed of trust,
security or pledge agreement, license, lease, franchise, permit, agreement or
other instrument or obligation to which Seller or any respective Shareholder is
a party or to which Seller, any respective Shareholder or any of the properties
or assets of Seller may be subject, which violation, conflict, breach or default
would have a material adverse effect on the Assets or Seller's ability to
consummate the transactions contemplated hereby, or (b) violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation applicable
to Seller, any respective Shareholder or any of the properties or assets of
Seller, which violation would have a material adverse effect on the Assets or
Seller's ability to consummate the transactions contemplated hereby.
3.4 Consents and Approvals
-----------------------
Except for the consent of the other parties to the agreements, leases
and contracts contained in the Assets to the assignment and transfer thereof
from Seller to Buyer (including, without limitation, Existing Management
Agreements and Existing Brokerage Agreements), no notice to, declaration, filing
or registration with, or authorization, consent or approval of, or permit from,
any domestic or foreign governmental or regulatory body or authority, or any
other person or entity, is necessary in connection with the execution and
delivery of this Agreement by the Seller and the respective Shareholders and the
consummation by the Seller and the respective Shareholders of the transactions
contemplated by this Agreement.
3.5 Financial Statements
---------------------
The unaudited balance sheet as of June 30, 1994, and related unaudited
statements of operations, shareholders equity and cash flows for Seller for the
six (6) months then ended (the "Financial Statements") attached hereto as
Exhibit "G" fairly and accurately present in all material respects the assets,
- -----------
liabilities and financial position of Seller as of the date thereof and the
results of operations and changes in shareholders' equity and cash flows for the
period then ended. Seller shall deliver to Buyer prior to the Closing Date an
unaudited balance sheet as of July 31, 1994, and related unaudited statements of
operations, shareholders' equity and cash flows for Seller for the seven (7)
months then ended, prepared in the same manner as the Financial Statements,
which shall fairly and accurately present in all material respects the assets,
liabilities and financial position of Seller as of the date thereof
13
<PAGE>
and the results of operations and changes in shareholders' equity and cash flows
for the period then ended.
3.6 Books and Records
------------------
The books and records to which access was given Buyer prior to the
date hereof are the actual books and records of Seller and accurately and fairly
reflect, in all material respects, the activities, transactions, revenues and
expenses of Seller, and the budget for the twelve (12) month period ending July
31, 1995 attached hereto as Exhibit "H" fairly reflect the projected revenues
-----------
and expenses of Seller for such period, based upon the assumptions used in its
preparation, which assumptions Seller and each Shareholder represent were
prepared in good faith at the time such projections were prepared. Seller will
advise Buyer, in writing, prior to the Closing Date of any material adverse
changes in such projections.
3.7 Litigation
-----------
There currently are no pending actions, suits, investigations or
proceedings by, against, involving or relating to Seller, at law or in equity,
or before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality in which any claim has been
made or asserted against Seller. There is outstanding no garnishment, attachment
or writ of execution issued with reference to Seller or any of the Assets.
Seller is not a party or subject to any judgment, decree or order enjoining it
in respect of any business practice or the conduct of business in any area.
3.8 Compliance with Law
--------------------
Seller has not violated or failed to comply with any statute, law,
ordinance, regulation, rule, decree or order of any foreign, federal, state or
local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable to its business or
operations. The conduct of Seller's business is in material conformity with all
building code, health and environmental requirements except where the aggregate
of all such non-conformities would not have a material adverse effect on Seller.
The conduct of Seller's business is in material conformity with all energy,
public utility, zoning and OSHA requirements and all other foreign, federal,
state and local governmental and regulatory
14
<PAGE>
requirements except where the aggregate of all such non-conformities would not
have a material adverse effect on Seller. Seller has not received any notice to
the effect that, or otherwise been advised that, it is not in compliance with,
any statute, law, ordinance, regulation, rule, judgment, decree or order. Seller
has no reason to anticipate that any presently existing circumstances are likely
to result in the violation of, any such statute, law, ordinance, regulation,
rule, judgment, decree or order.
3.9 Permits
--------
Seller has all permits from governmental agencies required to conduct
its present business as now being conducted, except such permits the failure of
which to obtain would not have a material adverse effect on the Assets.
3.10 Liabilities
------------
Seller has no liabilities, obligations or commitments of any material
nature (whether accrued, absolute, contingent or otherwise and whether matured
or unmatured), due or to become due, except (a) liabilities reflected or
provided for in the Financial Statements and (b) liabilities incurred since the
date of the Financial Statements in the ordinary course of business and
consistent with Seller's past practice.
3.11 Labor Matters
--------------
Seller has not entered into any written employment agreement with any
employees. Except as provided by law, the employment of all persons presently
employed or retained by Seller is terminable at will. Seller is not a party to
any collective bargaining agreement, nor is Seller subject to any organizing
efforts of any labor union, organization, local or subdivision. There are no
labor grievances, or investigations, claims or suits concerning employment
pending or threatened against Seller. Seller has not entered into any agreement,
oral or written, with any present or former employee of Seller that will result
in a commitment or obligation (absolute or contingent) of Seller and/or Buyer to
make any payment to any present or former employee of Seller following his or
her termination of employment. Seller does not maintain, participate in or
contribute to, has never maintained, participated in or contributed to, and has
not announced plans or legally binding commitments to maintain, participate in
or contribute to, any qualified or non-qualified pension or profit-
15
<PAGE>
sharing plan and/or other form of deferred compensation and/or post-retirement
insurance, compensation or benefits which covers or has covered any employees or
former employees of Seller exclusive of Benefit Arrangements (as defined below).
The employment of all employees presently employed by Seller whose names are set
forth on Exhibit "I" attached hereto shall be terminated as of the Closing Date
-----------
and any related severance payments due as a result of such termination shall be
the responsibility of Seller. Exhibit "I" also sets forth which of those
-----------
employees to be terminated by Seller will be offered employment by Buyer
pursuant to the provisions of Section 2.5.
3.12 Benefit Arrangements
---------------------
Each written plan, arrangement, program, agreement or commitment
providing for insurance coverage (including any self-insured arrangement),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, and life, health, disability or accident benefits which
covers or has covered any employees of Seller (collectively, "Benefit
Arrangements"), has been maintained in compliance with its terms and with the
requirements described by any and all statutes, orders, rules and regulations
which are applicable to such Benefit Arrangement. Set forth on Exhibit "J" is a
-----------
complete and accurate description of each Benefit Arrangement of Seller.
3.13 Brokers and Finders
--------------------
Neither Seller, any Shareholder nor any of Seller's officers,
directors, employees or agents have employed any broker, finder or similar agent
or incurred any liability for any brokerage fees, commissions, finder's fees or
similar payments in connection with the transactions contemplated by this
Agreement.
3.14 Title
------
Seller has good and marketable title to the Assets (exclusive of
Assets for which Seller cannot hold title such as leased property and except
that certain of the Existing Management Agreements and Existing Brokerage
Agreements cannot be assigned without the prior consent of the other party
thereto) and has possession thereof and there is no lien or encumbrance against
any such asset except any lien imposed by law in the ordinary course of business
for assessments not yet due and payable.
16
<PAGE>
3.15 Tenant Lease
-------------
The term of the tenant lease for office space located at 1420
Kensington Road, Suite 103, Oak Brook, Illinois 60521 expires November 30, 1994.
3.16 Material Misstatements or Omissions
------------------------------------
No representation or warranty by Seller or any Shareholder in this
Agreement, or in any document, exhibit, statement, certificate or schedule
heretofore or hereinafter furnished or made available by Seller or any
Shareholder to the Buyer pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement, including, without limitation, the
Disclosure Schedule, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary to make the
statements or facts contained therein, taken as a whole, not misleading.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
- ---------------------------------------
Buyer hereby represents and warrants to Seller and each of the
Shareholders as follows:
4.1 Organization of Buyer
----------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite power and
authority to conduct its business as it is now being conducted.
4.2 Authorization
--------------
17
<PAGE>
Buyer has the requisite power and authority to enter into this
Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable against it in accordance with its terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium and other similar laws, or by equitable principles,
relating to or limiting the rights of creditors generally and (b) limitations
imposed by law or equitable principles upon the availability of specific
performance, injunctive relief or other equitable remedies.
4.3 Brokerage/Finders Fees
-----------------------
Neither Buyer nor any of its officers, directors, employees or agents
have employed any broker, finder or similar agent or incurred any liability for
any brokerage fees, commissions, finder's fees or similar payments in connection
with the transactions contemplated by this Agreement.
4.4 No Conflict or Violation
-------------------------
Neither the execution and delivery of this Agreement by Buyer, nor the
consummation of the transactions contemplated hereby, nor compliance by Buyer
with any of the provisions hereof will result in (a) a violation of or a
conflict with any provision of the Certificate of Incorporation or Bylaws of
Buyer, (b) a breach of, or a default under, any term or provision of any
contract, agreement, indebtedness, lease, commitment, license, franchise,
permit, authorization or concession to which Buyer is a party which breach or
default would have a material adverse effect on the business or financial
condition of Buyer or its ability to consummate the transactions contemplated
hereby or (c) a violation by Buyer of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or award, which violation would
have a material adverse effect on the business or financial condition of Buyer
or its ability to consummate the transactions contemplated hereby.
4.5 Consents and Approvals
-----------------------
18
<PAGE>
__________Except for the consent of the other parties to the agreements, leases
and contracts contained in the Assets to the assignment and transfer thereof
from Seller to Buyer (including, without limitation, Existing Management
Agreements and Existing Brokerage Agreements), no notice to, declaration, filing
or registration with, or authorization, consent or approval of, or permit from,
any domestic or foreign governmental or regulatory body or authority, or any
other person or entity, is necessary in connection with the execution and
delivery of this Agreement by the Buyer and the consummation by the Buyer of the
transactions contemplated by this Agreement.
ARTICLE V
---------
ACTIONS BY SELLER, THE SHAREHOLDERS
- ------------------------------------
AND BUYER PRIOR TO THE CLOSING
- ------------------------------
During the period from the date hereof through the Closing Date:
5.1 Maintenance of Business
------------------------
The business of Seller shall be conducted only in, and Seller shall
not take any action except in, the ordinary course of business and consistent
with past practice, and Seller shall use its best efforts to maintain and
preserve its business, assets, prospects, employees, suppliers, customers and
other advantageous business relationships.
5.2 Investigation by Buyer
-----------------------
Seller shall allow Buyer during regular business hours through Buyer's
Representatives, to make such investigation of the business, properties, books
and records of Seller, and to conduct such examination of the condition of
Seller, as Buyer deems necessary or advisable to familiarize itself with such
business, properties, books, records, condition and other matters, and to verify
the representations and warranties of Seller and the Shareholders hereunder.
19
<PAGE>
5.3 Notification of Certain Matters
--------------------------------
Seller and each Shareholder shall give prompt notice to Buyer, and
Buyer shall give prompt notice to Seller, of (a) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect any time from the date hereof to the Closing
Date and (b) any material failure of Seller, Shareholders or Buyer, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, and each party shall use all
reasonable efforts to remedy same.
ARTICLE VI
----------
CONDITIONS TO SELLER'S OBLIGATIONS
- ----------------------------------
The obligation of Seller and Shareholders to transfer the Assets to
Buyer and to consummate the other transactions contemplated hereby on the
Closing Date is subject, in the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions:
6.1 Representations, Warranties and Covenants
------------------------------------------
All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if such representations and warranties were made at and as of
the Closing Date except to the extent such representations and warranties are
expressly stated to be true as of another date, and Buyer shall have performed
in all material respects all agreements and covenants required hereby to be
performed by it prior to or at the Closing Date. There shall be delivered to
Seller at the Closing a certificate executed by Buyer, in form and substance and
executed in a manner reasonably satisfactory to Seller, to the foregoing effect.
6.2 No Governmental Proceeding or Litigation
-----------------------------------------
20
<PAGE>
No suit, action, investigation, inquiry or other proceeding by any
governmental authority or other person shall have been instituted which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially damage Seller and/or
Shareholders if the transactions contemplated hereunder are consummated.
6.3 Waiver by Seller
-----------------
Seller may unilaterally waive any of Seller's conditions described in
this Agreement. Except as otherwise provided in this Agreement, any such waiver
shall be effective only if the same is (a) in writing, (b) signed by Seller, and
(c) delivered to Buyer on or before the date such condition is to be satisfied.
6.4 Employment Agreements
----------------------
Each Shareholder shall have entered into an employment agreement with
Buyer in form and substance satisfactory to Buyer and each such applicable
Shareholder. Each such employment agreement shall specify salary, benefits,
discretionary bonus and other provisions customarily set forth in Buyer's
employment agreements with senior executives.
ARTICLE VII
-----------
CONDITIONS TO BUYER'S OBLIGATIONS
- ---------------------------------
The obligation of Buyer to purchase the Assets and to consummate the
other transactions contemplated hereby is subject, in the discretion of Buyer,
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions :
7.1 Representations, Warranties and Covenants
------------------------------------------
21
<PAGE>
All representations and warranties of Seller and the Shareholders
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date as if such representations and warranties were
made at and as of the Closing Date except to the extent such representations and
warranties are expressly stated to be true as of another date, and Seller and
the Shareholders shall have performed in all material respects all agreements
and covenants required hereby to be performed by them prior to or at the Closing
Date. There shall be delivered to Buyer at the Closing a certificate executed by
Seller and the Shareholders, in form and substance and executed in a manner
reasonably satisfactory to Buyer, to the foregoing effect.
7.2 No Governmental Proceeding or Litigation
-----------------------------------------
No suit, action, investigation, inquiry or other proceeding by any
governmental authority or other person shall have been instituted which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected materially and adversely to affect the value
of the Assets, the financial condition and/or business of Seller or otherwise
reasonably be expected to materially damage Buyer if the transactions
contemplated hereunder are consummated.
7.3 Due Diligence
-------------
Buyer and its Representatives shall have completed a due diligence
review of the operational, financial and legal affairs of Seller and Buyer shall
be satisfied, in its sole discretion, with the results of such investigation.
7.4 Existing Client Consents
-------------------------
Eighty percent (80%) or more of the Existing Management Agreements
shall be assignable to Buyer and consented to by the applicable Existing Clients
(when required). For purposes of this Section 7.4, the percentage of Existing
Management Agreements assignable to Buyer shall equal a fraction the numerator
of which is the aggregate gross revenues received by Seller during the twelve
(12) month period ended June 30, 1994, from the Existing Management Agreements
assignable to Buyer and consented to the by applicable
22
<PAGE>
Existing Clients (when required) and the denominator of which is the gross
revenues received by Seller during the twelve (12) month period ended June 30,
1994, from all of the Existing Management Agreements. Seller shall be required
to provide documentation reasonably satisfactory to Buyer evidencing the consent
(when required) of the Existing Clients to the assignment of each such Existing
Management Agreement to Buyer.
7.5 Employment Agreements
----------------------
Each Shareholder shall have entered into an employment agreement with
Buyer in form and substance satisfactory to Buyer and each such applicable
Shareholder. Each such employment agreement shall specify salary, benefits,
discretionary bonus and other provisions customarily set forth in Buyer's
employment agreements with senior executives. In addition, Buyer shall have
entered into employment agreements in such form and with such key personnel as
Buyer in its sole discretion determines are necessary to perform Buyer's
obligations under the Existing Management Agreements and the Existing Brokerage
Agreements.
7.6 Waiver by Buyer
----------------
Buyer may unilaterally waive any of Buyer's conditions described in
this Agreement. Except as otherwise provided in this Agreement, any such waiver
shall be effective only if the same is (a) in writing, (b) signed by Buyer, and
(c) delivered to Seller on or before the date such condition is to be satisfied.
ARTICLE VIII
------------
INDEMNIFICATION
- ---------------
8.1 Survival of Representations, Etc.
----------------------------------
All statements contained in the Disclosure Schedule or in the
certificates delivered at the Closing pursuant to Sections 6.1 and 7.1 shall be
deemed to be representations and warranties by the parties hereunder. The
representations and warranties of
23
<PAGE>
Seller, each of the Shareholders and Buyer contained herein shall survive the
Closing Date for a period of two (2) years regardless of any investigation made
by any of the parties hereto.
8.2 Indemnification
----------------
(a) By Seller and the Shareholders.
-------------------------------
(1) Joint and Several Indemnification. Seller and each
---------------------------------
Shareholder hereby agree, jointly and severally, to indemnify, defend
(subject to the provisions of Section 8.2(d)) and hold harmless Buyer and
its Representatives from and against any and all costs, losses,
liabilities, damages, lawsuits, deficiencies, claims and expenses,
including without limitation, interest, penalties, reasonable attorneys'
fees and all amounts paid in investigation, defense or settlement of any of
the foregoing (collectively, "Damages"), incurred in connection with,
arising out of, resulting from or incident to any claim by any third party
brought against Buyer arising from the actions or inactions of Seller
and/or any Shareholder or the operation of Seller's business prior to the
Closing.
(2) Additional Seller Indemnification. Seller hereby agrees to
---------------------------------
indemnify, defend and hold harmless Buyer and its Representatives from and
against any and all Damages incurred in connection with, arising out of,
resulting from, or incident to, any breach of any covenant or warranty, or
the inaccuracy of any representation, made by Seller and/or any Shareholder
in or pursuant to this Agreement.
(3) Additional Shareholder Indemnification. Each Shareholder
--------------------------------------
hereby agrees to indemnify, defend and hold harmless Buyer and its
Representatives from and against any and all Damages incurred in connection
with, arising out of, resulting from, or incident to, any breach of any
covenant or warranty, or the inaccuracy of any representation, made by
Seller and/or such Shareholder in or pursuant to this Agreement.
(4) Right of Offset. Buyer shall have the right to offset any
---------------
amounts due Seller under this Agreement or any other agreement to which any
Shareholder and Buyer are parties in satisfaction of Seller's and/or any
Shareholder's indemnification obligation set forth above in this Section
8.2. To the extent so offset, Seller's and/or any Shareholder's,
24
<PAGE>
as applicable, indemnification obligation set forth in this Section 8.2
shall be satisfied. Notwithstanding the foregoing, if there is a final,
non-appealable determination by a court of competent jurisdiction that
Buyer improperly offset any amounts that were otherwise payable to Seller
and/or any Shareholder, then Buyer shall be obligated to pay to Seller
and/or any such Shareholder, as applicable, such improperly withheld
amounts, together with interest thereon computed at the Wells Fargo Bank
reference (prime) rate of interest (adjusted concurrently with any
adjustments to such interest rate) accrued from and after the date any such
amounts were improperly withheld.
(b) By Buyer. Buyer shall indemnify, defend (subject to the
--------
provisions of Section 8.2(d)) and hold harmless each Shareholder, Seller and
Seller's Representatives from and against any and all Damages incurred in
connection with, arising out of, resulting from or incident to (i) any breach of
any covenant or warranty, or the inaccuracy of any representation, made by Buyer
in or pursuant to this Agreement, or (ii) any claim by any third party brought
against Seller and/or any Shareholder arising from the actions or inactions of
Buyer or the operation of Buyer's business on or after the Closing Date.
(c) Damages. The term "Damages" as used in this Section 8.2 is not
-------
limited to matters asserted by third parties against the indemnified party but
includes Damages incurred or sustained by the indemnified party in the absence
of third party claims. Payment by the indemnified party of amounts for which the
indemnified party is entitled to be indemnified hereunder shall not be a
condition precedent to the right of the indemnified party to enforce its
indemnity rights hereunder.
(d) Notification Requirement. Subject to the survival limitations of
------------------------
Section 8.1 requiring notification within two (2) years of the Closing Date, if
any party ("Indemnitee") hereto desires to make a claim against any other party
("Indemnitor") pursuant to the provisions of this Article VIII, then Indemnitee
shall notify Indemnitor of the claim, demand, action or right of action which is
the basis of such claim and the provision or provisions of this Agreement
alleged to have been breached or to be inaccurate, and shall give the Indemnitor
a reasonable opportunity to participate in the defense thereof. Indemnitee shall
provide Indemnitor with all information available to it regarding such claim,
demand, action or right of action (whether or not it involves a third party). In
addition, with respect to any claim brought by a third party against an
Indemnitee, each such Indemnitor shall have the right to approve the counsel
selected by Indemnitee, which approval shall not be unreasonably
25
<PAGE>
withheld or delayed. All settlements of third party claims proposed by an
Indemnitee shall be subject to the approval of Indemnitor, which approval shall
not be unreasonably withheld or delayed.
8.3 Recourse Limitation. Notwithstanding any provisions in this
-------------------
Agreement to the contrary, the liability of each Shareholder incurred in
connection with this Agreement shall not in any event exceed the product of (a)
the Purchase Price paid from time to time to Seller by Buyer and not otherwise
recouped or recovered (exclusive of offsets under Section 9.16) from Seller by
Buyer and less amounts offset by Buyer pursuant to Section 8.2(a)(4) multiplied
by (b) fifty percent (50%).
ARTICLE IX
----------
MISCELLANEOUS
- -------------
9.1 Termination
------------
This Agreement may be terminated and the transactions contemplated
hereby abandoned by the mutual written consent of each of the parties hereto or
by Seller or Buyer if the conditions to such party's obligations set forth in
Articles VI and VII, respectively, have not been satisfied on or before October
1, 1994 (unless waived by the party entitled to the benefit thereof), without
liability of any party hereto; provided, however, that Buyer or Seller may, by
-------- -------
notice to the other, extend the term of this Agreement until November 1, 1994;
and provided further that no party will be released from liability hereunder if
this Agreement is terminated and the transactions abandoned by reason of (a)
willful failure of such party to have performed its obligations hereunder, or
(b) any knowing misrepresentation made by such party of any matter set forth
herein. This Agreement shall terminate automatically if the Closing Date has not
occurred on or prior to October 1, 1994 (or November 1, 1994, if the term of
this Agreement is extended as provided above). In the event that a condition
precedent to its obligations is not satisfied, nothing contained herein shall be
deemed to require any party to terminate this Agreement, rather than to waive
such condition precedent and proceed with the transactions contemplated hereby.
9.2 Assignment
-----------
26
<PAGE>
Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by Seller without the prior written consent of Buyer. Buyer
shall have no right to assign this Agreement or any of the rights or obligations
hereunder without the prior written consent of Seller. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their, respective successors and assigns, and no other person shall
have any right, benefit or obligation hereunder.
9.3 Notices
--------
Unless otherwise provided herein, any notice, request, instruction or
other document to be given hereunder by any party to the others shall be in
writing and delivered in person or by commercial overnight courier, telegraph,
telex or by facsimile transmission or mailed by certified mail, postage prepaid,
return receipt requested, as follows:
If to Shareholders: Steven M. Pagnotta
25833 W. Apache
Barrington, Illinois 60010
Telephone No.: (708) 382-2113
Facsimile No.: (708) 573-9868
David A. Petersen
1001 Forestview Court
Naperville, Illinois 60540
Telephone No.: (708) 420-8226
Facsimile No.: (708) 573-9868
If to Buyer: Koll Management Services, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: President
Telephone No.: (714) 833-3030
Facsimile No.: (714) 833-8635
27
<PAGE>
With a copy to: Koll
10 South La Salle Street
Suite 2600
Chicago, Illinois 60603
Attn: President
With copy to: Senior Vice President
Telephone No.: (312) 984-1010
Facsimile No.: (312) 345-1122
With a copy to: Allen, Matkins, Leck,
Gamble & Mallory
18400 Von Karman Avenue
4th Floor
Irvine, California 92715
Attn: Thomas C. Foster, Esq.
Telephone No.: (714) 553-1313
Facsimile No.: (714) 553-8354
28
<PAGE>
If to Seller: Midstates Management
Co., Inc.
1420 Kensington Road
Suite 103
Oak Brook, Illinois 60521
Attention: President
Telephone No.: (708) 573-9860
Facsimile No.: (708) 573-9868
With a copy to in the event of notice to Seller and/or
either Shareholder:
Seyfarth, Shaw, Fairweather & Geraldson
55 East Monroe Street
Suite 4200
Chicago, Illinois 60603-5803
Attn: Jeffrey Jahns, Esq.
Telephone No.: (312) 346-8000
Facsimile No.: (312) 269-8869
Any such notice or other communication
shall be deemed received and effective
upon the earlier of (a) if personally
delivered, the date of delivery to the
address of the person to receive such
notice; (b) if delivered by commercial
overnight carrier, one day following
the receipt of such communication by
such carrier from the sender, as shown
on the sender's delivery invoice from
such carrier; (c) if mailed, forty-eight
(48) hours after the date of posting by
the United States Post Office as shown
by the sender's registry or certification
receipt, as the case may be; (d) if
given by telegraph or cable, when
delivered to the telegraph company with
charges prepaid; or (e) if given by
telex or telecopy, when sent. Any
reference herein to the date of receipt,
delivery, or giving, as the case
may be, of any notice or other
communication shall refer to the
date such communication becomes
effective under the terms of
this Section 9.3. Any notice or
other communication sent by cable,
telex, or telecopy
29
<PAGE>
must be confirmed within forty-eight
(48) hours by letter mailed or delivered
in accordance with the foregoing. Notice
of change of address shall be given by
written notice in the manner detailed in
this Section 9.3. Rejection or other
refusal to accept or the inability
to deliver because of changed address
of which no notice was given shall be
deemed to constitute receipt of the
notice or other communication sent.
9.4 Choice of Law
--------------
This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of Illinois, and
this Agreement shall be deemed executed, delivered and performed in the State of
Illinois.
9.5 Entire Agreement; Amendments and Waivers
-----------------------------------------
This Agreement, together with all Exhibits and schedules hereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. No supplement,
amendment, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
9.6 Counterparts
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
9.7 Invalidity
-----------
30
<PAGE>
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
9.8 Headings
---------
The headings of the Articles and Sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
9.9 Further Assurances
-------------------
On and after the Closing Date, Seller, the Shareholders and Buyer
shall take all appropriate action and execute all documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the provisions hereof.
9.10 Expenses
---------
Seller, the Shareholders and Buyer will each be liable for their own
costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement.
9.11 Attorneys Fees
---------------
In any litigation relating to this Agreement between the parties
hereto,. the prevailing party or parties shall be entitled to recover reasonable
attorney fees, court costs and other reasonable expenses incurred in connection
with such litigation.
9.12 Publicity
----------
31
<PAGE>
Neither the Shareholders, Seller nor Buyer shall issue any press
release or make any public statement regarding the transactions contemplated
hereby (including, but not limited to, any press release or public statement
announcing the execution of this Agreement, the termination of this Agreement or
the consummation of the transactions contemplated hereby), without the prior
approval of the other parties hereto save and except for any disclosures,
notices or public filings required by law. The parties hereto shall issue a
mutually acceptable press release as soon as practicable after the execution of
this Agreement announcing such execution and as soon as practicable after the
Closing Date announcing the consummation of the transactions contemplated
hereby.
9.13 Confidential Information
-------------------------
The parties acknowledge that the transaction described herein is of a
confidential nature and shall not be disclosed except to consultants, advisors,
affiliates and Representatives, or as required by law, until such time as the
parties make a public announcement regarding the transaction as provided in
Section 9.12. In connection with the negotiation of this Agreement and the
preparation for the consummation of the transactions contemplated hereby, each
party acknowledges that it will have access to confidential information relating
to the other parties. Each party shall treat such information as confidential,
preserve the confidentiality thereof and not duplicate or use such information,
except to advisors, consultants, affiliates and Representatives in connection
with the transactions contemplated hereby. Employees of Seller shall be
notified of the fact of the subject transaction in a joint communication from
Seller and Buyer mutually approved by Seller and Buyer. In the event of the
termination of this Agreement for any reason whatsoever, each party shall return
to the other all documents, work papers and other material (including all copies
thereof) obtained in connection with the transactions contemplated hereby and
shall use all reasonable efforts, including instructing its employees and others
who have had access to such information, to keep confidential and not to use any
such information, unless such information is now, or is hereafter disclosed,
through no act or omission of such party, in any manner making it available to
the general public.
9.14 Trading Stock of Buyer
-----------------------
32
<PAGE>
Seller and the Shareholders shall not purchase or sell any shares of
the common stock of Buyer until there has been a public disclosure of Buyer's
acquisition of the Assets.
9.15 Miscellaneous
--------------
Each of the Exhibits attached hereto is incorporated herein by
reference and expressly made a part of this Agreement for all purposes.
References to any Exhibit made in this Agreement shall be deemed to include this
reference and incorporation. Where the context so requires, the use of the
neuter gender shall include the masculine and feminine genders, the masculine
gender shall include the feminine and neuter genders, and the singular number
shall include the plural and vice versa. There are no third party beneficiaries
to this Agreement. Each party hereto acknowledges that (i) each party hereto is
of equal bargaining strength; and (ii) each such party has actively participated
in the drafting, preparation, and negotiation of this Agreement.
9.16 Right of Offset
----------------
In addition to Buyer's right of offset pursuant to Section 8.2(a)(4),
Buyer shall have the right to offset any amounts due Seller under this Agreement
in satisfaction of fifty percent (50%) of the obligations of Koll/Bradford Joint
Venture, a California general partnership, to Buyer under and pursuant to that
certain working capital loan by Buyer to Koll/Bradford Joint Venture. To the
extent so offset, the obligations of Koll/Bradford Joint Venture under such
working capital loan shall be satisfied. For example, for each One Dollar
($1.00) owed by Koll/Bradford Joint Venture under such working capital loan,
Buyer shall be entitled to deduct Fifty Cents ($.50) from any amounts due Seller
under this Agreement; upon such deduction of Fifty Cents ($.50), the entire One
Dollar ($1.00) so owed by Koll/Bradford Joint Venture shall be deemed satisfied
in full, it being understood that the other Fifty Cents ($.50) is effectively
being paid by Buyer to itself as a partner in Koll/Bradford Joint Venture.
ARTICLE X
---------
DEFINITIONS
- -----------
33
<PAGE>
10.1 Affiliate
----------
The term "Affiliate" means any person or entity which, directly or
---------
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with another person or entity. The term "control" as
used herein (including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
vote fifty percent (50%) or more of the outstanding voting securities of such
person or entity.
10.2 Assets
-------
The term "Assets" is defined in Section 1.1.
------
10.3 Benefit Arrangement
--------------------
The term "Benefit Arrangement" is defined in Section 3.12.
-------------------
10.4 Buyer
-----
The term "Buyer" means Koll Management Services, Inc.
-----
10.5 Closing
--------
The term "Closing" is defined in Section 2.1.
-------
10.6 Closing Date
------------
The term "Closing Date" is defined in Section 2.1.
10.7 Damages
--------
34
<PAGE>
The term "Damages" is defined in Section 8.2.
-------
10.8 Existing Brokerage Agreement; Existing Brokerage Agreements
-----------------------------------------------------------
__________The terms "Existing Brokerage Agreement" and "Existing Brokerage
---------------------------- ------------------
Agreements" are defined in Recital B.
- ----------
10.9 Existing Client; Existing Clients
---------------------------------
The terms "Existing Client" and "Existing Clients" are defined in
--------------- ----------------
Recital A.
10.10 Existing Managed Building; Existing Managed Buildings
-----------------------------------------------------
__________The term "Existing Managed Building" and "Existing Managed Buildings"
------------------------- --------------------------
are defined in Recital A.
10.11 Existing Management Agreement; Existing Management Agreements
-------------------------------------------------------------
__________The terms "Existing Management Agreement" and "Existing Management
----------------------------- -------------------
Agreements" are defined in Recital A.
- ----------
10.12 Indemnitee
----------
The term "Indemnitee" is defined in Section 8.2(d).
----------
10.13 Indemnitor
----------
The term "Indemnitor" is defined in Section 8.2(d).
----------
35
<PAGE>
10.14 Net New Business Income
-----------------------
__________The term "Net New Business Income" is defined in Section 1.3(b)(1).
-----------------------
10.15 Net Operating Income
--------------------
__________The term "Net Operating Income" is defined in Section 1.3(a)(1).
--------------------
10.16 New Business Expenses
---------------------
__________The term "New Business Expenses" is defined in Section 1.3(b)(3).
---------------------
10.17 New Business Revenues
---------------------
__________The term "New Business Revenues" is defined in Section 1.3(b)(2).
---------------------
10.18 Operating Expenses
------------------
__________The term "Operating Expenses" is defined in Section 1.3(a)(3).
------------------
10.19 Purchase Price
--------------
The term "Purchase Price" is defined in Section 1.2.
--------------
10.20 Representative
--------------
The term "Representative" means any officer, director, principal,
--------------
attorney, accountant, agent, employee or other representative.
36
<PAGE>
10.21 Revenues
The term "Revenues" is defined in Section 1.3(a)(2).
--------
10.22 Seller
------
The term "Seller" means Midstates Management Co., Inc. an Illinois
------
corporation.
10.23 Shareholders; Shareholder
-------------------------
The term "Shareholders" means Steven M. Pagnotta and David A.
------------
Petersen, collectively; the term "Shareholder" means either of the Shareholders.
-----------
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
"Shareholders"
STEVEN M. PAGNOTTA
DAVID A. PETERSEN
"Seller" MIDSTATES MANAGEMENT CO., INC.
an Illinois corporation
37
<PAGE>
By:
Name:
Title:
38
<PAGE>
"Buyer" KOLL MANAGEMENT SERVICES, INC.,
a Delaware corporation
By:
Name:
Title:
39
<PAGE>
EXHIBIT 10.41
* Confidential Treatment
Requested
STOCK AND ASSET PURCHASE AGREEMENT
by and among
BRADLEY C. BURGESS and JAMES W. SCHLESING
as "Individual Sellers,"
J. ROBERT WHITE, JR.,
as "New Mexico Seller,"
CBS INVESTMENT REALTY OF CALIFORNIA, INC.
as "Corporate Seller,"
KOLL MANAGEMENT SERVICES, INC.,
as "Buyer,"
and
CBS INVESTMENT REALTY OF NEW MEXICO, INC. and
CBS INVESTMENT REALTY, INC.
as the "Companies" being sold
Dated: March 4, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
ARTICLE I PURCHASE AND SALE OF STOCK AND ASSETS.............................. 2
1.1 Transfer of Stock.................................................. 2
1.2 Transfer of Assets................................................. 2
1.3 Consideration...................................................... 2
1.4 Adjustments to Purchase Price...................................... 3
1.5 Assumption of Liabilities of Corporate Seller...................... 6
1.6 Covenant Not to Compete............................................ 6
1.7 Excluded Assets.................................................... 8
ARTICLE II CLOSING............................................................ 8
2.1 Closing............................................................ 8
2.2 Documents to be Delivered.......................................... 9
2.3 Transfer Taxes..................................................... 10
2.4 Prorations......................................................... 10
2.5 Employment......................................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANIES........ 11
3.1 Organization and Qualification..................................... 11
</TABLE>
-i-
<PAGE>
<TABLE>
<C> <S> <C>
3.2 Capitalization..................................................... 11
3.3 Ownership of Shares................................................ 11
3.4 Title to Assets.................................................... 12
3.5 Authorization...................................................... 12
3.6 No Conflict or Violation........................................... 12
3.7 Consents and Approvals............................................. 13
3.8 Financial Statements............................................... 13
3.9 Books and Records.................................................. 13
3.10 Litigation......................................................... 14
3.11 Compliance with Law................................................ 14
3.12 Permits............................................................ 14
3.13 Liabilities........................................................ 14
3.14 Labor Matters...................................................... 15
3.15 Benefit Arrangements............................................... 15
3.16 Brokers and Finders................................................ 15
3.17 No Other Agreements to Sell........................................ 15
3.18 Material Misstatements or Omissions................................ 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER............................ 16
4.1 Organization of Buyer.............................................. 16
4.2 Authorization...................................................... 16
4.3 Brokerage/Finders Fees............................................. 16
</TABLE>
-ii-
<PAGE>
<TABLE>
<C> <S> <C>
4.4 No Conflict or Violation........................................... 16
4.5 Financial Statements............................................... 17
ARTICLE V ACTIONS BY SELLERS, THE COMPANIES AND BUYER PRIOR TO THE CLOSING... 17
5.1 Maintenance of Business............................................ 17
5.2 Investigation by Buyer............................................. 17
5.3 Notification of Certain Matters.................................... 17
ARTICLE VI CONDITIONS TO SELLERS' OBLIGATIONS................................. 18
6.1 Representations, Warranties and Covenants.......................... 18
6.2 No Governmental Proceeding or Litigation........................... 18
6.3 Waiver by Sellers.................................................. 18
ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS.................................. 18
7.1 Representations, Warranties and Covenants.......................... 18
7.2 No Governmental Proceeding or Litigation........................... 19
7.3 Waiver by Buyer.................................................... 19
ARTICLE VIII INDEMNIFICATION.................................................... 19
8.1 Survival of Representations, Etc................................... 19
8.2 Indemnification.................................................... 19
ARTICLE IX MISCELLANEOUS...................................................... 21
</TABLE>
-iii-
<PAGE>
<TABLE>
<C> <S> <C>
9.1 Termination........................................................ 21
9.2 Assignment......................................................... 22
9.3 Notices............................................................ 22
9.4 Choice of Law...................................................... 23
9.5 Entire Agreement; Amendments and Waivers........................... 23
9.6 Counterparts....................................................... 24
9.7 Invalidity......................................................... 24
9.8 Headings........................................................... 24
9.9 Further Assurances................................................. 24
9.10 Expenses........................................................... 24
9.11 Attorneys Fees..................................................... 24
9.12 Publicity.......................................................... 24
9.13 Confidential Information........................................... 25
9.14 Post-Closing Covenants............................................. 25
9.15 Access to Records; Cooperation..................................... 26
9.16 Advisory Board..................................................... 26
9.17 Miscellaneous...................................................... 27
ARTICLE X DEFINITIONS........................................................ 27
10.1 Advisory Board..................................................... 27
10.2 Affiliate.......................................................... 27
10.3 Agreement.......................................................... 28
</TABLE>
-iv-
<PAGE>
<TABLE>
<C> <S> <C>
10.4 Assets............................................................. 28
10.5 Benefit Arrangements............................................... 28
10.6 Buyer.............................................................. 28
10.7 Buyer Financial Statements......................................... 28
10.8 Calculation Year................................................... 28
10.9 CBS Agreements..................................................... 28
10.10 CBS-Arizona........................................................ 28
10.11 CBS-California..................................................... 28
10.12 CBS-New Mexico..................................................... 28
10.13 CBS Division....................................................... 28
10.14 CBS Financial Statements........................................... 28
10.15 Closing............................................................ 28
10.16 Closing Date....................................................... 28
10.17 Companies.......................................................... 29
10.18 Corporate Seller................................................... 29
10.19 Damages............................................................ 29
10.20 Down Payment Note.................................................. 29
10.21 Effective Date..................................................... 29
10.22 Existing Client; Existing Clients.................................. 29
10.23 Existing Brokerage Agreement and Existing Brokerage Agreements..... 29
10.24 Existing Management Agreement; Existing Management Agreements...... 29
</TABLE>
-v-
<PAGE>
<TABLE>
<C> <S> <C>
10.25 Individual Sellers; Seller......................................... 29
10.26 Installment Notes.................................................. 29
10.27 Installment Payment................................................ 29
10.28 January Financial Statements....................................... 29
10.29 Letter of Credit-Down Payment Note................................. 29
10.30 Letters of Credit-Installment Notes................................ 29
10.31 Limitation Percentage.............................................. 29
10.32 Net Operating Income............................................... 29
10.33 Net Operating Loss................................................. 29
10.34 New Mexico Seller.................................................. 29
10.35 Operating Budget................................................... 29
10.36 Operating Expenses................................................. 30
10.37 Purchase Price..................................................... 30
10.38 Representative..................................................... 30
10.39 Revenues........................................................... 30
10.40 Sellers............................................................ 30
10.41 Stock.............................................................. 30
SIGNATURE PAGES...................................................................... 30-31
</TABLE>
<TABLE>
<C> <S>
EXHIBIT "A" EXISTING CLIENTS
EXHIBIT "B-1" EXISTING MANAGEMENT AGREEMENTS
EXHIBIT "B-2" EXISTING BROKERAGE AGREEMENTS
EXHIBIT "B-3" CBS-ARIZONA AND NEW MEXICO AGREEMENTS
EXHIBIT "C" PERSONAL PROPERTY LEASES, FINANCING ARRANGEMENTS
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
AND REAL PROPERTY LEASES
EXHIBIT "D" CORPORATE SELLER ASSETS
EXHIBIT "E" CORPORATE SELLER LIABILITIES
EXHIBIT "F-1" DOWN PAYMENT PROMISSORY NOTE
EXHIBIT "F-2" INSTALLMENT PROMISSORY NOTE
EXHIBIT "G" LETTER OF CREDIT
EXHIBIT "H" SELLER GUARANTIES
EXHIBIT "I" INTENTIONALLY OMITTED
EXHIBIT "J" EMPLOYEES
EXHIBIT "K" DISCLOSURE SCHEDULE
EXHIBIT "L-1" CBS FINANCIAL STATEMENTS
EXHIBIT "L-2" JANUARY FINANCIAL STATEMENTS
EXHIBIT "M" 1995 BUDGET
EXHIBIT "N" BENEFIT ARRANGEMENTS
EXHIBIT "O" BUYER FINANCIAL STATEMENTS
</TABLE>
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<PAGE>
STOCK AND ASSET PURCHASE AGREEMENT
----------------------------------
__________THIS STOCK AND ASSET PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of March 4, 1995, effective as of the Effective Date, by and
among BRADLEY C. BURGESS and JAMES W. SCHLESING (individually, "Individual
Seller" and collectively, "Individual Sellers"), J. ROBERT WHITE, JR. ("New
Mexico Seller"), CBS INVESTMENT REALTY OF CALIFORNIA, INC., an Arizona
corporation ("Corporate Seller"), KOLL MANAGEMENT SERVICES, INC., a Delaware
corporation ("Buyer"), and CBS INVESTMENT REALTY OF NEW MEXICO, INC., an Arizona
corporation, and CBS INVESTMENT REALTY, INC., an Arizona corporation
(individually, a "Company" and collectively, the "Companies"). A glossary of
defined terms used herein is set forth in Article X.
R E C I T A L S:
- - - - - - - -
A. Individual Sellers each own five hundred (500) shares of common
stock, $1.00 par value, of CBS-Arizona, and ten thousand two hundred sixty-six
and one-half (10,266.5) shares of Class A common stock, $1.00 par value, and two
thousand (2,000) shares of Class B non-voting common stock, $1.00 par value of
CBS-New Mexico, CBS-Arizona owns fifty-eight thousand six hundred sixty-seven
(58,667) shares of Class A common stock, $1.00 par value, and eight thousand
(8,000) shares of Class B non-voting common stock, $1.00 par value, of CBS-New
Mexico, and New Mexico Seller owns eight thousand eight hundred (8,800) shares
of Class A common stock, $1.00 par value, of CBS-New Mexico (collectively, the
"Stock"), constituting all of the issued and outstanding capital stock of the
Companies. The Companies and Corporate Seller currently engage in the business
of providing property and facility management services and commercial real
estate brokerage services to third parties set forth on Exhibit "A"
-----------
(collectively, the "Existing Clients" and sometimes separately referred to as an
"Existing Client") pursuant to written agreements entered into by each Company
or Corporate Seller, as applicable, and each such Existing Client. Such written
agreements entered into by Corporate Seller and an Existing Client with respect
to property and facility management services set forth on Exhibit "B-1" attached
-------------
hereto shall hereinafter collectively be referred to as the "Existing Management
Agreements" and shall separately be referred to as an "Existing Management
Agreement," and such written agreements entered into by Corporate Seller and an
Existing Client with respect to commercial real estate brokerage services set
forth on Exhibit "B-2" attached hereto shall hereinafter
-------------
<PAGE>
collectively be referred to as the "Existing Brokerage Agreements" and shall
separately be referred to as an "Existing Brokerage Agreement."
B. Buyer desires to purchase from Individual Sellers and New Mexico
Seller, and Individual Sellers and New Mexico Seller desire to transfer to
Buyer, all of the Stock, and Buyer desires to purchase from Corporate Seller,
and Corporate Seller desires to transfer to Buyer, all of the Existing
Management Agreements, all of the Existing Brokerage Agreements and certain
other assets of Corporate Seller, upon the terms and subject to the conditions
set forth in this Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK AND ASSETS
- -------------------------------------
1.1 Transfer of Stock. Upon the terms and subject to the conditions
-----------------
contained herein, Individual Sellers and New Mexico Seller shall sell, transfer
and assign to Buyer, and Buyer shall acquire on the Closing Date, the Stock free
and clear of all liens and encumbrances.
1.2 Transfer of Assets. Upon the terms and subject to the conditions
------------------
contained herein, Corporate Seller shall: (a) transfer and convey to Buyer all
of the Existing Management Agreements and all of the Existing Brokerage
Agreements; (b) assign to Buyer the personal property leases, personal property
financing arrangements and real property leases of Corporate Seller set forth on
Exhibit "C"; (c) transfer to Buyer the other assets of Corporate Seller set
- -----------
forth on Exhibit "D" which assets include certain tangible personal property
-----------
heretofore leased by Corporate Seller from affiliated leasing companies; and (d)
assign to Buyer all rights to the use of the name "CBS Investment Realty" and
any derivatives thereof including, without limitation, all trademarks and
servicemarks in connection therewith. The foregoing assets to be transferred to
Buyer pursuant to this Agreement shall hereinafter be referred to as the
"Assets." Buyer shall acquire on the Closing Date the Assets free and clear of
all liens and encumbrances except as otherwise set forth on the Disclosure
Schedule attached hereto as Exhibit "K".
-----------
-2-
<PAGE>
1.3 Consideration. Upon the terms and subject to the conditions
-------------
contained herein, as consideration for the purchase of the Stock and the Assets,
Buyer shall pay to Sellers * Dollars ($ * ), as
decreased by the amount that the net earnings of Companies and Corporate Seller
for the calendar quarter ending March 31, 1995 (calculated consistently with
the CBS Financial Statements) are less than * Dollars
($ * ), and as adjusted pursuant to Section 1.4 (the "Purchase Price").
The Purchase Price shall be paid by Buyer's delivery to Sellers (a) at the
Closing of a promissory note made payable to Bradley C. Burgess, as collection
agent for Sellers, in the amount of * Dollars ($ * ),
as adjusted by the adjustment to Purchase Price for the decrease in net earnings
set forth in the preceding sentence, bearing interest at the greater of the rate
of interest charged Buyer by Bankers Trust of New York on Buyer's line of credit
as adjusted from time to time less one and two-tenths (1.2) percentage points or
the lowest applicable federal rate (within the meaning of the Internal Revenue
Code of 1986, as amended) for short term debt instruments for the month in which
the Closing occurs or the preceding two (2) months, providing for payment of all
principal on January 2, 1996 and otherwise in the form and substance of the
promissory note attached hereto as Exhibit "F-1" (the "Down Payment Note"), and
-------------
secured by an irrevocable standby letter of credit (the "Letter of Credit-Down
Payment Note") issued by Bankers Trust of New York in the form attached hereto
as Exhibit "G", and four (4) promissory notes made payable to each of the
-----------
Sellers in the aggregate amount of * Dollars ($ * ),
with each such note bearing interest at the rate of nine percent (9%) per annum,
providing for four (4) equal annual payments of principal and otherwise in the
form and substance of the promissory note attached hereto as Exhibit "F-2"
-------------
(collectively, the "Installment Notes"), and secured by an irrevocable standby
letter of credit (collectively, the "Letters of Credit-Installment Notes")
issued by Bankers Trust of New York in the form attached hereto as Exhibit "G",
-----------
and (b) on the sixtieth (60th) day following the end of each of the four (4)
Calculation Years, an annual installment payable to each Seller calculated in
accordance with the provisions of Section 1.4 (in the aggregate individually, an
"Installment Payment" and collectively, the "Installment Payments"). Buyer shall
not be required to see to the application of any payments made pursuant to this
Agreement to Bradley C. Burgess as collection agent, and the receipt by Bradley
C. Burgess, as collection agent, shall be full acquittance to Buyer. The cost of
the Letter of Credit-Down Payment Note and the cost of the Letters of Credit-
Installment Notes shall be borne by Buyer. Seller shall provide Buyer no less
than five (5) days prior to the Closing Date with the respective principal
balances of each Installment Note due each Seller and the respective percentages
of each Installment Payment due each Seller. The Purchase Price (including
liabilities assumed) shall be allocated to the Stock and the Assets as the
-3-
* Confidential Treatment
Requested
<PAGE>
parties shall agree following the Closing Date. The parties intend that the
allocations be made in accordance with the requirements of Section 1060 of the
Internal Revenue Code of 1986, as amended, and any applicable Treasury
Regulations promulgated thereunder. The parties hereto, each at its own expense,
also agree to file appropriate forms with the Internal Revenue Service setting
forth the information required to be furnished to the Internal Revenue Service
by Section 1060 and the applicable Treasury Regulations thereunder.
1.4 Adjustments to Purchase Price.
-----------------------------
The Installment Payment due on the sixtieth (60th) day following the
end of any relevant Calculation Year shall be equal to * percent
( * %) of the amount that Net Operating Income for such Calculation Year
exceeds * ($ * ) up to * Dollars
($ * ) of Net Operating Income for such Calculation Year plus
* percent ( * %) of the amount that Net Operating Income for such
Calculation Year exceeds * Dollars ($ * ).
Notwithstanding the foregoing, in no event shall Installment Payments in the
aggregate exceed * Dollars ($ * ).
(a) The term "Net Operating Income" for any relevant Calculation
Year means the Revenues during such year less:
(i) the Operating Expenses during such year,
(ii) a reasonable allocation of Buyer's corporate overhead
during such year, consistent with allocations made by Buyer to its
operating divisions not to exceed an amount equal to *
Dollars ($ * ) reflecting the aggregate corporate overhead of
Corporate Seller and the Companies for the calendar year ended December 31,
1994, as such maximum allocation may be increased or decreased to reflect
variances in business volume as agreed by Sellers and Buyer; and
(iii) any Net Operating Loss incurred in a Calculation Year
previous to such relevant Calculation Year to the extent same has not been
offset in the calculation of Net Operating Income for a Calculation Year
previous to such relevant Calculation Year.
-4-
* Confidential Treatment
Requested
<PAGE>
(b) The term "Net Operating Loss" for any relevant Calculation
Year means the amount that the items specified in subsections (i) and (ii)
of Section 1.4(a) for such year exceeds the Revenues for such year.
(c) The term "Revenues" for any relevant Calculation Year means
the gross revenues, net of any third party commission or fee paid to non-
affiliated entities, of the CBS Division during such year. In furtherance
of the foregoing,
(i) any gross revenues derived by the Companies or Buyer
from property or facilities management agreements or commercial real
estate brokerage agreements with respect to buildings located in the
States of Arizona and New Mexico shall constitute gross revenues for
purposes of calculating Net Operating Income,
(ii) any gross revenues derived by the Companies or Buyer
from property or facilities management agreements or commercial real
estate brokerage agreements with respect to buildings located in the
State of Texas shall not constitute gross revenues for purposes of
calculating Net Operating Income,
(iii) any gross revenues derived by the Companies or Buyer
from the Existing Management Agreements and Existing Brokerage
Agreements shall constitute gross revenues for purposes of calculating
Net Operating Income, and
(iv) any gross revenues derived by the Companies or Buyer
from property or facilities management agreements (other than Existing
Management Agreements) or commercial real estate brokerage agreements
(other than Existing Brokerage Agreements) with respect to buildings
located in the Counties of Ventura, Los Angeles, Riverside, San
Bernardino, Orange and San Diego, California, shall constitute gross
revenues for purposes of calculating Net Operating Income provided
such property or facilities management assignment or such commercial
real estate brokerage assignment was procured by personnel of the CBS
Division.
-5-
<PAGE>
(d) The term "Operating Expenses" for any relevant Calculation
Year means all operating expenses incurred by or on behalf of the CBS
Division during such year exclusive of interest of any kind, depreciation,
acquisition costs of Buyer incurred in acquiring the Stock and the Assets
and costs of transition of putting Buyer in control of the business of
Corporate Seller and the Companies, as reasonably determined by Buyer, but
including, without limitation,
(i) office expenses,
(ii) labor and benefits costs including, without limitation,
fees and/or commissions to independent contractors,
(iii) real property rent expense for such period,
(iv) travel and entertainment expenses,
(v) insurance costs, including, without limitation, errors
and omissions/professional liability insurance costs and the cost of
including the activities of the CBS Division under Buyer's umbrella
liability coverage,
(vi) professional fees,
(vii) all taxes (except income taxes),
(viii) marketing expenses,
(ix) personal property rent expenses payable to third
party lessors,
-6-
<PAGE>
(x) computer maintenance and non-capitalizable software
costs for all computers including, without limitation, a reasonable
allocation of Buyer's maintenance costs for Buyer's AS 400 computer as
set forth in the then relevant Operating Budget, and
(xi) accounting costs including, without limitation, a
reasonable allocation of Buyer's accounting costs consistent with
allocations by Buyer to its operating divisions not to exceed an
amount equal to Four Hundred Sixty-Three Thousand Seven Hundred
Dollars ($463,700) reflecting the aggregate accounting costs of
Corporate Seller and the Companies for the calendar year ended
December 31, 1994.
(e) For purposes of the foregoing, Revenues, Operating Expenses,
Net Operating Income and Net Operating Loss shall be calculated under the
accrual method of accounting and in accordance with generally accepted
accounting principles. In the event any Operating Expense in any relevant
Calculation Year is less than it would have otherwise been solely because
of operational efficiencies arising from Buyer's acquisition of the Stock
and the Assets in the reasonable determination of Buyer, then for purposes
of calculating Net Operating Income for such Calculation Year, such
Operating Expense shall be deemed to be an amount equal to what such
expense would have been but for such operational efficiencies.
(f) Within twenty (20) days following the end of each month
during each Calculation Year, Buyer shall prepare and distribute to Sellers
a profit and loss statement for the CBS Division for such month and for the
applicable Calculation Year to date including budget variances, and a trial
balance. Within sixty (60) days following the end of each Calculation Year,
Buyer shall prepare and distribute to Sellers an annual report for the CBS
Division setting forth the calculation of Net Operating Income or Net
Operating Loss, as applicable, for the applicable Calculation Year,
certified as true and correct by the Chief Financial Officer of Buyer, in
his capacity as an officer of Buyer.
(g) Notwithstanding anything to the contrary contained in this
Agreement, Buyer shall have the right, but not the obligation, at any time
within the
-7-
<PAGE>
first one hundred eighty (180) days following the Closing Date, to elect to
pay Bradley C. Burgess, as collection agent for Sellers on January 2, 1996,
an amount equal to * Dollars ($ * ) in full
satisfaction of Buyer's obligation to pay Installment Payments.
1.5 Assumption of Liabilities of Corporate Seller. Upon the terms
---------------------------------------------
and subject to the conditions contained herein, at the Closing, Buyer shall
assume (a) all obligations and liabilities of Corporate Seller accruing, arising
out of, or relating to, events or occurrences happening after the Closing Date
(i) under any Existing Management Agreements, Existing Brokerage Agreements, and
the personal property leases, personal property financing arrangements and real
property leases set forth on Exhibit "C" attached hereto assigned to Buyer by
-----------
Corporate Seller pursuant to the terms of this Agreement, but not including any
obligation or liability for any breach of any such contract occurring prior to
the Closing Date, and (ii) in respect of any employees of Corporate Seller
employed by Buyer on or after the Closing Date with respect to events occurring
after the Closing Date, and (b) the trade payables and other liabilities of
Corporate Seller set forth on Exhibit "E" attached hereto. Buyer shall not
-----------
assume any obligation or liabilities of Corporate Seller not specifically
described in this Section 1.5.
1.6 Covenant Not to Compete.
-----------------------
(a) Corporate Seller hereby agrees that it shall not (i) for a
period of five (5) years following the Closing Date, engage in the trade or
business, directly or indirectly, of providing property or facilities
management services or commercial real estate brokerage services in the
States of California, Arizona or New Mexico or (ii) for a period of ten
(10) years following the Closing Date, solicit or contract with any client
of Buyer and/or the Companies for the rendering of property or facilities
management services and/or commercial real estate brokerage services with
respect to any building then currently being managed by Buyer and/or the
Companies and/or any building under a sales and/or leasing listing
agreement with Buyer and/or the Companies in the States of California,
Arizona or New Mexico.
(b) Each Individual Seller hereby agrees that he shall not,
either as an employee (exclusive of employment with Buyer or an Existing
Client), employer, consultant, agent, principal, partner, shareholder,
corporate officer, director or in any other individual or representative
capacity, (i) for a period of five (5) years following
-8-
* Confidential Treatment
Requested
<PAGE>
the Closing Date, engage in the trade or business, directly or indirectly,
of providing property or facilities management services or commercial real
estate brokerage services in the States of California, Arizona or New
Mexico, or (ii) for a period of ten (10) years following the Closing Date,
solicit or contract with, or acquire, individually or in the aggregate with
one or more of the Individual Sellers and/or New Mexico Seller, controlling
interest in any entity or organization which solicits or contracts with,
any client of Buyer and/or the Companies for the rendering of property or
facilities management services and/or commercial real estate brokerage
services with respect to any building then currently being managed by Buyer
and/or the Companies and/or any building under a sales and/or leasing
listing agreement with Buyer and/or the Companies in the States of
California, Arizona or New Mexico.
(c) New Mexico Seller hereby agrees that he shall not, either as
an employee (exclusive of employment with Buyer or an Existing Client),
employer, consultant, agent, principal, partner, shareholder, corporate
officer, director or in any other individual or representative capacity,
for a period of five (5) years following the Closing Date, solicit or
contract with, or acquire, individually or in the aggregate, with one or
more of the Individual Sellers, controlling interest in any entity or
organization which solicits or contracts with, (i) any Existing Client for
the rendering of property or facilities management services or commercial
real estate brokerage services, or (ii) any client of Buyer and/or the
Companies for rendering of property or facilities management services
and/or commercial real estate brokerage services with respect to any
building then currently being managed by Buyer and/or the Companies and/or
any building under a sales and/or leasing listing agreement with Buyer
and/or the Companies in the State of New Mexico.
(d) Notwithstanding the foregoing provisions of this Section
1.6, it is understood that each Seller may provide (i) real estate
consulting services to an Existing Client provided such consulting services
are not in the nature of property or facilities management services or
commercial real estate brokerage services and (ii) property or facilities
management services with respect to any building owned by such Seller
and/or such Seller's spouse, lineal descendants or lineal ancestors.
(e) Each Seller agrees not to hire any of the employees of Buyer
in connection with the rendition by such Seller of property or facilities
management services or commercial real estate brokerage services of the
type then currently being rendered by Buyer for a period of one 1 year
following any such employee's
-9-
<PAGE>
termination, for any reason, of employment with Buyer, unless otherwise
agreed by Buyer and such Seller.
(f) In the event any of the covenants in this Section 1.6 shall
be determined by any court of competent jurisdiction to be unenforceable by
reason of its extending for too great a period of time, or over too great a
geographical area, or by reason of its being too extensive in any other
respect, it shall be interpreted to extend only over the maximum period of
time for which it may be enforceable, and/or over the maximum geographical
area as to which it may be enforceable and/or to the maximum extent in all
other respects as to which it may be enforceable, all as determined by such
court in such action.
(g) Each Seller acknowledges that a breach of the covenants
contained in this Section 1.6 will cause irreparable damage to Buyer, the
exact amount of which will be difficult to ascertain, and that the remedies
at law for any such breach will be inadequate. Accordingly, each Seller
agrees that if such Seller breaches the covenants contained in this Section
1.6 in addition to any other remedy which may be available at law or in
equity, Buyer shall be entitled to specific performance and injunctive
relief as against such Seller, without, in the event of a final judgment,
posting a bond or other security.
(h) The covenants contained in this Section 1.6 shall terminate
and be of no further force or effect as to all of the Sellers in the event
Buyer is in breach of this Agreement by reason of the failure to pay
Sellers any sum due Sellers under this Agreement by the due date thereof
where such failure continues for ten (10) days after written notice thereof
from Sellers specifying such failure. Failure to pay Sellers any sum
otherwise due Sellers under this Agreement by reason of the exercise by
Buyer of its offset rights set forth in Section 8.2(a)(3) shall not
constitute a breach under this Agreement resulting in a termination of the
covenants contained in this Section 1.6. In the event the covenants
contained in this Section 1.6 terminate by reason of the provisions of this
Section 1.6(h), then Buyer hereby agrees that it shall not, for the period
commencing with the date of such termination and ending on the tenth (10th)
anniversary of the Closing Date, contact, solicit or contract with an
Existing Client for the rendering of property or facilities management
services or commercial real estate brokerage services.
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<PAGE>
1.7 Excluded Assets. Seller and Buyer acknowledge and agree that the
---------------
assets of CBS-Arizona as of the Closing Date shall not include those certain
assets listed on a schedule to be provided Sellers by Buyer no later than five
(5) days prior to the Closing Date which schedule will include the America West
suite, and Sellers are authorized to distribute such assets to the shareholders
of CBS-Arizona prior to the Closing Date.
ARTICLE II
CLOSING
- -------
2.1 Closing. The closing of the transactions contemplated herein
-------
(the "Closing") shall be held at 10:00 a.m. local time on March 31, 1995, or
-------
such other date as may be mutually agreed upon in writing by Sellers and Buyer
(the "Closing Date"), at the offices of Buyer's counsel, Allen, Matkins, Leck,
-------------
Gamble & Mallory, 18400 Von Karman Avenue, Fourth Floor, Irvine, California
92715.
2.2 Documents to be Delivered. To effect the transfer of the Stock
-------------------------
and the Assets referred to in Sections 1.1 and 1.2 and the delivery of the
consideration described in Section 1.3 hereof, Sellers and Buyer shall, on the
Closing Date, deliver the following:
(a) Individual Sellers and New Mexico Seller shall deliver to
Buyer certificate(s) evidencing the Stock, free and clear of any liens and
encumbrances of any nature whatsoever, duly endorsed in blank for transfer
or accompanied by stock powers duly executed in blank.
(b) Corporate Seller shall assign to Buyer all of its respective
rights and obligations with respect to each Existing Management Agreement
and each Existing Brokerage Agreement, to the extent each such Existing
Management Agreement and each Existing Brokerage Agreement is assignable
without consent of the other party thereto. If any such Existing Management
Agreement and/or any such Existing Brokerage Agreement is not assignable
without consent of the other party thereto and Corporate Seller does not
obtain the consent of the other party to such contract of the proposed
assignment to Buyer, then such contract shall only be
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<PAGE>
assigned to Buyer upon the written request of Buyer delivered to Corporate
Seller. Corporate Seller shall assign to Buyer all of its respective rights
and obligations as lessee or borrower, as applicable, under the personal
property leases, personal property financing arrangements and real property
leases described on Exhibit "C" attached hereto. Corporate Seller shall
-----------
transfer to Buyer all of the other assets of Corporate Seller listed on
Exhibit "D" attached hereto. Corporate Seller shall assign to Buyer all
-----------
rights to the use of the name "CBS Investment Realty" and derivatives
thereof including, without limitation, all trademarks and servicemarks in
connection therewith. Corporate Seller shall deliver to Buyer at the
Closing such assignment documentation and conveyancing instruments as shall
be reasonably requested by Buyer, in form and substance and in a manner
reasonably satisfactory to Buyer and Corporate Seller, to vest in Buyer
title in and to the Assets assigned to Buyer in accordance with the
provisions of this Agreement.
(c) Buyer and Sellers shall each deliver all documents required
to be delivered by them, respectively, pursuant to Articles VI and VII,
respectively.
(d) Buyer shall deliver the Down Payment Note to Sellers.
(e) Buyer shall deliver the Installment Notes to Sellers.
(f) Buyer shall cause the Letter of Credit-Down Payment Note to
be issued and delivered to Bradley C. Burgess, as collection agent for
Sellers.
(g) Buyer shall cause the Letters of Credit-Installment Notes to
be issued and delivered to Sellers.
(h) All instruments and documents executed and delivered to
Buyer pursuant hereto shall be in form and substance, and shall be executed
in a manner, reasonably satisfactory to Buyer. All instruments and
documents executed and delivered to Sellers pursuant hereto shall be in
form and substance, and shall be executed in a manner, reasonably
satisfactory to Sellers.
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<PAGE>
2.3 Transfer Taxes. Sellers shall be responsible for any documentary
--------------
transfer taxes and any sales, use or other taxes, duties, fees and governmental
exactions imposed by reason of the transfer of the assets of Corporate Seller
provided hereunder and any deficiency, interest or penalty asserted with respect
thereto.
2.4 Prorations. Except as otherwise set forth below, there shall
----------
not be any proration of expenses or income with respect to any of the Assets
acquired by Buyer. All revenue accrued prior to the Effective Date with respect
to the Assets shall be the property of Corporate Seller and paid by Buyer to
Corporate Seller upon its receipt by Buyer and all revenue accrued from and
after the Effective Date with respect to the Assets shall be the property of
Buyer. All expenses accrued prior to the Effective Date with respect to the
Assets shall be the responsibility of Corporate Seller and all expenses accrued
from and after the Effective Date with respect to the Assets shall be the
responsibility of Buyer.
2.5 Employment.
----------
(a) The employment of all employees presently employed by
Corporate Seller shall be terminated by Corporate Seller as of the Closing
Date and related severance payments and accrued vacation and/or sick pay
payments due as a result of such termination shall be the responsibility of
Corporate Seller. Immediately following the Closing, Buyer shall offer
employment to all of the employees of Corporate Seller who are listed on
Exhibit "J" attached hereto, and Corporate Seller shall assist Buyer, to
-----------
the extent permitted by state and federal law, in hiring such employees.
The salaries offered to such employees shall be market competitive as of
the Closing Date in the reasonable discretion of Buyer after consultation
with Sellers and other employee benefits offered to such employees shall be
consistent with employee benefits provided existing employees of Buyer
similarly situated as to seniority and title as of the Closing Date.
(b) Notwithstanding anything in this Agreement to the contrary,
Sellers and Buyer acknowledge and agree that Buyer is acquiring the Stock
subject to the liabilities or obligations that each Company has or may have
under: (1) the Worker Adjustment and Retraining Notification Act ("WARN"),
29 U.S.C. (S) 2101 et seq.; (2) the Consolidated Omnibus Budget
-- ---
Reconciliation Act ("COBRA"), 29 U.S.C. (S) 1161
-13-
<PAGE>
et seq., (including to each Company's employees currently receiving COBRA
-- ---
benefits and those who may become eligible for COBRA benefits); and (3) any
obligations or liabilities of each Company arising out of such Company's
termination of its employees including, but not limited to, actions,
claims, liabilities, demands, and the like by each such Company's employees
for wrongful termination and/or breach of alleged oral, implied and/or
express employment contracts.
(c) Buyer acknowledges that Sellers are obligated to pay a
portion of the Installment Payments to certain employees employed by
Corporate Seller and the Companies as of the date of this Agreement.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF SELLERS AND THE COMPANIES
- ---------------------------------------
Sellers (exclusive of New Mexico Seller) and the Companies hereby,
jointly and severally, and New Mexico Seller to his actual knowledge, severally,
represent and warrant to Buyer, except as set forth on the Disclosure Schedule
attached hereto as Exhibit "K", the following:
-----------
3.1 Organization and Qualification. CBS-Arizona is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Arizona. CBS-California is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona. CBS-New
Mexico is a corporation duly organized, validly existing and in good standing
under the laws of the State of Arizona. Corporate Seller and each Company has
the requisite power and authority to conduct its business as it is now being
conducted. Copies of the Articles of Incorporation and the Bylaws of each
Company delivered to Buyer are accurate and complete as of the date hereof.
3.2 Capitalization. CBS-Arizona has authorized one million
--------------
(1,000,000) shares of common stock, $1.00 par value, one thousand (1,000) shares
of which are validly issued and outstanding, fully paid and nonassessable. CBS-
New Mexico has authorized One Million (1,000,000) shares of Class A common
stock, $1.00 par value, eighty-eight thousand
-14-
<PAGE>
(88,000) shares of which are validly issued and outstanding, fully paid and
nonassessable, one hundred thousand (100,000) shares of Class B non-voting
stock, $1.00 par value, twelve thousand (12,000) shares of which are validly
issued and outstanding, fully paid and nonassessable, and one million
(1,000,000) shares of Serial Preferred stock, $1.00 par value, none of which is
issued and outstanding. No shares of common stock are held in the treasury of
either of the Companies. All of the shares of common stock of CBS-Arizona are
owned by Individual Sellers. All of the shares of common stock of CBS-New Mexico
are owned by CBS-Arizona, Individual Sellers and New Mexico Seller. There are no
other shares of capital stock or other equity securities of either of the
Companies outstanding, and no other outstanding options, warrants, rights to
subscribe (including any preemptive rights), calls or commitments of any
character whatsoever to which either of the Companies is a party or may be
bound, requiring the issuance or sale of shares of any capital stock or other
equity securities of either of the Companies or securities or rights convertible
into or exchangeable for such shares or other equity securities, and there are
no contracts, commitments, understandings or arrangements by which either of the
Companies is or may become bound to issue additional shares of its capital stock
or other equity securities or options, warrants or rights to purchase or acquire
any additional shares of its capital stock or other equity securities or
securities convertible into or exchangeable for such shares or other equity
securities.
3.3 Ownership of Shares. CBS-Arizona, Individual Sellers and New
-------------------
Mexico Seller (a) are the record and beneficial owners of all of the outstanding
capital stock of each of the Companies, (b) have good and marketable title to
all of the Stock and (c) have the absolute right, power and authority to sell,
transfer and deliver the Stock, in each case free and clear of all encumbrances.
Except for the Stock, CBS-Arizona, Individual Sellers and New Mexico Seller do
not own any, and there are no, additional shares of capital stock of either of
the Companies issued and outstanding. There are no options, warrants, rights,
calls, commitments or other agreements of any character whatsoever relating to
the Stock owned by either Individual Seller or by New Mexico Seller.
3.4 Title to Assets. Corporate Seller has good and marketable title
---------------
to the Assets (exclusive of Assets for which Corporate Seller cannot hold title
such as leased property and except that certain of the Existing Management
Agreements and Existing Brokerage Agreements cannot be assigned without the
prior written consent of the other party thereto) and has possession thereof and
there is no lien or encumbrance against any such Asset except any lien imposed
by law in the ordinary course of business for assessments not yet due and
payable.
-15-
<PAGE>
3.5 Authorization. Each Seller and each of the Companies have the
-------------
requisite power and authority to enter into this Agreement, to perform their
respective obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Companies and Corporate Seller and the consummation by the Companies and
Corporate Seller of the transactions contemplated hereby have been duly approved
by the Board of Directors and the shareholders of each of the Companies and
Corporate Seller. No other corporate proceedings on the part of the Companies or
Corporate Seller are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Companies and each Seller and constitutes a legal, valid and binding obligation
of each Company and each Seller, enforceable against each Company and each
Seller in accordance with its terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws, or by equitable principles, relating to or limiting the rights of
creditors generally and, (b) limitations imposed by law or equitable principles
upon the availability of specific performance, injunctive relief or other
equitable remedies.
3.6 No Conflict or Violation. Neither the execution and delivery of
------------------------
this Agreement by the Companies and Sellers nor the consummation of the
transactions contemplated hereby, nor compliance by the Companies and Sellers
with any of the provisions hereof will (a) violate, conflict with, or result in
a breach of any provisions of, or constitute a material default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any encumbrance upon any of the properties or assets of either of
the Companies or Corporate Seller under, any of the terms, conditions or
provisions of (i) the Articles of Incorporation or Bylaws of any of the
Companies or Corporate Seller or (ii) any note, bond, mortgage, indenture, deed
of trust, security or pledge agreement, partnership agreement, license, lease,
franchise, permit, agreement or other instrument or obligation to which any of
the Companies or Sellers is a party or to which any of the Companies or Sellers
or any of the properties or assets of any of the Companies or Corporate Seller
may be subject, (b) violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to any of the Companies or
Sellers or any of the properties or assets of any of the Companies or Corporate
Seller.
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<PAGE>
3.7 Consents and Approvals. Except for the consent of the other
----------------------
parties to the agreements, leases and contracts contained in the Assets to the
assignment and transfer thereof from Corporate Seller to Buyer, no notice to,
declaration, filing or registration with, or authorization, consent or approval
of, or permit from, any domestic or foreign governmental or regulatory body or
authority, or any other person or entity, is necessary in connection with the
execution and delivery of this Agreement by the Companies and Sellers and the
consummation by the Companies and Sellers of the transactions contemplated by
this Agreement. The foregoing representations and warranties in this Section 3.7
of the Individual Sellers is limited to their respective best knowledge as to
notices, filings, consents, etc. required of third parties or governmental and
regulatory authority in the States of California, Arizona, New Mexico and Texas,
and is limited to their respective actual knowledge as to notices, filings,
consents, etc. required of governmental and regulatory authority outside the
States of California, Arizona, New Mexico and Texas.
3.8 Financial Statements. The balance sheet for each Company and
--------------------
Corporate Seller as of December 31, 1994, and related statement of operations
for the year then ended (the "CBS Financial Statements") attached hereto as
Exhibit "L-1" and the balance sheet for each Company and Corporate Seller as of
- -------------
January 31, 1995, and related statement of operations for the month then ended
(the "January Financial Statements") attached hereto as Exhibit "L-2" have been
-------------
prepared in conformity with generally accepted accounting principles
consistently applied throughout the period covered thereby. The CBS Financial
Statements and the January Financial Statements fairly and accurately present in
all material respects the assets, liabilities and financial position of the
relevant Company and Corporate Seller as of the date thereof and the results of
operations for the periods then ended. There have been no payments to third
parties since the date of the CBS Financial Statements except in the ordinary
course of business and consistent with the past practice of the relevant Company
and Corporate Seller. There have been no distributions or payments to the
shareholders of the Companies or Corporate Seller since the date of the CBS
Financial Statements except for the full repayment of shareholder loans by CBS-
Arizona to Individual Sellers in the aggregate amount of Two Hundred Fifty-Eight
Thousand Six Hundred Seventy Five and 88/100 Dollars ($258,675.88). In addition,
there has been no material adverse change in the financial condition, working
capital, shareholders' equity, assets, liabilities, revenues, income or
condition of any of the Companies and Corporate Seller from and after the period
covered by the CBS Financial Statements.
-17-
<PAGE>
3.9 Books and Records. The books and records for each of the
-----------------
Companies and for Corporate Seller to which access was given Buyer prior to the
date hereof are the actual books and records of the relevant Company and
Corporate Seller and accurately and fairly reflect in all material respects the
activities, transactions, revenues and expenses of the relevant Company and
Corporate Seller. The preliminary budgets for each of the Companies and for
Corporate Seller for the calendar year ending December 31, 1995, attached hereto
as Exhibit "M" fairly reflect the projected revenues and expenses of each
-----------
Company and Corporate Seller for such period, based upon the assumptions used in
their preparation, which assumptions Sellers represent were prepared in good
faith at the time the projections were prepared. Sellers do not represent or
warrant that actual results for the calendar year ending December 31, 1995, will
equal or even approximate such projections.
3.10 Litigation. There are no pending actions, suits,
----------
investigations or proceedings by, against, involving or relating to any of the
Companies or Corporate Seller, at law or in equity, or before any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality in which any material claim has been made or asserted
against any of the Companies or Corporate Seller. The foregoing representation
and warranty of the Individual Sellers as to investigations is limited to their
respective actual knowledge. There is outstanding no garnishment, attachment or
writ of execution issued with reference to any of the Companies or Corporate
Seller or any of the assets of any of the Companies or Corporate Seller. None of
the Companies or Corporate Seller are a party or subject to any judgment, decree
or order enjoining it in respect of any business practice or the conduct of
business in any area.
3.11 Compliance with Law. None of the Companies or Corporate
-------------------
Seller have violated or failed to comply in any material respect with any
statute, law, ordinance, regulation, rule, decree or order of any federal, state
or local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable to its business or
operations. The conduct of the business of each Company and Corporate Seller is
in material conformity with all building code, health and environmental
requirements except where the aggregate of all such non-conformities would not
have a material adverse effect on any such Company or Corporate Seller. The
conduct of the business of each Company and Corporate Seller is in material
conformity with all energy, public utility, zoning and OSHA requirements and all
other foreign, federal, state and local governmental and regulatory requirements
except where the aggregate of all such non-conformities would not have a
material adverse effect on any such Company or Corporate Seller. The foregoing
-18-
<PAGE>
representations and warranties in this Section 3.11 of the Individual Sellers is
limited to their respective best knowledge. None of the Companies and Sellers
have received any notice to the effect that any Company or Corporate Seller is
not in compliance with, and Sellers and the Companies have no reason to
anticipate that any presently existing circumstances are likely to result in the
material violation of, any such statute, law, ordinance, regulation, rule,
judgment, decree or order except where the aggregate of all such potential
violations would not have a material adverse effect on any Company or Corporate
Seller.
3.12 Permits. Each Company and Corporate Seller has all permits
-------
from governmental agencies required to conduct its present business as now being
conducted, except such permits the failure of which to obtain would not have a
material adverse effect on any such Company or Corporate Seller.
3.13 Liabilities. Each Company and Corporate Seller has no
-----------
liabilities, obligations or commitments of any nature (whether accrued,
absolute, contingent or otherwise and whether matured or unmatured), due or to
become due, except (a) liabilities reflected or provided for in the January
Financial Statements for each such Company and Corporate Seller and (b)
liabilities incurred since the date of such January Financial Statements in the
ordinary course of business and consistent with the past practice of the
relevant Company or Corporate Seller, as applicable.
3.14 Labor Matters. Each Company and Corporate Seller has not
-------------
entered into any written employment agreement with any employees. Except as
provided by law, the employment of all persons presently employed or retained by
each Company and Corporate Seller is terminable at will. Each Company and
Corporate Seller is not a party to any collective bargaining agreement, nor is
any Company or Corporate Seller subject to any organizing efforts of any labor
union, organization, local or subdivision. There are no labor grievances, or
investigations, claims or suits concerning employment pending or threatened
against any Company or Corporate Seller. The foregoing representation and
warranty of the Individual Sellers as to threatened grievances, investigations,
claims or suits is limited to their respective best knowledge. Each Company and
Corporate Seller has not entered into any agreement, oral or written, with any
present or former employee that will result in a commitment or obligation
(absolute or contingent) of such Company or Corporate Seller and/or Buyer to
make any payment to any present or former employee of such Company or Corporate
Seller, as applicable, following his or her termination of employment. Each
Company and Corporate Seller does not maintain, participate in or contribute to,
has never maintained, participated in or contributed to, or has not announced
plans or legally binding
-19-
<PAGE>
commitments to maintain, participate in or contribute to, any qualified or non-
qualified pension or profit-sharing plan and/or other form of deferred
compensation and/or post-retirement insurance, compensation or benefits which
covers or has covered any employees or former employees of such Company or
Corporate Seller exclusive of Benefit Arrangements (as defined below).
3.15 Benefit Arrangements. Each written plan, arrangement,
--------------------
program, agreement or commitment providing for insurance coverage (including any
self-insured arrangement), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, and life, health,
disability or accident benefits which covers or has covered any employees of
either Company or Corporate Seller (collectively, "Benefit Arrangements"), has
been maintained in material compliance with its terms and with the requirements
described by any and all statutes, orders, rules and regulations which are
applicable to such Benefit Arrangement. Set forth on Exhibit "N" is a complete
-----------
and accurate description of each Benefit Arrangement of each Company and
Corporate Seller. True, complete and correct copies of each Benefit Arrangement
including written interpretations thereof and written descriptions thereof which
have been distributed to the employees or former employees of each Company and
Corporate Seller and a complete description of any such Benefit Arrangement
which is not in writing, have been delivered to Buyer.
3.16 Brokers and Finders. None of the Companies, Sellers or the
-------------------
officers, directors, employees or agents of the Companies or Sellers have
employed any broker, finder or similar agent or incurred any liability for any
brokerage fees, commissions, finder's fees or similar payments in connection
with the transactions contemplated by this Agreement.
3.17 No Other Agreements to Sell. No Company and no Seller has any
---------------------------
commitment or legal obligation, absolute or contingent, to any person or firm
other than Buyer to (a) sell, assign or transfer any material portion of the
assets of either Company or Corporate Seller, any assets of either Company or
Corporate Seller not in the ordinary course of business or any of the capital
stock of either Company or Corporate Seller, (b) effect any merger,
consolidation or other reorganization of either Company or Corporate Seller or
(c) enter into an agreement to do any of the foregoing.
3.18 Material Misstatements or Omissions. No representation or
-----------------------------------
warranty by either Company or any Seller in this Agreement, or in any document,
exhibit, statement,
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<PAGE>
certificate or schedule heretofore or hereinafter furnished or made available to
the Buyer pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement, including, without limitation, the Disclosure
Schedule, contains any untrue statement of a material fact, or omits to state
any material fact necessary to make the statements or facts contained therein
not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
- ---------------------------------------
Buyer hereby represents and warrants to Sellers as follows:
4.1 Organization of Buyer. Buyer is duly organized, validly
---------------------
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to conduct its business as it is now being
conducted.
4.2 Authorization. Buyer has the requisite power and authority to
-------------
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby have been duly approved by the Board of Directors of Buyer.
No other corporate proceedings on the part of Buyer are necessary to authorize
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable against it in accordance with its terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium and other similar laws, or by equitable principles,
relating to or limiting the rights of creditors generally and (b) limitations
imposed by law or equitable principles upon the availability of specific
performance, injunctive relief or other equitable remedies.
4.3 Brokerage/Finders Fees. Neither Buyer nor any of its officers,
----------------------
directors, employees or agents have employed any broker, finder or similar agent
or incurred any liability for any brokerage fees, commissions, finder's fees or
similar payments in connection with the transactions contemplated by this
Agreement.
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<PAGE>
4.4 No Conflict or Violation. Neither the execution and delivery of
------------------------
this Agreement by Buyer, nor the consummation of the transactions contemplated
hereby, nor compliance by Buyer with any of the provisions hereby will result in
(a) a violation of or a conflict with any provision of the Articles of
Incorporation or Bylaws of Buyer, (b) a breach of, or a default under, any term
or provision of any contract, agreement, indebtedness, lease, commitment,
license, franchise, permit, authorization or concession to which Buyer is a
party which breach or default would have a material adverse effect on the
business or financial condition of Buyer or its ability to consummate the
transactions contemplated hereby or (c) a violation by Buyer of any statute,
rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or
award, which violation would have a material adverse effect on the business or
financial condition of Buyer or its ability to consummate the transactions
contemplated hereby.
4.5 Financial Statements. The balance sheet for Buyer as of
--------------------
September 30, 1994, and related statement of operations, shareholders equity and
cash flows for the year then ended (the "Buyer Financial Statements") attached
hereto as Exhibit "O" have been prepared in conformity with generally accepted
-----------
accounting principles consistently applied throughout the period covered
thereby. The Buyer Financial Statements fairly and accurately present in all
material respects the assets, liabilities and financial position of Buyer as of
the date thereof and the results of operations and changes in shareholders'
equity and cash flows for the periods then ended. There has been no material
adverse change in the financial condition, working capital, shareholders'
equity, assets, liabilities, revenues, income or condition of Buyer from and
after the period covered by the Financial Statements.
ARTICLE V
---------
ACTIONS BY SELLERS, THE COMPANIES
AND BUYER PRIOR TO THE CLOSING
- ------------------------------
During the period from the date hereof through the Closing Date:
5.1 Maintenance of Business. Except as set forth in the Disclosure
-----------------------
Schedule attached hereto as Exhibit "K", the business of Corporate Seller and
the Companies shall be conducted only in, and the Companies and Corporate Seller
shall not take any action
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<PAGE>
except in, the ordinary course of business and consistent with past practice,
and the Companies and Corporate Seller shall use their respective best efforts
to maintain and preserve their respective business, assets, prospects,
employees, suppliers, customers and other advantageous business relationships.
5.2 Investigation by Buyer. Sellers shall allow Buyer during
----------------------
regular business hours through Buyer's Representatives, to make such
investigation, inspection and duplication, at Buyer's expense, of the business,
properties, books and records of each Company and Corporate Seller, and to
conduct such examination of the condition of each Company and Corporate Seller,
as Buyer deems necessary or advisable to familiarize itself with such business,
properties, books, records, condition and other matters, and to verify the
representations and warranties of Sellers and the Companies hereunder.
5.3 Notification of Certain Matters. Each Seller and each Company
-------------------------------
shall give prompt notice to Buyer, and Buyer shall give prompt notice to
Sellers, of (a) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
any time from the date hereof to the Closing Date and (b) any material failure
of any Seller, either Company or Buyer, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, and each party shall use all reasonable efforts to remedy same.
ARTICLE VI
----------
CONDITIONS TO SELLERS' OBLIGATIONS
- ----------------------------------
The obligation of Sellers to transfer the Stock and Assets to Buyer
and to consummate the other transactions contemplated hereby on the Closing Date
is subject, in the discretion of Sellers, to the satisfaction, on or prior to
the Closing Date, of each of the following conditions:
6.1 Representations, Warranties and Covenants. All representations
-----------------------------------------
and warranties of Buyer contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date as if such representations
and warranties were made at and as of the Closing Date, and Buyer shall have
performed in all material respects all
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<PAGE>
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date. There shall be delivered to Sellers at the Closing a
certificate executed by Buyer, in form and substance and executed in a manner
reasonably satisfactory to Sellers, to the foregoing effect.
6.2 No Governmental Proceeding or Litigation. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted which questions the validity or legality
of the transactions contemplated hereby and which could reasonably be expected
materially to damage Sellers and/or the Companies if the transactions
contemplated hereunder are consummated.
6.3 Waiver by Sellers. Sellers may unilaterally waive any of
-----------------
Sellers' conditions described in this Agreement. Except as otherwise provided in
this Agreement, any such waiver shall be effective only if the same is (a) in
writing, (b) signed by all of the Sellers, and (c) delivered to Buyer on or
before the date such condition is to be satisfied.
ARTICLE VII
-----------
CONDITIONS TO BUYER'S OBLIGATIONS
- ---------------------------------
The obligation of Buyer to purchase the Stock and the Assets and to
consummate the other transactions contemplated hereby is subject, in the
discretion of Buyer, to the satisfaction, on or prior to the Closing Date, of
each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations
-----------------------------------------
and warranties of Sellers and the Companies contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date, and
Sellers and the Companies shall have performed in all material respects all
agreements and covenants required hereby to be performed by them prior to or at
the Closing Date. There shall be delivered to Buyer at the Closing a certificate
executed by Sellers and the Companies, in form and substance and executed in a
manner reasonably satisfactory to Buyer, to the foregoing effect.
7.2 No Governmental Proceeding or Litigation. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any governmental authority or
other person shall
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have been instituted which questions the validity or legality of the
transactions contemplated hereby and which could reasonably be expected
materially to damage Buyer if the transactions contemplated hereunder are
consummated.
7.3 Waiver by Buyer. Buyer may unilaterally waive any of Buyer's
---------------
conditions described in this Agreement. Except as otherwise provided in this
Agreement, any such waiver shall be effective only if the same is (a) in
writing, (b) signed by Buyer, and (c) delivered to Sellers on or before the date
such condition is to be satisfied.
ARTICLE VIII
------------
INDEMNIFICATION
- ---------------
8.1 Survival of Representations, Etc. All statements contained in
--------------------------------
the Disclosure Schedule or in the certificates delivered at Closing pursuant to
Sections 6.1 and 7.1 shall be deemed to be representations and warranties by the
parties hereunder. The representations and warranties of each of the Companies,
Sellers and Buyer contained herein shall survive the Closing Date for a period
of four (4) years regardless of any investigation made by any of the parties
hereto.
8.2 Indemnification.
---------------
(a) By Sellers and the Companies.
(1) Indemnification. Each Company and each Seller
---------------
(exclusive Seller) hereby agrees, jointly and severally, to indemnify,
defend (subject to the provisions of Section 8.2(d)) and hold harmless
Buyer and its Representatives from and against any and all costs,
losses, liabilities, damages, lawsuits, deficiencies, claims and
expenses, including without limitation, interest, penalties,
reasonable attorneys' fees and all amounts paid in investigation,
defense or settlement of any of the foregoing (collectively,
"Damages") in excess of Ten Thousand Dollars ($10,000) in the
aggregate, incurred in connection with, arising out of, resulting from
or incident to (i) any and all obligations of the Companies under that
certain tenant lease for office space located at 12801 North Central
Expressway, Dallas, Texas
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provided the furniture, fixtures and equipment located at such office
space were included on the schedule of excluded assets delivered by
Buyer to Sellers pursuant to Section 1.7, (ii) any breach of any
covenant or warranty, or the inaccuracy of any representation, made by
any Seller (exclusive of any covenants or warranties by New Mexico
Seller in Section 1.6) and/or either Company in or pursuant to this
Agreement, and/or (iii) any claim by any third party brought against
Buyer prior to the fourth (4th) anniversary of the Closing Date
arising from the actions or inactions of any Seller or the operation
of the business of either Company (exclusive of CBS-Arizona's business
operations in Texas) or Corporate Seller prior to the Closing. New
Mexico Seller hereby agrees, severally, to indemnify, defend (subject
to the provisions of Section 8.2(d)) and hold harmless Buyer and its
Representatives from and against any and all Damages in excess of Ten
Thousand Dollars ($10,000) in the aggregate incurred in connection
with, arising out of, resulting from or incident to any breach of any
covenant or warranty, or the inaccuracy of any representation, made by
New Mexico Seller in or pursuant to this Agreement.
(2) Individual Seller and New Mexico Seller Limitations.
---------------------------------------------------
The liability of New Mexico Seller and each Individual Seller incurred
in connection with the indemnification obligations of such Seller
(including, without limitation, any liability as a shareholder of a
Company or Corporate Seller) set forth above in this Section 8.2(a)
shall not in any event exceed an amount equal to the amounts received
by Sellers under this Agreement and the Down Payment Note multiplied
by such Seller's Limitation Percentage plus amounts received by such
Seller from the Installment Note payable to such Seller.
(3) Right of Offset. Buyer shall have the right to offset
---------------
any amounts due any Seller under this Agreement, the Installment Notes
and/or any other agreement to which any Seller and Buyer are parties
(exclusive of the Down Payment Note) in satisfaction of the
indemnification obligations set forth above in this Section 8.2(a)
following ten (10) days prior written notice to such Seller of Buyer's
intended exercise of such offset rights, except that with respect to
the indemnification obligations of New Mexico Seller, Buyer shall only
have a right to offset amounts due New Mexico Seller under this
Agreement (exclusive of the Down Payment Note) and/or the Installment
Note payable to New Mexico Seller. Notwithstanding the
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foregoing, if there is a final, non-appealable determination by a
court of competent jurisdiction that Buyer improperly offset any
amounts that were otherwise payable to any Seller, then, without
limitation to any rights or remedies available to such Seller, Buyer
shall be obligated to pay to such Seller such improperly withheld
amounts, together with interest thereon computed at the Wells Fargo
Bank reference (prime) rate of interest (adjusted concurrently with
any adjustments to such interest rate) accrued from and after the date
any such amounts were improperly withheld.
(b) By Buyer. Buyer shall indemnify, defend (subject to the
--------
provisions of Section 8.2(d)) and hold harmless each Seller and each
Seller's Representatives from and against any and all Damages in excess of
Ten Thousand Dollars ($10,000) in the aggregate incurred in connection
with, arising out of, resulting from or incident to (i) any and all
liability of any such Seller under any guarantee of any liability of a
Company, which guarantee is listed on Exhibit "H" attached hereto, (ii) any
breach of any covenant or warranty, or the inaccuracy of any
representation, made by Buyer in or pursuant to this Agreement, and/or
(iii) any claim by any third party brought against any Seller arising from
the actions or inactions of Buyer or the operation of Buyer's business on
or after the Closing Date.
(c) Damages. The term "Damages" as used in this Section 8.2 is
-------
not limited to matters asserted by third parties against the indemnified
party but includes Damages incurred or sustained by the indemnified party
in the absence of third party claims. Payment by the indemnified party of
amounts for which the indemnified party is entitled to be indemnified
hereunder shall not be a condition precedent to the right of the
indemnified party to enforce its indemnity rights hereunder.
(d) Notification Requirement. If any party ("Indemnitee")
------------------------
hereto desires to make a claim against any other party ("Indemnitor")
pursuant to the provisions of this Article VIII, then Indemnitee shall
immediately notify Indemnitor of the claim, demand, action or right of
action which is the basis of such claim and the provision or provisions of
this Agreement alleged to have been breached or to be inaccurate, and shall
give the Indemnitor a reasonable opportunity to participate in the defense
thereof. Indemnitee shall provide Indemnitor with all information available
to it regarding such claim, demand, action or right of action (whether or
not it involves a third party). In addition, with respect to any claim
brought by a third party against an Indemnitee, each such Indemnitor shall
have the right to approve the counsel selected
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by Indemnitee, which approval shall not be unreasonably withheld or
delayed. All settlements of third party claims proposed by an Indemnitee
shall be subject to the approval of Indemnitor, which approval shall not be
unreasonably withheld or delayed.
(e) Exclusive Remedy. With respect to matters covered by
----------------
Sections 8.2(a) (exclusive of any rights or remedies available to a Seller
for any improper exercise by Buyer of its offset rights set forth in
Section 8.2(a)(3)) and 8.2(b) hereof, the exclusive remedy available to the
parties hereto shall be indemnification under this Article VIII subject to
the limitations and requirements contained in this Article VIII.
ARTICLE IX
MISCELLANEOUS
- -------------
9.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated hereby abandoned by the mutual written consent of each
of the parties hereto or by Sellers or Buyer if the conditions to such party's
obligations set forth in Articles VI and VII, respectively, have not been
satisfied on or before March 31, 1995 (unless waived by the party entitled to
the benefit thereof), without liability of any party hereto; provided, however,
that no party will be released from liability hereunder if this Agreement is
terminated and the transactions abandoned by reason of (a) willful failure of
such party to have performed its obligations hereunder, or (b) any knowing
misrepresentation made by such party of any matter set forth herein. This
Agreement shall terminate automatically if the Closing Date has not occurred on
or prior to May 31, 1995. In the event that a condition precedent to its
obligations is not satisfied, nothing contained herein shall be deemed to
require any party to terminate this Agreement, rather than to waive such
condition precedent and proceed with the transactions contemplated hereby.
9.2 Assignment. Neither this Agreement, nor any of the rights or
----------
obligations hereunder, may be assigned by any Seller without the prior written
consent of Buyer, nor by Buyer without the prior written consent of Sellers.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their, respective successors and assigns, and
no other person shall have any right, benefit or obligation hereunder.
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9.3 Notices. Unless otherwise provided herein, any notice, request,
-------
instruction or other document to be given hereunder by any party to the others
shall be in writing and delivered in person or by commercial courier, telegraph,
telex or by facsimile transmission or mailed by certified mail, postage prepaid,
return receipt requested, as follows:
If to Individual Sellers or Bradley C. Burgess
Corporate Seller: 4707 East Roadrunner Place
Paradise Valley, Arizona 85253
Telephone No.: (602) 922-3522
James W. Schlesing
5801 East Exeter Boulevard
Phoenix, Arizona 85018
Telephone No.: (602) 994-3112
With a copy to: O'Connor, Cavanagh, Anderson,
Westover, Killingsworth & Beshears
One East Camelback Road
Suite 1100
Phoenix, Arizona 85012-1656
Attention: Karen L. Liepmann, Esq.
Telephone No.: (602) 263-2400
Facsimile No.: (602) 263-2900
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<PAGE>
If to New Mexico Seller: J. Robert White, Jr.
1605 Kit Carson Avenue SW
Albuquerque, New Mexico 87104
Telephone No.: (505) 766-9817
With a copy to: O'Connor, Cavanagh, Anderson,
Westover, Killingsworth & Beshears
One East Camelback Road
Suite 1100
Phoenix, Arizona 85012-1656
Attention: Karen L. Liepmann, Esq.
Telephone No.: (602) 263-2400
Facsimile No.: (602) 263-2900
If to Buyer: Koll Management Services, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: President
Telephone No.: (714) 833-3030
Facsimile No.: (714) 833-8635
With a copy to: Allen, Matkins, Leck, Gamble &
Mallory
18400 Von Karman Avenue
4th Floor
Irvine, California 92715
Attn: Thomas C. Foster, Esq.
Telephone No.: (714) 553-1313
Facsimile No.: (714) 553-8354
Any such notice or other communication shall be deemed received and effective
upon the earlier of (a) if personally delivered, the date of delivery to the
address of the person to receive such notice; (b) if delivered by commercial
carrier, one (1) day following the receipt of such communication by such carrier
from the sender, as shown on the sender's delivery invoice from such carrier;
(c) if mailed, forty-eight (48) hours after the date of posting by the United
States Post Office as shown by the sender's registry or certification receipt,
as the case may be; (d) if given by telegraph or cable, when delivered to the
telegraph company with charges prepaid; or (e) if given by telex or telecopy,
when sent. Any reference herein to the
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date of receipt, delivery, or giving, as the case may be, of any notice or other
communication shall refer to the date such communication becomes effective under
the terms of this Section 9.3. Any notice or other communication sent by cable,
telex, or telecopy must be confirmed within forty-eight (48) hours by letter
mailed or delivered in accordance with the foregoing. Notice of change of
address shall be given by written notice in the manner detailed in this Section
9.3. Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given shall be deemed to constitute
receipt of the notice or other communication sent.
9.4 Choice of Law. This Agreement shall be construed, interpreted
-------------
and the rights of the parties determined in accordance with the laws of the
State of California.
9.5 Entire Agreement; Amendments and Waivers. This Agreement,
----------------------------------------
together with all Exhibits and schedules hereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, amendment, modification
or waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
9.6 Counterparts. This Agreement may be executed in one (1) or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one (1) and the same instrument.
9.7 Invalidity. In the event that any one (1) or more of the
----------
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
9.8 Headings. The headings of the Articles and Sections herein are
--------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
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9.9 Further Assurances. On and after the Closing Date, Sellers, the
------------------
Companies, and Buyer shall take all appropriate action and execute all
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof, including
without limitation, putting Buyer in possession and operating control of the
business of the Companies and in possession of the Assets.
9.10 Expenses. Sellers and Buyer shall each be liable for their own
--------
costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement. Sellers shall be liable for the
costs and expenses of the Companies incurred in connection with the negotiation,
preparation, execution and consummation of this Agreement.
9.11 Attorneys Fees. The parties agree that if it be determined by
--------------
any court that any party has failed to perform its obligations herein, then the
prevailing party or parties shall be entitled to recover reasonable attorney
fees, court costs and other reasonable expenses incurred in the enforcement of
the rights and obligations set forth in this Agreement or any claim for damages
based on any breach of this Agreement.
9.12 Publicity. Neither the Companies, Sellers, nor Buyer shall
---------
issue any press release or make any public statement regarding the transactions
contemplated hereby (including, but not limited to, any press release or public
statement announcing the execution of this Agreement, the termination of this
Agreement or the consummation of the transactions contemplated hereby), without
the prior approval of the other parties hereto. The parties hereto shall issue a
mutually acceptable press release as soon as practicable after the Closing Date
announcing the consummation of the transactions contemplated hereby.
9.13 Confidential Information. The parties acknowledge that the
------------------------
transaction described herein is of a confidential nature and shall not be
disclosed except to consultants, advisors, affiliates and Representatives, or as
required by law, until such time as the parties make a public announcement
regarding the transaction as provided in Section 9.12. In connection with the
negotiation of this Agreement and the preparation for the consummation of the
transactions contemplated hereby, each party acknowledges that it will have
access to confidential information relating to the other parties. Each party
shall treat such information as confidential, preserve the confidentiality
thereof and not duplicate or use such information,
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except to advisors, consultants, affiliates and Representatives in connection
with the transactions contemplated hereby. Employees of the Companies and
employees of Corporate Seller shall be notified of the fact of the subject
transaction in a joint communication from Sellers and Buyer mutually approved by
Sellers and Buyer. In the event of the termination of this Agreement for any
reason whatsoever, each party shall return to the other all documents, work
papers and other material (including all copies thereof) obtained in connection
with the transactions contemplated hereby and shall use all reasonable efforts,
including instructing its employees and others who have had access to such
information, to keep confidential and not to use any such information, unless
such information is now, or is hereafter disclosed, through no act or omission
of such party, in any manner making it available to the general public.
9.14 Post-Closing Covenants.
----------------------
(a) For a period of one hundred and eighty (180) days following
the Closing Date, each Seller hereby agrees to exercise such Seller's best
efforts, at such Seller's cost and expense provided such cost and expense
is reasonable, to obtain (a) consent from the applicable Existing Clients
of Corporate Seller to the assignment of the Existing Management Agreements
and the Existing Brokerage Agreements from Corporate Seller to Buyer and
(b) acknowledgment of the transfer of the Stock and agreement to continue
the engagement of the Companies with respect to the CBS Agreements listed
on Exhibit "B-3" attached hereto from the applicable Existing Clients of
the Companies, as soon as is possible following the Closing Date.
(b) Buyer hereby agrees to exercise Buyer's reasonable, diligent
and good faith efforts to obtain written releases of Individual Seller from
the guarantees of the liabilities of the Companies set forth on Exhibit "H"
attached hereto, which efforts shall include the pledging of assets of the
Companies as security for such liabilities but which shall not include
Buyer's incurring any recourse liability with respect to such liabilities.
(c) Within thirty (30) days following the Closing Date, Buyer
shall cause Companies to pay to each Individual Seller, as compensation for
past services, an amount equal to fifty percent (50%) of the amount that
the net earnings of Companies and Corporate Seller for the calendar quarter
ending March 31, 1995 (calculated consistently with the CBS Financial
Statements) exceeds One Hundred Fifty Thousand Dollars ($150,000).
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(d) For a period of thirty-six (36) months following the Closing
Date, Buyer shall include Sellers in its errors and omissions/professional
liability insurance coverage with maximum aggregate coverage of One Million
Dollars ($1,000,000) for prior acts over the preceding thirty-six (36)
month period at Sellers' expense.
9.15 Access to Records; Cooperation. Each of the parties hereto
------------------------------
shall make their respective books and records (including work papers, corporate
records, employee records and tax records in their possession or in the
possession of their respective accountants but only to the extent such books and
records relate to the subject matter of this Agreement) available for reasonable
business purposes at all reasonable times during normal business hours for the
five (5) year period following the Closing Date. As used in this paragraph, the
right of inspection includes the right to make extracts or copies. The
Representatives of a party inspecting the records of the other party shall be
reasonably satisfactory to the other party. Without limitation, a reasonable
business purpose shall be the review of records in order to investigate, satisfy
or mitigate any potentially indemnifiable claims, acts or omissions. In addition
to the foregoing, each party hereto agrees that it shall cooperate with the
others to the extent reasonably necessary or appropriate to assist the others in
investigating, satisfying or mitigating any potentially indemnifiable acts,
actions or omissions.
9.16 Advisory Board. From and after the Closing Date until the
--------------
first to occur of satisfaction in full of the Installment Payments (including
satisfaction pursuant to Section 1.4(g)) or the expiration of the last
Calculation Year, the oversight for management of the CBS Division as such
management relates to Net Operating Income shall be rendered by an advisory
board (the "Advisory Board") composed of four (4) members, with Individual
Sellers being entitled to select two (2) members and Buyer being entitled to
select two (2) members. Individual Sellers hereby designate Bradley C. Burgess
and James W. Schlesing as Individual Sellers' initial members of the Advisory
Board, and Buyer hereby designates D. Glen Raiger and Gary Nielsen as Buyer's
initial members of the Advisory Board. Individual Sellers unanimously, on the
one hand, and Buyer, on the other hand, from time to time may change one or more
of such party's designated members of the Advisory Board without the consent of
any other party by giving written notice thereof to all parties. Although there
shall be no regularly scheduled meetings of the Advisory Board, meetings of the
Advisory Board may be called by any member thereof by giving at least fourteen
(14) days' prior written notice to the other members of the Advisory Board. The
date, time and place of any such
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meeting shall be established by the member calling said meeting. Attendance at
meetings of the Advisory Board may be satisfied telephonically.
Within thirty (30) days following the execution of this Agreement,
Buyer shall prepare for the review and approval of the Advisory Board, an
operating budget (the "Operating Budget") for the CBS Division for the first
Calculation Year. On or before January 31 of 1996, 1997 and 1998, Buyer shall
prepare, or cause to be prepared, for the review and approval of the Advisory
Board a proposed Operating Budget for the next ensuing Calculation Year. Each
Operating Budget shall contain a detailed description of all projected
expenditures for operating expenses and all projected revenues. Within sixty
(60) days after Closing Date and on or before March 2, 1996, 1997 and 1998, the
applicable proposed Operating Budget must be approved by a majority of all four
(4) members of the Advisory Board.. Buyer shall have the authority to cause the
CBS Division to incur actual expenditures for any item set forth in, and with
respect to the period covered by, an approved Operating Budget. In addition,
Buyer shall have the authority to cause the CBS Division without the further
consent of the Advisory Board to incur expenditures in excess of the various
line item amounts set forth for such expenditures in the approved Operating
Budget, provided for purposes of calculating Net Operating Income actual
expenditures incurred for such line item in excess of one hundred five percent
(105%) of the total estimated expenditures for such line item set forth in, and
with respect to the period covered by, such approved Operating Budget shall not
be considered a Operating Expense for purposes of calculating Net Operating
Income. The Operating Budget then in effect may be reviewed, updated and
submitted by Buyer to the Advisory Board, for review and approval, from time to
time as reasonably deemed necessary by Buyer. Companies and/or Buyer shall not
be entitled to terminate the employment of Steve Corney, John Wyss, Steve
Wilmore or New Mexico Seller with Companies and/or Buyer without the consent of
both of Sellers' members of the Advisory Board.
9.17 Miscellaneous. Each of the Exhibits attached hereto is
-------------
incorporated herein by reference and expressly made a part of this Agreement for
all purposes. References to any Exhibit made in this Agreement shall be deemed
to include this reference and incorporation. Where the context so requires, the
use of the neuter gender shall include the masculine and feminine genders, the
masculine gender shall include the feminine and neuter genders, and the singular
number shall include the plural and vice versa. Time is of the essence of this
Agreement. There are no third party beneficiaries to this Agreement. Each party
hereto acknowledges that (i) each party hereto is of equal bargaining strength;
(ii) each such party has actively participated in the drafting, preparation, and
negotiation of this
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Agreement; and (iii) any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not apply in the interpretation
of this Agreement, any portion hereof, any amendments hereto, or any Exhibits
attached hereto.
ARTICLE X
DEFINITIONS
- -----------
10.1 The term Advisory Board is defined in Section 9.16.
10.2 The term "Affiliate" means any person or entity which, directly
or indirectly, through one (1) or more intermediaries, controls or is controlled
by or is under common control with another person or entity. The term "control"
as used herein (including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
vote fifty percent (50%) or more of the outstanding voting securities of such
person or entity.
10.3 The term "Agreement" means this Stock and Asset Purchase
Agreement.
10.4 The term "Assets" is defined in Section 1.2.
10.5 The term "Benefit Arrangements" is defined in Section 3.15.
10.6 The term "Buyer" means Koll Management Services, Inc., a
Delaware corporation.
10.7 The term "Buyer Financial Statements" is defined in Section 4.5.
10.8 The term "Calculation Year" means the twelve (12) month period
commencing on the first day of the month next following the Closing Date and
each of the next three (3) twelve (12) month periods thereafter.
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10.9 The term "CBS Agreements" means the Existing Management
Agreements, the Existing Brokerage Agreements and those certain property and
facilities management agreements and those certain commercial real estate
brokerage agreements by and between each Company and third party clients set
forth on Exhibit "B-3".
10.10 The term "CBS-Arizona" means CBS Investment Realty, Inc., an
Arizona corporation.
10.11 The term "CBS-California" means CBS Investment Realty of
California, Inc., an Arizona corporation.
10.12 The term "CBS-New Mexico" means CBS Investment Realty of New
Mexico, Inc., an Arizona corporation.
10.13 The term "CBS Division" means a separate division of Buyer for
purposes of calculating Net Operating Income consisting of the business
operations of the Companies exclusive of the business operations located in all
parts of Texas except El Paso, Texas, the business operations acquired by Buyer
from Corporate Seller and any other business operation of Buyer in the States of
Arizona and New Mexico.
10.14 The term "CBS Financial Statements" is defined in Section 3.8.
10.15 The term "Closing" is defined in Section 2.1.
10.16 The term "Closing Date" is defined in Section 2.1.
10.17 The term "Companies" means CBS Investment Realty of New Mexico,
Inc., an Arizona corporation, and CBS Investment Realty, Inc., an Arizona
corporation, collectively; the term "Company" means either one of the Companies.
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10.18 The term "Corporate Seller" means CBS Investment Realty of
California, Inc., an Arizona corporation.
10.19 The term "Damages" is defined in Section 8.2(c).
10.20 The term "Down Payment Note" is defined in Section 1.3.
10.21 The term "Effective Date" means January 1, 1995.
10.22 The terms "Existing Client" and "Existing Clients" are defined
in Recital A.
10.23 The terms "Existing Brokerage Agreement" and "Existing
Brokerage Agreements" are defined in Recital A.
10.24 The terms "Existing Management Agreement" and "Existing
Management Agreements" are defined in Recital A.
10.25 The term "Individual Sellers" means Bradley C. Burgess and
James W. Schlesing, collectively; the term "Individual Seller" means either one
of the Individual Sellers.
10.26 The term "Installment Notes" is defined in Section 1.3.
10.27 The terms "Installment Payment" and "Installment Payments" are
defined in Section 1.3.
10.28 The term "January Financial Statements" is defined in Section
3.8.
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10.29 The term "Letter of Credit-Down Payment Note" is defined in
Section 1.3.
10.30 The term "Letters of Credit-Installment Notes" is defined in
Section 1.3.
10.31 The term "Limitation Percentage" means forty-nine and 656/1000
percent (49.656%) with respect to Bradley C. Burgess, forty-nine and 656/1000
percent (49.656%) with respect to James W. Schlesing and zero and 688/1000
percent (.688%) with respect to J. Robert White, Jr.
10.32 The term "Net Operating Income" is defined in Section 1.4(a).
10.33 The term "Net Operating Loss" is defined in Section 1.4(b).
10.34 The term "New Mexico Seller" means J. Robert White, Jr.
10.35 The term "Operating Budget" is defined in Section 9.16.
10.36 The term "Operating Expenses" is defined in Section 1.4(d).
10.37 The term "Purchase Price" is defined in Section 1.3.
10.38 The term "Representative" means any officer, director,
principal, attorney, accountant, agent, employee or other representative.
10.39 The term "Revenues" is defined in Section 1.4(c).
10.40 The term "Sellers" means the Corporate Seller, the Individual
Sellers, and New Mexico Seller, collectively; the term "Seller" means any one of
the Sellers.
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10.41 The term "Stock" is defined in Recital A.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
"Individual Sellers"
BRADLEY C. BURGESS
JAMES W. SCHLESING
"New Mexico Seller"
J. ROBERT WHITE, JR.
"Corporate Seller" CBS INVESTMENT REALTY OF
CALIFORNIA, INC., an Arizona corporation
By:
Name:
Title:
-40-
<PAGE>
"Buyer" KOLL MANAGEMENT SERVICES,
INC., a Delaware corporation
By:
D. Glen Raiger
Executive Vice-President
"Companies" CBS INVESTMENT REALTY, INC., an
Arizona corporation
By:
Name:
Title:
CBS INVESTMENT REALTY OF NEW
MEXICO, INC., an Arizona corporation
By:
Name:
Title:
-41-
<PAGE>
EXHIBIT 10.42
* Confidential Treatment
Requested
FIRST AMENDMENT TO STOCK AND ASSET PURCHASE AGREEMENT
-----------------------------------------------------
AND MUTUAL RELEASE
------------------
______________ THIS FIRST AMENDMENT TO STOCK AND ASSET PURCHASE AGREEMENT AND
MUTUAL RELEASE (the "Amendment") is made and entered into as of May 1, 1996 by
---------
and among BRADLEY C. BURGESS, JAMES W. SCHLESING, J. ROBERT WHITE, JR., CBS
INVESTMENT REALTY OF CALIFORNIA, INC., an Arizona corporation, and KOLL
MANAGEMENT SERVICES, INC., a Delaware corporation. Except where otherwise
defined herein, the capitalized terms used in this Amendment shall have the
respective meanings assigned to such terms in the "Purchase Agreement" (as such
term is defined in Recital A below). This Amendment is made with reference to
the following facts:
R E C I T A L S:
- - - - - - - -
A. The parties hereto have previously entered into that certain
Stock and Asset Purchase Agreement dated March 4, 1995, effective as of January
1, 1995 (the "Purchase Agreement").
------------------
B. The parties hereto now desire to amend the Purchase
Agreement with respect to the payment of Installment Payments and to provide to
each other a mutual release of all claims with respect to the transactions
contemplated by the Purchase Agreement, all as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Recitals, the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree to amend the Purchase Agreement as follows:
A G R E E M E N T:
- - - - - - - - -
______________ 1. Buy-Out of Installment Payments. Notwithstanding any
-------------------------------
provisions in the Purchase Agreement to the contrary, Buyer shall pay each
Individual Seller an amount equal to * Dollars ($ * ) (the "Buy-Out
Amount") in full satisfaction of Buyer's obligation to pay Installment Payments.
Each Individual Seller's
* Confidential Treatment
Requested
<PAGE>
Buy-Out Amount shall accrue simple interest at the rate of nine percent (9%) per
annum from May 1, 1996, and shall be payable as follows:
(a) * Dollars ($ * ) plus accrued interest
on such initial installment only shall be due and payable concurrently with
Buyer's execution of this Amendment.
(b) Accrued interest shall be payable quarterly in arrears
commencing July 1, 1996 and continuing on the first day of each calendar
quarter thereafter until the Buy-Out Amount is paid in full.
(c) * Dollars ($ * ) plus accrued interest on
the outstanding and unpaid Buy-Out Amount shall be due and payable on each
of May 1, 1997, May 1, 1998 and May 1, 1999.
Buyer's obligation to pay each Individual Seller the Buy-Out Amount shall be
fully recourse and unsecured.
2. Mutual Release.
--------------
(a) Except for all of the covenants, obligations and
undertakings set forth in this Amendment, Buyer's obligations under the
Installment Notes, Buyer's assumption of liabilities with respect to the
tenant leases of Corporate Seller and Companies and with respect to the
Bank One indebtedness, Buyer's obligations under Section 9.14(d) of the
Purchase Agreement, and each Seller's obligations under Section 1.6 of the
Purchase Agreement, each party for itself and on behalf of its successors
and assigns, hereby fully and forever waives, releases, and discharges the
other parties hereto, and such other parties' "Related Parties" (as such
term is defined below in this Paragraph 2(a)), of and from all manner of
action or actions, cause or causes of action, at law or in equity, suits,
debts, liens, contracts, agreements, rights, promises, liabilities, claims,
obligations, demands, damages, losses, costs, penalties, fees (including,
without limitation, attorney's fees), and/or expenses, of any kind or
nature whatsoever, known or unknown, suspected or unsuspected, concealed or
hidden, fixed or contingent (collectively, the "Claims"), which any one (1)
------
or more of such releasors now have, ever had, or may hereafter have against
any one (1) or more of such releasees, by reason of any matter, cause, or
thing whatsoever arising out of or related in any way to (i) the
transactions contemplated by the Purchase Agreement,
-2-
* Confidential Treatment
Requested
<PAGE>
(ii) the Purchase Agreement, and/or (iii) any documents or other
instruments executed and delivered in connection with the Purchase
Agreement. The term "Related Parties" means, in the case of any party, such
---------------
party's agents, representatives, related entities, affiliates,
partnerships, partners, investors, shareholders, officers, directors,
employees, subsidiaries, receivers, successors, assigns, and attorneys past
and present, and any and all parties acting by, through, or in concert with
such party.
(b) Each party intends, through the releases provided above in
Paragraph 2(a), to fully, and finally, and forever settle, release, and
extinguish (as a full and final accord and satisfaction) all Claims
existing between or among the parties and referenced in Paragraph 2(a),
except for Claims excluded under such Paragraph. In furtherance of such
intention, the releases herein given shall be and remain in effect as full
and complete releases of the relevant claims released notwithstanding the
discovery of the existence of any additional Claims or facts related
thereto. Accordingly, as a condition of this Amendment, each party hereby
acknowledges that any and all releases made by such party pursuant to
Paragraph 2(a) shall extend to any and all Claims which such releasor does
not know or suspect to exist in such releasor's favor at the time this
Amendment is fully executed and delivered, even if the knowledge of such
Claims on the part of such releasor would have materially affected such
releasor's settlement with such releasor's releasees hereunder.
(c) While the parties acknowledge that this Amendment provides
for specific releases, they hereby expressly waive and relinquish all
rights and benefits they may have under Section 1542 of the Civil Code of
the State of California with respect to the Claims that are the subject of
the releases set forth in Paragraph 2(a) above. Civil Code Section 1542
reads as follows:
"(S)1542 [CERTAIN CLAIMS NOT AFFECTED BY GENERAL RELEASE.] A GENERAL
----------------------------------------------
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
(d) Each party understands and acknowledges the significance and
consequences of such release and specific waiver of California Civil Code
Section 1542 and has been advised by independent legal counsel concerning
the same.
-3-
<PAGE>
3. Cross Default. In the event of a default under any
-------------
Installment Note resulting in a right of the holder thereof to accelerate the
principal balance thereof, then, at the option of each Individual Seller, the
entire balance of such Individual Seller's Buy-Out Amount, together with all
accrued interest thereon, upon written notice to Buyer, shall immediately become
due and payable. Failure of Buyer to make any installment of a Buy-Out Amount or
interest thereon due under this Amendment within ten (10) days of its due date
shall constitute a default under each Installment Note providing each holder
thereof the right to make immediate demand for payment of the entire balance of
principal of such Installment Note, together with all accrued interest thereon.
4. Covenant Not to Compete. The covenants contained in Section
-----------------------
1.6 of the Purchase Agreement shall terminate and be of no further force or
effect as to all of the Sellers in the event Buyer is in breach of this
Amendment by reason of the failure to pay an Individual Seller any sum due such
Individual Seller under this Amendment by the due date thereof where such
failure continues for ten (10) days after written notice thereof from such
Individual Seller specifying such failure. Failure to pay Individual Sellers any
sum otherwise due Individual Sellers under this Amendment by reason of the
exercise by Buyer of its offset rights set forth in Section 8.2(a)(3) of the
Purchase Agreement shall not constitute a breach under this Amendment resulting
in a termination of the covenants contained in Section 1.6 of the Purchase
Agreement.
5. Miscellaneous.
-------------
(a) Each party hereto agrees to perform any further acts,
and to execute and deliver (with acknowledgment, verification, and/or
affidavit, if required) any further documents and instruments, as may be
reasonably necessary or desirable to implement and/or accomplish the
provisions of this Amendment and the transactions contemplated herein.
(b) This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original Amendment, but all
of which, taken together, shall constitute one (1) and the same Amendment,
binding on the parties hereto. The signature of any party hereto to any
counterpart hereof shall be deemed a signature to, and may be appended to,
any other counterpart hereof.
-4-
<PAGE>
(c) This Amendment and the Purchase Agreement (as hereby
amended) together contain and constitute the entire agreement between the
parties hereto with respect to the subject matter hereof, and this
Amendment and the Purchase Agreement, as hereby amended, may not be
modified, amended, or otherwise changed in any manner, except as provided
in the Purchase Agreement (as hereby amended).
(d) This Amendment is solely for the benefit of the parties
hereto and no other person or entity is entitled to rely upon or benefit
from this Amendment or any term hereof or thereof.
(e) Should any litigation be commenced between or among the
parties or their representatives concerning any provision of this Amendment
or the rights and duties of any person or entity in relation thereto, the
party prevailing in such litigation, whether by out-of-court settlement or
final judgment, shall be entitled, in addition to such other relief as may
be granted, to a reasonable sum as and for attorneys' fees reasonably
incurred in such litigation.
(f) Every provision of this Amendment is intended to be
severable. If any term or provision hereof is declared by a court of
competent jurisdiction to be illegal or invalid, such illegal or invalid
terms or provisions shall not affect the other terms and provisions hereof,
which terms and provisions shall remain binding and enforceable.
(g) Assignment. Neither this Amendment, nor any of the rights or
----------
obligations hereunder, may be assigned by any Seller without the prior
written consent of Buyer, nor by Buyer without the prior written consent of
Sellers. Subject to the foregoing, this Amendment shall be binding upon and
inure to the benefit of the parties hereto and their, respective successors
and assigns, and no other person shall have any right, benefit or
obligation hereunder.
(h) Notices. Unless otherwise provided herein, any notice,
- -------
request, instruction or other document to be given hereunder by any party
to the others shall be in writing and delivered in person or by commercial
courier, telegraph, telex or by facsimile transmission or mailed by
certified mail, postage prepaid, return receipt requested, as follows:
-5-
<PAGE>
If to Individual Sellers or Bradley C. Burgess
Corporate Seller: 4707 East Roadrunner Place
- ------------------------------------ Paradise Valley, Arizona 85253
Telephone No.: (602) 922-3522
James W. Schlesing
5801 East Exeter Boulevard
Phoenix, Arizona 85018
Telephone No.: (602) 994-3112
With a copy to: O'Connor, Cavanagh, Anderson,
Westover, Killingsworth & Beshears
One East Camelback Road
Suite 1100
Phoenix, Arizona 85012-1656
Attention: Karen L. Liepmann, Esq.
Telephone No.: (602) 263-2400
Facsimile No.: (602) 263-2900
If to New Mexico Seller: J. Robert White, Jr.
1605 Kit Carson Avenue SW
Albuquerque, New Mexico 87104
Telephone No.: (505) 766-9817
With a copy to: O'Connor, Cavanagh, Anderson,
Westover, Killingsworth & Beshears
One East Camelback Road
Suite 1100
Phoenix, Arizona 85012-1656
Attention: Karen L. Liepmann, Esq.
Telephone No.: (602) 263-2400
Facsimile No.: (602) 263-2900
-6-
<PAGE>
If to Buyer: Koll Management Services, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: President
Telephone No.: (714) 833-3030
Facsimile No.: (714) 833-8635
With a copy to: Allen, Matkins, Leck, Gamble &
Mallory
18400 Von Karman Avenue
4th Floor
Irvine, California 92715
Attn: Thomas C. Foster, Esq.
Telephone No.: (714) 553-1313
Facsimile No.: (714) 553-8354
Any such notice or other communication shall be deemed received and
effective upon the earlier of (a) if personally delivered, the date of
delivery to the address of the person to receive such notice; (b) if
delivered by commercial carrier, one (1) day following the receipt of such
communication by such carrier from the sender, as shown on the sender's
delivery invoice from such carrier; (c) if mailed, forty-eight (48) hours
after the date of posting by the United States Post Office as shown by the
sender's registry or certification receipt, as the case may be; (d) if
given by telegraph or cable, when delivered to the telegraph company with
charges prepaid; or (e) if given by telex or telecopy, when sent. Any
reference herein to the date of receipt, delivery, or giving, as the case
may be, of any notice or other communication shall refer to the date such
communication becomes effective under the terms of this section. Any notice
or other communication sent by cable, telex, or telecopy must be confirmed
within forty-eight (48) hours by letter mailed or delivered in accordance
with the foregoing. Notice of change of address shall be given by written
notice in the manner detailed in this section. Rejection or other refusal
to accept or the inability to deliver because of changed address of which
no notice was given shall be deemed to constitute receipt of the notice or
other communication sent.
(i) Publicity. Neither Sellers nor Buyer shall issue any press
---------
release or make any public statement regarding the transactions
contemplated hereby (including, but not limited to, any press release or
public statement announcing the execution of this Amendment or the
consummation of the transactions contemplated hereby), without the prior
approval of the other parties hereto.
-7-
<PAGE>
(j) The Paragraph headings used in this Amendment are for reference
purposes only, and are not intended to be used in construing this
Amendment. As used in this Amendment, the masculine gender shall include
the feminine and neuter, and the singular number shall include the plural,
and vice versa. The Recitals set forth in this Amendment are incorporated
into this Amendment by this reference and expressly made a part of this
Amendment for all purposes. Time is of the essence of this Amendment. The
provisions of this Amendment shall be construed and enforced in accordance
with the laws of the State of California. Each party hereto acknowledges,
represents, and warrants that (i) each party hereto is of equal bargaining
strength; (ii) each such party has actively participated in the drafting,
preparation, and negotiation of this Amendment; (iii) each such party
hereto and such party's independent counsel have reviewed this Amendment;
and (iv) any rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not apply in the interpretation
of this Amendment, any portion hereof or any amendments hereto.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the
date first set forth above.
"Individual Sellers"
BRADLEY C. BURGESS
JAMES W. SCHLESING
"New Mexico Seller"
J. ROBERT WHITE, JR.
"Corporate Seller"
CBS INVESTMENT REALTY OF
CALIFORNIA, INC., an Arizona corporation
By:
Name:
Title:
- ----------------------------------------
"Buyer" KOLL MANAGEMENT SERVICES, INC.,
a Delaware corporation
By:
Name:
Title:
-9-
<PAGE>
EXHIBIT 10.43
* Confidential Treatment
Requested
ASSET PURCHASE AGREEMENT
------------------------
by and among
RICHARD G. WOLLACK
and BRENT DONALDSON,
as "Shareholders,"
LIQUIDITY FINANCIAL GROUP, L.P.,
as "Seller"
and
KOLL MANAGEMENT SERVICES, INC.,
as "Buyer"
Dated: March 24, 1995
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE AND SALE OF ASSETS.......................... 1
1.1 Transfer Of Assets........................................ 1
1.2 Consideration for Assets.................................. 2
1.3 Adjustments to Purchase Price............................. 2
1.4 Acceleration and Deferral of Deferred Portion............. 5
1.5 Assumption of Liabilities................................. 5
1.6 Covenant Not to Compete.................................... 6
1.7 Put....................................................... 7
ARTICLE II CLOSING.............................................. 7
2.1 Closing................................................... 7
2.2 Documents to be Delivered................................. 8
2.3 Transfer Taxes............................................ 9
2.4 Prorations................................................ 9
2.5 Employment................................................ 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND
THE SHAREHOLDERS...................................... 10
3.1 Organization and Qualification............................ 10
3.2 Authorization............................................. 10
3.3 No Conflict or Violation.................................. 10
3.4 Consents and Approvals.................................... 11
3.5 Books and Records......................................... 11
3.6 Litigation................................................ 11
3.7 Compliance with Law....................................... 11
3.8 Permits................................................... 12
3.9 Labor Matters............................................. 12
3.10 Benefit Arrangements...................................... 12
3.11 Brokers and Finders....................................... 12
3.12 Title..................................................... 13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.............. 13
4.1 Organization of Buyer..................................... 13
4.2 Authorization............................................. 13
4.3 Brokerage/Finders Fees.................................... 13
4.4 No Conflict or Violation.................................. 13
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.5 No Loss of Control........................................ 14
ARTICLE V ACTIONS BY SELLER, THE SHAREHOLDERS AND
BUYER PRIOR TO THE CLOSING........................... 14
5.1 Maintenance of Business................................... 14
5.2 Investigation by Buyer.................................... 14
5.3 Notification of Certain Matters........................... 14
ARTICLE VI CONDITIONS TO SELLER'S OBLIGATIONS................... 15
6.1 Representations, Warranties and Covenants................. 15
6.2 No Governmental Proceeding or Litigation.................. 15
6.3 Employment Agreement...................................... 15
6.4 License Agreement......................................... 15
6.5 Waiver by Seller.......................................... 15
ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS.................... 16
7.1 Representations, Warranties and Covenants................. 16
7.2 No Governmental Proceeding or Litigation.................. 16
7.3 Employment Agreement...................................... 16
7.4 License Agreement......................................... 16
7.5 Waiver by Buyer........................................... 16
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII INDEMNIFICATION...................................... 17
8.1 Survival of Representations, Etc.......................... 17
8.2 Indemnification........................................... 17
ARTICLE IX MISCELLANEOUS........................................ 19
9.1 Termination............................................... 19
9.2 Assignment................................................ 20
9.3 Notices................................................... 20
9.4 Choice of Law............................................. 21
9.5 Entire Agreement; Amendments and Waivers.................. 21
9.6 Counterparts.............................................. 22
9.7 Invalidity................................................ 22
9.8 Headings.................................................. 22
9.9 Further Assurances........................................ 22
9.10 Expenses.................................................. 22
9.11 Attorneys Fees............................................ 22
9.12 Publicity................................................. 22
9.13 Confidential Information.................................. 23
9.14 Miscellaneous............................................. 23
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE X DEFINITIONS.......................................... 24
10.1 Accounting Party.......................................... 24
10.2 Affiliate................................................. 24
10.3 Assets.................................................... 24
10.4 Benefit Arrangement....................................... 24
10.5 Business.................................................. 24
10.6 Buyer..................................................... 24
10.7 Calculation Year.......................................... 24
10.8 Closing................................................... 24
10.9 Closing Date.............................................. 24
10.10 Damages................................................... 24
10.11 Deferred Portion.......................................... 25
10.12 Down Payment.............................................. 25
10.13 Employment Agreement...................................... 25
10.14 Existing Contracts........................................ 25
10.15 Financial Statements...................................... 25
10.16 First Year................................................ 25
10.17 Indemnitee................................................ 25
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.18 Indemnitor................................................ 25
10.19 INDEX..................................................... 25
10.20 License Agreement......................................... 25
10.21 Net Operating Income...................................... 25
10.22 Net Operating Loss........................................ 25
10.23 Non-Accounting Party...................................... 26
10.24 Operating Expenses........................................ 26
10.25 Purchase Price............................................ 26
10.26 Representative............................................ 26
10.27 Revenues.................................................. 26
10.28 Seller.................................................... 26
10.29 Seller's Office Space..................................... 26
10.30 Shareholders; Shareholder................................. 26
10.31 T.R.E.E.S................................................. 26
10.32 T.R.E.E.S. Employees...................................... 26
</TABLE>
EXHIBITS
- --------
EXHIBIT "A" PERSONAL PROPERTY LEASES AND FINANCING ARRANGEMENTS
- ----------
EXHIBIT "B" TANGIBLE PERSONAL PROPERTY
EXHIBIT "C" PURCHASE PRICE ALLOCATION
EXHIBIT "D" SELLER EMPLOYEES
-vi-
<PAGE>
EXHIBIT "E" DISCLOSURE SCHEDULE
EXHIBIT "F" SELLER'S OCCUPANCY AND OFFICE COST ALLOCATION
-vii-
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT, dated as of March 24, 1995, is made by
and among RICHARD G. WOLLACK and BRENT DONALDSON (collectively, "Shareholders"),
KOLL MANAGEMENT SERVICES, INC., a Delaware corporation ("Buyer"), and LIQUIDITY
FINANCIAL GROUP, L.P., a California limited partnership ("Seller"). A glossary
of defined terms used herein is set forth in Article XI.
R E C I T A L S :
----------------
A. Seller currently engages in multiple businesses including,
without limitation, (i) real estate and REIT research and providing third-party
clients real estate price and rent trends in over fifty major United States
markets through its transaction-based database, real estate market trend
publications, including, without limitation, National Real Estate Index, REIT-
Score, MetroMarket Facts, MarketScore, Market Monitor, National Market Overview
and Market History Report, and related print and disc products (collectively,
"INDEX"), (ii) providing investment management services to third-party clients
desiring to invest in publicly traded real estate equity securities, principally
REITs, under the acronym "T.R.E.E.S.", including the REIT-Cast model, and (iii)
providing asset management services to Boatmen's Trust and Liquidity Fund 24.
The activities described in clauses (i), (ii) and (iii) of this Recital A shall
hereinafter be referred to as the "Business".
B. Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, all of the Assets upon the terms and subject to the conditions set
forth in this Agreement.
A G R E E M E N T :
------------------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
<PAGE>
PURCHASE AND SALE OF ASSETS
- ---------------------------
1.1 Transfer Of Assets
------------------
Upon the terms and subject to the conditions contained herein at the
Closing, Seller shall assign, transfer and convey to Buyer and/or shall cause
its wholly owned corporate subsidiaries to assign, transfer and convey to Buyer
(a) all of its consulting, investment management, subscription and service
agreements with third party clients and investors associated with the activities
described as INDEX and T.R.E.E.S. and its asset management agreements with
Boatman's Trust and Liquidity Fund 24 (the "Existing Contracts"), together with
related databases; (b) the personal property leases and personal property
financing arrangements of Seller set forth on Exhibit "A"; (c) the tangible
----------
personal property of Seller set forth on Exhibit "B"; and (d) all of its
-----------
trademarks, copyrights and servicemarks, if any, associated with the activities
described as INDEX and T.R.E.E.S. The foregoing assets to be transferred to
Buyer pursuant to this Agreement shall hereinafter be referred to as the
"Assets."
1.2 Consideration for Assets
------------------------
Upon the terms and subject to the conditions contained herein, as
consideration for the purchase of the Assets, Buyer shall pay to Seller *
Dollars ($ * ), as adjusted pursuant to Section 1.3 (the "Purchase Price"). The
Purchase Price shall be paid in two (2) installments, * Dollars ($ * ) (the
"Down Payment") on the Closing Date and * Dollars ($ * ), as adjusted pursuant
to Section 1.3 (the "Deferred Portion") and as such Deferred Portion is
increased by interest at a per annum rate from and after the end of the third
(3rd) Calculation Year equal to the prevailing Wells Fargo Bank commercial prime
rate (adjusted concurrently with any adjustments to such interest rate) plus six
(6) percentage points, on the sixtieth (60th) day following the end of the sixth
(6th) Calculation Year, as such due date may be accelerated as hereinafter
provided in Section 1.4. The Purchase Price shall be allocated to the Assets as
set forth on Exhibit "C".
-----------
1.3 Adjustments to Purchase Price
-----------------------------
The Deferred Portion shall be decreased (but not below zero) by * for every
dollar that Net Operating Income (which can be a negative number) for the
year (the "First Year") commencing on the first day of the month next
following the Closing
2
* Confidential Treatment
Requested
<PAGE>
Date (but not any subsequent year) is less than * Dollars ($ * ). Seller
and Buyer negotiated the $ * figure in the previous sentence based on
certain assumptions about the scope of the INDEX business during the First
Year. If Buyer directs or requests that the INDEX be marketed in Asia
during the First Year, the costs of doing so shall not be included in
Operating Expenses.
(a) The term "Net Operating Income" for any relevant Calculation
Year means the Revenues during such year less:
(i) the Operating Expenses during such year, and
(ii) any Net Operating Loss incurred in a Calculation Year
previous to such relevant Calculation Year to the extent same has not
been offset in the calculation of Net Operating Income for a
Calculation Year previous to such relevant Calculation Year.
(b) The term "Net Operating Loss" for any relevant Calculation
Year means the amount that the Operating Expenses for such year exceeds the
Revenues for such year.
(c) The term "Revenues" for any relevant Calculation Year means
the gross revenues, net of any third party commission or fee, of Buyer
and/or any Affiliate of Buyer during such year from activities associated
with INDEX exclusive of fees received under the License Agreement, which
activities include, without limitation, publications commenced after the
Closing Date. Seller understands that from time to time Buyer and its
Affiliates may furnish complimentary copies of, or complimentary
subscriptions to, one or more INDEX publications or may offer copies or
subscriptions at discounted rates. The first Thirty Thousand Dollars
($30,000) of such complimentary or discounted copies and subscriptions
shall not be included in Revenues. However, any excess shall be included in
Revenues. For purposes of making this calculation, the then-current
"regular" subscription and individual copy rates shall be attributed to all
copies and subscriptions.
(d) The term "Operating Expenses" for any relevant Calculation
Year means all operating expenses incurred by Buyer and/or any Affiliate of
Buyer in connection with activities associated with INDEX during such year
which activities
3
* Confidential Treatment
Requested
<PAGE>
include, without limitation, publications commenced after the Closing Date
and which operating expenses shall include, without limitation, the
following:
(i) office expenses,
(ii) labor and benefit costs directly connected to the
Revenues derived from the activities associated with INDEX exclusive
of labor and benefit costs payable to or on behalf of Richard G.
Wollack and his secretary,
(iii) real property rent expense for such period,
(iv) travel and entertainment expenses,
(v) insurance costs, including, without limitation,
errors and omissions/professional liability insurance costs,
(vi) professional fees,
(vii) all taxes (except income taxes),
(viii) marketing expenses related directly to the
activities associated with INDEX,
(ix) personal property rent expenses payable to third
party lessors and debt service on personal property financing
arrangements payable to third party lenders,
(x) computer maintenance and software costs for all
personal and mainframe computers,
(xi) depreciation on any depreciable property acquired
after the Closing Date for use in connection with activities
associated with
4
<PAGE>
INDEX, depreciation on any depreciable property acquired from Seller
and used in connection with the activities associated with INDEX based
upon the depreciable basis and depreciable life of any such property
immediately prior to such acquisition, and a reasonable allocation of
depreciation (based on use) on any depreciable property owned by Buyer
as of the Closing Date and used in connection with the activities
associated with INDEX,
(xii) a reasonable allocation of Seller's monthly
overhead and occupancy costs incurred in Seller's Office Space related
to the activities associated with INDEX prepared by Seller based upon
(1) a one hundred percent (100%) allocation of occupancy costs
associated with the INDEX production and storage areas, (2) a
percentage allocation of the balance of the occupancy costs based upon
a head count of employees involved in the activities described as
INDEX as of the last day of the calendar month immediately preceding
the calendar month for which the allocation is calculated, and (3) a
percentage allocation of Seller's overhead equal to fifty percent
(50%) of the percentage calculated in clause (2) above except that for
purposes of calculating the percentage allocation of Seller's overhead
Richard G. Wollack and his secretary shall not be considered as
employees involved in the activities described as INDEX, which
allocation shall be calculated consistently with the example set forth
on Exhibit "F" attached hereto and shall be subject to Buyer's
-----------
reasonable approval,
(xiii) a reasonable allocation of Buyer's accounting costs
consistent with allocations by Buyer to its operating divisions in the
event that Buyer elects to provide accounting for the activities
associated with INDEX following a reasonable determination by Buyer
that the quality of accounting provided by Seller is not commensurate
with Buyer's standards, and
(xiv) interest at Buyer's cost of funds on outstanding
working capital advances made by Buyer in connection with activities
associated with INDEX, which working capital advances shall be deemed
made by Buyer ratably over the First Year and only to the extent that
Net Operating Income for the First Year is a negative number.
(e) For purposes of the foregoing, Revenues, Operating Expenses,
Net Operating Income and Net Operating Loss for any relevant computation
period shall be calculated under the cash method of accounting except that
gross revenues
5
<PAGE>
received for subscriptions in excess of twelve (12) months shall be
considered as received in the relevant computation period as to that
portion of such gross revenues attributable to the first twelve (12) months
of such subscription and shall be considered as received ratably over the
months of such subscription in excess of the first twelve (12) months of
such subscription as to that portion of such gross revenues attributable to
the period of such subscription subsequent to the first twelve (12) months.
For purposes of calculating Net Operating Income or Net Operating Loss,
there shall be no allocation of Buyer's overhead except for the allocation
described in Section 1.3(d)(xiii).
(f) Within sixty (60) days following the end of each Calculation
Year, whichever of Seller or Buyer (the "Accounting Party") is providing
the accounting for the activities associated with INDEX as of the end of
such year shall prepare and distribute to the other (the "Non-Accounting
Party") an annual report setting forth the calculation of Net Operating
Income for such year, certified as true and correct by the Chief Financial
Officer of the Accounting Party, in his capacity as an officer of the
Accounting Party. Any such report, and the accounting records maintained in
connection therewith, shall be subject to audit by a nationally recognized
certified public accounting firm selected by the Non-Accounting Party, at
such party's expense; provided that in the event the Non-Accounting Party
is Seller and any such audit results in a calculation of Net Operating
Income which is one hundred five percent (105%) or more of the Net
Operating Income calculated by Buyer, then such recalculated amount shall
constitute Net Operating Income for such year and the expense of such audit
shall be borne by Buyer or in the event the Non-Accounting Party is Buyer
and any such audit results in a calculation of Net Operating Income which
is ninety-five percent (95%) or less of the Net Operating Income calculated
by Seller, then such recalculated amount shall constitute Net Operating
Income for such year and the expense of such audit shall be borne by
Seller.
(g) Buyer shall be obligated to reimburse Seller for the monthly
allocation of Seller's overhead and occupancy costs incurred in Seller's
Office Space described in Section 1.3(d)(xii) within fifteen (15) days of
receipt by Buyer of such allocation prepared by Seller provided such
allocation has been approved by Buyer, which approval shall not be
unreasonably withheld.
1.4 Acceleration and Deferral of Deferred Portion.
---------------------------------------------
6
<PAGE>
Notwithstanding the provisions of Section 1.2, on the sixtieth (60th) day
following the end of each Calculation Year, a portion of the Deferred Portion
equal to the Net Operating Income for such Calculation Year up to the sum of *
Dollars ($ * ) plus accrued and unpaid interest on the Deferred Portion shall be
due and payable. Buyer shall have the right to prepay the Deferred Portion at
any time without penalty. In the event Buyer sells the databases, publications
and related print and disc products described in this Agreement as INDEX and
related subscription and service agreements to a third party, the entire
Deferred Portion plus accrued and unpaid interest shall be due and payable upon
the closing of such sale.
1.5 Assumption of Liabilities
-------------------------
Upon the terms and subject to the conditions contained herein, at the
Closing, Buyer shall assume all obligations and liabilities accruing, arising
out of, or relating to, events or occurrences happening after the Closing Date
(a) under any Existing Contracts, personal property leases and personal property
financing arrangements assigned to Buyer pursuant to the terms of this
Agreement, but not including any obligation or liability for any breach of any
such contract occurring prior to the Closing Date, and (b) in respect of any
employees of Seller employed by Buyer on and/or after the Closing Date with
respect to events occurring after the Closing Date. Buyer shall not assume any
obligations or liabilities of Seller not specifically described in this Section
1.5. In this regard, Buyer shall not assume any obligations of Seller under the
tenant lease for the Seller's Office Space or any obligations to the T.R.E.E.S.
Employees.
1.6 Covenant Not to Compete
-----------------------
(a) Seller hereby agrees that it shall not, for a period of six
(6) years following the Closing Date, contact, solicit or contract with any
then existing client of Buyer for the provision of: (i) investment
management services respecting investments in publicly-traded real estate
equity securities (principally REITs) or (ii) data on real estate prices or
trends in competition with any of the publications then constituting the
INDEX.
(b) Brent Donaldson hereby agrees that he shall not, for a
period of three (3) years following the Closing Date, either as an
employee, employer, consultant, agent, principal, partner, shareholder,
corporate officer, director or in any other individual or representative
capacity, solicit or contract with, or acquire,
7
* Confidential Treatment
Requested
<PAGE>
individually or in the aggregate with the other Shareholder, controlling
interest in any entity or organization which solicits or contracts with,
any then existing client of Buyer for the provision of: (i) investment
management services to Boatmen's Trust or Liquidity Fund 24 respecting
investments in publicly-traded real estate equity securities (principally
REITs) or (ii) data on real estate prices or trends in competition with any
of the publications then constituting the INDEX. Notwithstanding the
foregoing, nothing in this Section 1.6(b) shall prohibit Mr. Donaldson from
serving as an employee or in any other capacity with any entity or another
organization that conducts any such activities if Mr. Donaldson does not
himself participate in such activities.
(c) Notwithstanding the foregoing provisions of this Section
1.6, the rendition of services by Seller pursuant to the provisions of an
Existing Contract which could not be assigned to Buyer for lack of a third
party consent thereto shall not violate the foregoing provisions of this
Section 1.6 provided the consideration received by Seller from such
Existing Contract is assigned by Seller to Buyer in the exact form received
and as and when received.
(d) Seller and each Shareholder agree not to hire any of the
employees of Buyer in connection with the rendition by Seller and/or any
Shareholder of research, investment management and/or investment counsel
services of the type then currently being rendered by Buyer in connection
with the activities described as INDEX or T.R.E.E.S. for a period of one 1
year following any such employee's termination, for any reason, of
employment with Buyer.
(e) In the event any of the covenants in this Section 1.6 shall
be determined by any court of competent jurisdiction to be unenforceable by
reason of its extending for too great a period of time, or over too great a
geographical area, or by reason of its being too extensive in any other
respect, it shall be interpreted to extend only over the maximum period of
time for which it may be enforceable, and/or over the maximum geographical
area as to which it may be enforceable and/or to the maximum extent in all
other respects as to which it may be enforceable, all as determined by such
court in such action.
(f) Seller and each Shareholder acknowledge that a breach of the
covenants contained in this Section 1.6 will cause irreparable damage to
Buyer, the exact amount of which will be difficult to ascertain, and that
the remedies at law for any such breach will be inadequate. Accordingly,
Seller and each Shareholder agree
8
<PAGE>
that if Seller and/or any Shareholder breaches the covenants contained in
this Section 1.5 in addition to any other remedy which may be available at
law or in equity, Buyer shall be entitled to specific performance and
injunctive relief, without posting a bond or other security.
(g) In the event the databases, publications and related print
and disc products described in this Agreement as INDEX and related
subscription and service agreements are reacquired by Seller pursuant to
Section 1.7 or otherwise, the covenants contained in this Section 1.6 with
respect to the activities described as INDEX shall terminate and be of no
further force or effect.
(h) In the event the Existing Contracts associated with the
activities described as T.R.E.E.S. and related databases are reacquired by
Seller pursuant to Section 2.5 or otherwise, the covenants contained in
this Section 1.6 with respect to the activities described as T.R.E.E.S.
shall terminate and be of no further force or effect.
1.7 Put
---
During the sixty (60) day period following the end of the third (3rd)
Calculation Year, Buyer shall have the right, but not the obligation, to elect
to put the then current databases, publications and related print and disc
products described in this Agreement as INDEX and related subscription and
service agreements and the tangible personal property acquired from Seller to
Seller for a purchase price equal to * Dollars ($ * ) less the amount by which
Net Operating Income for the first three (3) Calculation Years exceeds any
payments of the Deferred Portion previously received by Seller, by delivering
written notice of such election to Seller. The closing of such transaction shall
occur within thirty (30) days following the effective date of Buyer's notice of
its election to put such assets to Seller and shall be consummated in a manner
consistent with the provisions of Section 2.2 except that the terms "Seller" and
"Buyer" therein shall be transposed. Seller shall have the right to decline to
purchase such assets in consideration for the forgiveness by Seller of the
outstanding balance of the Deferred Portion as of the end of the third (3rd)
Calculation Year.
ARTICLE II
----------
9
<PAGE>
CLOSING
- -------
2.1 Closing
-------
The closing of the transactions contemplated herein (the "Closing")
shall be held at 10:00 a.m. local time on March 31, 1995, or such other date as
may be mutually agreed upon in writing by Seller and Buyer (the "Closing Date"),
at the offices of Buyer's counsel, Allen, Matkins, Leck, Gamble & Mallory, 18400
Von Karman Avenue, 4th Floor, Irvine, California 92715.
2.2 Documents to be Delivered
-------------------------
To effect the transfer of the Assets referred to in Section 1.1 and
the delivery of the consideration described in Section 1.2 hereof, Seller and
Buyer shall, on the Closing Date, deliver the following:
(a) Seller shall assign (or cause its wholly owned corporate
subsidiaries to assign) to Buyer all of its rights and obligations with
respect to each Existing Contract, to the extent each such Existing
Contract is assignable without consent of the other party thereto, and its
related databases. If any such Existing Contract is not assignable without
consent of the other party thereto and Seller does not obtain the consent
of the other party to such contract of the proposed assignment to Buyer,
then such contract shall only be assigned to Buyer upon the written request
of Buyer delivered to Seller; provided that, notwithstanding any provision
of this Agreement to the contrary, failure to obtain any such third party
consent shall not result in a breach of any representation, warranty,
covenant or agreement of Seller hereunder. In any event, Seller shall
provide Buyer with any consideration received by Seller with respect to any
such Existing Contract in the exact form received, and as and when
received, by Seller. Seller shall assign (or cause its wholly owned
corporate subsidiaries to assign) to Buyer all of its rights and
obligations as lessee or borrower, as applicable, under the personal
property leases and personal property financing arrangements described on
Exhibit "A" attached hereto. Seller shall transfer (or cause its wholly
-----------
owned corporate subsidiaries to transfer) to Buyer all of the tangible
personal property in the nature of furniture, fixtures, office equipment,
computers, calculators, office supplies and the like listed on Exhibit "B"
----------
attached hereto. Seller shall assign (or cause its wholly owned corporate
subsidiaries to assign) to Buyer all of
10
<PAGE>
its trademarks, copyrights and servicemarks, if any, associated with the
activities described as INDEX and T.R.E.E.S. Seller shall deliver to Buyer
at the Closing such assignment documentation and conveyancing instruments
as shall be reasonably requested by Buyer, in form and substance and in a
manner reasonably satisfactory to Buyer and Seller, to vest in Buyer title
in and to the Assets of Seller assigned to Buyer in accordance with the
provisions of this Agreement.
(b) Buyer shall deliver to Seller the Down Payment, by certified
check or wire transfer of funds.
(c) Buyer and Seller shall each deliver all documents required
to be delivered by them, respectively, pursuant to Articles VI and VII,
respectively.
(d) All instruments and documents executed and delivered to
Buyer pursuant hereto shall be in form and substance, and shall be executed
in a manner, reasonably satisfactory to Buyer. All instruments and
documents executed and delivered to Seller pursuant hereto shall be in form
and substance, and shall be executed in a manner, reasonably satisfactory
to Seller.
2.3 Transfer Taxes
--------------
Seller shall be responsible for any documentary transfer taxes and any
sales, use or other taxes, duties, fees and governmental exactions imposed by
reason of the transfer of the assets of Seller provided hereunder and any
deficiency, interest or penalty asserted with respect thereto.
2.4 Prorations
-----------
All cash receipts prior to the Closing Date with respect to the Assets
shall be the property of Seller and all cash receipts from and after the Closing
Date with respect to the Assets shall be the property of Buyer. All expenses
accrued prior to the Closing Date with respect to the Assets shall be the
responsibility of Seller and all expenses accrued from and after the Closing
Date with respect to the Assets shall be the responsibility of Buyer.
2.5 Employment
----------
11
<PAGE>
Immediately following the Closing, Buyer shall offer employment to all
of the employees of Seller who are listed on Exhibit "D" attached hereto except
-----------
those designated as T.R.E.E.S. Employees, and Seller shall assist Buyer, to the
extent permitted by state and federal law, in hiring such employees. The
salaries offered to such employees shall be market competitive as of the Closing
Date in the reasonable discretion of the Buyer after consultation with Seller
and other employee benefits offered to such employees shall be consistent with
employee benefits provided existing employees of Buyer similarly situated as to
seniority and title as of the Closing Date. Such employees shall be notified of
the transfer of the management functions to Buyer in a joint communication from
Seller and Buyer mutually approved by Seller and Buyer. Also set forth on
Exhibit "D" are the employees of Seller utilized by Seller in the activities
- ----------
described as T.R.E.E.S (the "T.R.E.E.S. Employees"). From and after the Closing
until the end of the First Year, Seller shall make available to Buyer the
services of the T.R.E.E.S. Employees in connection with the activities described
as T.R.E.E.S., as reasonably requested by Buyer, in consideration for the
payment by Buyer to Seller of the hourly amount set forth opposite each such
T.R.E.E.S. Employee's name on Exhibit "D" plus any bonus amounts earned by each
-----------
such T.R.E.E.S. Employee in accordance with the formula set forth on Exhibit "D"
-----------
by the fifteenth (15th) day of each month during the First Year for time billed
and/or bonus earned in the previous month. Buyer shall have no obligation to
utilize the services of the T.R.E.E.S. Employees and to pay Seller the monthly
consideration therefor following thirty (30) days' prior written notice from
Buyer to Seller of Buyer's election to cease the activities described as
T.R.E.E.S., provided within such thirty (30) day period Buyer assigns, transfers
and conveys to Seller the Existing Contracts associated with the activities
described as T.R.E.E.S., related databases and all trademarks, copyrights and
servicemarks associated with the activities described as T.R.E.E.S. Nothing
herein should be construed as a covenant on the part of Seller to continue the
employment of any T.R.E.E.S. Employees. Seller acknowledges that following the
expiration of the First Year, Buyer shall have the right to offer employment to
all or any of the T.R.E.E.S. Employees on such terms and conditions as Buyer
shall determine in its sole discretion.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
- -------------------------------
OF SELLER AND THE SHAREHOLDERS
- ------------------------------
Seller and each of the Shareholders, to the best of each such
Shareholder's knowledge, hereby represent and warrant to Buyer, except as set
forth on the Disclosure Schedule attached hereto as Exhibit "E", the following:
----------
12
<PAGE>
3.1 Organization and Qualification
------------------------------
Seller is a limited partnership duly organized, validly existing and
in good standing under the laws of the State of California and has the requisite
power and authority to conduct its business as it is now being conducted.
3.2 Authorization
-------------
Seller and each Shareholder have the requisite power and authority to
enter into this Agreement, to perform their respective obligations hereunder,
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Seller and each Shareholder and constitutes a
legal, valid and binding obligation of Seller and each Shareholder, enforceable
against Seller and each Shareholder in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws, or by equitable principles, relating to or
limiting the rights of creditors generally and (b) limitations imposed by law or
equitable principles upon the availability of specific performance, injunctive
relief or other equitable remedies.
3.3 No Conflict or Violation
-------------------------
Neither the execution and delivery of this Agreement by Seller and
each Shareholder, nor the consummation by Seller and each Shareholder of the
transactions contemplated hereby, nor compliance by Seller and the Shareholders
with any of the provisions hereof will (a) violate, conflict with, or result in
a breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
encumbrance upon any of the Assets of Seller under, any of the terms, conditions
or provisions of (i) the partnership agreement of Seller or (ii) any note, bond,
mortgage, indenture, deed of trust, security or pledge agreement, license,
lease, franchise, permit, agreement or other instrument or obligation to which
Seller or any Shareholder is a party or to which Seller, any Shareholder or any
of the properties or assets of Seller may be subject, which violation, conflict,
breach or default would have a material adverse effect on the Assets or Seller's
ability to consummate the transactions contemplated hereby, or (b) violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to Seller,
13
<PAGE>
any Shareholder or any of the properties or assets of Seller, which violation
would have a material adverse effect on the Assets or Seller's ability to
consummate the transactions contemplated hereby.
3.4 Consents and Approvals
----------------------
Except for the consent of the other parties to the agreements, leases
and contracts contained in the Assets to the assignment and transfer thereof
from Seller to Buyer, no notice to, declaration, filing or registration with, or
authorization, consent or approval of, or permit from, any domestic or foreign
governmental or regulatory body or authority, or any other person or entity, is
necessary in connection with the execution and delivery of this Agreement by the
Seller and the Shareholders and the consummation by the Seller and the
Shareholders of the transactions contemplated by this Agreement.
3.5 Books and Records
-----------------
The books and records to which access was given Buyer prior to the
date hereof are the actual books and records of Seller and accurately and fairly
reflect, in all material respects, the revenues and expenses of Seller.
3.6 Litigation
----------
There currently are no pending actions, suits, investigations or
proceedings by, against, involving or relating to Seller, at law or in equity,
or before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality in which any claim has been
made or asserted against Seller. There is outstanding no garnishment, attachment
or writ of execution issued with reference to Seller or any of the Assets.
Seller is not a party or subject to any judgment, decree or order enjoining it
in respect of any business practice or the conduct of business in any area.
3.7 Compliance with Law
-------------------
Seller has not violated or failed to comply with any statute, law,
ordinance, regulation, rule, decree or order of any foreign, federal, state or
local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable
14
<PAGE>
to its business or operations, which violation or failure to comply would have a
material adverse effect on the Assets or Seller's ability to consummate the
transactions contemplated hereby. The conduct of Seller's Business is in
material conformity with all building code, health and environmental
requirements except where the aggregate of all such non-conformities would not
have a material adverse effect on Seller. The conduct of Seller's Business is in
conformity with all energy, public utility, zoning and OSHA requirements and all
other foreign, federal, state and local governmental and regulatory requirements
except where the aggregate of all such non-conformities would not have a
material adverse effect on Seller. Seller has not received any notice to the
effect that, or otherwise been advised that, it is not in compliance with, any
statute, law, ordinance, regulation, rule, judgment, decree or order. Seller has
no reason to anticipate that any presently existing circumstances are likely to
result in the violation of, any such statute, law, ordinance, regulation, rule,
judgment, decree or order, which violation would have a material adverse effect
on the Assets or Seller's ability to consummate the transactions contemplated
hereby.
3.8 Permits
-------
Seller has all permits from governmental agencies required to conduct
the Business as now being conducted, except such permits the failure of which to
obtain would not have a material adverse effect on the Assets.
3.9 Labor Matters
-------------
Seller has not entered into any written employment agreement with any
employees employed in the Business including, without limitation, the employees
listed on Exhibit "D" attached hereto. Except as provided by law, the employment
----------
of all persons presently employed or retained by Seller with respect to the
Business, including, without limitation, the employees listed on Exhibit "D"
----------
attached hereto, is terminable at will. Seller is not a party to any collective
bargaining agreement, nor is Seller subject to any organizing efforts of any
labor union, organization, local or subdivision. There are no labor grievances,
or investigations, claims or suits concerning employment pending or threatened
against Seller. Seller has not entered into any agreement, oral or written, with
any present or former employee of Seller that will result in a commitment or
obligation (absolute or contingent) of Seller and/or Buyer to make any payment
to any present or former employee of Seller following his or her termination of
employment. Seller does not maintain, participate in or contribute to, has never
maintained, participated in or contributed to, and has not announced plans or
legally binding commitments to maintain, participate in or contribute to, any
qualified or non-qualified pension or profit-sharing plan and/or other form of
deferred compensation
15
<PAGE>
and/or post-retirement insurance, compensation or benefits which covers or has
covered any employees or former employees of Seller exclusive of Benefit
Arrangements (as defined below). Any severance payments and accrued vacation
and/or sick pay payments accrued as of the Closing Date with respect to the
employees of Seller shall be the responsibility of Seller, whether or not any
such employee is hired by Buyer on or after the Closing Date.
3.10 Benefit Arrangements
--------------------
Each written plan, arrangement, program, agreement or commitment
providing for insurance coverage (including any self-insured arrangement),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, and life, health, disability or accident benefits which
covers or has covered any employees of Seller (collectively, "Benefit
Arrangements"), has been maintained in compliance with its terms and with the
requirements described by any and all statutes, orders, rules and regulations
which are applicable to such Benefit Arrangement.
3.11 Brokers and Finders
-------------------
Neither Seller, any Shareholder nor any of Seller's officers,
directors, employees or agents have employed any broker, finder or similar agent
or incurred any liability for any brokerage fees, commissions, finder's fees or
similar payments in connection with the transactions contemplated by this
Agreement.
3.12 Title
-----
Seller and/or a wholly owned corporate subsidiary of Seller has good
and marketable title to the Assets (exclusive of Assets for which Seller or such
subsidiary cannot hold title such as leased property and except that certain of
the Existing Contracts cannot be assigned without the prior consent of the other
party thereto) and has possession thereof and there is no lien or encumbrance
against any such asset except any lien imposed by law in the ordinary course of
business for assessments not yet due and payable.
ARTICLE IV
----------
16
<PAGE>
REPRESENTATIONS AND WARRANTIES OF BUYER
- ---------------------------------------
Buyer hereby represents and warrants to Seller and each of the
Shareholders as follows:
4.1 Organization of Buyer
---------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite power and
authority to conduct its business as it is now being conducted.
4.2 Authorization
-------------
Buyer has the requisite power and authority to enter into this
Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable against it in accordance with its terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium and other similar laws, or by equitable principles,
relating to or limiting the rights of creditors generally and (b) limitations
imposed by law or equitable principles upon the availability of specific
performance, injunctive relief or other equitable remedies.
4.3 Brokerage/Finders Fees
----------------------
Neither Buyer nor any of its officers, directors, employees or agents
have employed any broker, finder or similar agent or incurred any liability for
any brokerage fees, commissions, finder's fees or similar payments in connection
with the transactions contemplated by this Agreement.
4.4 No Conflict or Violation
------------------------
Neither the execution and delivery of this Agreement by Buyer, nor the
consummation of the transactions contemplated hereby, nor compliance by Buyer
with any of the provisions hereof will result in (a) a violation of or a
conflict with any provision of the
17
<PAGE>
Certificate of Incorporation or Bylaws of Buyer, (b) a breach of, or a default
under, any term or provision of any contract, agreement, indebtedness, lease,
commitment, license, franchise, permit, authorization or concession to which
Buyer is a party which breach or default would have a material adverse effect on
the business or financial condition of Buyer or its ability to consummate the
transactions contemplated hereby or (c) a violation by Buyer of any statute,
rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or
award, which violation would have a material adverse effect on the business or
financial condition of Buyer or its ability to consummate the transactions
contemplated hereby.
4.5 No Loss of Control
------------------
Neither Buyer nor any representative of Buyer is currently involved in
active discussions or is party to a letter of intent or agreement regarding any
transaction that could result in a direct or indirect change of control of Buyer
or a sale of all or substantially all of the assets of Buyer.
ARTICLE V
---------
ACTIONS BY SELLER, THE SHAREHOLDERS
- -----------------------------------
AND BUYER PRIOR TO THE CLOSING
- ------------------------------
During the period from the date hereof through the Closing Date:
5.1 Maintenance of Business
-----------------------
The Business of Seller shall be conducted only in, and Seller shall
not take any action except in, the ordinary course of business and consistent
with past practice, and Seller shall use its best efforts to maintain and
preserve the Business, the Assets, and its prospects, employees, suppliers,
customers and other advantageous business relationships associated with the
Business.
5.2 Investigation by Buyer
----------------------
18
<PAGE>
Seller shall allow Buyer during regular business hours through Buyer's
Representatives, to make such investigation, inspection and duplication, at
Buyer's expense, of the Business, the Assets, and the books and records of
Seller associated with the Business, and to conduct such examination of the
condition of Seller, as Buyer deems necessary or advisable to familiarize itself
with such Business, Assets, books, records, condition and other matters, and to
verify the representations and warranties of Seller and the Shareholders
hereunder.
5.3 Notification of Certain Matters
-------------------------------
Seller and each Shareholder shall give prompt notice to Buyer, and
Buyer shall give prompt notice to Seller, of (a) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect any time from the date hereof to the Closing
Date and (b) any material failure of Seller, Shareholders or Buyer, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, and each party shall use all
reasonable efforts to remedy same.
ARTICLE VI
----------
CONDITIONS TO SELLER'S OBLIGATIONS
- ----------------------------------
The obligation of Seller and Shareholders to transfer the Assets to
Buyer and to consummate the other transactions contemplated hereby on the
Closing Date is subject, in the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions:
6.1 Representations, Warranties and Covenants
-----------------------------------------
All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if such representations and warranties were made at and as of
the Closing Date, and Buyer shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date. There shall be delivered to Seller at the
19
<PAGE>
Closing a certificate executed by Buyer, in form and substance and executed in a
manner reasonably satisfactory to Seller, to the foregoing effect.
6.2 No Governmental Proceeding or Litigation
----------------------------------------
No suit, action, investigation, inquiry or other proceeding by any
governmental authority or other person shall have been instituted which
questions the validity or legality of the transactions contemplated hereby or
which could reasonably be expected materially and adversely to affect the value
of the Assets, the financial condition and/or business of Buyer or otherwise
reasonably be expected to materially damage Seller and/or Shareholders if the
transactions contemplated hereunder are consummated.
6.3 Employment Agreement
--------------------
Buyer shall have entered into an employment agreement with Richard G.
Wollack in form and substance satisfactory to Buyer and Richard G. Wollack (the
"Employment Agreement").
6.4 License Agreement
-----------------
Seller and Buyer shall have entered into the License Agreement.
6.5 Waiver by Seller
----------------
Seller may unilaterally waive any of Seller's conditions described in
this Agreement. Except as otherwise provided in this Agreement, any such waiver
shall be effective only if the same is (a) in writing, (b) signed by Seller, and
(c) delivered to Buyer on or before the date such condition is to be satisfied.
ARTICLE VII
-----------
CONDITIONS TO BUYER'S OBLIGATIONS
- ---------------------------------
20
<PAGE>
The obligation of Buyer to purchase the Assets and to consummate the
other transactions contemplated hereby is subject, in the discretion of Buyer,
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions:
7.1 Representations, Warranties and Covenants
-----------------------------------------
All representations and warranties of Seller and the Shareholders
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date as if such representations and warranties were
made at and as of the Closing Date, and Seller and the Shareholders shall have
performed in all material respects all agreements and covenants required hereby
to be performed by them prior to or at the Closing Date. There shall be
delivered to Buyer at the Closing a certificate executed by Seller and the
Shareholders, in form and substance and executed in a manner reasonably
satisfactory to Buyer, to the foregoing effect.
7.2 No Governmental Proceeding or Litigation
----------------------------------------
No suit, action, investigation, inquiry or other proceeding by any
governmental authority or other person shall have been instituted which
questions the validity or legality of the transactions contemplated hereby or
which could reasonably be expected materially and adversely to affect the value
of the Assets, the financial condition and/or business of Seller or otherwise
reasonably be expected to materially damage Buyer if the transactions
contemplated hereunder are consummated.
7.3 Employment Agreement
--------------------
Richard G. Wollack shall have entered into the Employment Agreement
with Buyer.
7.4 License Agreement
-----------------
Seller and Buyer shall have entered into the License Agreement.
7.5 Waiver by Buyer
---------------
21
<PAGE>
Buyer may unilaterally waive any of Buyer's conditions described in
this Agreement. Except as otherwise provided in this Agreement, any such waiver
shall be effective only if the same is (a) in writing, (b) signed by Buyer, and
(c) delivered to Seller on or before the date such condition is to be satisfied.
ARTICLE VIII
------------
INDEMNIFICATION
- ---------------
8.1 Survival of Representations, Etc.
---------------------------------
All statements contained in the Disclosure Schedule or in the
certificates delivered at the Closing pursuant to Sections 6.1 and 7.1 shall be
deemed to be representations and warranties by the parties hereunder. The
representations and warranties of each of Seller, the Shareholders and Buyer
contained herein shall survive the Closing Date for a period of two (2) years
regardless of any investigation made by any of the parties hereto.
8.2 Indemnification
---------------
(a) By Seller and the Shareholders.
------------------------------
(1) Seller Indemnification. Seller hereby agrees to
----------------------
indemnify, defend (subject to the provisions of Section 8.2(d)) and hold
harmless Buyer and its Representatives from and against any and all costs,
losses, liabilities, damages, lawsuits, deficiencies, claims and expenses,
including without limitation, interest, penalties, reasonable attorneys'
fees and all amounts paid in investigation, defense or settlement of any of
the foregoing (collectively, "Damages"), incurred in connection with,
arising out of, resulting from or incident to (i) any breach of any
covenant or warranty, or the inaccuracy of any representation, made by
Seller and/or any Shareholder in or pursuant to this Agreement, and (ii)
any claim by any third party brought against Buyer arising from the actions
or inactions of Seller and/or any Shareholder or the operation of Seller's
business prior to the Closing, provided that neither Seller nor either
Shareholder shall be required to indemnify any Damages unless the sum of
all Damages exceeds Five Thousand Dollars ($5,000), in which case
22
<PAGE>
the amount required to be indemnified shall be the amount of Damages in
excess of Five Thousand Dollars ($5,000).
(2) Shareholder Indemnification. Each Shareholder hereby
---------------------------
agrees to indemnify, defend and hold harmless Buyer and its Representatives
from and against any and all Damages incurred in connection with, arising
out of, resulting from, or incident to, any breach of any covenant or
warranty, or the inaccuracy of any representation, made by such Shareholder
in or pursuant to this Agreement, it being understood that each
Shareholder's representations and warranties are being made only to the
best of that Shareholder's knowledge and that no breach of any
representation or warranty by Seller or one Shareholder shall be considered
a breach of that representation or warranty by the other Shareholder unless
that knowledge criterion is established with respect to that other
Shareholder.
(3) Shareholder Indemnification Limitations. The liability
---------------------------------------
of each Shareholder in connection with the indemnification obligations of
such Shareholder set forth above in this Section 8.2(a) shall not in any
event exceed an amount equal to Three Hundred Thousand Dollars ($300,000)
with respect to Richard G. Wollack and Two Hundred Thousand Dollars
($200,000) with respect to Brent Donaldson. Buyer agrees that it and its
Representatives shall not institute a suit against either Shareholder for
indemnification under this Section 8.2 until it has first exercised its
offset rights set forth in Section 8.2(a)(4). Moreover, neither Buyer nor
any of its Representatives shall be entitled to collect any indemnification
amounts from either Shareholder until two (2) years after Buyer first
asserts a timely indemnification claim against Seller and that Shareholder
in writing. If and to the extent Seller or a Shareholder indemnifies Buyer
or any of Buyer's Representatives, the indemnitors shall be subrogated to
any and all rights of the indemnitees against any insurers or other third
parties with respect to the matters indemnified. In addition, even before
any such subrogation, Buyer and its Representatives shall take reasonable
steps (for example, filing timely claims) in order to preserve all such
claims against third parties and shall reasonably cooperate (without out-
of-pocket expense to Buyer) with the indemnitors in prosecuting any such
claims.
(4) Right of Offset. Buyer shall have the right to offset
---------------
any amounts due Seller and/or any Shareholder under this Agreement in
satisfaction of Seller's and/or any Shareholder's indemnification
obligation set forth above in this Section 8.2. Notwithstanding the
foregoing, if there is a final, non-appealable determination by a court of
competent jurisdiction that Buyer improperly offset any amounts that were
otherwise payable to Seller and/or any Shareholder, then Buyer
23
<PAGE>
shall be obligated to pay to Seller and/or any such Shareholder, as applicable,
such improperly withheld amounts, together with interest thereon computed at the
prevailing Wells Fargo Bank commercial prime rate of interest (adjusted
concurrently with any adjustments to such interest rate) accrued from and after
the date any such amounts were improperly withheld.
(b) By Buyer. Buyer shall indemnify, defend (subject to the
--------
provisions of Section 8.2(d)) and hold harmless each Shareholder, Seller and
Seller's Representatives from and against any and all Damages incurred in
connection with, arising out of, resulting from or incident to (i) any breach of
any covenant or warranty, or the inaccuracy of any representation, made by Buyer
in or pursuant to this Agreement, or (ii) any claim by any third party brought
against Seller and/or any Shareholder arising from the actions or inactions of
Buyer or the operation of Buyer's business on or after the Closing Date,
provided that Buyer shall not be required to indemnify any Damages unless the
sum of all Damages exceeds Five Thousand Dollars ($5,000), in which case the
amount required to be indemnified shall be the amount of Damages in excess of
Five Thousand Dollars ($5,000).
(c) Damages. The term "Damages" as used in this Section 8.2 is
-------
not limited to matters asserted by third parties against the indemnified party
but includes Damages incurred or sustained by the indemnified party in the
absence of third party claims. Payment by the indemnified party of amounts for
which the indemnified party is entitled to be indemnified hereunder shall not be
a condition precedent to the right of the indemnified party to enforce its
indemnity rights hereunder.
(d) Notification Requirement.
------------------------
(1) If any party ("Indemnitee") hereto desires to make a
claim against any other party ("Indemnitor") pursuant to the provisions of
this Article VIII, then Indemnitee shall notify Indemnitor of the claim,
demand, action or right of action which is the basis of such claim and the
provision or provisions of this Agreement alleged to have been breached or
to be inaccurate. Indemnitee shall provide Indemnitor with all information
available to it regarding such claim, demand, action or right of action
(whether or not it involves a third party). Any failure of Indemnitee to
notify Indemnitor of any such claim shall not waive any rights of
Indemnitee, except to the extent that the rights of the Indemnitor are
actually prejudiced.
24
<PAGE>
(2) With respect to any claim brought by a third party
against an Indemnitee, the Indemnitor may, and upon request of the
Indemnitee shall, assume the defense of the claim with competent counsel of
its choice, approved by Indemnitee, which approval shall not be
unreasonably withheld or delayed. Subject to the deductible set forth in
Sections 8.2(a)(1) and 8.2(b) and the limits set forth in Section
8.2(a)(3), the Indemnitor shall pay the fees and expenses of that counsel.
However, any Indemnitee is authorized (but not required) to retain counsel
(in which case the fees and expenses of that counsel shall be paid by the
Indemnitor) in order to file any motion, answer or other pleading and take
any other action which it reasonably considers essential to protect its
interests or those of the Indemnitor until the Indemnitor retains counsel,
provided that such action does not prejudice the defense of the claim.
Moreover, even though the Indemnitor retains counsel, the Indemnitee shall
have the right to retain its own counsel. However, except as provided in
the sentence preceding the previous sentence, the fees and expenses of such
counsel shall be paid by the Indemnitee. If requested by the Indemnitor,
the Indemnitee shall cooperate with the Indemnitor and its counsel is
contesting any claim that the Indemnitor defends or, if appropriate and
related to the claim, in making any counterclaim or cross-claim against the
third party asserting the claim or against any other person. No claim for
which indemnification is sought under this Section 8.2 may be settled or
compromised without the consent of the Indemnitor and the Indemnitee. Such
consent shall not be unreasonably withheld or delayed.
(e) Sole Monetary Remedies. The remedies set forth in this
----------------------
Section 8.2 constitute the sole monetary remedies of Seller, Buyer, the
Shareholders and their respective Representatives respecting any of the matters
addressed in this Agreement including, without limitation, any non-contract
monetary remedies. However, this Section 8.2(e) shall not affect Buyer's or
Richard G. Wollack's remedies under the Employment Agreement.
ARTICLE IX
----------
MISCELLANEOUS
- -------------
9.1 Termination
-----------
25
<PAGE>
This Agreement may be terminated and the transactions contemplated
hereby abandoned by the mutual written consent of each of the parties hereto or
by Seller or Buyer if the conditions to such party's obligations set forth in
Articles VI and VII, respectively, have not been satisfied on or before April
30, 1995 (unless waived by the party entitled to the benefit thereof), without
liability of any party hereto; provided that no party will be released from
liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of (a) willful failure of such party to have performed its
obligations hereunder, or (b) any knowing misrepresentation made by such party
of any matter set forth herein. In the event that a condition precedent to its
obligations is not satisfied, nothing contained herein shall be deemed to
require any party to terminate this Agreement, rather than to waive such
condition precedent and proceed with the transactions contemplated hereby.
9.2 Assignment
----------
Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by Seller without the prior written consent of Buyer. Buyer
shall have the right to assign this Agreement to a wholly owned subsidiary of
Buyer without the consent of Seller provided the obligations of such assignee
under this Agreement are guaranteed by Buyer. Except for the foregoing, Buyer
shall have no right to assign this Agreement or any of the rights or obligations
hereunder without the prior written consent of Seller. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their, respective successors and assigns, and no other person shall
have any right, benefit or obligation hereunder.
9.3 Notices
-------
Unless otherwise provided herein, any notice, request, instruction or
other document to be given hereunder by any party to the others shall be in
writing and delivered in person or by commercial overnight courier, telegraph,
telex or by facsimile transmission or mailed by certified mail, postage prepaid,
return receipt requested, as follows:
If to Shareholders: Richard G. Wollack
2200 Powell Street
7th Floor
Emeryville, California 94608-1809
Telephone No.: (510) 596-3202
26
<PAGE>
Facsimile No.: (510) 596-3299
Brent Donaldson
2200 Powell Street
7th Floor
Emeryville, California 94608-1809
Telephone No.: (510) 596-3201
Facsimile No.: (510) 596-3299
With a copy to: Heller, Ehrman, White & McAuliffe
333 Bush Street, Suite 3100
San Francisco, California 94104-2878
Attention: Daniel E. Titelbaum, Esq.
Telephone No.: (415) 772-6134
Facsimile No.: (415) 772-6268
If to Buyer: Koll Management Services, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attn: President
Telephone No.: (714) 833-3030
Facsimile No.: (714) 833-8635
With a copy to: Allen, Matkins, Leck, Gamble & Mallory
18400 Von Karman Avenue
4th Floor
Irvine, California 92715
Attn: Thomas C. Foster, Esq.
Telephone No.: (714) 553-1313
Facsimile No.: (714) 553-8354
If to Seller: Liquidity Financial Group, L.P.
2200 Powell Street
7th Floor
Emeryville, California 94608-1809
Telephone No.: (510) 596-3200
Facsimile No.: (510) 596-3299
Any such notice or other communication shall be deemed received and effective
upon the earlier of (a) if personally delivered, the date of delivery to the
address of the person to receive such notice; (b) if delivered by commercial
overnight carrier, one day following the
27
<PAGE>
receipt of such communication by such carrier from the sender, as shown on the
sender's delivery invoice from such carrier; (c) if mailed, forty-eight (48)
hours after the date of posting by the United States Post Office as shown by the
sender's registry or certification receipt, as the case may be; (d) if given by
telegraph or cable, when delivered to the telegraph company with charges
prepaid; or (e) if given by telex or telecopy, when sent. Any reference herein
to the date of receipt, delivery, or giving, as the case may be, of any notice
or other communication shall refer to the date such communication becomes
effective under the terms of this Section 9.3. Any notice or other communication
sent by cable, telex, or telecopy must be confirmed within forty-eight (48)
hours by letter mailed or delivered in accordance with the foregoing. Notice of
change of address shall be given by written notice in the manner detailed in
this Section 9.3. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given shall be deemed
to constitute receipt of the notice or other communication sent.
9.4 Choice of Law
-------------
This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of California.
9.5 Entire Agreement; Amendments and Waivers
----------------------------------------
This Agreement, together with all Exhibits and schedules hereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. No supplement,
amendment, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
9.6 Counterparts
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
9.7 Invalidity
----------
28
<PAGE>
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
9.8 Headings
--------
The headings of the Articles and Sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
9.9 Further Assurances
------------------
On and after the Closing Date, Seller, the Shareholders and Buyer
shall take all appropriate action and execute all documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the provisions hereof.
9.10 Expenses
--------
Seller, the Shareholders and Buyer will each be liable for their own
costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement.
9.11 Attorneys Fees
--------------
In any litigation relating to this Agreement between the parties
hereto,. the prevailing party or parties shall be entitled to recover reasonable
attorney fees, court costs and other reasonable expenses incurred in connection
with such litigation.
9.12 Publicity
---------
29
<PAGE>
Neither the Shareholders, Seller nor Buyer shall issue any press
release or make any public statement regarding the transactions contemplated
hereby (including, but not limited to, any press release or public statement
announcing the execution of this Agreement, the termination of this Agreement or
the consummation of the transactions contemplated hereby), without the prior
approval of the other parties hereto save and except for any disclosures,
notices or public filings required by law. The parties hereto shall issue a
mutually acceptable press release as soon as practicable after the Closing Date
announcing the consummation of the transactions contemplated hereby.
9.13 Confidential Information
------------------------
The parties acknowledge that the transaction described herein is of a
confidential nature and shall not be disclosed except to consultants, advisors,
affiliates and Representatives, or as required by law, until such time as the
parties make a public announcement regarding the transaction as provided in
Section 9.11. In connection with the negotiation of this Agreement and the
preparation for the consummation of the transactions contemplated hereby, each
party acknowledges that it will have access to confidential information relating
to the other parties. Each party shall treat such information as confidential,
preserve the confidentiality thereof and not duplicate or use such information,
except to advisors, consultants, affiliates and Representatives in connection
with the transactions contemplated hereby. Employees of Seller shall be
notified of the fact of the subject transaction in a joint communication from
Seller and Buyer mutually approved by Seller and Buyer. In the event of the
termination of this Agreement for any reason whatsoever, each party shall return
to the other all documents, work papers and other material (including all copies
thereof) obtained in connection with the transactions contemplated hereby and
shall use all reasonable efforts, including instructing its employees and others
who have had access to such information, to keep confidential and not to use any
such information, unless such information is now, or is hereafter disclosed,
through no act or omission of such party, in any manner making it available to
the general public.
9.14 Miscellaneous
-------------
Each of the Exhibits attached hereto is incorporated herein by
reference and expressly made a part of this Agreement for all purposes.
References to any Exhibit made in this Agreement shall be deemed to include this
reference and incorporation. Where the context so requires, the use of the
neuter gender shall include the masculine and feminine
30
<PAGE>
genders, the masculine gender shall include the feminine and neuter genders, and
the singular number shall include the plural and vice versa. Time is of the
essence of this Agreement. There are no third party beneficiaries to this
Agreement. Each party hereto acknowledges that (i) each party hereto is of equal
bargaining strength; (ii) each such party has actively participated in the
drafting, preparation, and negotiation of this Agreement; and (iii) any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not apply in the interpretation of this Agreement, any
portion hereof, any amendments hereto, or any Exhibits attached hereto.
ARTICLE X
---------
DEFINITIONS
- -----------
10.1 Accounting Party
----------------
The term "Accounting Party" is defined in Section 1.3(f).
----------------
10.2 Affiliate
---------
The term "Affiliate" means any person or entity which, directly or
---------
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with another person or entity. The term "control" as
used herein (including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
vote fifty percent (50%) or more of the outstanding voting securities of such
person or entity.
10.3 Assets
------
The term "Assets" is defined in Section 1.1.
------
10.4 Benefit Arrangement
-------------------
The term "Benefit Arrangement" is defined in Section 3.12.
-------------------
31
<PAGE>
10.5 Business
---------
The term "Business" is defined in Recital A.
--------
10.6 Buyer
-----
The term "Buyer" means Koll Management Services, Inc.
-----
10.7 Calculation Year
----------------
The term "Calculation Year" means the First Year and each twelve (12)
----------------
month period thereafter until the Deferred Portion is satisfied.
10.8 Closing
-------
The term "Closing" is defined in Section 2.1.
-------
10.9 Closing Date
------------
The term "Closing Date" is defined in Section 2.1.
10.10 Damages
-------
The term "Damages" is defined in Section 8.2(c).
-------
10.11 Deferred Portion
----------------
The term "Deferred Portion" is defined in Section 1.2.
----------------
32
<PAGE>
10.12 Down Payment
------------
The term "Down Payment" is defined in Section 1.2.
------------
10.13 Employment Agreement
--------------------
The term "Employment Agreement" is defined in Section 6.3.
--------------------
10.14 Existing Contracts
------------------
__________The terms "Existing Contracts" is defined in Section 1.1.
------------------
10.15 Financial Statements
--------------------
The term "Financial Statements" is defined in Section 3.5.
--------------------
10.16 First Year
----------
The term "First Year" is defined in Section 1.3.
----------
10.17 Indemnitee
----------
The term "Indemnitee" is defined in Section 8.2(d).
----------
10.18 Indemnitor
-----------
The term "Indemnitor" is defined in Section 8.2(d).
----------
10.19 INDEX
-----
33
<PAGE>
__________The term "INDEX" is defined in Recital A.
-----
10.20 License Agreement
-----------------
__________The term "License Agreement" means that certain License Agreement by
-----------------
and between Seller and Buyer effective as of the Closing Date, wherein Buyer
licenses to Seller databases related to the activities described as INDEX and
T.R.E.E.S.
10.21 Net Operating Income
--------------------
__________The term "Net Operating Income" is defined in Section 1.3(a).
--------------------
10.22 Net Operating Loss
------------------
__________The term "Net Operating Loss" is defined in Section 1.3(b).
------------------
10.23 Non-Accounting Party
--------------------
__________The term "Non-Accounting Party" is defined in Section 1.3(f).
--------------------
10.24 Operating Expenses
------------------
The term "Operating Expenses" is defined in Section 1.3(d).
------------------
10.25 Purchase Price
--------------
The term "Purchase Price" is defined in Section 1.2.
--------------
10.26 Representative
--------------
34
<PAGE>
The term "Representative" means any officer, director, principal,
--------------
attorney, accountant, agent, employee or other representative.
10.27 Revenues
--------
__________The term "Revenues" is defined in Section 1.3(c).
--------
10.28 Seller
------
The term "Seller" means Liquidity Financial Group, L.P., a California
------
limited partnership.
10.29 Seller's Office Space
---------------------
__________The term "Seller's Office Space" means that certain office space
---------------------
located at 2200 Powell Street, 7th Floor, Emeryville, California 94608-1809,
with respect to which Seller is a tenant.
10.30 Shareholders; Shareholder
-------------------------
The term "Shareholders" means Richard G. Wollack and Brent Donaldson,
------------
collectively; the term "Shareholder" means any of the Shareholders.
-----------
10.31 T.R.E.E.S.
----------
The term "T.R.E.E.S." is defined in Recital A.
----------
10.32 T.R.E.E.S. Employees
--------------------
The term "T.R.E.E.S. Employees" is defined in Section 2.5.
-------------------
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or have
caused this Agreement to be duly executed on their respective behalf by their
respective officers thereunto duly authorized, as of the day and year first
above written.
"Shareholders"
RICHARD G. WOLLACK
________ ________________________
BRENT DONALDSON
"Seller" LIQUIDITY FINANCIAL GROUP, L.P., a
California limited partnership
By:
Liquidity Financial Corporation, a
California corporation,
General Partner
By:
Richard G. Wollack,
Its: Chairman
"Buyer" KOLL MANAGEMENT SERVICES,
INC., a Delaware corporation
By:
D. Glen Raiger,
Executive Vice-President
36
<PAGE>
EXHIBIT 10.44
* Confidential Treatment
Requested
ASSET PURCHASE AGREEMENT
by and between
THE SHELARD GROUP, INC.
and
SCI SERVICES, INC.
as "Sellers"
and
KOLL MANAGEMENT SERVICES, INC.,
as "Buyer,"
Dated: June 30, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
ARTICLE 1 PURCHASE AND SALE OF ASSETS............................. 2
1.1 TRANSFER OF ASSETS...................................... 2
------------------
1.2 CONSIDERATION........................................... 2
-------------
1.3 CALCULATION OF NET OPERATING INCOME..................... 4
-----------------------------------
1.4 ASSUMPTION OF LIABILITIES OF SELLERS.................... 6
------------------------------------
1.5 COVENANT NOT TO COMPETE................................. 7
-----------------------
1.6 EXCLUDED ASSETS......................................... 9
---------------
ARTICLE 2 CLOSING................................................. 9
2.1 CLOSING................................................. 9
-------
2.2 DOCUMENTS TO BE DELIVERED............................... 9
-------------------------
2.3 TRANSFER TAXES.......................................... 10
--------------
2.4 PRORATIONS.............................................. 10
----------
2.5 EMPLOYMENT.............................................. 11
----------
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS
AND THE SHAREHOLDERS.................................... 12
3.1 ORGANIZATION AND QUALIFICATION.......................... 12
------------------------------
3.2 CAPITALIZATION.......................................... 12
--------------
3.3 OWNERSHIP OF SHARES..................................... 13
-------------------
3.4 TITLE TO ASSETS......................................... 13
---------------
3.5 AUTHORIZATION........................................... 13
-------------
3.6 NO CONFLICT OR VIOLATION................................ 13
------------------------
3.7 CONSENTS AND APPROVALS.................................. 14
----------------------
3.8 FINANCIAL STATEMENTS.................................... 14
--------------------
3.9 BOOKS AND RECORDS....................................... 15
-----------------
3.10 LITIGATION.............................................. 15
----------
3.11 COMPLIANCE WITH LAW..................................... 15
-------------------
3.12 PERMITS AND LICENSES.................................... 16
--------------------
3.13 SOFTWARE LICENSES....................................... 16
-----------------
3.14 LIABILITIES............................................. 16
-----------
3.15 LABOR MATTERS........................................... 16
-------------
3.16 BENEFIT ARRANGEMENTS.................................... 17
--------------------
3.17 BROKERS AND FINDERS..................................... 17
-------------------
3.18 NO OTHER AGREEMENTS TO SELL............................. 17
---------------------------
3.19 MATERIAL MISSTATEMENTS OR OMISSIONS..................... 17
-----------------------------------
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER................. 18
4.1 ORGANIZATION OF BUYER................................... 18
---------------------
4.2 AUTHORIZATION........................................... 18
-------------
4.3 BROKERAGE/FINDERS FEES.................................. 18
----------------------
4.4 NO CONFLICT OR VIOLATION................................ 18
------------------------
4.5 FINANCIAL STATEMENTS.................................... 19
--------------------
ARTICLE 5 ACTIONS BY SELLERS, THE COMPANIES AND
BUYER PRIOR TO THE CLOSING.............................. 19
5.1 MAINTENANCE OF BUSINESS................................. 19
-----------------------
5.2 INVESTIGATION BY BUYER.................................. 19
----------------------
5.3 NOTIFICATION OF CERTAIN MATTERS......................... 19
-------------------------------
</TABLE>
(i)
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE 6 CONDITIONS TO SELLERS' OBLIGATIONS..................... 20
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.............. 20
-----------------------------------------
6.2 NO GOVERNMENTAL PROCEEDING OR LITIGATION............... 20
----------------------------------------
6.3 OPINION OF BUYER'S COUNSEL............................. 20
--------------------------
6.4 WAIVER BY SELLERS...................................... 20
-----------------
ARTICLE 7 CONDITIONS TO BUYER'S OBLIGATIONS...................... 20
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.............. 21
-----------------------------------------
7.2 NO GOVERNMENTAL PROCEEDING OR LITIGATION............... 21
----------------------------------------
7.3 OPINION OF SELLER'S COUNSEL............................ 21
---------------------------
7.4 WAIVER BY BUYER........................................ 21
---------------
ARTICLE 8 INDEMNIFICATION........................................ 21
8.1 SURVIVAL OF REPRESENTATIONS, ETC....................... 21
--------------------------------
8.2 INDEMNIFICATION........................................ 22
---------------
a. BY SELLERS AND SHAREHOLDERS...................... 22
b. RIGHT OF OFFSET.................................. 22
c. BY BUYER......................................... 22
d. DAMAGES.......................................... 22
e. NOTIFICATION REQUIREMENT......................... 23
f. EXCLUSIVE REMEDY................................. 23
ARTICLE 9 MISCELLANEOUS.......................................... 23
9.1 TERMINATION............................................ 23
-----------
9.2 ASSIGNMENT............................................. 23
----------
9.3 NOTICES................................................ 24
-------
9.4 CHOICE OF LAW.......................................... 26
-------------
9.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS............... 26
----------------------------------------
9.6 COUNTERPARTS........................................... 26
------------
9.7 INVALIDITY............................................. 26
----------
9.8 HEADINGS............................................... 26
--------
9.9 FURTHER ASSURANCES..................................... 27
------------------
9.10 EXPENSES............................................... 27
--------
9.11 ATTORNEYS FEES......................................... 27
--------------
9.12 PUBLICITY.............................................. 27
---------
9.13 CONFIDENTIAL INFORMATION............................... 27
------------------------
9.14 POST-CLOSING COVENANTS................................. 28
----------------------
a. CONSENTS FROM EXISTING CLIENTS................... 28
b. ERRORS AND OMISSION INSURANCE.................... 28
9.15 ACCESS TO RECORDS; COOPERATION......................... 28
------------------------------
9.16 MISCELLANEOUS.......................................... 29
-------------
ARTICLE 10 DEFINITIONS............................................ 29
10.1 AFFILIATE.............................................. 29
---------
10.2 ADJUSTED EARN OUT AMOUNT............................... 29
------------------------
10.3 AGREEMENT.............................................. 29
---------
10.4 ASSETS................................................. 29
------
10.6 BUYER.................................................. 29
-----
10.7 BUYER'S CLOSING CERTIFICATE............................ 29
---------------------------
10.8 BUYER FINANCIAL STATEMENT.............................. 29
-------------------------
10.9 BUYER'S FIRST POSITION CUMULATIVE ANNUAL BASE.......... 29
---------------------------------------------
10.10 BUYER ORIGINATED AGREEMENTS............................ 30
---------------------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<C> <S> <C>
10.11 CASH DOWN PAYMENT..................................... 30
-----------------
10.12 CLOSING............................................... 30
-------
10.13 CLOSING DATE.......................................... 30
------------
10.14 COMMERCIAL PROPERTY OR FACILITIES MANAGEMENT SERVICES. 30
-----------------------------------------------------
10.15 COMMERCIAL REAL ESTATE BROKERAGE SERVICES............. 30
-----------------------------------------
10.16 DAMAGES............................................... 30
-------
10.17 DISCLOSURE SCHEDULE................................... 30
-------------------
10.18 EARN OUT FORMULA...................................... 30
----------------
10.19 EARN OUT PAYMENTS..................................... 30
-----------------
10.20 EARN OUT PERIOD....................................... 30
---------------
10.21 EARN OUT YEAR......................................... 30
-------------
10.22 EMPLOYMENT AGREEMENT.................................. 30
--------------------
10.23 EXISTING BROKERAGE AGREEMENT.......................... 30
----------------------------
10.24 EXISTING CLIENT....................................... 30
---------------
10.25 EXISTING CONSTRUCTION AGREEMENT....................... 30
-------------------------------
10.26 EXISTING MANAGEMENT AGREEMENT......................... 30
-----------------------------
10.27 FULL EARN OUT AMOUNT.................................. 31
--------------------
10.28 GENERAL CONTRACTOR OR CONSTRUCTION SERVICES........... 31
-------------------------------------------
10.29 INDEMNITEE AND INDEMNITOR............................. 31
-------------------------
10.30 MAY FINANCIAL STATEMENTS.............................. 31
------------------------
10.31 MINNESOTA DIVISION.................................... 31
------------------
10.32 NET OPERATING INCOME.................................. 31
--------------------
10.33 NET OPERATING LOSS.................................... 31
------------------
10.34 OPERATING EXPENSES.................................... 31
------------------
10.35 OPINION OF BUYER'S COUNSEL............................ 31
--------------------------
10.36 OPINION OF SELLER'S COUNSEL........................... 31
---------------------------
10.37 PURCHASE PRICE........................................ 31
--------------
10.38 REGIONAL PRESIDENT.................................... 31
------------------
10.39 REPRESENTATIVE........................................ 31
--------------
10.40 REVENUES.............................................. 31
--------
10.41 SCI................................................... 31
---
10.42 SELLERS............................................... 31
-------
10.43 SELLER'S CLOSING CERTIFICATE.......................... 31
----------------------------
10.44 SGI................................................... 31
---
10.45 SGI/SCI FINANCIAL STATEMENTS.......................... 32
----------------------------
10.46 SHAREHOLDERS.......................................... 32
------------
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT LIST AGREEMENT REFERENCE
<C> <S> <S>
"A" EXISTING CLIENTS Recital A
"B-1" EXISTING MANAGEMENT AGREEMENTS Recital A, Section 3.4
"B-2" EXISTING BROKERAGE AGREEMENTS Recital A, Section 3.4
"B-3" EXISTING CONSTRUCTION AGREEMENTS Recital A, Section 3.4
"C" PERSONAL PROPERTY LEASES,
PERSONAL PROPERTY FINANCING
ARRANGEMENTS AND REAL PROPERTY LEASES. Sections 1.1, 1.4, 2.2, 3.4
"D-1" SELLERS' OTHER ASSETS Sections 1.1, 2.2
"D-2" (Intentionally Deleted)
"E" SELLERS' LIABILITIES Section 1.4
"F" (INTENTIONALLY DELETED)
"G" EMPLOYEES Section 2.5
"H" EMPLOYMENT AGREEMENT OF KIM A. CULP Section 2.5(b)
"I-1" SGI/SCI FINANCIAL STATEMENTS Section 3.8
"I-2" MAY FINANCIAL STATEMENTS Section 3.8
"J" 1995 BUDGETS Section 3.9
"K" DISCLOSURE SCHEDULE Section 1.1, Article 3, Section 5.1
"L" BENEFIT ARRANGEMENTS Section 3.15
"M" BUYER FINANCIAL STATEMENTS Section 4.5
"N" EXCLUDED ASSETS Section 1.6
</TABLE>
(iv)
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of June 30, 1995, by and between The Shelard Group, Inc., a Minnesota
corporation ("SGI") and SCI Services, Inc, a Minnesota corporation ("SCI"), on
the one hand, and Koll Management Services, Inc., a Delaware corporation
("Buyer"), on the other hand. SGI and SCI are sometimes individually referred to
herein as a "Seller" and collectively as "Sellers". Kim A. Culp ("Culp") and
Sheldon Z. Wert ("Wert") are all of the shareholders of each of SGI and SCI and
have joined Sellers in this Agreement as set forth hereinbelow. Culp and Wert
are referred to individually herein by their last names and collectively as
Shareholders. A glossary of defined terms used herein is set forth in Article
10.
RECITALS:
A. The Sellers currently engage in the business of providing commercial
property and facilities management services, commercial real estate brokerage
services, and general contractor and construction services to third parties as
set forth on EXHIBIT "A" (collectively, the "Existing Clients" and sometimes
separately referred to as an "Existing Client") pursuant to written agreements
entered into by each Seller as applicable, and each such Existing Client. Such
written agreements entered into by Sellers and an Existing Client with respect
to commercial property and facility management services set forth on EXHIBIT "B-
1" attached hereto shall hereinafter collectively be referred to as the
"Existing Management Agreements" shall separately be referred to as an "Existing
Management Agreement". Such written agreements entered into by Sellers and an
Existing Client with respect to commercial real estate brokerage services set
forth on EXHIBIT "B-2" attached hereto shall hereinafter collectively be
referred to as the "Existing Brokerage Agreements" and shall separately be
referred to as an "Existing Brokerage Agreement". Such written agreements
entered into by Sellers and an Existing Client with respect to general
contractor and construction services set forth on EXHIBIT B-3 attached hereto
shall hereafter collectively be referred to as the "Existing Construction
Agreements" and shall separately be referred to as an "Existing Construction
Agreement".
B. Buyer desires to purchase from Sellers, and Sellers desire to sell and
transfer to Buyer substantially all of the operating assets of Sellers
including, all of the Existing Management Agreements, all of the Existing
Brokerage Agreements and all of the Existing Construction Agreements and certain
other assets including the goodwill of Sellers, upon the terms and subject to
the conditions set forth in this Agreement.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1 PURCHASE AND SALE OF ASSETS
1.1 TRANSFER OF ASSETS. Upon the terms and subject to the conditions
------------------
contained herein, Sellers shall: (a) transfer and convey to Buyer all of the
Existing Management Agreements, all of the Existing Brokerage Agreements and all
of the Existing Construction Agreements; (b) assign to Buyer the personal
property leases, personal property financing arrangements and real property
leases of Sellers set forth on EXHIBIT "C"; (c) transfer to Buyer the goodwill
of Sellers and the other assets of Sellers set forth on EXHIBIT "D-1"; and (d)
assign to Buyer all rights to the use of the names "The Shelard Group" and "SCI
Services" and any derivatives thereof including, without limitation, all
trademarks, servicemarks and copyrights in connection therewith. Upon Buyer's
written request any time on or after the Closing Date, each Seller will promptly
change its corporate name to a name not similar to, derivative of or confusing
with "The Shelard Group" and/or "SCI Services". All of the foregoing assets to
be transferred to Buyer pursuant to this Agreement shall hereinafter be
collectively referred to as the "Assets." Buyer shall acquire on the Closing
Date the Assets free and clear of all liens and encumbrances except as otherwise
set forth on the Disclosure Schedule attached hereto as EXHIBIT "K".
1.2 CONSIDERATION. Upon the terms and subject to the conditions
-------------
contained herein, as consideration for the purchase of the Assets, Buyer shall
pay to Sellers up to * Dollars ($ * ) ("Purchase Price")
as follows:
a. The amount of * Dollars ($ * ) (the "Cash Down
Payment") shall be paid by Buyer to Seller in cash at the Closing;
b. The amount of up to * Dollars ($ * ) (the "Full
Earn Out Amount") shall be paid by Buyer to Seller over a four (4) year period
(the "Earn Out Period") and upon the terms of the formula which is set forth in
Subsection (c) immediately below (the "Earn Out Formula"). The Earn Out Period
shall commence on the Closing Date and end on the day before the fourth
anniversary of the Closing Date. Each year commencing on the Closing Date or
the anniversary of the Closing Date and ending on the day before the succeeding
anniversary of the Closing Date during the Earn Out Period is referred to as an
"Earn Out Year". "Earn Out Payments" due Sellers will be made annually after
each Earn Out Year by Buyer to Sellers in accordance with the Earn Out Formula.
Upon receipt by Sellers of the Full Earn Out Amount, all payments under the Earn
Out Formula
2
* Confidential Treatment
Requested
<PAGE>
shall cease and Sellers shall have been paid the Purchase Price in full even if
paid in full prior to the end of the Earn Out Period. Upon the end of the Earn
Out Period all payments under the Earn Out Formula shall cease and the Purchase
Price shall be adjusted to an amount equal to the Cash Down Payment plus the
full amount actually due to Sellers pursuant to the Earn Out Formula during the
Earn Out Period (the "Adjusted Earn Out Amount") and upon payment in full to
Sellers of the Adjusted Earn Out Amount the Purchase Price shall have been paid
in full.
c. The Full or Adjusted Earn Out Amount shall be determined by allocating
Net Operating Income from the business related to the Assets as operated by
Buyer (which upon the Closing Date shall become the Minnesota Division of Buyer)
in accordance with the Earn Out Formula as follows:
(1) Net Operating Income in any Earn Out Year shall be allocated to
and retained by Buyer until Buyer shall have been allocated annually
* Dollars ($ * ) for that Earn Out Year and *
Dollars ($ * ) for each previous Earn Out Year ("Buyer's First
Position Cumulative Annual Base").
(2) * percent ( * %) of Net Operating Income in any Earn Out Year
in excess of Buyers First Position Cumulative Annual Base shall be
allocated and distributed to Sellers until Sellers have received up to a
total of * Dollars ($ * ) during the Earn Out
Period.
(3) By way of example only: If Net Operating Income in the first Earn
Out Year were * Dollars ($ * ) the allocation
would be as follows:
<TABLE>
<CAPTION>
<S> <C>
Net Operating Income: $ *
Buyer's current allocation: $ *
Seller's current 50/50 allocation: $ *
Buyer's allocation carried forward
(to be allocated if available in
future Earn Out Years): *
</TABLE>
(4) By way of example only: If Net Operating Income in the second
Earn Out Year were * Dollars ($ * )
the allocation would be as follows:
<TABLE>
<CAPTION>
<S> <C>
Net Operating Income: $ *
Buyer's allocation carried forward
from past Earn Out Year: $ *
Buyer's current allocation: $ *
Seller's current 50/50 allocation
(50% of remaining $400,000): $ *
Buyer's current 50/50 allocation
(50% of remaining $400,000) $ *
</TABLE>
3
* Confidential Treatment
Requested
<PAGE>
1.3 CALCULATION OF NET OPERATING INCOME. Distributions to Sellers
-----------------------------------
pursuant to the Earn Out Formula shall be made solely from Net Operating Income.
a. The term "Net Operating Income" for any relevant Earn Out Year means
the Revenues during such year less:
(1) the Operating Expenses during such year,
(2) an allocation of Buyer's corporate overhead during such year,
consistent with allocations made by Buyer to its operating divisions and
reflective of Sellers historic overhead for the business of Sellers
relating to the Assets for the twelve (12) month period immediately prior
to the Closing Date as such allocation may be increased or decreased to
reflect variances in business volume all as reasonably determined by
Buyer with due input from and consultation with Shareholders; and
(3) any Net Operating Loss incurred in an Earn Out Year previous to
such relevant Earn Out Year to the extent same has not been offset in the
calculation of Net Operating Income for a Earn Out Year previous to such
relevant Earn Out Year.
b. The term "Net Operating Loss" for any relevant Earn Out Year means the
amount that the items specified in subsections (1) and (2) of Section 1.3(a) for
such year exceeds the Revenues for such year.
c. The term "Revenues" for any relevant Earn Out Year means the gross
revenues of the Minnesota Division, net of any income received from management,
brokerage and/or construction agreements administered by the Minnesota Division
but originated by Buyer outside the ordinary course of business of the Minnesota
Division ("Buyer Originated Agreements").
d. The term "Operating Expenses" for any relevant Earn Out Year means all
operating expenses incurred by or on behalf of the business of the Minnesota
Division during such year as reasonably determined by Buyer with due input from
and consultation with Shareholders, including, without limitation,
(1) office expenses,
(2) labor and benefits costs including, without limitation, fees
and/or commissions to independent contractors.
(3) real property rent expense for such period,
(4) travel and entertainment expenses,
(5) insurance costs, including, without limitation, errors and
omissions/professional liability insurance
4
<PAGE>
costs and the cost of including the activities of the Minnesota Division
under Buyer's umbrella liability coverage,
(6) professional fees,
(7) all taxes (except income taxes),
(8) marketing expenses,
(9) personal property rent expenses and interest on personal property
financing arrangements payable to third parties,
(10) computer maintenance and non-capitalizable software costs for all
personal computers,
(11) interest at Buyer's cost of funds on its lines of credit with
third party lenders on outstanding working capital advances, if any, made
by Buyer to the Minnesota Division,
(12) depreciation from Sellers' basis on depreciable Assets
transferred hereunder and depreciation on new depreciable Assets, if any,
purchased by Buyer for the benefit of the Minnesota Division during the
Earn Out Period.
(13) accounting costs including, without limitation, an allocation of
Buyer's accounting costs consistent with allocations by Buyer to its
operating divisions and reflective of Sellers historic accounting costs
for the business of Sellers relating to the Assets for the twelve (12)
month period immediately prior to the Closing Date as reasonably
determined by Buyer with due input from and consultation with the
Shareholders,
(14) the expense component of discharging the liabilities of Sellers
assumed by Buyer pursuant to the provisions of this Agreement, and
(15) any direct out of pocket costs of Buyer incurred on behalf of the
Sellers for any of the foregoing expenses.
Operating Expenses shall not include interest or depreciation other than as set
forth in subsections (11) and (12) above, acquisition costs of Buyer and/or
Seller incurred in the transactions contemplated by this Agreement which are to
be paid by each party pursuant to Section 9.10. Additionally, Operating
Expenses shall not include the transition costs of putting Buyer in control of
the business of Sellers which becomes the Minnesota Division or the costs of
changing the name(s) and identity(ies) of the business of Sellers should Buyer
elect to do so. Finally, Operating Expenses shall not include an allocation of
expenses
5
<PAGE>
for the administration by the Minnesota Division of Buyer Originated Agreements,
if any, as reasonably determined by Buyer with due input from and consultation
with the Shareholders.
e. For purposes of the foregoing, Revenues, Operating Expenses, Net
Operating Income and Net Operating Loss shall be calculated under the accrual
method of accounting and in accordance with generally accepted accounting
principles. In the event any Operating Expense in any relevant Earn Out Year is
less than it would have otherwise been solely because of operational
efficiencies arising from Buyer's acquisition of the Assets in the reasonable
determination of Buyer with due input from and consultation with the
Shareholders, then for purposes of calculating Net Operating Income for such
Earn Out Year, such Operating Expense shall be deemed to be an amount equal to
what such expense would have been but for such operational efficiencies.
f. Within twenty (20) days following the end of each month during each
Earn Out Year, Buyer shall prepare and distribute to Sellers a monthly profit
and loss statement setting forth the calculations of Net Operating Income or Net
Operating Loss as applicable for such month and for the applicable Earn Out Year
to date including budget variances. Within sixty (60) days following the end of
each Earn Out Year, Buyer shall prepare and distribute to Sellers an annual
report setting forth the calculation of Net Operating Income or Net Operating
Loss, as applicable, for the applicable Earn Out Year, certified as true and
correct by an officer of Buyer along with any Earn Out Payment due Sellers for
such Earn Out Year.
1.4 ASSUMPTION OF LIABILITIES OF SELLERS. Upon the terms and subject to
------------------------------------
the conditions contained herein, at the Closing, Buyer shall assume (a) all
obligations and liabilitiesrelating to the Assets arising from events occurring
after the Closing Date (i) under any Existing Management Agreements, Existing
Brokerage Agreements, Existing Construction Agreements and the personal property
leases, personal property financing arrangements and real property leases set
forth on EXHIBIT "C" attached hereto assigned to Buyer by Sellers pursuant to
the terms of this Agreement, but not including any obligations or liabilities
for any breach of any such contract occurring or claims arising from events
occurring prior to the Closing Date, and (ii) in respect of any employees of
Sellers employed by Buyer on or after the Closing Date with respect to events
occurring after the Closing Date (plus the liability for vacation and/or sick
pay accrued as of the Closing Date for employees of Seller employed by Buyer
and, potentially, severance pay to Ms. Bona all as set forth in Section 2.5
hereof), and (b) the trade payables and other liabilities of Sellers, if any,
set forth on EXHIBIT "E" attached hereto. Buyer shall not assume any obligations
or liabilities of Sellers not specifically described in this Section 1.4.
6
<PAGE>
1.5 COVENANT NOT TO COMPETE.
-----------------------
a. Each Seller hereby agrees that it shall not (i) for a period of five
(5) years following the Closing Date, engage in the trade or business, directly
or indirectly, of providing commercial property or facilities management
services, commercial real estate brokerage services and/or general contractor or
construction services in the State of Minnesota or (ii) for a period of ten (10)
years following the Closing Date solicit or contract with (1) any Existing
Client for the rendering of commercial property or facilities management
services and/or commercial real estate brokerage services and/or general
contractor and construction services, or (2) any client of Buyer for the
rendering of commercial property or facilities management services with respect
to any building then under a commercial property or facilities management
agreement with Buyer, any client of Buyer for the rendering of commercial real
estate brokerage services with respect to any building then under a sales or
leasing listing agreement with Buyer, or any client of Buyer for the rendering
of general contractor or construction services with respect to any building
under a construction or construction management agreement with Buyer in the
State of Minnesota.
b. Each Shareholder hereby agrees that he shall not, either as an
employee (exclusive of employment with Buyer or an Existing Client), employer,
consultant, agent, principal, partner, shareholder, corporate officer, director
or in any other individual or representative capacity, (i) for a period of five
(5) years following the Closing Date, engage in the trade or business, directly
or indirectly, of providing commercial property or facilities management
services and/or commercial real estate brokerage services and/or general
contractor or construction services in the State of Minnesota or (ii) for a
period of ten (10) years following the Closing Date, solicit or contract with,
or acquire, individually or with the other Shareholder, controlling interest in
any entity or organization which solicits or contracts with any client of Buyer
for the rendering of commercial property or facilities management services with
respect to any building then under a commercial property or facilities
management agreement with Buyer, any client of Buyer for the rendering of
commercial real estate brokerage services with respect to any building then
under a sales or leasing listing agreement with Buyer, any client of Buyer for
the rendering of general contractor or construction services, with respect to
any building under a construction or construction management agreement with
Buyer in the State of Minnesota. Notwithstanding the foregoing, Culp shall not
be in breach of the covenants contained in this Section 1.5 if he, during the
period from five (5) years through ten (10) years following the Closing Date,
accepts employment with (but does not alone or with Wert have a controlling
interest in) any entity which solicits or contracts with any client of Buyer for
the rendering of any of the services described in this subsection b. with
respect to any building then under an agreement with Buyer
7
<PAGE>
so long as Culp does not in any way suggest, initiate, direct or participate in
such solicitation or contract negotiation.
c. For a period of ten (10) years following the Closing Date, each Seller
and Shareholder agrees not to hire any of the employees of Buyer in connection
with the rendition by such Seller or Shareholder of commercial property or
facilities management services and/or commercial real estate brokerage services
and a general contractor or construction services of the type then currently
being rendered by Buyer for a period of one (1) year following any such
employee's termination, for any reason, of employment with Buyer, unless
otherwise agreed by Buyer and such Seller or Shareholder.
d. In the event any of the covenants in this Section 1.5 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time, or over too great a
geographical area, or by reason of its being too extensive in any other respect,
it shall be interpreted to extend only over the maximum period of time for which
it may be enforceable, and/or over the maximum geographical area as to which it
may be enforceable and/or to the maximum extent in all other respects as to
which it may be enforceable, all as determined by such court in such action.
e. In the event the covenants in this Section 1.5 shall be determined by
a court of competent jurisdiction to be unenforceable in any degree for any
reason under the laws of the State of Minnesota which is to be applied pursuant
to Section 9.4 hereof but enforceable to a greater degree under the laws of the
State of California, then notwithstanding the choice of the laws of the State of
Minnesota set forth in Section 9.4 hereof, the laws of the State of California,
excluding any laws that direct the application of the laws of another
jurisdiction, shall apply to the enforcement of such covenants.
f. Each Seller and each Shareholder acknowledges that a breach of the
covenants contained in this Section 1.5 will cause irreparable damage to Buyer,
the exact amount of which will be difficult to ascertain, and that the remedies
at law for any such breach will be inadequate. Accordingly, each Seller and/or
Shareholder agrees that if any such Seller and/or Shareholder breaches the
covenants contained in this Section 1.5 in addition to any other remedy which
may be available at law or in equity, Buyer shall be entitled to specific
performance and injunctive relief as against such Seller and/or Shareholder,
without, in the event of a final judgment, posting a bond or other security.
g. The covenants contained in this Section 1.5 shall terminate and be of
no further force or effect as to all of the Sellers and Shareholders so long as
Buyer is in breach of this Agreement by reason of the failure to pay Sellers any
Earn Out Payments due Sellers under this Agreement by the due date thereof where
such failure continues for ten (10) days after written notice thereof from
Sellers specifying such failure. Failure to
8
<PAGE>
pay Sellers any sum otherwise due Sellers under this Agreement by reason of the
exercise by Buyer of its offset rights set forth in Section 8.2(b) shall not
constitute a breach under this Agreement resulting in a termination of the
covenants contained in this Section 1.5.
h. The covenants contained in this Section 1.5 specifically relate to
"commercial property or facilities management services" and "commercial property
real estate brokerage services" which terms are specifically meant to exclude
-------
property or facilities management services and/or real estate brokerage services
rendered by any Seller or Shareholder or other entity to residential buildings
or projects including, without limitation, apartments, condominiums, town homes
or other multi-family residential projects. The covenants in this Section 1.5
which relate to "general contractor or construction services" have no such
limitation to "commercial" construction and are meant to extend to all general
contractor and construction services including, without limitation, residential
and tenant improvement construction.
i. Culp acknowledges and agrees that the covenants and obligations of
Culp as a Shareholder contained in this Section 1.5 are wholly separate and
independent of the obligations contained in the Employment Agreement between
Culp and Buyer attached hereto as EXHIBIT "H".
1.6 EXCLUDED ASSETS. Seller and Buyer acknowledge and agree that the
---------------
Assets being sold hereunder shall not include those certain assets listed on
EXHIBIT "N" attached hereto.
ARTICLE 2 CLOSING
2.1 CLOSING. The closing of the transactions contemplated herein (the
-------
"Closing") shall be held telephonically at 10:00 a.m. California time on Friday,
June 30, 1995, or such other date as may be mutually agreed upon in writing by
Sellers and Buyer (the "Closing Date"), at the offices of Sellers or its counsel
in Minnesota and Buyer or its counsel in California.
2.2 DOCUMENTS TO BE DELIVERED. To effect the transfer of the Assets
-------------------------
referred to in Sections 1.1 and the delivery of the consideration described in
Section 1.2 hereof, Sellers and Buyer shall, on the Closing Date, deliver the
following:
a. Sellers shall assign to Buyer all of their respective rights and
obligations with respect to each Existing Management Agreement and each Existing
Brokerage Agreement and each Existing Construction Agreement. Sellers shall
assign to Buyer all of its respective rights and obligations as lessee or
borrower, as applicable, under the personal property leases, personal property
financing arrangements and real property leases described on EXHIBIT "C"
attached hereto. Sellers shall transfer to Buyer all of the other Assets of
Sellers listed on EXHIBIT "D-1" attached
9
<PAGE>
hereto. Sellers shall assign to Buyer all rights to the use of the name "The
Shelard Group" and "SCI Services" and derivatives thereof including, without
limitation, all trademarks and servicemarks in connection therewith. Sellers
shall, if requested in writing by Buyer, deliver to Buyer at Closing or as soon
thereafter as practical evidence of the name change of each Seller as
contemplated by Section 1.1 hereof. This Agreement shall from and after the
Closing Date constitute the assignment document to vest title in the Buyer to
the Assets assigned to the Buyer in accordance with the provisions of this
Agreement. Notwithstanding the foregoing, Sellers shall deliver to Buyer at the
Closing or whenever thereafter requested by Buyer such assignment documentation
and conveyancing instruments in addition to this Agreement as shall be
reasonably requested by Buyer, in form and substance and in a manner reasonably
satisfactory to Buyer and Sellers, to vest in Buyer title in and to the Assets
assigned to Buyer in accordance with the provisions of this Agreement.
b. Buyer and Sellers shall each deliver all documents required to be
delivered by them, respectively, pursuant to Articles 6 and 7 respectively.
c. Buyer shall deliver the Cash Down Payment to Sellers by wire transfer.
d. All instruments and documents executed and delivered to Buyer pursuant
hereto shall be in form and substance, and shall be executed in a manner,
reasonably satisfactory to Buyer. All instruments and documents executed and
delivered to Sellers pursuant hereto shall be in form and substance, and shall
be executed in a manner, reasonably satisfactory to Sellers.
e. Buyer, on the one hand, and Sellers and Shareholders, on the other
hand, may execute and deliver this Agreement and all other documents to be
delivered at Closing by facsimile. Buyer, on the one hand, and Sellers and
Shareholders, on the other hand, agree to provide each other all such documents
bearing original signatures which will be delivered by commercial carrier to the
offices of their respective counsel no later than the second business day
following the Closing Date.
2.3 TRANSFER TAXES. Sellers shall be responsible for any documentary
--------------
transfer taxes and any sales, use, income or other taxes, duties, fees and
governmental exactions imposed by reason of the transfer of the Assets of
Sellers provided hereunder and any deficiency, interest or penalty asserted with
respect thereto.
2.4 PRORATIONS.
----------
a. Except as otherwise set forth below, there shall not be any proration
of expenses or income with respect to any of the Assets acquired by Buyer. All
revenue accrued prior to the Effective Date with respect to the Assets shall be
the property
10
<PAGE>
of Sellers and paid by Buyer to Sellers upon its receipt by Buyer and all
revenue accrued from and after the Closing Date with respect to the Assets shall
be the property of Buyer. All expenses accrued prior to the Closing Date with
respect to the Assets shall be the responsibility of Sellers and all expenses
accrued from and after the Closing Date with respect to the Assets shall be the
responsibility of Buyer.
b. Buyer and Seller acknowledge and agree that certain Existing
Management Agreements listed on EXHIBIT "B-1", namely
*
, provide for bonus management fees for services in the current year (1995)
which will not be determined and paid until the following year (1996). Buyer and
Seller agree that such bonuses when received by Buyer shall be prorated as of
the Closing Date and the prorated amount due Sellers shall be promptly paid by
Buyer to Sellers.
2.5 EMPLOYMENT.
----------
a. The employment of all employees presently employed by Sellers shall be
terminated by Sellers as of the Closing Date and related severance payments and
accrued vacation and/or sick pay payments due as a result of such termination
shall be the responsibility of Seller. Immediately following the Closing, Buyer
shall offer employment to all of the employees of Sellers who are listed on
EXHIBIT "G" attached hereto, and Sellers shall assist Buyer, to the extent
permitted by state and federal law, in hiring such employees. Buyer shall assume
liability for accrued vacation and/or sick pay for calendar year 1995 for those
employees of Sellers employed by Buyer as set forth on EXHIBIT "G". The
salaries and other compensation, if any, offered to such employees (other than
Culp, whose employment is addressed in Section 2.5(b) below) shall be market
competitive as of the Closing Date in the reasonable discretion of Buyer after
consultation with Sellers and other employee benefits offered to such employees
shall be consistent with employee benefits provided existing employees of Buyer
similarly situated as to seniority and title as of the Closing Date. Certain
senior management employees of Seller, designated as such on EXHIBIT "G", who
accept employment by Buyer will not be terminated or reassigned by Buyer during
the Earn Out Period without the express written consent of the Regional
President of Buyer. If Ms. Linda Bona, Seller's controller, is not offered
employment for a minimum of one (1) year on the aforesaid terms, Buyer will
reimburse Seller for one half (1/2) of the severance pay paid to Ms. Bona by
Sellers in an amount up to Thirty Five Thousand Dollars ($35,000).
b. Kim A. Culp, President of SGI, shall be employed as of the Closing
Date as Regional President of the Minnesota Division Buyer pursuant to the
Employment Agreement between Culp and Buyer attached hereto as EXHIBIT "H".
11
* Confidential Treatment
Requested
<PAGE>
c. Notwithstanding anything in this Agreement to the contrary, Sellers
and Buyer acknowledge and agree that other than as specifically set forth in
subsections a (regarding accrued vacation and sick pay) and b (regarding Culp's
Employment Agreement) of this Section 2.5, Buyer is NOT acquiring the Assets
---
subject to the liabilities or obligations that each Seller has or may have to
its employees including, without limitation, liabilities or obligations under:
(1) the Worker Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C.
(S) 2101 et seq.; (2) the Consolidated Omnibus Budget Reconciliation Act
("COBRA"), 29 U.S.C. (S) 1161 et seq., (including to each Sellers employees
currently receiving COBRA benefits and those who may become eligible for COBRA
benefits); (3) any obligations or liabilities of each Seller arising out of such
Seller's termination of its employees including, but not limited to, actions,
claims, liabilities, demands, severance pay and the like by each such Sellers
employees for wrongful termination and/or breach of alleged oral, implied and/or
express employment contracts; and (4) any obligations for bonus accrued and/or
subsequently determined to be paid to any employees of Sellers for the calendar
year period prior to the Closing Date whether or not such persons are employed
by Buyer.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE SHAREHOLDERS
Sellers and Shareholders hereby, jointly and severally, represent and
warrant to Buyer, except as set forth on the Disclosure Schedule attached hereto
as EXHIBIT "K", the following:
3.1 ORGANIZATION AND QUALIFICATION. SGI is a corporation duly organized,
------------------------------
validly existing and in good standing under the laws of the State of Minnesota.
SCI is a corporation duly organized, validly existing and in good standing under
the laws of the State of Minnesota. Each Seller has the requisite power and
authority to conduct its business as it is now being conducted. Copies of the
Articles of Incorporation and the Bylaws of each Seller delivered to Buyer are
accurate and complete as of the date hereof.
3.2 CAPITALIZATION. The authorized capital stock of SGI consists of 2,500
--------------
shares of common stock without par value of which 170 shares are issued and
outstanding. All the such shares are validly issued, fully paid, and
nonassessable, and such shares have been so issued in full compliance with all
federal and state securities laws. There are no outstanding subscriptions,
options, rights, warrants, convertible securities, or other agreements or
commitments obligating SGI to issue or to transfer from treasury any additional
shares of its capital stock of any class. The authorized capital stock of SCI
consists of 10,000 shares of common stock having a par value of $ 0.01 each, of
which 200 shares are issued and outstanding. All the such shares are validly
issued, fully paid, and nonassessable, and
12
<PAGE>
such shares have been so issued in full compliance with all federal and state
securities laws. There are no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments obligating
SCI to issue or to transfer from treasury any additional shares of its capital
stock of any class.
3.3 OWNERSHIP OF SHARES. The Shareholders (a) are the record and
-------------------
beneficial owners of all of the outstanding capital stock of each of SGI and SCI
and (b) have good and marketable title to all of the capital stock of each of
SGI and SCI free and clear of all liens, encumbrances, security agreements,
equities, claims, options, charges and restrictions. There are no other
options, warrants, rights, calls, commitments or other agreements of any
character whatsoever relating to the shares of capital stock of SGI and SCI
owned by the Shareholders.
3.4 TITLE TO ASSETS. Each Seller has good title to the Assets (except for
---------------
certain of the Existing Management Agreements and Existing Brokerage Agreements
and Existing Construction Agreements which provide for written consent of the
other party thereto to the assignment and except for Assets for which each
Seller cannot hold title such as leased property, for which each Seller holds
good leasehold interest, as shown on EXHIBIT "C" and except for financing liens
and encumbrances on personal property as shown on EXHIBIT "C") and has
possession thereof and there is no lien or encumbrance against any such Asset
except any lien imposed by law in the ordinary course of business for taxes or
assessments not yet due and payable.
3.5 AUTHORIZATION. Each Seller has the requisite power and authority to
-------------
enter into this Agreement, to perform its respective obligations hereunder, and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by the Sellers and the consummation by the Sellers of the
transactions contemplated hereby have been duly approved by the Board of
Directors and the shareholders of each of the Sellers. No other corporate
proceedings on the part of the Sellers are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each Seller and each Shareholder and constitutes a legal, valid
and binding obligation of each Seller and each Shareholder, enforceable against
each Seller and each Shareholder in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws, or by equitable principles, relating to or
limiting the rights of creditors generally, and (b) limitations imposed by law
or equitable principles upon the availability of specific performance,
injunctive relief or other equitable remedies.
3.6 NO CONFLICT OR VIOLATION. Except for the consents of other parties
------------------------
with respect to the transfer of those Assets listed in Section 3.4 hereof and
set forth on EXHIBITS B-1, B-2, B-3 and C as requiring such consents, neither
the execution and delivery
13
<PAGE>
of this Agreement by the Sellers or Shareholders nor the consummation of the
transactions contemplated hereby, nor compliance by the Sellers and Shareholders
with any of the provisions hereof will (a) violate, conflict with, or result in
a breach of any provisions of, or constitute a material default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any encumbrance upon any of the properties or assets of either of
the Sellers under any of the terms, conditions or provisions of (i) the Articles
of Incorporation or Bylaws of either of the Sellers or (ii) any note, bond,
mortgage, indenture, deed of trust, security or pledge agreement, partnership
agreement, license, lease, franchise, permit, agreement or other instrument or
obligation to which any of the Sellers or Shareholders is a party or to which
any of the Sellers or Shareholders or any of the properties or assets of any of
the Sellers or Shareholders may be subject, (b) violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation applicable to any
of the Sellers or Shareholders or any of the properties or assets of any of the
Sellers.
3.7 CONSENTS AND APPROVALS. Except for the consent of the other parties
----------------------
with respect to the transfer of certain of those Assets listed in Section 3.4
hereof and set forth in EXHIBITS B-1, B-2, B-3 and C no notice to, declaration,
filing or registration with, or authorization, consent or approval of, or permit
from, any domestic or foreign governmental or regulatory body or authority, or
any other person or entity, is necessary in connection with the execution and
delivery of this Agreement by the Sellers and Shareholders and the consummation
by the Sellers or Shareholders of the transactions contemplated by this
Agreement.
3.8 FINANCIAL STATEMENTS. The balance sheet for each Seller as of
--------------------
December 31, 1994, and related income statement for the year then ended (the
SGI/SCI Financial Statements,) attached hereto as EXHIBIT "I-1" and the balance
sheet for each Seller and as of May 31, 1995 for the year to date, and related
income statement for the month then ended (the "May Financial Statements")
attached hereto as EXHIBIT "I-2" have been internally prepared and then compiled
and reviewed (but not audited) by Grant Thornton, certified public accountants.
The SGI/SCI Financial Statements and the May Financial Statements fairly and
accurately present in all material respects the assets, liabilities and
financial position of the relevant Seller as of the date thereof and the results
of operations or the periods then ended. There have been no payments to third
parties since the date of the SGI/SCI Financial Statements except in the
ordinary course of business and consistent with the past practice of the
relevant Seller. There have been no distributions or payments to the
Shareholders of either Seller since the date of the SGI/SCI Financial Statements
In addition, there has been no material adverse change in the financial
condition, working
14
<PAGE>
capital, shareholders' equity, assets, liabilities, revenues, income or
condition of either of the Sellers from and after the period covered by the
SGI/SCI Financial Statements except in the ordinary course of business and
consistent with past practices of Seller.
3.9 BOOKS AND RECORDS. The books and records for each of the Sellers to
-----------------
which access was given Buyer prior to the date hereof are the actual books and
records of the relevant Seller and accurately and fairly reflect in all material
respects the activities, transactions, revenues and expenses of the relevant
Seller. The preliminary budgets for each of the Sellers for the calendar year
ending December 31, 1995, attached hereto as EXHIBIT "J" fairly reflect the
projected revenues and expenses of each Seller for such period, based upon the
assumptions used in their preparation, which assumptions Sellers and
Shareholders represent were prepared in good faith at the time the projections
were prepared. Sellers and Shareholders do not represent or warrant that actual
results for the calendar year ending December 31, 1995, will equal or even
approximate such projections.
3.10 LITIGATION. Except as set forth in EXHIBIT "K" there are no threatened
----------
or pending actions, suits, investigations or proceedings by, against, involving
or relating to either of the Sellers, at law or in equity, or before any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality in which any material claim has been made or
asserted against each of the Sellers. The matters set forth on EXHIBIT "K" if
settled or decided adversely to Sellers, will not result in a material adverse
change in the business or assets or financial condition of either Seller and if
such settlement or decision is after the Closing Date it will not result in any
claim or judgement against the Minnesota Division of Buyer or the Assets. The
foregoing representation and warranty of the Shareholders as to investigations
is limited to their respective best knowledge. There is outstanding no
garnishment, attachment or writ of execution issued with reference to either of
the Sellers or any of the assets of either of the Sellers. Neither of the
Sellers is a party or subject to any judgment, decree or order enjoining it in
respect of any business practice or the conduct of business in any area.
3.11 COMPLIANCE WITH LAW. Neither of the Sellers has violated or failed to
-------------------
comply in any material respect with any statute, law, ordinance, regulation,
rule, decree or order of any federal, state or local government or any other
governmental department or agency, or any judgment, decree or order of any
court, applicable to its business or operations. The conduct of the business of
each Seller is in material conformity with all building code, health and
environmental requirements except where the aggregate of all such non-
conformities would not have a material adverse effect on any such Seller. The
conduct of the business of each Seller is in material conformity with all
energy, public utility, zoning and OSHA requirements and all other foreign,
federal, state and local governmental and
15
<PAGE>
regulatory requirements except where the aggregate of all such non-conformities
would not have a material adverse effect on any such Seller. The foregoing
representations and warranties in this Section 3.11 of the Shareholders is
limited to their respective best knowledge. Neither of the Sellers has received
any notice to the effect that any Seller is not in compliance with, and Sellers
have no reason to anticipate that any presently existing circumstances are
likely to result in the material violation of, any such statute, law, ordinance,
regulation, rule, judgment, decree or order except where the aggregate of all
such potential violations would not have a material adverse effect on either of
the Sellers.
3.12 PERMITS AND LICENSES. Each Seller has all permits and licenses from
--------------------
governmental agencies required to conduct its present business as now being
conducted, except such permits the failure of which to obtain would not have a
material adverse effect on any such Seller.
3.13 SOFTWARE LICENSES. All computer software packages of Sellers which
-----------------
are included in the Assets being transferred to Buyer pursuant to the provisions
of this Agreement as set forth on EXHIBIT C are useful in the business of
Sellers as presently conducted, are properly licensed to each respective Seller,
are used in accordance with such licenses and may be transferred to Buyer
without breaching any such license agreement and without the payment of any
license or transfer fees to any licensor.
3.14 LIABILITIES. Neither Seller has any liabilities, obligations or
-----------
commitments of any nature (whether accrued, absolute, contingent or otherwise
and whether matured or unmatured), due or to become due, except (a) liabilities
reflected or provided for in the May Financial Statements for each such Seller
and (b) liabilities incurred since the date of the May Financial Statements in
the ordinary course of business and consistent with the past practice of the
relevant Seller, as applicable.
3.15 LABOR MATTERS. Neither Seller has entered into any written employment
-------------
agreement with any employees. Except as provided by law, the employment of all
persons presently employed or retained by each Seller is terminable at will.
Neither Seller is a party to any collective bargaining agreement, nor is either
Seller subject to any organizing efforts of any labor union, organization, local
or subdivision. There are no labor grievances, or investigations, claims or
suits concerning employment pending or threatened against either Seller. The
foregoing representation and warranty of the Shareholders as to threatened
grievances, investigations, claims or suits is limited to their respective best
knowledge. Neither Seller has entered into any agreement, oral or written, with
any present or former employee that will result in a commitment or obligation
(absolute or contingent) of such Seller and/or Buyer to make any payment to any
present or former employee of such Seller, as applicable, following his or her
termination of employment. Neither Seller
16
<PAGE>
maintains, participates in or contributes to, has ever maintained, participated
in or contributed to, or has announced plans or legally binding commitments to
maintain, participate in or contribute to, any qualified or non-qualified
pension or profit-sharing plan and/or other form of deferred compensation and/or
post-retirement insurance, compensation or benefits which covers or has covered
any employees or former employees of such Seller exclusive of Benefit
Arrangements (as defined below).
3.16 BENEFIT ARRANGEMENTS. Each written plan, arrangement, program,
--------------------
agreement or commitment providing for insurance coverage (including any self-
insured arrangement), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, and life, health, disability or
accident benefits which covers or has covered any employees of either Seller
(collectively, "Benefit Arrangements"), has been maintained in material
compliance with its terms and with the requirements described by any and all
statutes, orders, rules and regulations which are applicable to such Benefit
Arrangement. Set forth on EXHIBIT "L" is a complete and accurate description of
each Benefit Arrangement of each Seller. True, complete and correct copies of
each Benefit Arrangement including written interpretations thereof and written
descriptions thereof which have been distributed to the employees or former
employees of each Seller and a complete description of any such Benefit
Arrangement which is not in writing, have been delivered to Buyer.
3.17 BROKERS AND FINDERS. Neither of the Sellers or the officers,
-------------------
directors, employees or agents of the Sellers has employed any broker, finder or
similar agent or incurred any liability for any brokerage fees, commissions,
finder's fees or similar payments in connection with the transactions
contemplated by this Agreement.
3.18 NO OTHER AGREEMENTS TO SELL. Neither Seller has any commitment or
---------------------------
legal obligation, absolute or contingent, to any person or firm other than Buyer
to (a) sell, assign or transfer any material portion of the assets of either
Seller, any assets of either Seller not in the ordinary course of business or
any of the capital stock of either Seller, (b) effect any merger, consolidation
or other reorganization of either Seller or (c) enter into an agreement to do
any of the foregoing.
3.19 MATERIAL MISSTATEMENTS OR OMISSIONS. No representation or warranty by
-----------------------------------
either Seller and/or any Shareholder in this Agreement, or in any document,
exhibit, statement, certificate or schedule heretofore or hereinafter furnished
or made available to the Buyer pursuant to this Agreement or in connection with
the transactions contemplated by this Agreement, including, without limitation,
the Disclosure Schedule, contains any untrue statement of a material fact, or
omits to state any material fact necessary to make the statements or facts
contained therein not misleading. The foregoing representation and warranty of
17
<PAGE>
Shareholders as to material misstatements or omissions is limited to their
respective best knowledge.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
4.1 ORGANIZATION OF BUYER. Buyer is duly organized, validly existing and
---------------------
in good standing under the laws of the State of Delaware and has the requisite
power and authority to conduct its business as it is now being conducted.
4.2 AUTHORIZATION. Buyer has the requisite power and authority to enter
-------------
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby
have been duly approved by the Board of Directors of Buyer. No other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable against it in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium and other similar laws, or by equitable principles, relating to or
limiting the rights of creditors generally and (b) limitations imposed by law or
equitable principles upon the availability of specific performance, injunctive
relief or other equitable remedies.
4.3 BROKERAGE/FINDERS FEES. Neither Buyer nor any of its officers,
----------------------
directors, employees or agents have employed any broker, finder or similar agent
or incurred any liability for any brokerage fees, commissions, finder's fees or
similar payments in connection with the transactions contemplated by this
Agreement.
4.4 NO CONFLICT OR VIOLATION. Neither the execution and delivery of this
------------------------
Agreement by Buyer, nor the consummation of the transactions contemplated
hereby, nor compliance by Buyer with any of the provisions hereby will result in
(a) a violation of or a conflict with any provision of the Articles of
Incorporation or Bylaws of Buyer, (b) a breach of, or a default under, any term
or provision of any contract, agreement, indebtedness, lease, commitment,
license, franchise, permit, authorization or concession to which Buyer is a
party which breach or default would have a material adverse effect on the
business or financial condition of Buyer or its ability to consummate the
transactions contemplated hereby or (c) a violation by Buyer of any statute,
rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or
award, which violation would have a material adverse effect on the business or
financial condition of
18
<PAGE>
Buyer or its ability to consummate the transactions contemplated hereby.
4.5 FINANCIAL STATEMENTS. The balance sheet for Buyer as of December 31,
--------------------
1994, and related statement of operations, shareholders equity and cash flows
for the year then ended (the "Buyer Financial Statements") attached hereto as
EXHIBIT "M" have been prepared in conformity with generally accepted accounting
principles consistently applied throughout the period covered thereby. The Buyer
Financial Statements fairly and accurately present in all material respects the
assets, liabilities and financial position of Buyer as of the date thereof and
the results of operations and changes in shareholders' equity and cash flows for
the periods then ended. There has been no material adverse change in the
financial condition, working capital, shareholders' equity, assets, liabilities,
revenues, income or condition of Buyer from and alter the period covered by the
Financial Statements.
ARTICLE 5 ACTIONS BY SELLERS, THE COMPANIES AND BUYER PRIOR TO THE CLOSING
During the period from the date hereof through the Closing Date:
5.1 MAINTENANCE OF BUSINESS. Except as set forth in the Disclosure
-----------------------
Schedule attached hereto as EXHIBIT "K", the business of each Seller shall be
conducted only in, and neither Seller shall take any action except in, the
ordinary course of business and consistent with past practice, and the Sellers
shall use their respective best efforts to maintain and preserve their
respective' business, assets, prospects, employees, suppliers, customers and
other advantageous business relationships.
5.2 INVESTIGATION BY BUYER. Sellers shall allow Buyer during regular
----------------------
business hours through Buyer's Representatives, to make such investigation,
inspection and duplication, at Buyer's expense, of the business, properties,
books and records of each Seller, and to conduct such examination of the
condition of each Seller, as Buyer deems necessary or advisable to familiarize
itself with such business, properties, books, records, condition and other
matters, and to verify the representations and warranties of Sellers and the
Shareholders hereunder.
5.3 NOTIFICATION OF CERTAIN MATTERS. Each Seller and each Shareholder
-------------------------------
shall give prompt notice to Buyer, and Buyer shall give prompt notice to
Sellers, of (a) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
any time from the date hereof to the Closing Date and (b) any material failure
of either Seller or Buyer, as the case may be, to comply with or satisfy any
covenant, condition or agreement to
19
<PAGE>
be complied with or satisfied by it hereunder, and each party shall use all
reasonable efforts to remedy same.
ARTICLE 6 CONDITIONS TO SELLERS' OBLIGATIONS
The obligation of Sellers to transfer the Assets to Buyer and to
consummate the other transactions contemplated hereby on the Closing Date is
subject, in the discretion of Sellers, to the satisfaction, on or prior to the
Closing Date, of each of the following conditions:
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
-----------------------------------------
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Buyer shall have
performed in all material respects all agreements and covenants required hereby
to be performed by it prior to or at the Closing Date. Execution and delivery of
this Agreement by Buyer to Sellers and Shareholders at Closing shall constitute
Buyer's affirmation of the foregoing. If this Agreement is executed and
delivered by the parties prior to Closing, then there shall be delivered to
Sellers and Shareholders at the Closing a certificate executed by Buyer, in form
and substance and executed in a manner reasonably satisfactory to Sellers and
Shareholders, to the foregoing effect ("Buyer's Closing Certificate").
6.2 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted which questions the validity or legality
of the transactions contemplated hereby and which could reasonably be expected
materially to damage Sellers or Shareholders if the transactions contemplated
hereunder are consummated.
6.3 OPINION OF BUYER'S COUNSEL. There shall be delivered to Sellers and
--------------------------
Shareholders at the Closing an opinion of Buyer's counsel with respect to
transactions contemplated hereby reasonably satisfactory to Sellers,
Shareholders and their counsel ("Opinion of Buyer's Counsel").
6.4 WAIVER BY SELLERS. Sellers may unilaterally waive any of Sellers'
-----------------
conditions described in this Agreement. Except as otherwise provided in this
Agreement, any such waiver shall be effective only if the same is (a) in
writing, (b) signed by both of the Sellers, and (c) delivered to Buyer on or
before the date such condition is to be satisfied.
ARTICLE 7 CONDITIONS TO BUYER'S OBLIGATIONS
The obligation of Buyer to purchase the Assets and to consummate the other
transactions contemplated hereby is subject,
20
<PAGE>
in the discretion of Buyer, to the satisfaction, on or prior to the Closing
Date, of each of the following conditions:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
-----------------------------------------
warranties of Sellers and Shareholders contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Sellers and Shareholders shall have performed in all material respects all
agreements and covenants required hereby to be performed by them prior to or at
the Closing Date. Execution and delivery of this Agreement by Sellers and
Shareholders to Buyer at Closing shall constitute Sellers and Shareholders
affirmation of the foregoing. If this Agreement is executed and delivered by
the parties prior to Closing then there shall be delivered to Buyer at the
Closing a certificate executed by Sellers and Shareholders, in form and
substance and executed in a manner reasonably satisfactory to Buyer, to the
foregoing effect.
7.2 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted which questions the validity or legality
of the transactions contemplated hereby and which could reasonably be expected
materially to damage Buyer if the transactions contemplated hereunder are
consummated.
7.3 OPINION OF SELLER'S COUNSEL. There shall be delivered to Buyer at
---------------------------
closing an opinion of Seller's and Shareholders' counsel with respect to the
transactions contemplated hereby reasonably satisfactory to Buyer and its
counsel ("Opinion of Seller's Counsel").
7.4 WAIVER BY BUYER. Buyer may unilaterally waive any of Buyer's
---------------
conditions described in this Agreement. Except as otherwise provided in this
Agreement, any such waiver shall be effective only if the same is (a) in
writing, (b) signed by Buyer, and (c) delivered to Sellers and Shareholders on
or before the date such condition is to be satisfied.
ARTICLE 8 INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in the
--------------------------------
Disclosure Schedule set forth as EXHIBIT K hereto or in the certificates
delivered at Closing pursuant to Sections 6.1 and 7.1 shall be deemed to be
representations and warranties by the parties hereunder. The representations and
warranties of each of the Sellers, Shareholders, and Buyer contained herein
shall survive the Closing Date for a period of four (4) years regardless of any
investigation made by any of the parties hereto. All obligations of the parties
hereto to be performed after the Closing Date shall survive the Closing Date.
21
<PAGE>
8.2 INDEMNIFICATION.
---------------
a. BY SELLERS AND SHAREHOLDERS. Each Seller and each Shareholder hereby
agrees, jointly and severally, to indemnify, defend (subject to the provisions
of Section 8.2(e)) and hold harmless Buyer and its Representatives from and
against any and all costs, losses, liabilities, damages, lawsuits, deficiencies,
claims and expenses, including without limitation, interest, penalties,
reasonable attorneys' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing (collectively, "Damages") in excess of Ten
Thousand Dollars ($10,000) incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any covenant or warranty, or
the inaccuracy of any representation, made by either Seller or any Shareholder
in or pursuant to this Agreement, and/or (ii) any claim by any third party
brought against Buyer prior to the fourth (4th) anniversary of the Closing Date
arising from the actions or inactions of any Seller or Shareholder or the
operation of the business of either Seller prior to the Closing.
b. RIGHT OF OFFSET. Buyer shall have the right to offset any amounts due
any Seller under this Agreement, and any other agreement to which any Seller and
Buyer are parties against the indemnification obligations of Sellers and
Shareholders set forth above in Section 8.2(a). (Buyer's right of offset shall
not extend to the compensation due Culp as an employee of Buyer pursuant to the
Employment Agreement set forth as EXHIBIT H hereto.) Notwithstanding the
foregoing, if there is a final, non-appealable determination by a court of
competent jurisdiction that Buyer improperly offset any amounts that were
otherwise payable to any Seller, then, Buyer shall be obligated to pay to such
Seller such improperly withheld amounts, together with interest thereon computed
at the Wells Fargo Bank reference (prime) rate of interest (adjusted
concurrently with any adjustments to such interest rate) accrued from and after
the date any such amounts were improperly withheld.
c. BY BUYER. Buyer shall indemnify, defend (subject to the provisions of
Section 8.2(e)) and hold harmless each Seller and each Shareholder and their
Representatives from and against any and all Damages in excess of Ten Thousand
Dollars ($10,000) incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any covenant or warranty, or the inaccuracy of any
representation, made by Buyer in or pursuant to this Agreement, and/or (ii) any
claim by any third party brought against any Seller arising from the actions or
inactions of Buyer or the operation of Buyer's business on or after the Closing
Date.
d. DAMAGES. The term "Damages" as used in this Section 8.2 is not
limited to matters asserted by third parties against the indemnified party but
includes Damages incurred or sustained by the indemnified party in the absence
of third party claims. Payment by the indemnified party of amounts for which the
indemnified party is entitled to be indemnified hereunder shall
22
<PAGE>
not be a condition precedent to the right of the indemnified party to enforce
its indemnity rights hereunder.
e. NOTIFICATION REQUIREMENT. If any party ("Indemnitee") hereto desires
to make a claim against any other party ("Indemnitor") pursuant to the
provisions of this Article 8, then Indemnitee shall immediately notify
Indemnitor of the claim, demand, action or right of action which is the basis of
such claim and the provision or provisions of this Agreement alleged to have
been breached or to be inaccurate, and shall give the Indemnitor a reasonable
opportunity to participate in the defense thereof. Indemnitee shall provide
Indemnitor with all information available to it regarding such claim, demand,
action or right of action (whether or not it involves a third party). In
addition, with respect to any claim brought by a third party against an
Indemnitee, each such Indemnitor shall have the right to approve the counsel
selected by Indemnitee, which approval shall not be unreasonably withheld or
delayed. All settlements of third party claims proposed by an Indemnitee shall
be subject to the approval of Indemnitor, which approval shall not be
unreasonably withheld or delayed.
f. EXCLUSIVE REMEDY. With respect to matters covered by Sections 8.2(a)
(b) and (c), the exclusive remedy available to the parties hereto shall be
indemnification under this Article 8 subject to the limitations and requirements
contained in this Article 8.
ARTICLE 9 MISCELLANEOUS
9.1 TERMINATION. This Agreement may be terminated and the transactions
-----------
contemplated hereby abandoned by the mutual written consent of each of the
parties hereto or by Sellers or Buyer if the conditions to such party's
obligations set forth in Articles 6 and 7, respectively, have not been satisfied
on or before August 31, 1995 (unless waived by the party entitled to the benefit
thereof), without liability of any party hereto; provided, however, that no
party will be released from liability hereunder if this Agreement is terminated
and the transactions abandoned by reason of (a) willful failure of such party to
have performed its obligations hereunder, or (b) any knowing misrepresentation
made by such party of any matter set forth herein. This Agreement shall
terminate automatically if the Closing Date has not occurred on or prior to
August 31, 1995. In the event that a condition precedent to its obligations is
not satisfied, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the transactions contemplated hereby.
9.2 ASSIGNMENT. Neither this Agreement, nor any of the rights or
----------
obligations hereunder, may be assigned by any Seller or any Shareholder without
the prior written consent of Buyer, nor by Buyer without the prior written
consent of Sellers and
23
<PAGE>
Shareholders. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their, respective successors and
assigns, and no other person shall have any right, benefit or obligation
hereunder.
9.3 NOTICES. Unless otherwise provided herein, any notice, request,
-------
instruction or other document to be given hereunder by any party to the others
shall be in writing and delivered in person or by commercial courier, telegraph,
telex or by facsimile transmission or mailed by certified mail, postage prepaid,
return receipt requested, as follows:
TO SELLERS:
(Pre Closing)
THE SHELARD GROUP, INC.
SCI SERVICES, INC.
11455 Viking Drive, Suite 300
Eden Prairie, MN 55344
Attention: Kim A. Culp, President
Phone: 612/943-7001
Fax: 612/943-7055
(Post-Closing)
THE SHELARD GROUP, INC.
SCI SERVICES, INC.
c/o Kim A. Culp
KOLL
11455 Viking Drive, Suite 300
Eden Prairie, MN 55344
Phone: 612/943-7001
Fax: 612/943-7055
TO SHAREHOLDERS:
(Pre-Closing)
Kim A. Culp
c/o THE SHELARD GROUP, INC.
11455 Viking Drive, Suite 300
Eden Prairie, MN 55344
Phone: 612/943-7001
Fax: 612/943-7055
24
<PAGE>
(Post Closing)
Kim A. Culp
c/o KOLL
11455 Viking Drive, Suite 300
Eden Prairie, MN 55344
Phone: 612/943-7001
Fax: 612/943-7055
Sheldon Z. Wert
Century Bank
11455 Viking Drive
Eden Prairie, MN 55344
Phone: 612/943-2300
Fax: 612/943-2020
WITH A COPY TO:
MAUN & SIMON
2900 Norwest Center
Minneapolis, MN 55402
Attn: Jerome E. Simon, Esq.
Phone: 612/338-1113
Fax: 612/338-2271
TO BUYER:
KOLL
4343 Von Karman Avenue
Newport Beach, CA 92660
Attn: D. Glen Raiger,
Executive Vice President
& Senior Managing Director
Phone: 714/833-3030
Fax: 714/833-3755
WITH A COPY TO:
McKENNA & STAHL
2603 Main Street, Suite 1010
Irvine, California 92714-6232
Attn: Charles A. McKenna, Jr., Esq.
Phone: 714/752-2800
Fax: 714/752-6723
Any such notice or other communication shall be deemed received and
effective upon the earlier of (a) if personally delivered, the date of delivery
to the address of the person to receive such notice; (b) if delivered by
commercial carrier, one (1) day following the receipt of such communication by
such carrier from the sender, as shown on the sender's delivery
25
<PAGE>
invoice from such carrier; (c) if mailed, forty-eight (48) hours after the date
of posting by the United States Post Office as shown by the sender's registry or
certification receipt, as the case may be; (d) if given by telegraph or cable,
when delivered to the telegraph company with charges prepaid; or (e) if given by
telex or telecopy, when sent. Any reference herein to the date of receipt,
delivery, or giving, as the case may be, of any notice or other communication
shall refer to the date such communication becomes effective under the terms of
this Section 9.3. Any notice or other communication sent by cable, telex, or
telecopy must be confirmed within forty-eight (48) hours by letter mailed or
delivered in accordance with the foregoing. Notice of change of address shall be
given by written notice in the manner detailed in this Section 9.3. Rejection or
other refusal to accept or the inability to deliver because of changed address
of which no notice was given shall be deemed to constitute receipt of the notice
or other communication sent.
9.4 CHOICE OF LAW. Subject to the provisions of Section 1.5 regarding the
-------------
Covenant Not to Compete, this Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
Minnesota.
9.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together
----------------------------------------
with all Exhibits and schedules hereto, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, amendment, modification or waiver of
this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
9.6 COUNTERPARTS. This Agreement may be executed in one (1) or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one (1) and the same instrument. Each such
counterpart may have attached thereto separate signature page(s) for one or more
of the signatories hereto.
9.7 INVALIDITY. In the event that any one (l) or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
9.8 HEADINGS. The headings of the Articles and Sections herein are
--------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
26
<PAGE>
9.9 FURTHER ASSURANCES. On and after the Closing Date, Sellers, the
------------------
Shareholders and Buyer shall take all appropriate action and execute all
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof, including
without limitation, putting Buyer in possession and operating control of the
business of the Sellers and in possession of the Assets.
9.10 EXPENSES. Sellers and Buyer shall each be liable for their own costs
--------
and expenses incurred in connection with the negotiation, preparation, execution
and performance of this Agreement. Sellers shall be liable for the costs and
expenses of the Shareholders incurred in connection with the negotiation,
preparation, execution and consummation of this Agreement.
9.11 ATTORNEYS FEES. The parties agree that if it be determined by any
--------------
court that any party has failed to perform its obligations herein, then the
prevailing party or parties shall be entitled to recover reasonable attorney
fees, court costs and other reasonable expenses incurred in the enforcement of
the rights and obligations set forth in this Agreement or any claim for damages
based on any breach of this Agreement.
9.12 PUBLICITY. Neither the Sellers, the Shareholders, nor Buyer shall
---------
issue any press release or make any public statement regarding the transactions
contemplated hereby (including, but not limited to, any press release or public
statement announcing the execution of this Agreement, the termination of this
Agreement or the consummation of the transactions contemplated hereby), without
the prior approval of the other parties hereto. The parties hereto shall issue a
mutually acceptable press release as soon as practicable after the Closing Date
announcing the consummation of the transactions contemplated hereby.
9.13 CONFIDENTIAL INFORMATION. The parties acknowledge that the
------------------------
transaction described herein is of a confidential nature and shall not be
disclosed except to consultants, advisors, affiliates and Representatives, or as
required by law, until such time as the parties make a public announcement
regarding the transaction as provided in Section 9.12. In connection with the
negotiation of this Agreement and the preparation for the consummation of the
transactions contemplated hereby, each party acknowledges that it will have
access to confidential information relating to the other parties. Each party
shall treat such information as confidential, preserve the confidentiality
thereof and not duplicate or use such information, except to advisors,
consultants, affiliates and Representatives in connection with the transactions
contemplated hereby. Employees of the Sellers shall be notified of the fact of
the subject transaction in a joint communication from Sellers and Buyer mutually
approved by Sellers and Buyer. In the event of the termination of this Agreement
for any reason whatsoever, each party shall return to the other all documents,
work papers and other material (including all copies thereof obtained in
connection with the transactions contemplated hereby) and shall use all
reasonable
27
<PAGE>
efforts, including instructing its employees and others who have had access to
such information, to keep confidential and not to use any such information,
unless such information is now, or is hereafter disclosed, through no act or
omission of such party, in any manner making it available to the general public.
9.14 POST-CLOSING COVENANTS.
----------------------
a. CONSENTS FROM EXISTING CLIENTS. For a period of one hundred and
eighty (180) days following the Closing Date, each Seller hereby agrees to
exercise such Seller's best efforts, at such Seller's cost and expense (only to
the extent of out of pocket costs and expenses, if any, beyond the scope of the
ordinary course of business of the Minnesota Division and Culp as President
thereof) to obtain (a) consent from the applicable Existing Clients whose
consent is required to the assignment of the Existing Management Agreements, the
Existing Brokerage Agreements and the Existing Construction Agreements to Buyer,
(b) acknowledgment of the transfer of the Assets and agreement of the applicable
Existing Clients whose consent is not required to continue the engagement of the
Buyer with respect to the Existing Management Agreements, Existing Brokerage
Agreements and the Existing Construction Agreements and (c) consent from such
parties as may be appropriate to the assignment of Sellers' real property
leases, personal property leases and financing arrangements to Buyer as soon as
possible after the Closing Date.
b. ERRORS AND OMISSION INSURANCE. For a period of four (4) years
following the Closing Date, Sellers shall purchase and maintain at Sellers'
expense an extended reporting period on Sellers current errors and
omissions/professional liability insurance policy (or alternative coverage
reasonably satisfactory to Buyer) with maximum aggregate coverage of One Million
Dollars ($1,000,000) with the prior acts endorsement relating back to May, 1990.
9.15 ACCESS TO RECORDS; COOPERATION. Each of the parties hereto shall make
------------------------------
their respective books and records (including work papers, corporate records,
employee records and tax records in their possession or in the possession of
their respective accountants but only to the extent such books and records
relate to the subject matter of this Agreement) available for reasonable
business purposes at all reasonable times during normal business hours for the
five (5) year period following the Closing Date. As used in this paragraph, the
right of inspection includes the right to make extracts or copies. The
Representatives of a party inspecting the records of the other party shall be
reasonably satisfactory to the other party. Without limitation, a reasonable
business purpose shall be the review of records in order to investigate, satisfy
or mitigate any potentially indemnifiable claims, acts or omissions. In addition
to the foregoing, each party hereto agrees that it shall cooperate with the
others to the extent reasonably necessary or appropriate to assist the others in
investigating, satisfying or mitigating any potentially indemnifiable acts,
actions or omissions.
28
<PAGE>
9.16 MISCELLANEOUS. Each of the Exhibits attached hereto is incorporated
-------------
herein by reference and expressly made a part of this Agreement for all
purposes. References to any Exhibit made in this Agreement shall be deemed to
include this reference and incorporation. Where the context so requires, the use
of the neuter gender shall include the masculine and feminine genders, the
masculine gender shall include the feminine and neuter genders, and the singular
number shall include the plural and vice versa. Time is of the essence of this
Agreement. There are no third party beneficiaries to this Agreement. Each party
hereto acknowledges that (i) each party hereto is of equal bargaining strength;
(ii) each such party has actively participated in the drafting, preparation, and
negotiation of this Agreement; and (iii) any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not apply
in the interpretation of this Agreement, any portion hereof, any amendments
hereto, or any Exhibits attached hereto.
ARTICLE 10 DEFINITIONS
10.1 AFFILIATE. The term "Affiliate" means any person or entity which,
---------
directly or indirectly, through one (1) or more intermediaries, controls or is
controlled by or is under common control with another person or entity. The term
"control" as used herein (including there terms "controlling, " "controlled by"
and "under common control with") means the possession, direct or indirect, of
the power to vote fifty percent (50%) or more of the outstanding voting
securities of such person or entity.
10.2 ADJUSTED EARN OUT AMOUNT. The term "Adjusted Earn Out Amount" is
------------------------
defined in Section 1.2(b).
10.3 AGREEMENT. The term "Agreement" means this Asset Purchase
---------
Agreement.
10.4 ASSETS. The term "Assets" is defined in Section 1.1.
------
10.5 BENEFIT ARRANGEMENTS. The term "Benefit Arrangements" is defined in
--------------------
Section 3.15.
10.6 BUYER. The term "Buyer" means Koll Management Services, Inc., a
-----
Delaware corporation.
10.7 BUYER'S CLOSING CERTIFICATE. The term "Buyer's Closing Certificate"
---------------------------
is defined in Section 6.1.
10.8 BUYER FINANCIAL STATEMENT. The term "Buyer Financial Statements" is
-------------------------
defined in Section 4.5.
10.9 BUYER'S FIRST POSITION CUMULATIVE ANNUAL BASE. The term "Buyer's
---------------------------------------------
First Position Cumulative Annual Base" is defined in Section 1.2(c).
29
<PAGE>
10.10 BUYER ORIGINATED AGREEMENTS. The term "Buyer Originated Agreements"
---------------------------
is defined in Section 1.3(c).
10.11 CASH DOWN PAYMENT. The term "Cash Down Payment" is defined in
-----------------
Section 1.2(a).
10.12 CLOSING. The term "Closing" is defined in Section 2.1.
-------
10.13 CLOSING DATE. The term "Closing Date" is defined in Section 2.1.
------------
10.14 COMMERCIAL PROPERTY OR FACILITIES MANAGEMENT SERVICES. The term
-----------------------------------------------------
"commercial management or facilities management" is defined in Section 1.5(g)
10.15 COMMERCIAL REAL ESTATE BROKERAGE SERVICES. The term "commercial real
-----------------------------------------
estate brokerage services" is defined in Section 1.5(g).
10.16 DAMAGES. The term "Damages" is defined in Sections 8.2(a) and
-------
8.2(d).
10.17 DISCLOSURE SCHEDULE. The term "Disclosure Schedule is defined as
-------------------
EXHIBIT "K" hereto.
10.18 EARN OUT FORMULA. The term "Earn Out Formula" is defined in Section
----------------
1.2(b).
10.19 EARN OUT PAYMENTS. The term "Earn Out Payments" is defined in
-----------------
Section 1.2(b).
10.20 EARN OUT PERIOD. The term "Earn Out Period" is defined in Section
---------------
1.2(b).
10.21 EARN OUT YEAR. The term "Earn Out Year" is defined in Section
-------------
1.2(b).
10.22 EMPLOYMENT AGREEMENT. The term "Employment Agreement" between Culp
--------------------
and Buyer is defined in Section 2.5(b).
10.23 EXISTING BROKERAGE AGREEMENT. The terms "Existing Brokerage
----------------------------
Agreement" and "Existing Brokerage Agreements" are defined in Recital A.
10.24 EXISTING CLIENT. The terms "Existing Client" and "Existing Clients"
---------------
are defined in Recital A.
10.25 EXISTING CONSTRUCTION AGREEMENT. The terms "Existing Construction
-------------------------------
Agreement" and "Existing Construction Agreements" are defined in Recital A.
10.26 EXISTING MANAGEMENT AGREEMENT. The terms "Existing Management
-----------------------------
Agreement" and "Existing Management Agreements" are defined in Recital A.
30
<PAGE>
10.27 FULL EARN OUT AMOUNT. The term "Full Earn Out Amount" is defined in
--------------------
Section 1.2(b).
10.28 GENERAL CONTRACTOR OR CONSTRUCTION SERVICES. The term "general
-------------------------------------------
contractor or construction services" is defined in Section 1.5(g)
10.29 INDEMNITEE AND INDEMNITOR. The terms "Indemnitee and Indemnitor" are
-------------------------
defined in Section 8.2(e).
10.30 MAY FINANCIAL STATEMENTS. The term "May Financial Statements" is
------------------------
defined in Section 3.8.
10.31 MINNESOTA DIVISION. The term "Minnesota Division" of Buyer is
------------------
defined in Section 1.2(c).
10.32 NET OPERATING INCOME. The term "Net Operating Income" is defined in
--------------------
Section 1.3(a).
10.33 NET OPERATING LOSS. The term "Net Operating Loss" is defined in
------------------
Section 1.3(b).
10.34 OPERATING EXPENSES. The term "Operating Expenses" is defined in
------------------
Section 1.3(d).
10.35 OPINION OF BUYER'S COUNSEL. The term "Opinion of Buyer's Counsel" is
--------------------------
defined in Section 6.3.
10.36 OPINION OF SELLER'S COUNSEL. The term "Opinion of Seller's Counsel is
---------------------------
defined in Section 7.3.
10.37 PURCHASE PRICE. The term "Purchase Price" is defined in Section 1.1.
--------------
10.38 REGIONAL PRESIDENT. The term "Regional President" is defined in
------------------
Section 2.5
10.39 REPRESENTATIVE. The term "Representative" means any officer,
--------------
director, principal, attorney, accountant, agent, employee or other
representative.
10.40 REVENUES. The term "Revenues" is defined in Section 1.3(c).
--------
10.41 SCI. The term "SCI" means SCI Services, Inc. a Minnesota
---
corporation.
10.42 SELLERS. The term "Sellers" means SGI and SCI. The term Seller
-------
means either one of SGI or SCI.
10.43 SELLER'S CLOSING CERTIFICATE. The term "Seller's Closing
----------------------------
Certificate" is defined in Section 7.1.
10.44 SGI. The term "SGI" means The Shelard Group, Inc., a Minnesota
---
corporation.
31
<PAGE>
10.45 SGI/SCI FINANCIAL STATEMENTS. The term "SGI/SCI Financial
----------------------------
Statements" is defined in Section 3.8.
10.46 SHAREHOLDERS. The term "Shareholders" means Kim A. Culp and Sheldon
------------
Z. Wert. The term "Shareholder" means any one of the Shareholders.
[SIGNATURE PAGES TO FOLLOW]
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
SELLERS
"SGI"
THE SHELARD GROUP, INC., a
Minnesota corporation
By:
-------------------------------
KIM A. CULP, President
By:
-------------------------------
SHELDON Z. WERT, Vice President
"SCI"
SCI SERVICES, INC., a Minnesota
corporation
By:
------------------------------
KIM A. CULP, President
By:
------------------------------
SHELDON Z. WERT, President
33
<PAGE>
SHAREHOLDERS
---------------------------------
KIM A. CULP
---------------------------------
SHELDON Z. WERT
34
<PAGE>
BUYER
KOLL MANAGEMENT SERVICES, INC.
By:
-----------------------------
D. GLEN RAIGER,
Executive Vice President and
Senior Managing Director
35
<PAGE>
EXHIBIT 10.45
AMENDMENT TO ASSET PURCHASE AGREEMENT
AND
AGREEMENT FOR CONSTRUCTION MANAGEMENT SERVICES
This Amendment to the Asset Purchase Agreement and Agreement for Construction
Management Services ("Agreement") is entered into as of this 5th day of August,
1995, by and between Koll Management Services, Inc. ("Koll"), a Delaware
corporation, and SCI Services, Inc. ("SCI"), a Minnesota corporation, with
reference to the following facts:
RECITALS
A. Koll is the Buyer and SCI is a Seller pursuant to that certain Asset
Purchase Agreement dated as of June 30, 1995 ("Asset Purchase Agreement"), by
which Buyer purchased substantially all of the operating assets of The Shelard
Group, Inc., a Minnesota corporation, and SCI. Terms defined in the Asset
Purchase Agreement are used in this Agreement as so defined.
B. Koll is currently engaged in the business of providing asset, property and
facility management service, and other realty advisory, brokerage and
construction services throughout various regions of the United States including
Minnesota. SCI has been in the business of providing general contractor and
construction services in the State of Minnesota prior to the Closing of the
transactions set forth by the Asset Purchase Agreement which occurred on June
30, 1995. SCI is currently prevented from providing general contractor and
construction services in the State of Minnesota pursuant to the Covenant Not to
Compete contained in the Asset Purchase Agreement.
C. Pursuant to the Asset Purchase Agreement, Sellers assigned to Koll, as
Buyer, that certain Construction Contract listed on Exhibit B-3, EXISTING
CONSTRUCTION AGREEMENTS, as DEER RIDGE TOWNHOMES LIMITED PARTNERSHIP ("Deer
Ridge Construction Contract"). The Deer Ridge Construction Contract was not
meant to be purchased by Koll pursuant to the Asset Purchase Agreement and Koll
has not assumed the duties of general contractor pursuant to the Deer Ridge
Construction Contract.
D. SCI desires to continue to function as general contractor under the Deer
Ridge Construction Contract and to complete the construction of the Deer Ridge
Townhomes ("Deer Ridge Project"). Koll is willing to consent to SCI
constructing the Deer Ridge Project as general contractor and to provide
construction management services to SCI in connection therewith.
E. Koll has previously consented to SCI constructing that certain project
commonly known as Carver Lake Townhomes ("Carver Lake Project") pursuant to that
certain Agreement for Construction Management Services dated July 14, 1995, by
and between Koll and SCI ("Carver Lake Agreement").
<PAGE>
AGREEMENTS
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein and for other good and valuable consideration and receipt and adequacy
which are hereby acknowledged the parties agree as follows:
1. AMENDMENT TO ASSET PURCHASE AGREEMENT. The Asset Purchase Agreement is
-------------------------------------
hereby amended to delete any reference to the assignment of the Deer Ridge
Construction Contract to Koll as one of the Assets transferred pursuant to the
Asset Purchase Agreement. Koll and SCI agree that the Deer Ridge Construction
Contract has not been assigned to Koll and that Koll did not at Closing, and has
not subsequently, assumed any obligations or duties pursuant to the Deer Ridge
Construction Contract.
2. CONSTRUCTION MANAGEMENT SERVICES. Koll will provide construction
--------------------------------
management services to SCI in connection with SCI's construction of the Deer
Ridge Project as general contractor. Such services shall include the assignment
of personnel, accounting and administrative support as necessary to administer
the Dear Ridge Construction Contract for the benefit of SCI as general
contractor. Koll will invoice SCI for the construction management services at
Koll's cost of using Koll employees to provide such services based upon current
estimated hourly rates such as, by way of example, the estimated hourly rates of
the individuals set forth on Exhibit A hereto.
3. SECOND TIME WAIVER OF COVENANT NOT TO COMPETE. Koll hereby waives the
---------------------------------------------
provisions of the Covenant Not To Compete with respect to SCI specifically and
only to allow SCI to perform its duties as general contractor under the Deer
Ridge Construction Contract. Such waiver shall not be deemed to be nor shall it
constitute a waiver of any other provision of the Covenant Not To Compete and
SCI acknowledges that the Covenant Not To Compete remains in full force and
effect except as expressly waived herein with respect to SCI's construction of
the Deer Ridge Project as general contractor and as expressly waived pursuant to
the Carver Lake Agreement with respect to SCI's construction of the Carver Lake
Project as general contractor.
4. INDEMNIFICATION. SCI hereby agrees to indemnify, defend and hold
---------------
harmless Koll, its Representatives and Employees from and against any and all
costs, losses, liabilities, damages, lawsuits, deficiencies, claims and
expenses, including without limitation, interest penalties, reasonable attorneys
fees and all amounts paid in investigation, defense or settlement of any of the
foregoing in connection with any claim by any third party brought against Koll
arising from the actions or inactions of SCI or Koll or any of its
Representative or Employees in connection with SCI's performance of the Deer
Ridge Construction Contract as general contractor and/or Koll's performance of
this Agreement as construction manager.
5. INSURANCE. SCI agrees to include Koll, its Representatives and
---------
Employees as additional insureds under its
2
<PAGE>
course of construction, liability and all risk policies covering the Dear Ridge
Project all in a manner reasonably satisfactory to Koll.
6. ASSIGNMENT. Neither this Agreement, nor any of the rights or
----------
obligations hereunder, may be assigned by Koll without the prior written consent
of SCI, nor by SCI without the prior written consent of Koll. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their, respective successors and assigns, and no other person
shall have any right, benefit or obligation hereunder.
7. NOTICES. Unless otherwise provided herein, any notice, request,
-------
instruction or other document to be given hereunder by any party to the others
shall be in writing and delivered in person or by commercial courier, telegraph,
telex or by facsimile transmission or mailed by certified mail, postage prepaid,
return receipt requested, as follows:
TO KOLL:
KOLL
4343 Von Karman Avenue
Newport Beach, CA 92660
Attn: D. Glen Raiger,
Executive Vice President
& Senior Managing Director
Phone: 714/833-3030
Fax: 714/833-3755
WITH A COPY TO:
McKENNA & STAHL
2603 Main Street, Suite 1010
Irvine, California 92714-6232
Attn: Charles A. McKenna, Jr., Esq.
Phone: 714/752-2800
Fax: 714/752-6723
TO SCI:
SCI SERVICES, INC.
c/o Kim A. Culp
KOLL
11455 Viking Drive, Suite 300
Eden Prairie, MN 55344
Phone: 612/943-7001
Fax: 612/943-7055
3
<PAGE>
WITH A COPY TO:
MAUN & SIMON
2900 Norwest Center
Minneapolis, MN 55402
Attn: Jerome E. Simon, Esq.
Phone: 612/338-1113
Fax: 612/338-2271
Any such notice or other communication shall be deemed received and
effective upon the earlier of (a) if personally delivered, the date of delivery
to the address of the person to receive such notice; (b) if delivered by
commercial carrier, one (1) day following the receipt of such communication by
such carrier from the sender, as shown on the sender's delivery invoice from
such carrier; (c) if mailed, forty-eight (48) hours after the date of posting by
the United States Post Office as shown by the sender's registry or certification
receipt, as the case may be; (d) if given by telegraph or cable, when delivered
to the telegraph company with charges prepaid; or (e) if given by telex or
telecopy, when sent. Any reference herein to the date of receipt, delivery, or
giving, as the case may be, of any notice or other communication shall refer to
the date such communication becomes effective under the terms of this Section 7.
Any notice or other communication sent by cable, telex, or telecopy must be
confirmed within forty-eight (48) hours by letter mailed or delivered in
accordance with the foregoing. Notice of change of address shall be given by
written notice in the manner detailed in this Section 7. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to constitute receipt of the notice or
other communication sent.
8. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, constitutes
----------------------------------------
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. No supplement, amendment,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
9. COUNTERPARTS. This Agreement may be executed in one (1) or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one (1) and the same instrument. Each such
counterpart may have attached thereto separate signature page(s) for one or more
of the signatories hereto.
10. INVALIDITY. In the event that any one (l) or more of the provisions
----------
contained in this Agreement or in any other instrument
4
<PAGE>
referred to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument.
11. HEADINGS. The headings of the Articles and Sections herein are
--------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
12. FURTHER ASSURANCES. Koll and SCI shall take all appropriate action
------------------
and execute such documents which may be reasonably necessary or advisable to
carry out any of the provisions hereof.
13. EXPENSES. Koll and SCI shall each be liable for their own costs and
--------
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Agreement.
14. ATTORNEYS FEES. The parties agree that if it be determined by any
--------------
court that any party has failed to perform its obligations herein, then the
prevailing party or parties shall be entitled to recover reasonable attorney
fees, court costs and other reasonable expenses incurred in the enforcement of
the rights and obligations set forth in this Agreement or any claim for damages
based on any breach of this Agreement.
15. MISCELLANEOUS. Where the context so requires, the use of the neuter
-------------
gender shall include the masculine and feminine genders, the masculine gender
shall include the feminine and neuter genders, and the singular number shall
include the plural and vice versa. Time is of the essence of this Agreement.
There are no third party beneficiaries to this Agreement. Each party hereto
acknowledges that (i) each party hereto is of equal bargaining strength; (ii)
each such party has actively participated in the drafting, preparation, and
negotiation of this Agreement; and (iii) any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not apply
in the interpretation of this Agreement, any portion hereof or any amendments
hereto.
[SIGNATURE PAGE TO FOLLOW]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
KOLL
KOLL MANAGEMENT SERVICES, INC.
By: _______________________________
D. GLEN RAIGER,
Executive Vice President and
Senior Managing Director
SCI
SCI SERVICES, INC., a Minnesota
corporation
By: _______________________________
KIM A. CULP, President
By: _______________________________
SHELDON Z. WERT, Vice President
6
<PAGE>
EXHIBIT 10.46
* Confidential Treatment
Requested
===============================================================================
OPERATING AGREEMENT
FOR
KOLL-DOVE GLOBAL DISPOSITION SERVICES, LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I DEFINITIONS................................................ 1
ARTICLE II ORGANIZATIONAL MATTERS..................................... 9
2.1 Formation.................................................. 9
---------
2.2 Name....................................................... 9
----
2.3 Term....................................................... 9
----
2.4 Office and Agent........................................... 9
----------------
2.5 Names and Addresses of the Members......................... 9
----------------------------------
2.6 Business of the Company.................................... 10
-----------------------
ARTICLE III CAPITAL CONTRIBUTIONS...................................... 10
3.1 Initial Contribution....................................... 10
--------------------
3.2 Mandatory Additional Contributions......................... 11
----------------------------------
3.3 No Further Contributions Required.......................... 11
---------------------------------
3.4 Units...................................................... 11
-----
3.5 Failure to Make Contributions.............................. 11
-----------------------------
3.6 No Interest................................................ 12
-----------
3.7 Loans by Members........................................... 13
----------------
ARTICLE IV MEMBERS.................................................... 14
4.1 Limited Liability.......................................... 14
-----------------
4.2 Admission of Additional Members............................ 14
-------------------------------
4.3 Voting Rights.............................................. 14
-------------
4.4 Meetings of Members........................................ 14
-------------------
A. Date, Time and Place of Meetings of Members; Secretary. 14
------------------------------------------------------
B. Power to Call Meetings................................. 14
----------------------
C. Notice of Meetings..................................... 15
------------------
D. Manner of Giving Notice; Affidavit of Notice........... 15
--------------------------------------------
E. Validity of Action..................................... 15
------------------
F. Quorum................................................. 15
------
G. Adjourned Meeting; Notice.............................. 16
-------------------------
H. Waiver of Notice or Consent............................ 16
---------------------------
I. Action by Written Consent Without a Meeting............ 16
-------------------------------------------
J. Telephonic Participation by Member at Meetings......... 17
----------------------------------------------
K. Voting................................................. 17
------
L. Record Date............................................ 17
-----------
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
4.5 Remuneration To Members...................................... 18
-----------------------
4.6 Members Are Not Agents....................................... 18
----------------------
4.7 No Right to Withdraw......................................... 19
--------------------
ARTICLE V MANAGEMENT AND CONTROL OF THE COMPANY........................ 19
5.1 Management of the Company by Managers........................ 19
-------------------------------------
A. Exclusive Management by Managers......................... 19
--------------------------------
B. Agency Authority of Managers............................. 19
----------------------------
C. Meetings of Managers..................................... 19
--------------------
5.2 Election of Managers......................................... 20
--------------------
A. Number, Designation, Terms and Qualifications............ 20
---------------------------------------------
B. Resignation.............................................. 21
-----------
C. Removal.................................................. 21
-------
D. Vacancies................................................ 21
---------
5.3 Powers of Managers........................................... 21
------------------
A. Powers of Managers....................................... 21
------------------
B. Limitations on Power of Managers......................... 22
--------------------------------
C. Member Approval.......................................... 23
---------------
5.4 Members Have No Managerial Authority......................... 23
------------------------------------
5.5 Performance of Duties; Liability of Managers................. 24
--------------------------------------------
5.6 Devotion of Time............................................. 24
----------------
5.7 Competing Activities......................................... 25
--------------------
5.8 Transactions Between the Company and the Managers............ 25
-------------------------------------------------
5.9 Fees to Managers............................................. 25
----------------
5.10 Acts of Managers............................................. 25
----------------
5.11 Officers..................................................... 26
--------
A. Appointment of Officers.................................. 26
-----------------------
B. Removal, Resignation and Filing of Vacancy of Officers... 26
------------------------------------------------------
C. Salaries of Officers..................................... 26
--------------------
D. Duties and Powers of the Chairperson..................... 26
------------------------------------
E. Duties and Powers of the Chief
------------------------------
Executive Officer and President.......................... 27
-------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
F. Duties and Powers of Secretary............................27
------------------------------
G. Duties and Powers of Chief Financial Officer..............28
--------------------------------------------
H. Acts of Officers as Conclusive Evidence of Authority......28
----------------------------------------------------
I. Signing Authority of Officers.............................28
-----------------------------
5.12 Limited Liability.............................................28
-----------------
ARTICLE VI ALLOCATIONS OF NET PROFITS AND NET LOSSES AND
DISTRIBUTIONS.................................................29
6.1 Maintenance of Capital Accounts...............................29
-------------------------------
6.2 Allocations of Net Profit and Net Loss........................30
--------------------------------------
A. Net Loss..................................................30
--------
B. Net Profit................................................30
----------
6.3 Special Allocations...........................................30
-------------------
A. Minimum Gain Chargeback...................................30
-----------------------
B. Chargeback of Minimum Gain Attributable to Member
-------------------------------------------------
Nonrecourse Debt..........................................30
----------------
C. Nonrecourse Deductions....................................31
----------------------
D. Member Nonrecourse Deductions.............................31
-----------------------------
E. Qualified Income Offset...................................31
-----------------------
F. Preventative Allocation...................................31
-----------------------
G. Optional Adjustment to Basis - Section 754................32
------------------------------------------
H. Overall Limitation on Allocation of Net Losses............32
----------------------------------------------
I. Curative Allocations......................................32
--------------------
J. Koll Preferred Return Allocation..........................33
--------------------------------
6.4 Other Allocation Rules........................................33
----------------------
A. Frequency.................................................33
---------
B. Remaining Items...........................................33
---------------
C. Share of Excess Nonrecourse Liabilities...................33
---------------------------------------
6.5 Tax Allocations; Code Section 704(c)..........................33
------------------------------------
A. Proportional to Net Profits or Net Losses.................33
-----------------------------------------
B. Contribution of Property..................................33
------------------------
C. Gross Asset Value Adjustment..............................34
----------------------------
D. Discretion; Effect........................................34
------------------
6.6 Allocation of Net Profits and Losses in Respect of a
----------------------------------------------------
Transferred Interest..........................................34
--------------------
6.7 Distributions.................................................35
-------------
A. Generally.................................................35
---------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
B. Distributions to Pay Taxes........................... 35
--------------------------
C. Priority of Distributions............................ 35
-------------------------
D. Koll Earned Preferred Return......................... 35
----------------------------
E. Examples............................................. 36
--------
F. Distributions with respect to Transferred
-----------------------------------------
Interests............................................ 37
---------
6.8 Form of Distribution....................................... 37
--------------------
6.9 Restriction on Distributions............................... 38
----------------------------
6.10 Return of Distributions.................................... 38
-----------------------
6.11 Obligations of Members to Report Allocations............... 38
--------------------------------------------
ARTICLE VII TRANSFER AND ASSIGNMENT OF INTERESTS....................... 38
ARTICLE VIII ACCOUNTING, RECORDS, REPORTING BY MEMBERS.................. 39
8.1 Books and Records.......................................... 39
-----------------
8.2 Delivery to Members and Inspection......................... 39
----------------------------------
8.3 Annual Statements.......................................... 40
-----------------
8.4 Financial and Other Information............................ 40
-------------------------------
8.5 Other Filings.............................................. 41
-------------
8.6 Bank Accounts.............................................. 41
-------------
8.7 Accounting Decisions and Reliance on Others................ 41
-------------------------------------------
8.8 Tax Returns and Elections.................................. 41
-------------------------
8.9 Tax Matters................................................ 41
-----------
ARTICLE IX DISSOLUTION AND WINDING UP................................. 41
9.1 Dissolution................................................ 41
-----------
9.2 Election to Continue....................................... 42
--------------------
9.3 Certificate of Dissolution................................. 42
--------------------------
9.4 Winding Up................................................. 42
----------
9.5 Distributions in Kind...................................... 43
---------------------
9.6 Distribution of Assets and Order of Payment of
----------------------------------------------
Liabilities Upon Dissolution............................... 43
----------------------------
9.7 Timing of Liquidation Distributions........................ 43
-----------------------------------
9.8 Provision for Debts and Liabilities of Company............. 44
----------------------------------------------
9.9 Limitations on Payments Made in Dissolution................ 44
-------------------------------------------
9.10 Certificate of Cancellation................................ 44
---------------------------
9.11 No Action for Dissolution.................................. 44
-------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
9.12 Right to Use Dove Names After Liquidation.................. 45
-----------------------------------------
ARTICLE X INDEMNIFICATION AND INSURANCE.............................. 45
10.1 Indemnification of Agents.................................. 45
-------------------------
10.2 Insurance.................................................. 45
---------
ARTICLE XI INVESTMENT REPRESENTATIONS................................. 46
11.1 Preexisting Relationship or Experience..................... 46
--------------------------------------
11.2 No Advertising............................................. 46
--------------
11.3 Investment Intent.......................................... 46
-----------------
11.4 Purpose of Entity.......................................... 46
-----------------
11.5 Residency.................................................. 46
---------
11.6 Economic Risk.............................................. 46
-------------
11.7 No Registration of Units................................... 47
------------------------
11.8 Membership Interest in Restricted Security................. 47
------------------------------------------
11.9 No Obligation to Register.................................. 47
-------------------------
11.10 No Disposition in Violation of Law......................... 47
----------------------------------
11.11 Legends.................................................... 48
-------
11.12 Investment Risk............................................ 48
---------------
11.13 Restrictions on Transferability............................ 48
-------------------------------
11.14 Information Reviewed....................................... 49
--------------------
11.15 No Representations by Company.............................. 49
-----------------------------
11.16 Consultation with Attorney................................. 49
--------------------------
11.17 Tax Consequences........................................... 49
----------------
11.18 No Assurance of Tax Benefits............................... 49
----------------------------
11.19 Indemnity.................................................. 50
---------
11.20 Limitation................................................. 50
----------
ARTICLE XII MISCELLANEOUS.............................................. 50
12.1 Complete Agreement......................................... 50
------------------
12.2 Binding Effect............................................. 51
--------------
12.3 Parties in Interest........................................ 51
-------------------
12.4 Interpretation............................................. 51
--------------
12.5 Severability............................................... 51
------------
12.6 Additional Documents....................................... 51
--------------------
12.7 Notices.................................................... 51
-------
12.8 Amendments................................................. 52
----------
12.9 Amendments by Managers..................................... 52
----------------------
12.10 Reliance on Authority of Person Signing Agreement.......... 52
-------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
12.11 No Interest in Company Property; Waiver
---------------------------------------
of Action for Partition..................................... 52
-----------------------
12.12 Multiple Counterparts....................................... 52
---------------------
12.13 Attorneys' Fees............................................. 52
---------------
12.14 Time is of the Essence...................................... 52
----------------------
12.15 Remedies Cumulative......................................... 52
-------------------
</TABLE>
Exhibit A Names and Addresses of Members
Exhibit B Capital Contributions, Units and
Percentage Interests
Exhibit C Names and Addresses of Managers
Exhibit D Buy/Sell Agreement
-vi-
<PAGE>
OPERATING AGREEMENT
FOR
KOLL-DOVE GLOBAL DISPOSITION SERVICES, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
This Operating Agreement is made as of this 13th day of March, 1995, by
and among the parties listed on the signature pages hereof, with reference to
the following facts:
A. On March 9, 1995, Articles of Organization for Koll-Dove Global
Disposition Services, LLC (the "Company"), a limited liability company under the
laws of the State of California, were filed with the California Secretary of
State.
B. The parties desire to adopt and approve an operating agreement for
the Company.
NOW, THEREFORE, the parties (hereinafter sometimes collectively referred
to as the "Members," or individually as the "Member") by this Agreement set
forth the operating agreement for the Company under the laws of the State of
California upon the terms and subject to the conditions of this Agreement.
ARTICLE 1
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Article I shall have the meanings set forth elsewhere in this Agreement):
1.1 "Act" shall mean the Beverly-Killea Limited Liability Company Act,
---
codified in the California Corporations Code, Section 17000 et seq., as the same
-- ----
may be amended from time to time.
1.2 "Adjusted Capital Account Deficit" shall mean, with respect to any
--------------------------------
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
A. Crediting to such Capital Account (i) any amount which such
Member is obligated to restore following the liquidation
-1-
<PAGE>
of such Member's Membership Interest in the Company (pursuant to the terms of
this Agreement or otherwise); (ii) the amount of such Member's share of the
Company Minimum Gain (which share shall be determined in accordance with the
method for determining a partner's share of partnership minimum gain under
Regulations Section 1.704-2(g)); and (iii) the amount of such Member's share of
Member Minimum Gain (which share shall be determined in accordance with the
method for determining a partner's share of partner nonrecourse debt minimum
gain under Regulations Section 1.704-2(i)(5)); and
-
B. Debiting to such Capital Account the items described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6).
- - - -
This definition is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d), and shall be interpreted consistently therewith.
-
1.3 "Affiliate" shall mean, with respect to any Person, any
---------
individual, partnership, corporation, trust or other entity or association,
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with such Person. The term "control," as
used in the immediately preceding sentence, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the controlled entity.
1.4 "Agreement" shall mean this Operating Agreement, as originally
---------
executed and as amended from time to time.
1.5 "Articles" shall mean the Articles of Organization for the Company
--------
originally filed with the California Secretary of State and as amended from time
to time.
1.6 "Bankruptcy" with respect to a Member shall mean: (a) the entry of
----------
a decree or order for relief by a court having jurisdiction in respect of such
Member in an involuntary case under federal or state bankruptcy or insolvency
law, or the appointment of a receiver, assignee, or trustee for such person or
for any substantial part of his or her property, or the issuance of an order for
the winding-up or liquidation of his or her affairs and the continuance of any
such decree or order unstayed and in effect for a period of 90 consecutive days;
(b) the commencement by such Member of a voluntary proceeding seeking any
decree, order or appointment
-2-
<PAGE>
referred to in clause (a) or the consent by such Member to any such decree,
order or appointment; (c) the making by such Member of a general assignment for
the benefit of creditors; or (d) the admission in writing by such Member of its
inability to pay its debts as they become due.
1.7 "Book Depreciation" shall mean, for each fiscal year or other
-----------------
period, an amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to the Company's assets for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
any asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, Book Depreciation with respect to such
asset shall be an amount which bears the same ratio to such beginning Gross
Asset Value as the federal income tax depreciation, amortization or other cost
recovery deduction with respect to such asset for such year or other period
bears to such beginning adjusted tax basis; provided, however, that if the
-------- -------
federal income tax depreciation, amortization or other cost recovery deduction
with respect to such asset for such year is zero, Book Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Managers.
1.8 "Capital Account" shall mean with respect to any Member the
---------------
capital account which the Company establishes and maintains for such Member
pursuant to Section 6.1.
1.9 "Capital Contribution" shall mean with respect to any Member the
--------------------
amount of money and the initial Gross Asset Value of any property other than
money (net of liabilities assumed or taken subject to by the Company)
contributed by the Member with respect to the Membership Interest held by such
Member.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended
----
from time to time, or any corresponding provisions of succeeding law.
1.11 "Company" shall mean Koll-Dove Global Disposition Services, LLC, a
-------
California limited liability company.
1.12 "Company Minimum Gain" shall have the meaning ascribed to the term
--------------------
"partnership minimum gain" in the Regulations Section 1.704-2(d).
-3-
<PAGE>
1.13 "Contribution Agreement" shall mean that certain Contribution
----------------------
Agreement entered into by and among Koll, Dove Group, and Dovetech, Inc., dated
March 9, 1995.
1.14 "Corporations Code" shall mean the California Corporations Code,
-----------------
as amended from time to time, and the provisions of succeeding law.
1.15 "Dissolution Event" shall mean with respect to any Member one or
-----------------
more of the following: the death, adjudicated incompetency, withdrawal,
resignation, expulsion, Bankruptcy, or dissolution of any Member.
1.16 "Distributable Cash" shall mean the amount of cash which the
------------------
Managers deem available for distribution to the Members, taking into account all
Company debts, liabilities, and obligations of the Company then due and amounts
which the Managers deem necessary to place into reserves for customary and usual
claims with respect to the Company's business.
1.17 "Dove Group" shall mean Ross Dove, Kirk Dove, Ross-Dove Company,
----------
Inc., Dovemedia, Ltd. and Dove Capital Corporation, collectively.
1.18 "Economic Interest" shall mean a Person's share of one or more of
-----------------
the Company's Net Profits and Net Losses (and items of income, gain, loss, or
deduction), and right to receive distributions from the Company pursuant to this
Agreement and the Act, but shall not include any other rights of a Member,
including, without limitation, the right to vote or participate in the
management, or except as provided in Section 17106 of the Corporations Code, any
right to information concerning the business and affairs of the Company.
1.19 "Fiscal Year" shall mean the Company's tax and accounting year
-----------
which shall be determined in accordance with Section 8.8.
1.20 "GE Capital Debt" shall mean that certain obligation of the Ross-
---------------
Dove Company, Inc. to General Electric Capital Corporation, in the face amount
of $8,603,150, dated July 28, 1994, that the Company assumed pursuant to the
Contribution Agreement.
-4-
<PAGE>
1.21 "Gross Asset Value" shall mean, with respect to any asset, the
-----------------
asset's adjusted basis for federal income tax purposes, subject to the following
exceptions and adjustments:
A. The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset, as
determined by the contributing Member and the Managers;
B. The Gross Asset Value of all Company assets shall be adjusted
to equal their respective gross fair market values, as determined by the
Managers, immediately preceding the occurrence of any of the following events:
(i) the acquisition of an additional Membership Interest in the Company by any
new or existing Member in exchange for more than a de minimis Capital
----------
Contribution if the Managers determine that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Member in the
Company; (ii) the distribution by the Company of more than a de minimis amount
----------
of property as consideration for an interest in the Company if the Managers
determine that such adjustment is necessary or appropriate to reflect the
relative economic interests of the Members in the Company; and (iii) the
liquidation of the Company within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g) (which for this purpose shall include the termination of
-
the Company for federal income tax purposes pursuant to Code Section
708(b)(1)(B));
C. The Gross Asset Value of any Company asset distributed to any
Member shall be the gross fair market value of such asset on the date of
distribution (determined in accordance with Section 9.5);
D. The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustment to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and Section 6.3(G);
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this subsection D to the extent the Managers determine that an adjustment
pursuant to subsection B above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subsection D; and
-5-
<PAGE>
E. If the Gross Asset Value of an asset has been determined or
adjusted pursuant to subsection A, B, or D above, such Gross Asset Value shall
thereafter be adjusted by the Book Depreciation (calculated in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g)) taken into account with respect to
-
such asset for purposes of computing Net Profits and Net Losses.
1.22 "IBM Claim" shall mean all of the rights of the Ross-Dove Company,
---------
Inc. against International Business Machines Corporation ("IBM") arising from a
dispute between Ross-Dove Company, Inc. and IBM in connection with the purchase
of certain computers from IBM on or around June, 1994, which rights were
contributed to the Company pursuant to the Contribution Agreement.
1.23 "Koll" shall mean Koll Management Services, Inc.
----
1.24 "Koll Earned Preferred Return" shall mean a preferred return with
----------------------------
respect to Koll's Membership Interest, computed in accordance with Section
6.7.D.
1.25 "Koll's Fees" shall mean all revenues derived by Koll and its
-----------
Affiliates pursuant to that certain Strategic Alliance Agreement, entered into
in February, 1995, between Koll and the Ross-Dove Company, Inc. (as amended or
superseded from time to time), and all real estate management fees paid by the
Company to Koll or any of its Affiliates (including management fees paid
pursuant to any property management agreement relating to the Company's
principal office), and any and all real estate referral fees paid by the Company
to Koll or any of its Affiliates.
1.26 "Majority Vote" of the Members shall mean a vote of Members
-------------
holding more than fifty percent (50%) of the Units.
1.27 "Manager" shall mean any one of the persons appointed by the
-------
Members pursuant to Section 5.2 to manage the Company, as provided in Article V.
1.28 "Member" shall mean each Person who (a) is an initial signatory to
------
this Agreement, has been admitted to the Company as a Member in accordance with
the Articles or this Agreement or is an assignee who has become a Member in
accordance with Article VII of this Agreement, and (b) with respect to whom a
Dissolution Event has not occurred.
-6-
<PAGE>
1.29 "Member Minimum Gain" shall mean the minimum gain attributable to
-------------------
Member Nonrecourse Debt, determined in accordance with the rules set forth for
determining "partner nonrecourse debt minimum gain" in Regulations Section
1.704-2(i)(3).
1.30 "Member Nonrecourse Debt" shall have the meaning ascribed to the
-----------------------
term "partner nonrecourse debt" in Regulations Section 1.704-2(b)(4).
1.31 "Member Nonrecourse Deductions" shall mean items of Company loss,
-----------------------------
deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to
Member Nonrecourse Debt, and shall be determined in accordance with the rules
set forth for determining "partner nonrecourse deductions" in Regulations
Section 1.704-2(i)(2).
1.32 "Membership Interest" shall mean a Member's entire interest in the
-------------------
Company, including the Member's Economic Interest, the right to vote on or
participate in the management, and the right to receive information concerning
the business and affairs, of the Company.
1.33 "Minimum Fees" shall mean: (i) for the initial or last Fiscal Year
------------
of the Company, $2,500,000 multiplied by a fraction, the numerator of
which is the number of full months in such Fiscal Year, and the denominator of
which is 12; and (ii) for any other year, $2,500,000.
1.34 "Net Earnings" of the Company shall mean the combined net income
------------
of the Company and Dovetech, Inc., as determined by the Company's outside
accountants in accordance with generally accepted accounting principles.
1.35 "Net Profits" or "Net Losses," as the case may be, for any period,
----------- ----------
shall mean an amount equal to the Company's Taxable Income or Taxable Loss for
such period, with the following adjustments:
A. Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Net Profits and Net Losses
pursuant to this definition shall be added to such Taxable Income or shall
reduce such Taxable Loss;
-7-
<PAGE>
B. Any expenditure of the Company described in Code Section
705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
-
in computing Net Profits or Net Losses pursuant to this definition, shall be
subtracted from such Taxable Income or Loss;
C. If the Gross Asset Value of any Company asset is adjusted
pursuant to subsection B or C of the definition of Gross Asset Value, the amount
of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Profits or Net Losses;
D. Gain or loss resulting from the disposition of any Company
asset with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the asset
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
E. In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such Taxable Income or Loss,
there shall be taken into account Book Depreciation for such fiscal year or
other period;
F. To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account
- -
in determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's Interest, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes of
computing Net Profits or Net Losses; and
G. Notwithstanding any other provision of this definition, any
item which is specially allocated pursuant to Section 6.3 shall not be taken
into account in computing Net Profits or Net Losses.
1.36 "Nonrecourse Deduction" shall mean any item of Company loss,
---------------------
deduction or expense that is attributable to a Nonrecourse Liability, and shall
be determined in accordance with the rules set forth in Regulations Sections
1.704-2(c) and 1.704-2(j)(1).
-8-
<PAGE>
1.37 "Nonrecourse Liability" shall have the meaning set forth in
---------------------
Regulation Section 1.752-1(a)(2).
1.38 "Percentage Interest" shall mean the percentage represented by the
-------------------
number of Units held by a Member to the total number of Units held by all the
Members, as such percentage may be adjusted from time to time pursuant to the
terms of this Agreement.
1.39 "Person" shall mean an individual, general partnership, limited
------
partnership, limited liability company, corporation, trust, estate, real estate
investment trust association or any other entity.
1.40 "Regulations" shall, unless the context clearly indicates
-----------
otherwise, mean the regulations currently in force as final or temporary that
have been issued by the U.S. Department of Treasury pursuant to its authority
under the Code.
1.41 "Super Majority" of the Managers shall mean at least five (5) of
--------------
the seven (7) Managers; provided that if at any time the number of authorized
Managers is other than seven (7), then a Super Majority shall be adjusted as
provided in Section 5.2.
1.42 "Super Majority Vote" of the Managers shall mean a vote requiring
-------------------
the approval of a Super Majority of the Managers.
1.43 "Tax Matters Partner" initially shall be Koll or any successor
-------------------
designated pursuant to Section 8.9.
1.44 "Taxable Income" or "Taxable Loss," as the case may be, for any
-------------- ------------
period, shall mean the taxable income or taxable loss of the Company for such
period, determined in accordance with Code Section 703(a), including all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1).
1.45 "Units" shall mean the units of Membership Interest issued by the
-----
Company to its Members, in exchange for Capital Contributions and commitments to
make Capital Contributions.
-9-
<PAGE>
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Members have formed a
---------
California limited liability company under the laws of the State of California
by filing the Articles with the California Secretary of State and entering into
this Agreement. The rights and liabilities of the Members shall be determined
pursuant to the Act and this Agreement. To the extent that the rights or
obligations of any Member are different by reason of any provision of this
Agreement than they would be in the absence of such provision, this Agreement
shall, to the extent permitted by the Act, control.
2.2 Name. The name of the Company shall be "Koll-Dove Global
----
Disposition Services, LLC." The business of the Company may be conducted under
that name or, upon compliance with applicable laws, any other name that the
Managers deem appropriate or advisable. The Managers shall cause to be filed
any fictitious name certificates and similar filings, and any amendments
thereto, that the Managers consider appropriate or advisable.
2.3 Term. The term of this Agreement shall be 30 years, unless
----
extended or sooner terminated as hereinafter provided.
2.4 Office and Agent. The Company shall continuously maintain an
----------------
office and registered agent in the State of California as required by the Act.
The principal office of the Company shall be at 1241 East Hillsdale Boulevard,
Foster City, California 94404, or such other place as the Managers from time to
time may determine. Prompt notice of any change in the location of the principal
office shall be given to all Members. The Company also may have such offices,
anywhere within and without the State of California, as the Managers from time
to time may determine, or the business of the Company may require. The
registered agent shall be as stated in the Articles or as otherwise determined
by the Managers.
2.5 Names and Addresses of the Members. The respective names and
----------------------------------
addresses of the Members are set forth on Exhibit "A."
2.6 Business of the Company. Notwithstanding the purpose of the
-----------------------
Company which is described in the Articles, the Company shall not engage in any
business other than the following without the approval of a Super Majority Vote
of the Managers:
-10-
<PAGE>
A. The holding of auctions for the sale of capital assets, real
estate, financial instruments, excess or obsolete inventory and other assets;
the buying and selling of capital assets; the production of marketing and
advertising materials associated with the foregoing; and the conduct (through a
wholly-owned subsidiary) of fee-based appraisals of assets; and
B. Such other activities directly related to the foregoing
business as may be necessary or advisable in the opinion of the Managers to
further such business.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Initial Contributions.
---------------------
A. Dove Group's Capital Contributions. As of the effective date
----------------------------------
of this Agreement, pursuant to the Contribution Agreement: (i) each of Ross-Dove
Company, Inc., Dovemedia, Ltd. and Dove Capital Corporation, have contributed to
the capital of the Company substantially all of their respective assets
(excluding certain specified assets identified in the Contribution Agreement),
subject to all of their respective liabilities (excluding certain specified
liabilities identified in the Contribution Agreement), all as evidenced and more
fully described in the Contribution Agreement; and (ii) Ross Dove and Kirk Dove
each have contributed all of their respective right, title and interest in all
of the issued and outstanding stock of Dovetech, Inc., as evidenced and more
fully described in the Contribution Agreement. The Members agree that the net
fair market value of each of the Dove Group's contributions equal the amounts
set forth opposite each of their names on Exhibit B, and each will receive an
initial credit to its Capital Account equal to such net fair market value.
B. Koll's Capital Contributions. As of the effective date of this
----------------------------
Agreement, pursuant to the Contribution Agreement, Koll has contributed to the
capital of the Company $ * in immediately available funds, and Koll will
receive a corresponding credit to its Capital Account.
-11-
* Confidential Treatment
Requested
<PAGE>
3.2 Mandatory Additional Contributions.
----------------------------------
A. Koll's Second Contribution. On or before the 30th day
--------------------------
following the effective date of this Agreement, Koll shall contribute to the
capital of the Company an additional $ * in immediately available funds, and
Koll shall receive a corresponding credit to its Capital Account for such
additional contribution when each such contribution is made.
B. Koll's Deferred Contribution. Subject to Section 3.7.B and
----------------------------
Koll's offset rights pursuant to the Contribution Agreement, on or before
December 31, 1997, Koll shall contribute to the capital of the Company an
additional $ * in immediately available funds; provided, however that the
Managers may from time to time call for some or all of such additional
contribution from Koll at any time prior to December 31, 1997, if the Managers
determine that such earlier contribution would be desirable in order to provide
increased growth, value and profitability for the Company. Koll shall receive a
corresponding credit to its Capital Account for each such additional
contribution when each such contribution is made.
3.3 No Further Contributions Required. No Member shall be required to
---------------------------------
contribute to the capital of the Company any amounts in addition to the amounts
contributed or required to be contributed pursuant to Sections 3.1 and 3.2. If
the Company needs additional funds for any reason, the Members may, but will not
be required to, make additional Capital Contributions to the Company on terms
approved by a Super Majority Vote of the Managers.
3.4 Units. As of the effective date of this Agreement, in exchange for
-----
all amounts contributed or committed to be contributed to the capital of the
Company pursuant to Sections 3.1 and 3.2, each Member shall be issued that
number of Units as are set forth opposite each Member's name on Exhibit B; it
being understood that no additional Units shall be issued at the time of making
any additional contributions pursuant to Section 3.2.
3.5 Failure to Make Contributions. If any Member does not timely
-----------------------------
contribute capital when required to do so pursuant to the provisions of Section
3.2, such Member shall be in default under this Agreement, and the Managers (or
if the Managers fail to do so, any non-defaulting Member) shall notify the
defaulting Member in writing of such default, and the entire amount of its
unmade capital
-12-
* Confidential Treatment
Requested
<PAGE>
contribution (including any amounts not currently due) (the "Defaulted Amount")
shall become immediately due and payable. If the defaulting Member does not
contribute the entire Defaulted Amount to the Company within 14 days following
such notice, those non-defaulting Members who hold a majority of the Units held
by all non-defaulting Members may cause the Company to exercise any one or more
of the following remedies:
A. The Company may commence an action to collect from the
defaulting Member by legal process the Defaulted Amount, together with court
costs and reasonable attorneys' fees.
B. The non-defaulting Members may advance funds to the Company to
cover some or all of the Defaulted Amount. Amounts which a non-defaulting
Member so advances on behalf of the defaulting Member shall become a loan due
and owing from the defaulting Member to such nondefaulting Member and bear
interest at the highest rate permitted by law, payable monthly. All cash
distributions otherwise distributable to the defaulting Member under this
Agreement shall instead be paid to the non-defaulting Members making such
advances until such advances and interest thereon are paid in full. In any
event, any such advances shall be evidenced by a promissory note and shall be
due and payable by the defaulting Member one (1) year from the date that such
advance was made. Effective upon a Member becoming a defaulting Member, each
Member grants to the non-defaulting Members who advance funds under this Section
3.5.B a security interest in its Economic Interest to secure its obligation to
repay such advances and agrees to execute and deliver a promissory note as
described herein together with a security agreement and such UCC-1 financing
statements as such non-defaulting Members may reasonably request.
C. The non-defaulting Members who hold a majority of the Units
held by all non-defaulting Members may dissolve the Company, in which event the
Company shall be wound-up, liquidated and terminated pursuant to Article IX.
Each Member acknowledges and agrees that the remedies described in this
Section 3.5 bear a reasonable relationship to the damages which the Members
estimate may be suffered by the Company and the non-defaulting Members by reason
of the failure of a defaulting Member to make an additional Capital Contribution
when required, and the election of any or all of the above described remedies is
not unreasonable under the circumstances existing as of
-13-
<PAGE>
the date hereof. The election of the non-defaulting Members to pursue any remedy
provided in this Section 3.5 shah not be a waiver or limitation of the right to
pursue an additional or different remedy available hereunder or at law or equity
with respect to any subsequent default.
3.6 No Interest. No Member shall be entitled to receive any interest
-----------
on his or her Capital Contributions.
3.7 Loans by Members.
----------------
A. Generally. Except as otherwise provided in Section 3.7.B, no
---------
Member will be required to make loans to the Company by virtue of being a Member
in the Company. Loans may be made, however, by any Member to the Company and
shall not be considered Capital Contributions. The amount of any such loan
shall be a debt due from the Company to such lending Member, and shall be made
upon such terms and conditions and bearing interest at such rates as are
approved by a Super Majority Vote of the Managers.
B. GE Capital Debt. If, in any of the first two (2) Fiscal Years
---------------
of the Company, the Company is required to make principal payments on the GE
Capital Debt (or on any replacement debt) in excess of the sum of: (i) $867,333
per such Fiscal Year and (ii) any net proceeds realized by the Company from the
IBM Claim in such Fiscal Year, then the Dove Group (or any one or more of the
Dove Group) shall loan to the Company the amount of such excess. Any such loan
(the "Dove Group Loan") shall be evidenced by a promissory note, shall bear
interest at the same rate as the GE Capital Debt (or any replacement debt), and
shall be repaid by the Company within 12 months after the making thereof, except
(with respect to a Dove Group Loan made during the first such Fiscal Year) to
the extent that, in the second of such Fiscal Years, any principal repayment
made by the Company on the Dove Group Loan together with any principal payment
made by the Company on the GE Capital Debt (or any replacement debt) would
exceed the sum of: (i) $867,333 and (ii) any net proceeds realized from the IBM
Claim in such Fiscal Year, in which event the Dove Group Loan would be extended
for an additional 12 months. The failure of the Dove Group collectively to make
any required Dove Group Loan shall be treated as a default by each of the Dove
Group, and remedies analogous to those set forth in Section 3.5 shall be
available to the Company and to Koll. Without limiting any remedies described
in the preceding sentence, if the Dove Group fails to make any required Dove
Group Loan pursuant to
-14-
<PAGE>
this Section 3.7.B, Koll may elect to advance to the Company some or all of the
amounts otherwise required to be loaned by the Dove Group, in which case each
dollar advanced by Koll shall, for so long as it has not been repaid, defer one
dollar of Koll's obligation to make further Capital Contributions pursuant to
Section 3.2.B, until and to the extent such advance is repaid; it being
understood that the sum of Koll's Capital Contributions pursuant to Section
3.2.B and any unrepaid advance made by Koll pursuant to this Section 3.7.B,
shall not exceed in the aggregate $ * . Furthermore, if any advance made by
Koll has not been repaid in full at the end of any Fiscal Year, Ross Dove and
Kirk Dove shall not be entitled to any bonus in their capacities as employees
for such Fiscal Year.
ARTICLE IV
MEMBERS
4.1 Limited Liability. Except as required under the Act or as
-----------------
expressly set forth in this Agreement, no Member shall be personally liable for
any debt, obligation or liability of the Company, whether that liability or
obligation arises in contract, tort or otherwise.
4.2 Admission of Additional Members. The Company may issue additional
-------------------------------
Units and may admit new Members to the Company. Any additional Members shall
obtain Units and will participate in the management, Net Profits, Net Losses,
and distributions of the Company on such terms as are determined by Super
Majority Vote of the Managers. Any additional Members shall execute and deliver
such number of counterpart signature pages to this Agreement and the Buy-Sell
Agreement as the Managers may require, evidencing such Member's intent to be
bound by all of the terms and conditions of this Agreement (including the Buy-
Sell Agreement). Exhibits A and B shall be amended to reflect each issuance of
additional Membership Interests. Notwithstanding the foregoing, substitute
Members may only be admitted in accordance with Article VII.
4.3 Voting Rights. Except as expressly provided in this Agreement, the
-------------
Act or the Articles, Members shall have no voting, approval or consent rights.
Unless otherwise provided in this Agreement, all matters in which a vote,
approval or consent of the Members is required, a vote, consent or approval of
Members holding a Majority Vote (or, in instances in which there are defaulting
Members, non-defaulting Members who hold a majority of the Units
-15-
* Confidential Treatment
Requested
<PAGE>
held by all non-defaulting Members) shall be sufficient to authorize or approve
such act.
4.4 Meetings of Members.
-------------------
A. Date, Time and Place of Meetings of Members; Secretary. The
------------------------------------------------------
Members may, but shall not be required to hold regular meetings. Meetings of
Members may be held at such date, time and place within or without the State of
California as the Managers may fix from time to time. At any Members' meeting,
the Managers shall appoint a person to preside at the meeting and a person to
act as secretary of the meeting. The secretary of the meeting shall prepare
minutes of the meeting which shall be placed in the minute books of the Company.
B. Power to Call Meetings. Unless otherwise prescribed by the Act
----------------------
or by the Articles, meetings of the Members may be called by any Manager, or
upon written demand of Members holding more than ten percent (10%) of the
Percentage Interests for the purpose of addressing any matters on which the
Members may vote.
C. Notice of Meetings. Written notice of a meeting of Members
------------------
shall be sent or otherwise given to each Member in accordance with Section 4.4.D
not less than ten (10) nor more than sixty (60) days before the date of the
meeting. The notice shall specify the place, date and hour of the meeting and
the general nature of the business to be transacted. No other business may be
transacted at this meeting. Upon written request to a Manager by any person
entitled to call a meeting of Members, the Managers shall immediately cause
notice to be given to the Members entitled to vote that a meeting will be held
at a time requested by the person calling the meeting, not less than ten (10)
days nor more than sixty (60) days alter the receipt of the request. If the
notice is not given within ten (10) days after the receipt of the request, the
person entitled to call the meeting may give the notice.
D. Manner of Giving Notice; Affidavit of Notice. Notice of any
--------------------------------------------
meeting of Members shall be given in accordance with Section 12.7. If any
notice addressed to a Member at the address of that Member appearing on the
books of the Company is returned to the Company by the United States Postal
Service marked to indicate that the United States Postal Service is unable to
deliver the notice to the Member at that address, all future notices or reports
shall be
-16-
<PAGE>
deemed to have been duly given without further mailing if these shall be
available to the Member on written demand of the Member at the principal
executive office of the Company for a period of one year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of
any meeting shall be executed by the Manager or any secretary, assistant
secretary or any transfer agent of the Company giving the notice, and shall be
filed and maintained in the minute book of the Company.
E. Validity of Action. Any action approved at a meeting, other
------------------
than by unanimous approval of those entitled to vote, shall be valid only if the
general nature of the proposal so approved was stated in the notice of meeting
or in any written waiver of notice.
F. Quorum. The presence in person or by proxy of the holders of a
------
majority of the Units shall constitute a quorum at a meeting of Members. The
Members present at a duly called or held meeting at which a quorum is present
may continue to do business until adjournment, notwithstanding the loss of a
quorum, if any action taken after loss of a quorum (other than adjournment) is
approved by Majority Vote of the Members.
G. Adjourned Meeting; Notice. Any Members' meeting, whether or
-------------------------
not a quorum is present, may be adjourned from time to time by the vote of the
majority of the Units represented at that meeting, either in person or by proxy,
but in the absence of a quorum, no other business may be transacted at that
meeting, except as provided in Section 4.8.F. When any meeting of Members is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
subsequently fixed, or unless the adjournment is for more than forty-five (45)
days from the date set for the original meeting, in which case the Managers
shall set a new record date. At any adjourned meeting the Company may transact
any business which might have been transacted at the original meeting.
H. Waiver of Notice or Consent. The actions taken at any meeting
---------------------------
of Members however called and noticed and wherever held, have the same validity
as if taken at a meeting duly held after
-17-
<PAGE>
regular call and notice, if a quorum is present either in person or by proxy,
and if either before or after the meeting, each of the Members entitled to vote
who was not present in person or by proxy, signs a written waiver of notice or
consents to the holding of the meeting or approves the minutes of the meeting.
All such waivers, consents or approvals shall be filed with the Company records
or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting. Neither the
business to be transacted nor the purpose of any meeting of Members need be
specified in any written waiver of notice except as provided in Section 4.4.E.
I. Action by Written Consent Without a Meeting. Any action that
-------------------------------------------
may be taken at a meeting of Members may be taken without a meeting, if a
consent in writing setting forth the action so taken is signed and delivered to
the Company within sixty (60) days of the record date for that action by Members
having not less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all Members entitled to vote
on that action at a meeting were present and voted. All such consents shall be
filed with the Managers or the secretary, if any, of the Company and shall be
maintained in the Company records. Any Member giving a written consent, or the
Member's proxy holders, may revoke the consent by written notice received by the
Managers or secretary, if any, of the Company before written consents of the
number of votes required to authorize the proposed action have been filed.
Unless the consents of all Members entitled to vote have been
solicited in writing, (i) notice of any Member approval of an amendment to the
Articles or this Agreement, a dissolution of the Company, or a merger of the
Company, without a meeting by less than unanimous written consent, shall be
given at least ten (10) days before the consummation of the action authorized by
such approval, and (ii) prompt notice shall be given of the taking of any other
action approved by Members without a meeting by less than
-18-
<PAGE>
unanimous written consent to those Members entitled to vote who have not
consented in writing.
J. Telephonic Participation by Member at Meetings. Members may
----------------------------------------------
participate in any Members' meeting through the use of any means of conference
telephones or similar communications equipment as long as all Members
participating can hear one another. A Member so participating is deemed to be
present in person at the meeting.
K. Voting. If a quorum is present, except on those matters
------
otherwise expressly noted in this Agreement, a Majority Vote of the Members
shall be deemed to be an act approved by the Members.
L. Record Date. In order that the Company may determine the
-----------
Members of record entitled to notices of any meeting or to vote, or entitled to
receive any distribution or to exercise any rights in respect of any
distribution or to exercise any rights in respect of any other lawful action, a
Manager, or Members representing more than ten percent (10%) of the Percentage
Interests may fix, in advance, a record date, that is not more than sixty (60)
days nor less than ten (10) days prior to the date of the meeting and not more
than sixty (60) days prior to any other action. In no record date is fixed:
(i) The record date for determining Members entitled to notice
of or to vote at a meeting of Members shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held.
(ii) The record date for determining Members entitled to give
consent to Company action in writing without a meeting shall be the day on which
the first written consent is given.
(iii) The record date for determining Members for any other
purpose shall be at the close of business on the day on which the Managers adopt
the resolution relating thereto, or the sixtieth (60th) day prior to the date of
the other action, whichever is later.
(iv) The determination of Members of record entitled to notice
of or to vote at a meeting of Members shall apply to any adjournment of the
meeting unless a Manager or the Members who
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<PAGE>
called the meeting fix a new record date for the adjourned meeting, but the
Manager or the Members who called the meeting shall fix a new record date if the
meeting is adjourned for more than forty-five (45) days from the date set for
the original meeting.
4.5 Remuneration To Members.
-----------------------
A. Except as otherwise authorized in, or pursuant to, this
Agreement, no Member is entitled to remuneration for acting in the Company
business.
B. Notwithstanding the foregoing, the Company shall reimburse the
Members for organizational expenses (including, without limitation, legal and
accounting fees and costs) incurred to form the Company, and prepare the
Articles, this Agreement (including the Buy/Sell Agreement) and the Contribution
Agreement. To the extent that the Dove Group's combined reimbursement pursuant
to the foregoing exceeds Koll's reimbursement, Koll shall receive a special
distribution from the Company in an amount equal to such excess; and similarly,
to the extent that Koll's reimbursement pursuant to the foregoing exceeds the
Dove Group's combined reimbursement, the Dove Group shall receive a special
distribution from the Company in an amount equal to such excess.
C. It is contemplated that certain Members shall be officers and
employees of the Company and, as such, shall be entitled to salaries, bonus,
benefits and other remuneration all as set forth in any applicable employment
agreement or as otherwise determined from time to time by a Super Majority Vote
of the Managers.
4.6 Members Are Not Agents. Pursuant to Article V and the Articles,
----------------------
the management of the Company is vested in the Managers. No Member, acting
solely in the capacity of a Member, is an agent of the Company nor can any
Member in such capacity bind nor execute any instrument on behalf of the
Company.
4.7 No Right to Withdraw. No Member shall have the right to withdraw
--------------------
from the Company.
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<PAGE>
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by Managers.
-------------------------------------
A. Exclusive Management by Managers. The business, property and
--------------------------------
affairs of the Company shall be managed exclusively by the Managers. Except for
situations in which the approval of the Members is expressly required by the
Articles or this Agreement, and except to the extent powers have been delegated
to the officers as set forth in Section 5.11 below, the Managers shall have
full, complete and exclusive authority, power and discretion to manage and
control the business, property and affairs of the Company, to make all decisions
regarding those matters and to perform any and all other acts or activities
customary or incident to the management of the Company's business, property and
affairs consistent with the conduct and authority normally attributable to a
"corporate" board of directors.
B. Authority of Managers. No Manager, acting alone and solely in
---------------------
his or her capacity as a Manager, is an agent of the Company nor can any Manager
acting alone in such capacity bind the Company or execute any instrument on
behalf of the Company. Except to the extent that this Agreement expressly
requires the approval of more than a majority of the Managers, every act or
decision done or made by the Managers shall be by a majority of the Managers.
C. Meetings of Managers. Meetings of the Managers may be called
--------------------
by any Manager or by the chairperson, president, any vice-president or the
secretary. All meetings shall be held upon four (4) days notice by mail or
forty-eight (48) hours notice delivered personally or by telephone, telegraph or
facsimile. A notice need not specify the purpose of any meeting. Notice of a
meeting need not be given to any Manager who signs a waiver of notice or a
consent to holding the meeting or an approval of the minutes thereof, whether
before or after the meeting, or who attends the meeting without protesting,
prior to its commencement, the lack of notice to such Manager. All such waivers,
consents and approvals shall be filed with the Company records or made a part of
the minutes of the meeting. A majority of the Managers present, whether or not a
quorum is present, may adjourn any meeting to another time and place. If the
meeting is adjourned for more than twenty-four (24) hours, notice of any
adjournment shall be given
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prior to the time of the adjourned meeting to the Managers who are not present
at the time of the adjournment. Meetings of the Managers may be held at any
place within or without the State of California which has been designated in the
notice of the meeting. Managers may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all
Managers participating in such meeting can hear one another. Participation in a
meeting in such manner constitutes a presence in person at such meeting. A
majority of the authorized number of Managers constitutes a quorum of the
Managers for the transaction of business.
Any action required or permitted to be taken by the Managers may
be taken by the Managers without a meeting, if a majority of the Managers
consent in writing to such action. Any action required or permitted to be taken
by a Super Majority Vote of the Managers may be taken by the Managers without a
meeting, if a Super Majority of the Managers consent in writing to such action.
Such action by written consent shall have the same force and effect as a
majority vote of such Managers.
The provisions of this Section 5.1.C govern meetings of the
Managers if the Managers elect, in their discretion, to hold meetings. However,
nothing in this Section 5.1.C or in this Agreement is intended to require that
meetings of managers be held, it being the intent of the Members that meetings
of Managers are not required.
5.2 Election of Managers.
--------------------
A. Number, Designation, Terms and Qualifications. The Company
---------------------------------------------
shall initially have seven (7) Managers who shall initially be those persons
listed on Exhibit "C" attached hereto. The Managers shall be appointed by the
Members for one (1) year terms in accordance with the provisions of this Section
5.2. Four (4) of the seven (7) Managers (the "Koll Designees") shall be
appointed by Koll, subject to the Dove Group's right to interview and approve
each of the Koll Designees prior to their appointment, which approval will not
be unreasonably withheld, and three (3) of the seven (7) Managers (the "Dove
Designees") shall be appointed by the Dove Group, subject to Koll's right to
interview and approve each of the Dove Designees prior to their appointment,
which approval will not be unreasonably withheld. The appointments shall be made
at a meeting of the Members or by written action signed by the Members. Unless
he or she resigns or is removed, each Manager shall
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<PAGE>
hold office until the later of the expiration of the one-year term of his or her
appointment or until a successor is appointed and qualified. A Manager need not
be a Member, a resident of the State of California, or a citizen of the United
States. A Manager, however, cannot be any person who has any interest whatsoever
in any competitor of the Company. The number of Managers of the Company may be
varied from time to time by Super Majority Vote of the Managers in which case
the definition of Super Majority and the number of Koll Designees and Dove
Designees shall be appropriately adjusted, provided that in no instance shall
there be less than one Manager and provided further that if the number of
Managers is reduced from more than one to one, the Articles shall be amended to
so state, and if the number of Managers is increased from one to more than one,
the Articles shall be amended to delete the statement that the Company has only
one Manager.
B. Resignation. Any Manager may resign at any time by giving
-----------
written notice to the Members and remaining Managers without prejudice to the
rights, if any, of the Company under any contract to which the Manager is a
party. The resignation of any Manager shall take effect upon receipt of that
notice or at such later time as shall be specified in the notice; and, unless
otherwise specified in the notice, the acceptance of the resignation shall not
be necessary to make it effective. The resignation of a Manager who is also a
Member shall not affect the Manager's rights as a Member and shall not
constitute a withdrawal of a Member.
C. Removal. The Members who appointed a Manager may remove such
-------
Manager with or without cause. Any removal shall be without prejudice to the
rights, if any, of the Manager under any employment contract and, if the Manager
is also a Member, shall not affect the Manager's rights as a member or
constitute a withdrawal of a Member.
D. Vacancies. A vacancy or vacancies in the number of Managers
---------
shall be deemed to exist in the case of the death, resignation, or removal of
any Manager or if the authorized number of Managers is increased, or if the
Members fail to appoint the full authorized number of Managers to be appointed.
Koll shall have the right to fill any vacancy created with respect to a Koll
Designee, and the Dove Group shall have the right to fill any vacancy created
with respect to a Dove Designee. No reduction of the authorized number of
Managers shall have the effect of removing any Manager prior to the expiration
of the Manager's term of office.
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<PAGE>
5.3 Powers of Managers.
------------------
A. Powers of Managers. Without limiting the generality of Section
------------------
5.1, but subject to Section 5.3.B and to the express limitations set forth
elsewhere in this Agreement, the Managers shall have all necessary powers to
manage and carry out the purposes, business, property and affairs of the
Company, including, without limitation, the power to exercise on behalf and in
the name of the Company all of the powers described in Corporations Code Section
17003.
B. Limitations on Power of Managers. The Managers shall not have
--------------------------------
authority hereunder to cause the Company to take any of the following actions
without first obtaining a Super Majority Vote of the Managers:
(i) Subject to the rights of the Members pursuant to the
Buy/Sell Agreement, the sale, exchange or other disposition of all, or
substantially all, of the Company's assets occurring as part of a single
transaction or plan, or in multiple transactions over a twelve (12) month
period, except in the orderly liquidation and winding up of the business of the
Company upon its duly authorized dissolution;
(ii) Subject to the rights of the Members pursuant to the
Buy/Sell Agreement, the merger of the Company with another limited liability
company or limited partnership; provided in no event shall a Member be required
to become a general partner in a merger with a limited partnership without such
Member's express written consent or unless the agreement of merger provides each
Member with the dissenter's rights described in the Act;
(iii) The establishment of different classes of Members;
(iv) Transactions between the Company and one or more of the
Members or Managers or one or more of any Member's or Manager's Affiliates, or
transactions in which one or more Members or Managers, or one or more of any
Members' or Manager's Affiliates, has a material financial interest;
(v) Without limiting subsection (iv), the lending of money
by the Company to any Manager, Member or officer;
(vi) Any act which would make it impossible to carry on the
ordinary business of the Company;
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<PAGE>
(vii) The confession of a judgment against the Company;
(viii) Any sale or issuance of, or grant of options, warrants,
subscriptions, or other rights with respect to any Units of the Company;
(ix) Any recapitalization, restructuring or reorganization
of the Company, including any change in its Units affected by a combination,
reclassification, exchange, split or reverse split, conversion or other change;
(x) Any public offering of any securities of the Company;
(xi) The borrowing of any funds by the Company if such
borrowing would result in the aggregate borrowings of the Company exceeding
$3,000,000;
(xii) The agreement by the Company to enter into or modify
any employment agreements for any personnel if the base compensation and bonuses
per year of any said employment agreement are estimated to exceed $250,000;
(xiii) The appointment of Ross Dove or Kirk Dove to any office
of the Company;
(xiv) The adoption, material modification, or termination of
employee compensation plans, including bonus programs, equity participation
plans, and retirement programs;
(xv) The selection of Company counsel; and
(xvi) to take any other action that, pursuant to the express
provision of this Agreement, requires a Super Majority Vote of the Managers,
including without limitation, as provided in Section 2.6 (actions outside scope
of defined business of Company), Section 3.3 (additional capital contributions
by existing Members), Section 3.7.A. (loans by Members to Company), Section 4.2
(admission of additional Members), Section 5.2.A (varying number of authorized
Managers), Section 9.1.A (extension of the term of the Company), Section 9.1.C
(election to dissolve the Company), and Section 12.8 (amending this Agreement).
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<PAGE>
C. Member Approval. The Managers shall not have authority
---------------
hereunder to cause the Company to engage in the following transactions without
first obtaining the vote of the Members as noted below:
(i) The merger of the Company with a corporation or a
general partnership or other person shall require the affirmative vote or
written consent of all Members; and
(ii) Any other transaction described in this Agreement as
requiring the vote, consent or approval of the Members in the manner specified.
5.4 Members Have No Managerial Authority. The Members shall have no
------------------------------------
power to participate in the management of the Company except as expressly
authorized by this Agreement or the Articles and except as expressly required by
the Act. Unless expressly and duly authorized in writing to do so by a Manager
or Managers, no Member shall have any power or authority to bind or act on
behalf of the Company in any way, to pledge its credit, or to render it liable
for any purpose.
5.5 Performance of Duties; Liability of Managers. Notwithstanding
--------------------------------------------
Section 17255(a) of the Corporations Code, a Manager shall not be liable to the
Company or to any Member for any loss or damage sustained by the Company or any
Member, unless the loss or damage shall have been the result of fraud, deceit,
gross negligence, reckless or intentional misconduct, or a knowing violation of
law by the Manager. The Managers shall perform their managerial duties in good
faith, in a manner they reasonably believe to be in the best interests of the
Company and its Members, and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstance. A Manager who so performs the duties of Manager shall not have any
liability by reason of being or having been a Manager of the Company.
In performing their duties, the Managers shall be entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, of the following persons or groups unless they have
knowledge concerning the matter in question that would cause such reliance to be
unwarranted and provided that the Managers act in good faith and
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<PAGE>
after reasonable inquiry when the need therefor is indicated by the
circumstances:
(a) one or more officers, employees or other agents of the
Company whom the Managers reasonably believe to be reliable and competent in the
matters presented;
(b) any attorney, independent accountant, or other person
as to matters which the Managers reasonably believe to be within such person's
professional or expert competence; or
(c) a committee upon which the Managers do not serve, duly
designated in accordance with a provision of the Articles or this Agreement, as
to matters within its designated authority, which committee the Managers
reasonably believe to merit competence.
5.6 Devotion of Time. The Managers are not obligated to devote all of
----------------
their time or business efforts to the affairs of the Company. The Managers shall
devote whatever time, effort and skill as they deem appropriate for the
operation of the Company.
5.7 Competing Activities. The Managers, either as Managers, officers
--------------------
or employees of the Company, during the term of their employment or while they
are an officer or Manager, shall not compete with the Company, either directly
or indirectly, and shall not direct any business opportunities related in any
way to the Company's business to any other Person.
5.8 Transactions Between the Company and the Managers. Notwithstanding
-------------------------------------------------
that it may constitute a conflict of interest, the Managers may, and may cause
their Affiliates to, engage in any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service, or the establishment of any salary, other compensation or other terms
of employment) with the Company so long as such transaction is not expressly
prohibited by this Agreement, provided that such transaction is approved by a
Super Majority Vote of the Managers. A transaction between the Managers and/or
their Affiliates, on the one hand, and the Company, on the other hand, shall be
conclusively determined to constitute a transaction on terms and conditions, on
an overall basis, fair and reasonable to the Company and at least as favorable
to the Company as those generally available in a similar transaction between
parties operating at arm's length if approved
-27-
<PAGE>
by Super Majority Vote of the Managers. Except as expressly set forth in this
Agreement, the Managers shall not have any obligation, in connection with any
such transaction between the Company and the Managers or an Affiliate of the
Managers, to seek the consent of the Members.
5.9 Fees and Reimbursements to Managers. The Company shall not
-----------------------------------
initially pay the Managers, in their capacities as such, any fee for services in
connection with the management of the Company. Notwithstanding the foregoing,
the Company may pay the Managers, in their capacities as such, a regular fee for
services in connection with the management of the Company, as determined from
time to time by the Managers, and no Manager shall be prevented from receiving
any fee because the Manager is also a Member of the Company. The Company shall
reimburse the Managers for reasonable travel and other out of pocket costs of
attending meetings.
5.10 Acts of Managers. Any note, mortgage, evidence of indebtedness,
----------------
contract, certificate, statement, conveyance or other instrument in writing, and
any assignment or endorsement thereof, executed or entered into between the
Company and any other person, when signed by one or more Managers is not valid
as to the Company unless each signing Manager has the authority to sign as an
officer of the Company.
5.11 Officers.
--------
A. Appointment of Officers. The Managers will appoint officers
-----------------------
from time to time. The officers of the Company will include a chairperson, chief
executive officer, president, secretary and chief financial officer, and may
include any other officers as the Members may determine from time to time. The
officers shall serve at the pleasure of the Managers, subject to all rights, if
any, of an officer under any contract of employment. Any individual may hold any
number of offices. No officer need be a resident of the State of California or
citizen of the United States. The officers shall exercise such powers and
perform such duties as specified in this Agreement and as shall be determined
from time to time by the Managers.
The initial officers shall be as follows:
Chairman and Chief Executive Officer Ross Dove
President Kirk Dove
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<PAGE>
Secretary and Chief Financial Officer Lee Cochran
B. Removal, Resignation and Filling of Vacancy of Officers.
-------------------------------------------------------
Subject to the rights, if any, of an officer under a contract of employment, any
officer may be removed, either with or without cause, by the Managers at any
time.
Any officer may resign at any time by giving written notice to the
Managers. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights if any, of the Company under any contract to which the officer is a
party.
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
this Agreement for regular appointments to that office.
C. Salaries of Officers. Subject to Sections 5.3, 5.8 and 5.9,the
--------------------
salaries of all officers and agents of the Company shall be fixed by a
resolution of the Managers.
D. Duties and Powers of the Chairperson. The chairperson, if such
------------------------------------
an officer be appointed, shall, if present, preside at meetings of the Members
and the Managers, and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Managers or prescribed by this
Agreement.
E. Duties and Powers of the Chief Executive Officer and
----------------------------------------------------
President. Subject to such supervisory powers, if any, as may be given by the
- ---------
Managers to the chairperson, the president and the chief executive officer of
the Company shall, subject to the control of the Managers, have general and
active management of the business of the Company and shall see that all orders
and resolutions of the Members and Managers are carried into effect. He or she
shall have the general powers and duties of management usually vested in the
chief executive office and the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the Managers or this
Agreement.
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<PAGE>
The chief executive officer and the president shall be the only
officers authorized to execute bonds, mortgages and other contracts except where
the signing and execution thereof shall be expressly delegated by the Managers
to some other officer or agent of the Company.
F. Duties and Powers of Secretary. The secretary shall attend all
------------------------------
meetings of the Managers and all meetings of the Members, and shall record all
the proceedings of the meetings in a book to be kept for that purpose, and shall
perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the Members and
shall perform such other duties as may be prescribed by the Managers. The
secretary shall have custody of the seal, if any, and the secretary shall have
authority to affix the same to any instrument requiring it, and when so affixed,
it may be attested by his or her signature. The Managers may give general
authority to any other officer to affix the seal of the Company, if any, and to
attest the affixing by his or her signature.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Company's transfer agent or registrar,
as determined by resolution of the Managers, a register, or a duplicate
register, showing the names of all Members and their addresses, their Percentage
Interest, the number and date of certificates (if any) issued for the same, and
the number and date of cancellation of every certificate (if any) surrendered
for cancellation. The secretary shall also keep all documents described in
Section 8.1 and such other documents as such may be required under the Act. The
secretary shall perform such other duties and have such other authority as may
be prescribed elsewhere in this Agreement or from time to time by the Managers.
The secretary shall have the general duties, powers and responsibilities of a
secretary of a corporation.
If the Managers choose to appoint an assistant secretary or assistant
secretaries, the assistant secretaries, in the order of their seniority, in the
absence, disability or inability to act of the secretary, shall perform the
duties and exercise the powers of the secretary, and shall perform such other
duties as the Managers may from time to time prescribe.
G. Duties and Powers of Chief Financial Officer. The chief
--------------------------------------------
financial officer shall keep and maintain, or cause to be kept and
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<PAGE>
maintained, adequate and correct books and records of accounts of the properties
and business transactions of the Company, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, Membership
Interests and Economic Interests. The books of account shall at all reasonable
times be open to inspection by any Member.
The chief financial officer shall have the custody of the funds
and securities of the Company, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Company, and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Company in such depositories as may be designated by the Managers.
If the Managers choose to elect a treasurer or assistant
treasurers, the treasurer or assistant treasurers in the order of their
seniority shall, in the absence, disability or inability to act of the chief
financial officer, perform the duties and exercise the powers of the chief
financial officer, and shall perform such other duties as the Managers shall
from time to time prescribe.
H. Acts of Officers as Conclusive Evidence of Authority. Any
----------------------------------------------------
note, mortgage, evidence of indebtedness, contract, certificate, statement,
conveyance or other instrument in writing, and any assignment or endorsement
thereof, executed or entered into between the Company and any other Person, when
signed by (i) any one of the chairperson of the board, the chief executive
officer, or the president and (ii) any one of the secretary or chief financial
officer of the Company, is not invalidated as to the Company by any lack of
authority of the signing officers in the absence of actual knowledge on the part
of the other Person that the signing officers had no authority to execute the
same.
I. Signing Authority of Officers. The Managers shall set forth by
-----------------------------
written resolution the signing authority of officers of the Company.
5.12 Limited Liability. No person who is a Manager or officer or both a
-----------------
Manager and officer of the Company shall be personally liable under any judgment
of a court, or in any other manner, for any debt, obligation, or liability of
the Company, whether that liability or obligation arises in contract, tort or
otherwise, solely by reason of being a Manager of officer or both a Manager and
officer of the Company.
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<PAGE>
ARTICLE VI
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS
6.1 Maintenance of Capital Accounts.
-------------------------------
A. General. A Capital Account will be maintained for each Member
-------
in accordance with the following provisions. Each Member's Capital Account will
be:
(i) Increased by:
(a) Such Member's Capital Contributions;
(b) Such Member's allocable share of Net Profits; and
(c) Any items in the nature of income or gain that are
specially allocated to such Member pursuant to Section 6.3; and
(ii) Decreased by:
(a) The amount of cash and the Gross Asset Value of
any Company property (net of any liabilities assumed or taken subject to)
distributed to such Member pursuant to any provision of this Agreement;
(b) Such Member's allocable share of Net Losses; and
(c) Any items in the nature of expenses or losses that
are specially allocated to such Member pursuant to Section 6.3.
B. Transfers. If any Membership Interest in the Company is
---------
transferred in accordance with the terms of this Agreement (including the
Buy/Sell Agreement), the transferee will succeed to the Capital Account of the
transferor to the extent it relates to the transferred Membership Interest.
C. Discretion to Modify. The foregoing provisions and the other
--------------------
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulations Sections 1.704-1(b) and 1.704-2, and will be
interpreted and applied in a
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manner consistent with such Regulations. If the Managers determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto, are computed in order to comply with such Regulations, the
Managers may make such modification, provided they determine that such
modification will have no material adverse effect on the aggregate amounts
distributable to any Member pursuant to this Agreement.
6.2 Allocations of Net Profit and Net Loss.
--------------------------------------
A. Net Loss. After giving effect to the special allocations set
--------
forth in Section 6.3, Net Loss shall be allocated to the Members in proportion
to their Percentage Interests.
B. Net Profit. After giving effect to the special allocations set
----------
forth in Section 6.3, Net Profit shall be allocated to the Members in proportion
to their Percentage Interests.
6.3 Special Allocations.
-------------------
A. Minimum Gain Chargeback. Notwithstanding any other provision
-----------------------
of this Article 6, but subject to the exceptions set forth in Regulations
Sections 1.704-2(f)(2) (exception for certain conversions and refinancings of
Nonrecourse Liabilities into recourse debt or Member-Related Nonrecourse Debt),
1.704-2(f)(3) (exception for certain capital contributions used to repay
Nonrecourse Liabilities), 1.704-2(f)(4) (exceptions granted by the Commissioner
of the Internal Revenue Service upon request), and 1.704-2(f)(5) (other
exceptions that may be established by published revenue ruling), if there is a
net decrease in Company Minimum Gain during any Company Fiscal Year, each Member
shall be specially allocated, prior to any other allocation of Net Profits, Net
Losses, or other specially allocated item under this Section 6.3.A for such
year, items of Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Member's share of the net decrease
in Company Minimum Gain, determined in accordance with Regulations Section
1.704-2(g)(2), during such year. Allocations pursuant to this Section 6.3.A
shall be made in proportion to the amounts required to be allocated to each
Member under this Section 6.3.A. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-2(f)(6). This Section
6.3.A is intended to comply with the minimum gain chargeback requirement
contained in Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
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<PAGE>
B. Chargeback of Minimum Gain Attributable to Member Nonrecourse
-------------------------------------------------------------
Debt. Notwithstanding Section 6.2 of this Agreement, but subject to the
- ----
exceptions set forth in Regulations Section 1.704-2(i)(4) (including exceptions
consistent with those set forth in Regulations Sections 1.704-2(f)(2), (f)(3),
(f)(4), and (f)(5)), if, with respect to a Member Nonrecourse Debt, there is a
net decrease in Member Minimum Gain for any fiscal year of the Company
(determined in accordance with Regulations Section 1.704-2(i)(3)), each Member
with a share of the Member Minimum Gain (such share to be determined in
accordance with Regulations Section 1.704-2(i)(5)) will be specially allocated
items of Company income and gain for such year (and if necessary for subsequent
years) in an amount equal to such Member's share of the net decrease in such
Member Minimum Gain during such year. The items so allocated will be determined
in a manner consistent with the provisions of Regulations Section 1.704-2(i)(4).
This Section is intended to comply with the minimum gain chargeback requirement
in Section 1.704-2(i)(4) of the Regulations, and will be interpreted
consistently therewith. The allocation required by this Section 6.3.B will be
made after any allocation required by Section 6.3.A but before any other
allocation for the year.
C. Nonrecourse Deductions. Notwithstanding any other provision of
----------------------
this Article VI, any Nonrecourse Deductions for any Fiscal Year or other period
shall be specially allocated to the Members in proportion to their Percentage
Interests.
D. Member Nonrecourse Deductions. Notwithstanding any other
-----------------------------
provision of this Article VI, Member Nonrecourse Deductions for any Fiscal Year
or other period shall be specially allocated to the Member who bears the
economic risk of loss (within the meaning of Regulations Section 1.752-2) with
respect to the Member Nonrecourse Debt to which such items are attributable.
This provision is intended to comply with the requirements of Regulations
Section 1.704-2(i)(1), and will be interpreted consistently therewith.
E. Qualified Income Offset. Notwithstanding Section 6.2, if any
-----------------------
Member unexpectedly receives any adjustment, allocation or distribution
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), that,
- - - -
after tentatively taking into account all allocations that would be made for the
current period under this Article VI (other than allocations pursuant to this
Section 6.3.E), would cause or increase an Adjusted Capital Account Deficit,
items of Company
-34-
<PAGE>
income and gain will be specially allocated to such Member in an amount and
manner sufficient to eliminate, to the extent required by the Regulations under
Code Section 704(b), the Adjusted Capital Account Deficit as quickly as
possible. This Section is intended to comply with the qualified income offset
requirement in Regulations Section 1.704-1(b)(2)(ii)(d) and will be interpreted
-
consistently therewith. Allocations under this Section 6.3.E will be comprised
of a pro rata portion of each item of Company income (including gross income)
and gain for the year; however, items of income and gain allocated under
Sections 6.3.A and 6.3.B will be excluded from the operation of this Section
6.3.E.
F. Preventative Allocation. If any Member would have a deficit
-----------------------
Capital Account balance at the end of any Company Fiscal Year which is in excess
of the sum of (i) the amount such Member is obligated to restore to the Company
on liquidation, (ii) such Member's share of the Company's Minimum Gain as of the
end of such Fiscal Year, and (iii) such Member's share of Member Minimum Gain as
of the end of such Fiscal Year, each such Member will be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible. Allocations under this Section 6.3.F will be comprised of a pro rata
portion of each item of Company income (including gross income) and gain for the
year; however, items of income and gain allocated under Sections 6.3.A and 6.3.B
will be excluded from the operation of this Section 6.3.F.
G. Optional Adjustment to Basis - Section 754. To the extent an
------------------------------------------
adjustment to the adjusted tax basis of any Company asset pursuant to Code
Section 734(b) or Code Section 743(b) is required pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital
-
Accounts as the result of a distribution to a Member in complete liquidation of
such Member's Membership Interest, the amount of such adjustment to the Capital
Accounts will be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis), and such
gain or loss will be specially allocated to the Members in a manner consistent
with the manner in which their Capital Accounts are required to be adjusted
pursuant to such Regulations Section.
H. Overall Limitation on Allocation of Net Losses.
----------------------------------------------
Notwithstanding any other provision of this Article VI, no Net Losses will be
allocated to any Member if such allocation would cause or increase an Adjusted
Capital Account Deficit in such Member's Capital
-35-
<PAGE>
Account. If the Capital Account of any Member would have an Adjusted Capital
Account Deficit at any time when the Capital Account of any other Member would
not have an Adjusted Capital Account Deficit, any further Net Losses will be
allocated in accordance with the respective Capital Account balances of the
Members whose Capital Accounts would have no Adjusted Capital Account Deficit.
I. Curative Allocations. The allocations set forth in Section
--------------------
6.3.A through 6.3.H (the "Regulatory Allocations") are intended to comply with
certain requirements of Regulations Sections 1.704-1(b) and 1.704-2. The
Regulatory Allocations may not be consistent with the manner in which the
Members intend to divide Company distributions. Accordingly, the Managers are
hereby authorized to divide other allocations of Net Profits, Net Losses, and
other items among the Members so as to prevent the Regulatory Allocations from
distorting the manner in which Company distributions will be divided among the
Members pursuant to this Agreement. In general, the Members anticipate that this
will be accomplished by specially allocating other Net Profits, Net Losses, and
items of income, gain, loss and deduction among the Members so that the net
amount of the Regulatory Allocations and such special allocations to each such
person is zero. However, the Managers will have discretion to accomplish this
result in any reasonable manner.
J. Koll Preferred Return Allocation. Notwithstanding Section 6.2,
--------------------------------
but after application of the Regulatory Allocations, all or a portion of the
remaining items of Company income or gain (including gross income), if any, for
any Fiscal Year shall be specially allocated to Koll to the extent of the
excess, if any, of (i) the cumulative distributions Koll has received pursuant
to Sections 6.7.C(i) and 9.6.A from the commencement of the Company to a date 30
days after the end of such Fiscal Year, over (ii) the cumulative items of income
and gain allocated to Koll pursuant to this Section 6.3.J for all prior Fiscal
Years.
6.4 Other Allocation Rules.
----------------------
A. Frequency. For purposes of determining the Net Profits, Net
---------
Losses, or any other item allocated to any period, Net Profits, Net Losses, and
any such other item will be determined on a daily, monthly, quarterly, or other
basis, as determined by the
-36-
<PAGE>
Managers using any permissible method under Code Section 706 and the Regulations
thereunder.
B. Remaining Items. Any item of Company income, gain, loss or
---------------
deduction and any other allocation not otherwise provided for in this Agreement
will be divided among the Members in the same proportions as they share Net
Profits or Net Losses, as the case may be, for such period.
C. Share of Excess Nonrecourse Liabilities. Solely for purposes
---------------------------------------
of determining a Member's proportionate share of the "excess nonrecourse
liabilities" of the Company within the meaning of Regulations Section 1.752-
3(a)(3), Members' interests in Company profits will be deemed to be equal to
their respective Percentage Interests.
6.5 Tax Allocations; Code Section 704(c).
------------------------------------
A. Proportional to Net Profits or Net Losses. Except as otherwise
-----------------------------------------
provided in this Section 6.5, for each taxable period, each item of Company
income, gain, deduction and loss for tax purposes will be allocated among the
Members in the same proportion as they share the corresponding item of Net
Profits, Net Losses or other item of Company income, gain, loss or deduction for
such period.
B. Contribution of Property. In accordance with Code Section
------------------------
704(c) and the Regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Company will, for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial Gross Asset Value.
C. Gross Asset Value Adjustment. If the Gross Asset Value of any
----------------------------
Company asset is adjusted as the result of an adjustment as described in
subsection B of the definition of Gross Asset Value, subsequent allocations of
income, gain, loss and deduction with respect to such asset will, for tax
purposes, take account of any variation between the adjusted basis of such asset
for federal income tax purposes and its Gross Asset Value in the same manner as
pursuant to Code Section 704(c) and the Regulations thereunder.
D. Discretion; Effect. Any election or other decision relating to
------------------
allocations pursuant to this Section 6.5 will be made by
-37-
<PAGE>
the Managers in any manner that reasonably reflects the purposes and intention
of this Agreement. Allocations pursuant to this Section 6.5 are for purposes of
federal, state and local taxes only and will not affect or in any way be taken
into account in computing any Member's Capital Account balance or share of Net
Income, Net Loss or distributions pursuant to any provision of this Agreement.
6.6 Allocation of Net Profits and Losses in Respect of a Transferred
----------------------------------------------------------------
Interest. If any Membership Interest is transferred, or is increased or
- --------
decreased by reason of the admission of a new Member or otherwise during any
Fiscal Year of the Company, each item of income, gain, loss, deduction or credit
of the Company for such Fiscal Year shall be assigned pro rata to each day in
the particular period of such fiscal year to which such item is attributable
(i.e., the day on or during which it is accrued or otherwise occurred) and the
amount of each such item so assigned to any such day shall be allocated to the
Member based upon his or her respective Membership Interest at the close of such
day.
However, for the purpose of accounting convenience and simplicity,
the Company shall treat a transfer of, or an increase or decrease in, a
Membership Interest which occurs at any time during a semi-monthly period
(commencing with a semi-monthly period including the date hereof) as having been
consummated on the last day of such semi-monthly period, regardless of when
during such semi-monthly period such transfer, increase, or decrease actually
occurs (i.e., sales and dispositions made during the first fifteen (15) days of
any month will be deemed to have been made on the 15th day of the month).
Notwithstanding any provision above to the contrary, gain or loss
of the Company realized in connection with a sale or other disposition of any of
the assets of the Company shall be allocated solely to the parties owning
Membership Interests as of the date such sale or other disposition occurs.
6.7 Distributions.
-------------
A. Generally. Except as otherwise provided in this Agreement,
---------
distributions shall be made out of Distributable Cash at such times and in such
amounts as the Managers may determine, and shall be set forth in writing from
time to time by resolution of the Managers.
-38-
<PAGE>
B. Distributions to Pay Taxes. Subject to Section 6.9, but
--------------------------
without regard to Section 17254 of the Corporations Code, distributions shall be
made each quarter to each Member in proportion to and in amounts at least equal
to the combined state and federal income taxes (assuming the maximum individual
tax rate) that is or will be payable on the Company's estimated taxable income
allocable to each Member with respect to the preceding quarter.
C. Priority of Distributions. Except as otherwise provided in
-------------------------
Section 6.7.B and Article IX, and without regard to Section 17254(a)(2) of the
Corporations Code, distributions shall be made among the Members in accordance
with the following order of priority:
(i) First, 100% to Koll, until Koll receives an amount
equal to the excess, if any, of: (a) the sum of the Koll Earned Preferred
Returns for each Fiscal Year from the inception of the Company through and
including the Fiscal Year most recently ended; over (b) the sum of all prior
distributions to Koll pursuant to this Section 6.7.C(i); and
(ii) Thereafter, among the Members in proportion to their
respective Percentage Interests.
D. Koll Earned Preferred Return. For purposes of the foregoing,
----------------------------
the "Koll Earned Preferred Return" for any particular Fiscal Year (the
"Determination Year") shall equal the lesser of (i) the sum of (x) the Koll
Preferred Return (computed in accordance with this Section 6.7.D) for the
Determination Year, and (y) the Koll Preferred Returns for any prior Fiscal
Years, to the extent not yet "earned," and (ii) the amount by which the
Company's Net Earnings for the Determination Year exceed $ * . "Koll
Preferred Return" as of the end of any particular Fiscal Year shall equal the
Shortfall (computed in accordance with this Section 6.7.D) as of the end of such
year, reduced (but not below zero) by any Fee Carryforward (computed in
accordance with this Section 6.7.D) as of the beginning of such year.
"Shortfall" as of the end of any particular Fiscal Year, shall equal the excess
(if any) of the Minimum Fees for such year over Koll's Fees for such year. "Fee
Carryforward" as of the beginning of any particular Fiscal Year, shall equal the
sum of the excess (if any), for each prior year, of Koll's Fees over the Minimum
Fees; provided that, to the extent that, in any particular Fiscal Year, any Fee
Carryforward is in fact used to reduce a Shortfall in computing the Koll
Preferred
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<PAGE>
Return, the Fee Carryforward as of the beginning of the next Fiscal
Year will be reduced by the amount so used. The Koll Preferred Return with
respect to any particular Fiscal Year will be deemed "earned" as soon as, and to
the extent that, it is reflected in Koll Earned Preferred Return for that year
or any subsequent year. In no event shall the failure to distribute the full
amount of the Koll Earned Preferred Return in any year result in a forfeiture in
future years by Koll of any portion of the Koll Earned Preferred Return.
E. Examples. The following example is included herein to
--------
illustrate the intended effect of Section 6.7.C(i):
[Rest of page intentionally blank.]
-40-
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE:
- --------
1 2 3 4 5 6
- - - - - -
Annual Accrued Koll Koll-Dove Koll Earned
Koll Fee Preferred Annual Net Preferred
Year/1/ Fees Shortfall/2/ Carry Forward/3/ Return/3/ Earnings Return/4/
- ----------- ------ ------------ ---------------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
1995 *
1996
1997
1998
1999
</TABLE>
F. Distributions with respect to Transferred Interests. Distributions
---------------------------------------------------
made under this Article 6 with respect to any transferred Membership Interest
will be made only to Members of record on the record date designated by the
Company.
6.8 Form of Distribution. Except as otherwise provided in Section 9.12, a
--------------------
Member, regardless of the nature of the member's Capital Contribution, has no
right to demand and receive any distribution from the Company in any form other
than money. No Member may be compelled to accept from the Company a
distribution of any asset in kind in lieu of a proportionate distribution of
money being made to other Members. Except upon a dissolution and the winding up
of the Company, no Member may be compelled to accept a distribution of any asset
in kind.
- ----------------------
/1/The example assumes each year is a full 12 months.
/2/Shortfall is the excess of $ * over Column 1 (actual fees received
by Koll)for current year.
/3/Fee Carryforward is the sum of the amounts by which Column 1 exceeds $ *
for the current and all prior years, reduced by the amount of the Fee
Carryforward used to reduce the Shortfall.
/4/Koll Preferred Return equals Column 2 (Shortfall) reduced by Column 3
(Fee Carryforward) from the previous year.
/5/To the extent that Column 5 (Net Earnings) exceeds $ * in any year,
the accrued Koll Preferred Return shall be deemed earned by Koll to the extent
of such excess Net Earnings in said year.
-41-
* Confidential Treatment
Requested
<PAGE>
6.9 Restriction on Distributions.
----------------------------
A. No distribution shall be made if, after giving effect to the
distribution the Company would not be able to pay its debt as they became due in
the usual course of business.
B. The Managers may base a determination that a distribution is
not prohibited on any of the following:
(i) Financial statements prepared on the basis of
accounting practices and principles that are reasonable in the circumstances.
(ii) A fair valuation.
(iii) Any other method that is reasonable in the
circumstances.
C. Solely for purposes of Section 6.9.A, the effect of a
distribution is measured as of the date the distribution is authorized if the
payment occurs within 120 days after the date of authorization, or the date
payment is made if it occurs more than 120 days of the date of authorization.
6.10 Return of Distributions. Except as otherwise provided in Section
-----------------------
17254(e) of the Corporations Code, no Member shall be obligated to return any
distribution to the Company or pay the amount of any distribution for the
account of the Company or to any creditor of the Company. The amount of any
distribution returned to the Company by a Member or paid by a Member for the
account of the Company or to a creditor of the Company shall be added to the
account or accounts from which it was subtracted when it was distributed to the
Member.
6.11 Obligations of Members to Report Allocations. The Members are
--------------------------------------------
aware of the income tax consequences of the allocations made by this Article VI
and hereby agree to be bound by the provisions of this Article VI in reporting
their shares of Company income and loss for income tax purposes.
-42-
<PAGE>
ARTICLE VII
TRANSFER AND ASSIGNMENT OF INTERESTS
The Members hereby agree to execute, concurrent with the execution of
this Agreement, the Buy/Sell Agreement substantially in the form attached hereto
as Exhibit "D" and incorporated herein by this reference which shall govern the
transfer of a Member's Units.
ARTICLE VIII
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
8.1 Books and Records. The books and records of the Company shall be
-----------------
kept, and the financial position and the results of its operations recorded, in
accordance with the accounting methods followed for federal income tax purposes.
The books and records of the Company shall reflect all the Company transactions
and shall be appropriate and adequate for the Company's business. The Company
shall maintain at its principal office in California all of the following:
A. A current list of the full name and last known business or
residence address of each Member set forth in alphabetical order, together with
the Capital Contributions, Capital Account and Percentage Interest of each
Member.
B. A current list of the full name and business or residence
address of each Manager.
C. A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Articles or any amendments thereto have been executed.
D. Copies of the Company's federal, state and local income tax or
information returns and reports for the six most recent taxable years;
E. A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;
-43-
<PAGE>
F. Copies of the financial statements of the Company for the six
most recent Fiscal Years; and
G. The Company's books and records as they relate to the internal
affairs of the Company for at least the current and past four Fiscal Years.
8.2 Delivery to Members and Inspection.
----------------------------------
A. Each Member and Manager has the right upon reasonable request
for purposes reasonably related to the interest of the Member or Manager, to:
(i) Inspect and copy during normal business hours any of
the Company records described in Sections 8.1.A through G; and
(ii) Obtain from the Managers, promptly after their becoming
available, a copy of the Company's federal, state and local income tax or
information returns for each Fiscal Year.
B. Any request, inspection or copying by a Member under this
Section 8.2 may be made by that Person or that Person's agent or attorney.
C. The Managers shall promptly furnish to a Member a copy of any
amendment to the Articles or this Agreement executed by a Manager pursuant to a
power of attorney from the Member.
8.3 Annual Statements.
-----------------
A. The Managers shall cause an audited annual report to be
prepared and sent to each of the Members not later than 120 days after the close
of the Fiscal Year. The report shall contain a balance sheet as of the end of
the Fiscal Year and an income statement and statement of changes in financial
position for the Fiscal Year.
B. The Managers shall cause to be prepared at least annually, at
Company expense, information necessary for the preparation of the Members'
federal and state income tax returns. The Managers shall cause to be sent to
each Member within ninety (90) days after the end of each taxable year such
information as is necessary to complete federal and state income tax or
information
-44-
<PAGE>
returns, and a copy of the Company's federal, state and local income
tax or information returns for that year.
C. The Managers shall cause to be filed at least annually with
the California Secretary of State the statement required under California
Corporations Code (S)17060.
8.4 Financial and Other Information. The Managers shall provide such
-------------------------------
financial and other information relating to the Company or any other entity in
which the Company owns, directly or indirectly, an equity interest, as a Member
may reasonably request. The Managers shall distribute to the Members, promptly
after the preparation or receipt thereof by the Managers, any financial or other
information relating to any entity in which the Company owns, directly or
indirectly, an equity interest, including any filings by such entity under the
Securities Exchange Act of 1934, as amended, that is received by the Company
with respect to any equity interest of the Company in such entity.
8.5 Other Filings. The Managers, at Company expense, shall cause to
-------------
be prepared and timely filed, with appropriate federal and state regulatory and
administrative bodies, amendments to, or restatements of, the Articles and all
reports required to be filed by the Company with those entities under the Act or
under any other applicable laws, rules, and regulations.
8.6 Bank Accounts. The Managers shall maintain the funds of the
-------------
Company in one or more separate accounts in the name of the Company, with such
financial contributions as the Managers may select, and shall not permit the
funds of the Company to be commingled in any fashion with the funds of any other
Person.
8.7 Accounting Decisions and Reliance on Others. All decisions as to
-------------------------------------------
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Managers, in consultation with the Company's accountants. The
Managers may rely upon the advice of the Company's accountants as to whether
such decisions are in accordance with accounting methods followed for federal
income tax purposes.
8.8 Tax Returns and Elections. The Company's Fiscal Year will end on
-------------------------
December 31 of each year unless otherwise determined by the Managers and
permitted by the Code. The Company's accountants will be instructed to prepare
and file all required
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<PAGE>
income tax returns for the Company. The Managers will make any tax election on
behalf of the Company necessary for completion of the Company tax return. If a
distribution of property is made in the manner provided in Code Section 734, or
if a transfer of any Membership Interest permitted by this Agreement is made in
the manner provided in Code Section 743, the Managers may cause the Company to
file an election under Code Section 754 in accordance with the procedures set
forth in the applicable Regulations promulgated thereunder.
8.9 Tax Matters Partner. The Managers may designate from time to time,
-------------------
by written resolution, a Member to be the Tax Matters Partner for purposes of
Code Sections 6221 et seq., who will have all the authority granted by the Code
-- ---
to a tax matters partner. The initial Tax Matters Partner shall be Koll. Prompt
notice of the designation of any new Tax Matters Partner will be given to all
Members.
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 Dissolution. The Company shall be dissolved, its assets shall be
-----------
disposed of, and its affairs wound up on the first to occur of the following:
A. Upon the expiration of the term set forth in Section 2.3,
unless a Super Majority Vote of the Managers elects to extend such term;
B. Upon the entry of a decree of judicial dissolution pursuant to
Section 17351 of the Corporations Code;
C. Upon a decision to dissolve by a Super Majority Vote of the
Managers;
D. The occurrence of a Dissolution Event with respect to any
Member, and the failure of the Members to elect to continue the Company in
accordance with Section 9.2;
E. The sale of all or substantially all of the assets of the
Company; or
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<PAGE>
F. Any other event which is specified in the Articles or under
applicable law as an event causing the dissolution of a limited liability
company, notwithstanding any provision in the operating agreement of such
limited liability company to the contrary.
9.2 Election to Continue. Upon the occurrence of a Dissolution Event
--------------------
with respect to any Member, the Company shall dissolve unless the other Members
(the "Remaining Members") consent by Majority Vote within ninety (90) days of
the Dissolution Event to the continuation of the business of the Company. If the
Remaining Members consent to the continuation of the business of the Company,
the Company and/or the Remaining Members shall, to the extent so provided in the
Buy/Sell Agreement, have the right to purchase, and the Member whose action or
conduct resulted in the Dissolution Event ("Former Member") or such Former
Member's legal representative shall, to the extent so required under the terms
of the Buy/Sell Agreement, sell, the Former Member's Membership Interest in
accordance with the terms and conditions of the Buy/Sell Agreement.
9.3 Certificate of Dissolution. As soon as possible following the
--------------------------
occurrence of any of the events specified in Section 9.1, the Managers shall
cause to be executed a Certificate of Dissolution in such form as shall be
prescribed by the California Secretary of State and shall file the Certificate
as required by the Act.
9.4 Winding Up. Upon the occurrence of any event specified in Section
----------
9.1, the Company shall continue solely for the purpose of winding up its affairs
in an orderly manner, liquidating its assets, and satisfying the claims of its
creditors. The Managers shall be responsible for overseeing the winding up and
liquidation of the Company, shall take full account of the assets and
liabilities of the Company, shall either cause its assets to be sold or
distributed, and if sold as promptly as is consistent with obtaining the fair
market value thereof, shall cause the proceeds therefrom, to the extent
sufficient therefor, to be applied and distributed as provided in Section 9.5.
The Managers shall give written notice of the commencement of winding up by mail
to all known creditors and claimants whose addresses appear on the records of
the Company.
9.5 Distributions in Kind. Any non-cash asset distributed to one or
---------------------
more Members shall first be valued at its fair market value to determine the Net
Profit or Net Loss that would have resulted if such asset were sold for such
value, such Net Profit or Net Loss shall
-47-
<PAGE>
then be allocated pursuant to Article VI, and the Members' Capital Accounts
shall be adjusted to reflect such allocations. The amount distributed and
charged to the Capital Account of each Member receiving an interest in such
distributed asset shall be the fair market value of such interest (net of any
liability secured by such asset that such Member assumes or takes subject to).
The fair market value of such asset shall be determined by the Managers or by
the Members or if any Member objects by an independent appraiser (any such
appraiser must be recognized as an expert in valuing the type of asset involved)
selected by the Manager or liquidating trustee and approved by the Members.
9.6 Distribution of Assets and Order of Payment of Liabilities Upon
---------------------------------------------------------------
Dissolution. After determining that all known debts and liabilities of the
- -----------
Company in the process of winding-up including, without limitation, debts and
liabilities to Members who are creditors of the Company, have been paid or
adequately provided for, the remaining assets shall be distributed to the
Members in the following order:
A. First, 100% to Koll until Koll has received an amount equal to
the excess, if any, of (i) the sum of the Koll Earned Preferred Returns for each
Fiscal Year from the inception of the Company through and including the last
Fiscal Year, over (ii) the sum of all prior distributions to Koll pursuant to
Section 6.7.C(i) and this Section 9.6.A.
B. And, the balance to the Members having positive balances in
their Capital Accounts (after giving effect to all contributions, distributions
and allocations for all periods, including the period during which such
distribution occurs), in the proportion that the positive balance in each
Member's Capital Account bears to the sum of all Capital Accounts having
positive balances.
9.7 Timing of Liquidation Distributions. Distributions in liquidation
-----------------------------------
will be made by the end of the taxable year in which the liquidation occurs or,
if later, within 90 days of the liquidating event and will otherwise comply with
Regulations Section 1.704-1(b).
9.8 Provision for Debts and Liabilities of Company. The payment of a
----------------------------------------------
debt or liability of the Company, whether the whereabouts of the creditor is
known or unknown, shall be considered to have been adequately provided for (for
purposes of
-48-
<PAGE>
Section 9.6) if the payment has been provided for by either of the following
means:
A. Payment thereof has been assumed or guaranteed in good faith
by one or more financially responsible persons or by the United States
government or any agency thereof, and the provision, including the financial
responsibility of the Person, was determined in good faith and with reasonable
care by the Members or Managers to be adequate at the time of any distribution
of the assets pursuant to this Section.
B. The amount of the debt or liability has been deposited as
provided in Section 2008 of the Corporations Code.
This Section 9.8 shall not prescribe the exclusive means of
making adequate provision for debts and liabilities.
9.9 Limitations on Payments Made in Dissolution. Except as otherwise
-------------------------------------------
specifically provided in this Agreement, each Member shall only be entitled to
look solely at the assets of Company for the return of his or her positive
Capital Account balance and shall have no recourse for his or her Capital
Contribution and/or share of Net Profits (upon dissolution or otherwise against
the Managers or any other Member).
9.10 Certificate of Cancellation. The Managers or Members who filed
---------------------------
the Certificate of Dissolution shall cause to be filed in the office of, and on
a form prescribed by, the California Secretary of State, a certificate of
cancellation of the Articles upon the completion of the winding up of the
affairs of the Company.
9.11 No Action for Dissolution. Except as expressly permitted in this
-------------------------
Agreement, a Member shall not take any voluntary action that directly causes a
Dissolution Event. The Members acknowledge that irreparable damage would be
done to the goodwill and reputation of the Company if any Member should bring an
action in court to dissolve the Company under circumstances where dissolution is
not required by Section 9.1. This Agreement has been drawn carefully to provide
fair treatment of all parties and equitable payment in liquidation of Economic
Interests. Accordingly, except where the Managers have failed to liquidate the
Company as required by this Article IX, each Member hereby waives and renounces
his or her right to initiate legal action to seek the appointment of a receiver
or trustee to liquidate the Company or to seek a decree of judicial
-49-
<PAGE>
dissolution of the Company on the ground that (a) it is not reasonably
practicable to carry on the business of the Company in conformity with the
Articles or this Agreement, or (b) dissolution is reasonably necessary for the
protection of the rights or interests of the complaining Member. Damages for
breach of this Section 9.8 shall be monetary damages only (and not specific
performance), and the damages may be offset against distributions by the Company
to which such Member would otherwise be entitled.
9.12 Right to Use Dove Names After Liquidation. In the event of a
-----------------------------------------
cessation of the business of the Company, whether in connection with the
dissolution and liquidation of the Company or otherwise, the Company shall
distribute to the Dove Group all of the Company's right, title, and interest in
and to, and the right to use, the names "Ross-Dove Company, Inc.," "Dovemedia,
Ltd.," "Dove Capital Corporation," and all similar names containing "Dove"
(other than any name that also uses "Koll"), and neither the Company nor Koll
shall have any further right to use such names.
ARTICLE X
INDEMNIFICATION AND INSURANCE
10.1 Indemnification of Agents. The Company shall indemnify any Person
-------------------------
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he or
she is or was a Member, Manager, officer, employee or other agent of the Company
or that, being or having been such a Member, Manager, officer, employee or
agent, he or she is or was serving at the request of the Company as a manager,
director, officer, employee or other agent of another limited liability company,
corporation, partnership, joint venture, trust or other enterprise (all such
persons being referred to hereinafter as an "agent"), to the fullest extent
permitted by applicable law in effect on the date hereof and to such greater
extent as applicable law may hereafter from time to time permit. The Managers
shall be authorized, on behalf of the Company, to enter into indemnity
agreements from time to time with any Person entitled to be indemnified by the
Company hereunder, upon such terms and conditions as the Managers deem
appropriate in their business judgment.
10.2 Insurance. The Company shall have the power to purchase and
---------
maintain insurance on behalf of any Person who is or was an
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<PAGE>
agent of the Company against any liability asserted against such Person and
incurred by such Person in any such capacity, or arising out of such Person's
status as an agent, whether or not the Company would have the power to indemnify
such Person against such liability under the provisions of Section 10.1 or under
applicable law.
ARTICLE XI
INVESTMENT REPRESENTATIONS
Each Member hereby represents and warrants to, and agrees with, the
Managers, the other Members, and the Company as follows:
11.1 Preexisting Relationship or Experience. (i) He or she has a
--------------------------------------
preexisting personal or business relationship with the Company or one or more of
its officers, Managers or control persons or (ii) by reason of his or her
business or financial experience, or by reason of the business or financial
experience of his or her financial advisor who is unaffiliated with and who is
not compensated, directly or indirectly, by the Company or any affiliate or
selling agent of the Company, he or she is capable of evaluating the risks and
merits of an investment in the Units and of protecting his or her own interest
in connection with this investment.
11.2 No Advertising. He or she has not seen, received, been presented
--------------
with, or been solicited by any leaflet, public promotional meeting, newspaper or
magazine article or advertisement, radio or television advertisement, or any
other form of advertising or general solicitation with respect to the sale of
the Units.
11.3 Investment Intent. He or she is acquiring the Units for
-----------------
investment purposes for his or her own account only and not with a view to or
for sale in connection with any distribution of all or any part of the Units. No
other person will have any direct or indirect beneficial interest in or right to
the Units.
11.4 Purpose of Entity. If the Member is a corporation, partnership,
-----------------
limited liability company, trust or other entity, it was not organized for the
specific purpose of acquiring the Units.
11.5 Residency. He or she is a resident of the state set forth on
---------
Exhibit "A."
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<PAGE>
11.6 Economic Risk. He or she is financially able to bear the economic
-------------
risk of an investment in the Units, including the total loss thereof.
11.7 No Registration of Units. He or she acknowledges that the Units
------------------------
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or qualified under the California Corporate Securities Law of
1968, as amended, or any other applicable blue sky laws in reliance, in part, on
his or her representations, warranties and agreements herein.
11.8 Membership Interest in Restricted Security. He or she understands
------------------------------------------
that the Units are "restricted securities" under the Securities Act in that the
Units will be acquired from the Company in a transaction not involving a public
offering, and that the Units may be resold without registration under the
Securities Act only in certain limited circumstances and that otherwise the
Units must be held indefinitely. In this connection, he or she understands the
resale limitations imposed by the Securities Act and is familiar with SEC Rule
144, as presently in effect, and the conditions which must be met in order for
that Rule to be available for resale of "restricted securities," including the
requirement that the securities must be held for at least two years after
purchase thereof from the Company prior to resale (three years in the absence of
publicly available information about the Company) and the condition that there
be available to the public current information about the Company under certain
circumstances. He or she understands that the Company has not made such
information available to the public and has no present plans to do so.
11.9 No Obligation to Register. He or she represents, warrants and
-------------------------
agrees that the Company and the Managers are under no obligation to register or
quality the Units under the Securities Act or under any state securities law, or
to assist him or her in complying with any exemption from registration and
qualification.
11.10 No Disposition in Violation of Law. Without limiting the
----------------------------------
representations set forth above, and without limiting Article VII of this
Agreement, he or she will not make any disposition of all or any part of the
Units which will result in the violation by him or her or by the Company of the
Securities Act, the California Corporate Securities Law of 1968, or any other
applicable securities laws. Without limiting the foregoing he or she agrees not
to make any disposition of all or any part of the Units unless and until:
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A. There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement and any applicable requirements
of state securities laws; or
B. (i) He or she has notified the Company of the proposed
disposition and has furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Managers, he or she has furnished the Company with a written
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of any securities under the Securities
Act or the consent of or a permit from appropriate authorities under any
applicable state securities law.
C. In the case of any disposition of all or any part of the Units
pursuant to SEC Rule 144, in addition to the matters set forth in Section
11.10.B, he or she shall promptly forward to the Company a copy of any Form 144
filed with the SEC with respect to such disposition and a letter from the
executing broker satisfactory to the Company evidencing compliance with SEC Rule
144. If SEC Rule 144 is amended or if the SEC's interpretations thereof in
effect at the time of any such disposition have changed from its present
interpretations thereof, he or she shall provide the Company with such
additional documents as the Managers may reasonably require.
11.11 Legends. He or she understands that the certificates (if any)
-------
evidencing the Units may bear one or all of the following legends:
A. "THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS QUALIFIED AND
REGISTERED UNDER THE APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN
THE OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND
REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS
AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS WHICH
ARE SET FORTH HEREIN.
B. Any legend required by applicable state securities laws.
-53-
<PAGE>
11.12 Investment Risk. He or she acknowledges that the Units are a
---------------
speculative investment which involves a substantial degree of risk of loss by
him or her of his or her entire investment in the Company, that he or she
understands and takes full cognizance of the risk factors related to the
purchase of the Units, and that the Company is newly organized and has no
financial or operating history.
11.13 Restrictions on Transferability. He or she acknowledges that
-------------------------------
there are substantial restrictions on the transferability of the Units pursuant
to this Agreement, that there is no public market for the Units and none is
expected to develop, and that, accordingly, it may not be possible for him or
her to liquidate his or her investment in the Company.
11.14 Information Reviewed. He or she has received and reviewed all
--------------------
information he or she considers necessary or appropriate for deciding whether to
purchase the Units. He or she has had an opportunity to ask questions and
receive answers from the Company and its officers, Managers and employees
regarding the terms and conditions of purchase of the Units and regarding the
business, financial affairs and other aspects of the Company and has further had
the opportunity to obtain all information (to the extent the Company possesses
or can acquire such information without unreasonable effort or expense) which he
or she deems necessary to evaluate the investment and to verify the accuracy of
information otherwise provided to him or her.
11.15 No Representations by Company. Neither any Manager, any agent or
-----------------------------
employee of the Company or of any Manager, or any other Person has at any time
expressly or implicitly represented, guaranteed, or warranted to him or her that
he or she may freely transfer the Unit, that a percentage of profit and/or
amount or type of consideration will be realized as a result of an investment in
the Units, that past performance or experience on the part of the Managers or
their Affiliates or any other person in any way indicates the predictable
results of the ownership of the Units or of the overall Company business, that
any cash distributions from Company operations or otherwise will be made to the
Members by any specific date (except tax distributions as noted) or will be made
at all, or that any specific tax benefits will accrue as a result of an
investment in the Company.
-54-
<PAGE>
11.16 Consultation with Attorney. He or she has been advised to consult
--------------------------
with his or her own attorney regarding all legal matters concerning an
investment in the Company and the tax consequences of participating in the
Company, and has done so, to the extent he or she considers necessary.
11.17 Tax Consequences. He or she acknowledges that the tax
----------------
consequences to him or her of investing in the Company will depend on his or her
particular circumstances, and neither the Company, the Managers, the Members,
nor the partners, shareholders, members, managers, agents, officers, directors,
employees, affiliates or consultants of any of them will be responsible or
liable for the tax consequences to him or her of an investment in the Company.
He or she will look solely to, and rely upon, his or her own advisers with
respect to the tax consequences of this investment.
11.18 No Assurance of Tax Benefits. He or she acknowledges that there
----------------------------
can be no assurance that the Code or the Regulations will not be amended or
interpreted in the future in such a manner so as to deprive the Company and the
Members of some or all of the tax benefits they might now receive, nor that some
of the deductions claimed by the Company or the allocations of items of income,
gain, loss, deduction, or credit among the Members may not be challenged by the
Internal Revenue Service.
11.19 Indemnity. He or she shall indemnify and hold harmless the
---------
Company, each and every Manager, each and every other Member, and any officers,
directors, shareholders, managers, members, employees, partners, agents,
attorneys, registered representatives, and control persons of any such entity
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any violation of
this Article XI, against losses, liabilities and expenses of the Company, each
and every Manager, each and every other Member and any officers, directors,
shareholders, managers, members, employees, partners, attorneys, accountants,
agents, registered representatives and control persons of any such Person
(including attorneys' fees, judgments, fines and amounts paid in settlement,
payable as incurred) incurred by such Person in connection with such action,
suit, proceeding or the like.
11.20 Limitation. In no event shall any of the representations and
----------
warranties contained in this Article XI be used in any manner
-55-
<PAGE>
that would in any way mitigate or reduce any liability that (i) the Dove Group
has to Koll arising out of the Dove Group's representations and warranties and
obligations pursuant to the Contribution Agreement, or (ii) Koll has to the Dove
Group arising out of Koll's representations and warranties and obligations
pursuant to the Contribution Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Complete Agreement. This Agreement (including the Buy/Sell
------------------
Agreement) and the Articles constitute the complete and exclusive statement of
agreement among the Members and Managers with respect to the subject matter
herein and therein and replace and supersede all prior written and oral
agreements or statements by and among the Members and Managers or any of them.
No representation, statement, condition or warranty not contained in this
Agreement or the Articles will be binding on the Members or Managers or have any
force or effect whatsoever. To the extent that any provision of the Articles
conflict with any provision of this Agreement, the Articles shall control.
12.2 Binding Effect. Subject to the provisions of this Agreement
--------------
(including the Buy/Sell Agreement) relating to transferability, this Agreement
will be binding upon and inure to the benefit of the Members, and their
respective successors and assigns.
12.3 Parties in Interest. Except as expressly provided in the Act,
-------------------
nothing in this Agreement shall confer any rights or remedies under or by reason
of this Agreement on any Persons other than the Members and Managers and their
respective successors and assigns nor shall anything in this Agreement relieve
or discharge the obligation or liability of any third person to any party to
this Agreement, nor shall any provision give any third person any right of
subrogation or action over or against any party to this Agreement.
12.4 Interpretation. In the event any claim is made by any Member
--------------
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular
Member or his or her counsel.
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<PAGE>
12.5 Severability. If any provision of this Agreement or the
------------
application of such provision to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision to
persons or circumstances other than those to which it is held invalid shall not
be affected thereby.
12.6 Additional Documents. Each Member agrees to execute and deliver
--------------------
such additional documents and instruments as may be appropriate to effectuate,
carry out and perform all of the terms, provisions, and conditions of this
Agreement and the transactions contemplated hereby.
12.7 Notices. Any notice to be given or to be served upon the Company,
-------
any Manager or any party hereto in connection with this Agreement must be in
writing (which may include facsimile) and may be delivered by personal service,
mail, overnight courier or facsimile, and will be deemed to have been given and
received when so delivered to the address or facsimile number specified by the
party to receive the notice. Such notices will be given to a Member or Manager
at the address or facsimile number specified in Exhibit "A" or "C" hereto, or to
the Company at its principal office. Any party may, at any time by giving five
(5) days' prior written notice to the other parties, designate any other address
or facsimile number in substitution of the foregoing address to which such
notice will be given.
12.8 Amendments. All amendments to the Articles and this Agreement
----------
will be in writing and approved by Super Majority Vote of the Managers unless
otherwise expressly provided in this Agreement.
12.9 Amendments by Managers. Notwithstanding any provision of this
----------------------
Agreement, amendments to this Operating Agreement which, in the opinion of
counsel to the Company, are necessary to maintain the status of the Company as a
tax partnership under federal or state law or for other tax purposes may be made
by the Managers without the necessity of a vote of the Members.
12.10 Reliance on Authority of Person Signing Agreement. If a Member is
-------------------------------------------------
not a natural person, neither the Company nor any Member will (a) be required to
determine the authority of the individual signing this Agreement to make any
commitment or undertaking on behalf of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of such individual or
(b) be responsible for the application or distribution of
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<PAGE>
proceeds paid or credited to individuals signing this Agreement on behalf of
such entity.
12.11 No Interest in Company Property; Wavier of Action for Partition.
---------------------------------------------------------------
No Member has any interest in specific property of the Company. Without limiting
the foregoing, each Member irrevocably waives during the term of the Company any
right that he or she may have to maintain any action for partition with respect
to the property of the Company.
12.12 Multiple Counterparts. This Agreement may be executed in two or
---------------------
more or more couterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
12.13 Attorneys' Fees. In the event that any legal, declaratory, self
---------------
help, or equitable action or arbitration or any other action not considered to
be a legal or equitable action is commenced between the parties hereto or their
personal representatives concerning any provision of this Agreement or the
rights and duties of any person in relation thereto, the prevailing party shall
be entitled, in addition to such other relief that may be granted, to a
reasonable sum for their attorneys' fees and any other costs and expenses
relating thereto.
12.14 Time is of the Essence. All dates and times in this Agreement are
----------------------
of the essence.
12.15 Remedies Cumulative. The remedies under this Agreement are
-------------------
cumulative and shall not exclude any other remedies to which any Person may
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be lawfully entitled.
IN WITNESS WHEREOF, all of the Members of Koll-Dove Global Disposition
Services, LLC, a California limited liability company, have executed this
Agreement, effective as of the date written above.
DOVE GROUP:
Ross-Dove Company, Inc.
By:
-----------------
Ross M. Dove
Its: Chairman
By:
-----------------
Kirk Dove
Its: President and
Chief
Executive Officer
Dovemedia, Ltd.
By:
------------------
Ross M. Dove
Its: Chairman
By:
------------------
Kirk Dove
Its: President and
Chief
Executive Officer
[Signatories continued]
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<PAGE>
By:
----------------------
Kirk Dove
Its: President and
Chief
Executive Officer
----------------------
Ross Dove
---------------------
Kirk Dove
KOLL:
Koll Management Services, Inc.
By:
-------------------
Glen Raiger
Its: Executive Vice
President
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EXHIBIT 10.47
* Confidential Treatment
Requested
KOLL-DOVE
GLOBAL DISPOSITION SERVICES, LLC
CONTRIBUTION AGREEMENT
<PAGE>
<TABLE>
<S> <C>
1. Formation of Limited Liability Company...................... 3
--------------------------------------
2. Contribution of Ross-Dove Company Assets.................... 3
----------------------------------------
2.1 Cash.................................................. 3
----
2.2 Equipment............................................. 3
---------
2.3 Receivables........................................... 3
-----------
2.4 Contracts and Work in Progress........................ 4
------------------------------
2.5 Operating Data and Records............................ 4
--------------------------
2.6 Intangible Assets..................................... 4
-----------------
2.7 Inventory, Office Supplies and Furnishings............ 4
------------------------------------------
2.8 Claims................................................ 4
------
2.9 Prepayments........................................... 4
-----------
2.10 Dove Group Employees.................................. 4
--------------------
2.11 Other Assets.......................................... 5
------------
2.12 Excluded Assets....................................... 5
---------------
3. Assumption of Dove Group Liabilities........................ 5
------------------------------------
4. Contribution of Dovetech Stock.............................. 5
------------------------------
5. Koll Contribution........................................... 5
-----------------
5.1 Initial Contribution.................................. 5
--------------------
5.2 Secondary Contribution................................ 6
----------------------
5.3 Deferred Contribution................................. 6
---------------------
6. Issuance of LLC Units....................................... 6
---------------------
7. Representations and Warranties of the Ross-Dove
-----------------------------------------------
Companies and Ross and Kirk................................. 6
---------------------------
7.1 Organization, Good Standing and Qualification......... 7
---------------------------------------------
7.2 Authorization and Enforceability...................... 7
--------------------------------
7.3 Financial Statements.................................. 7
--------------------
7.4 No Changes............................................ 8
----------
7.5 Tax Returns, Audits and Claims........................ 9
------------------------------
7.6 Personal Property; Liens; and Sales Taxes............. 9
-----------------------------------------
7.7 Accounts Receivable................................... 10
-------------------
7.8 Inventory............................................. 11
---------
7.9 Intellectual Property................................. 11
---------------------
7.10 Major Customers and Suppliers......................... 11
-----------------------------
7.11 Labor Agreements; Benefit Plans....................... 11
-------------------------------
7.12 Insurance Policies.................................... 12
------------------
7.13 Compliance with Laws.................................. 12
--------------------
7.14 Litigation............................................ 13
----------
</TABLE>
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<TABLE>
<S> <C>
7.15 Maintenance of Books and Records...................... 14
--------------------------------
7.16 Absence of Unknown Liabilities........................ 14
------------------------------
7.17 Hazardous Waste....................................... 14
---------------
7.18 Contract Assignments and Consents..................... 15
---------------------------------
7.18.1 Consents...................................... 15
--------
7.18.2 Failure to Obtain Consent Prior to Closing.... 15
------------------------------------------
7.18.3 No Fees Required.............................. 15
----------------
7.19 Interest in Suppliers and Clients..................... 16
---------------------------------
7.20 Disclosure Qualifications............................. 16
-------------------------
7.21 Noncontravention...................................... 16
----------------
7.22 Trust Accounts........................................ 17
--------------
7.23 Capitalization of Dovetech............................ 17
--------------------------
7.24 Ownership of the Stock................................ 17
----------------------
7.25 Representations and Warranties True at Closing........ 17
----------------------------------------------
8. Representations and Warranties of Koll...................... 18
--------------------------------------
8.1 Organization and Good Standing........................ 18
------------------------------
8.2 Authorization and Enforceability...................... 18
--------------------------------
8.3 Noncontravention...................................... 18
----------------
9. Conduct Pending the Closing Date............................ 18
--------------------------------
10. Additional Agreements of the Parties........................ 19
------------------------------------
10.1 Employment Agreements................................. 19
---------------------
10.2 Buy/Sell Agreement.................................... 19
------------------
10.3 Additional Agreements and Instruments................. 19
-------------------------------------
11. Conditions Precedent to Performance by Koll................. 19
-------------------------------------------
11.1 Performance........................................... 19
-----------
11.2 Absence of Material Changes........................... 19
---------------------------
11.3 Consents.............................................. 19
--------
11.4 Exhibits and Schedules................................ 20
----------------------
11.5 Resolutions........................................... 20
-----------
12. Conditions Precedent to Performance by the Ross-Dove
----------------------------------------------------
Companies and Ross and Kirk................................. 20
---------------------------
12.1 Performance........................................... 20
-----------
12.2 Exhibits.............................................. 20
--------
12.3 Resolutions........................................... 21
-----------
13. Closing..................................................... 21
-------
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
14. Termination of Agreement.................................... 21
------------------------
15. Indemnification............................................. 22
---------------
15.1 General............................................... 22
-------
15.2 Claims for Indemnity.................................. 22
--------------------
15.3 Right to Defend; Settlement........................... 23
---------------------------
15.4 Right to Offset....................................... 24
---------------
16. Costs....................................................... 24
-----
16.1 Finder's or Broker's Fees............................. 24
-------------------------
16.2 Expenses.............................................. 24
--------
17. General Provisions.......................................... 24
------------------
17.1 Survival of Representations and Warranties............ 24
------------------------------------------
17.2 Assignment............................................ 25
----------
17.3 Notices............................................... 25
-------
17.4 Attorneys' Fees....................................... 26
---------------
17.5 Governing Law......................................... 26
-------------
17.6 Binding Effect........................................ 26
--------------
17.7 Severability.......................................... 26
------------
17.8 Agreement Preparation................................. 27
---------------------
17.9 Parties in Interest................................... 27
-------------------
17.10 Entire Agreement...................................... 27
----------------
17.11 Certain Definitions................................... 27
-------------------
17.12 Counterparts.......................................... 27
------------
</TABLE>
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DEFINED TERMS
-------------
<TABLE>
<CAPTION>
Term Defined at
- ---- ----------
Section
-------
<S> <C>
Additional Funds..................... 10.3
Articles............................. 1
Assets............................... 2
Balance.............................. 10.3
Businesses........................... Recital B
Claims............................... 2.8
Closing.............................. 13
Closing Date......................... 13
Contracts............................ 2.4
Deferred Contribution................ 5.3
Dove Group........................... Recital B
Dove Capital......................... Introduction (iii)
Dovemedia............................ Introduction (iii)
Dovetech............................. Introduction (ii)
Equipment............................ 2.2
Exhibit.............................. 17.11
Financial Statements................. 7.3
Initial Contribution................. 5.1
Intellectual Property................ 7.9
Kirk................................. Introduction (v)
Koll Business........................ Recital C
Koll Contribution.................... 5
Koll................................. Introduction (vi)
Liabilities.......................... 3
Liens................................ 7.6(a)
LLC.................................. Recital E
LLC Operating Agreement.............. 1
Loan................................. 10.3
Material Adverse Effect.............. 17.11
Most Recent Financial Statements..... 7.3(ii)
Most Recent Fiscal Year End.......... 7.3(ii)
Notes................................ 2.12
RDC.................................. Introduction (i)
Real Estate.......................... 2.12
Receivables.......................... 2.3
Records.............................. 2.5
Restructuring........................ 10.3
Rights............................... 2.6
Ross................................. Introduction(iv)
</TABLE>
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<TABLE>
<S> <C>
Ross-Dove Companies.................. Recital A
Schedule............................. 17.11
Secondary Contribution............... 5.2
Section.............................. 17.11
Stock................................ 4
</TABLE>
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<PAGE>
KOLL-DOVE
GLOBAL DISPOSITION SERVICES, LLC
CONTRIBUTION AGREEMENT
================================
This Agreement is entered into on this 9th day of March, 1995, by and
among the following parties:
(i) Ross-Dove Company, Inc., a California corporation ("RDC");
(ii) Dovetech, Inc., a California corporation ("Dovetech");
(iii) Dovemedia, Ltd., a California corporation ("Dovemedia");
(iv) Dove Capital Corporation, a California corporation ("Dove
Capital");
(v) Ross Dove, an individual ("Ross");
(vi) Kirk Dove, an individual ("Kirk");
(vii) Koll Management Services, Inc., a Delaware corporation ("Koll").
The parties in (i) through (vii) above are hereinafter at times
referred to individually as the "Party" and collectively as the "Parties."
RECITALS
--------
A. RDC, Dovetech, Dovemedia and Dove Capital (collectively referred to
hereinafter at times as the "Ross-Dove Companies") are Subchapter "S"
corporations that are each owned fifty percent by Ross and fifty percent by
Kirk.
B. The business engaged in by each of the Ross Dove Companies is as
follows:
(i) RDC: RDC holds auctions or sealed bids for the conversion of
---
capital assets into cash. In addition to having auctions
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<PAGE>
for capital assets, RDC also conducts auctions for the sale of commercial real
estate, financial instruments, excess or obsolete inventory and other assets
(the "RDC Business").
(ii) Dovetech: Dovetech is primarily engaged in conducting fee-based
--------
appraisals and is able to make beneficial use in that business of the data
collected through the RDC auctions with said data having been compiled by
Dovetech in its computer data base (the "Dovetech Business").
(iii) Dovemedia. Dovemedia is generally engaged in producing the
---------
marketing and advertising materials associated with RDC and Dovetech activities
(the "Dovemedia Business").
(iv) Dove Capital. Dove Capital is engaged in the business of buying
------------
and selling capital assets (the "Dove Capital Business").
The RDC Business, the Dovetech Business, the Dovemedia Business and the Dove
Capital Business are collectively referred to herein as the "Businesses." RDC,
Dovemedia and Dove Capital are collectively referred to herein as the "Dove
Group," and the RDC Business, the Dovetech Business and the Dovemedia Business
are collectively referred to as the "Dove Group Businesses."
C. Koll is one of the largest real estate services companies in the
United States engaged in the business of assisting institutions and structuring
and managing their commercial, industrial and retail real estate portfolios;
providing a diverse range of expertise in real estate consulting services,
operations surveys and audits, technical and administrative support, hands-on,
full-service facilities management; and offering investment advice in the areas
of acquisition and disposition analysis, strategic analysis and asset
management, and mortgage finance capabilities and offering real estate
investment advice (the "Koll Business").
D. Based upon Koll's analysis of the Businesses, Koll believes that the
Businesses will allow Koll to provide services that are complementary to the
Koll Business and Ross and Kirk believe that an investment by Koll in the
Businesses combined with Koll's resources and contacts will accelerate the
growth of the Businesses while at the same time generating more profit in the
Businesses.
E. The Parties believe that it would be in their best interest to
structure Koll's investment in the Businesses by forming a California
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<PAGE>
limited liability company (the "LLC") that would be the entity to which the
Businesses, the Dovetech Stock (as hereinafter defined), and substantially all
of the assets and liabilities of RDC, Dovemedia and Dove Capital would be
contributed, and the entity in which Koll would invest, all in accordance with
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the terms
and conditions set forth below, the parties agree as follows:
AGREEMENT
---------
1. Formation of Limited Liability Company. The LLC shall be formed
--------------------------------------
concurrent with the Closing ("Closing" and "Closing Date" are defined in Section
13). The LLC Articles of Organization shall be substantially in the form of the
Articles of Organization attached hereto as Exhibit "A" (the "Articles"). The
Articles shall be filed by Koll, on or before the Closing with the Limited
Liability Company Unit of the California Secretary of State. The "LLC Operating
Agreement" shall be substantially in the form attached hereto as Exhibit "B" and
shall be executed by the parties thereto concurrent with the Closing.
2. Contribution of Ross-Dove Company Assets. Subject to the terms and
----------------------------------------
conditions of this Agreement, on the Closing Date the Dove Group shall
contribute, assign, transfer, and deliver to the LLC substantially all of the
tangible and intangible assets, properties, and improvements of the Dove Group,
all as further set forth herein, which shall operate to transfer substantially
all of the assets of the Dove Group, along with the Dove Group Businesses, to
the LLC as the same are constituted on the Closing Date (collectively, the
"Assets"). Except as provided in Section 2.12, the Dove Group Assets
transferred to the LLC hereunder shall include, without limitation, all of the
following:
2.1 Cash. All cash on hand, in the bank or money market accounts,
----
and all certificates of deposit, letters of credit in favor of the Dove Group
and all other readily marketable securities or other cash equivalents.
2.2 Equipment. Except as expressly set forth herein, all machinery,
---------
equipment, vehicles, tooling, furniture and fixtures, and all other fixed assets
owned or leased by the Dove Group
-3-
<PAGE>
constituting all such items necessary for the continued operation of the Dove
Group Businesses, (the "Equipment").
2.3 Receivables. All accounts receivable and other rights to receive
-----------
payments from any clients of the Dove Group in connection with the conduct of
the Dove Group Businesses (the "Receivables").
2.4 Contracts and Work in Progress. Subject to Section 7.18, all
------------------------------
rights and benefits under any purchase commitments and contracts to which any
member of the Dove Group is a party (collectively, the "Contracts") constituting
all such Contracts in existence as of the Closing Date which are necessary or
beneficial to the operation of the Dove Group Businesses.
2.5 Operating Data and Records. All operating data and records of
--------------------------
the Dove Group relating to the Dove Group Businesses, including, but not limited
to, all client lists, sales records, credit information, correspondence, designs
and drawings, advertising materials and any other operating data and records
relating to the Dove Group Businesses (the "Records").
2.6 Intangible Assets. All the trade, business name, service marks,
-----------------
trademarks, trade names, trade secrets, copyrights, copyright applications,
patents, patent applications, all inventions, discoveries, improvements,
processes, formulas, whether patentable or not, and all shop rights, licenses,
and other agreements, and all permits, orders and approvals from any
governmental or regulatory agency and any other related intangible assets to
affect a transfer of all of the operating rights of the Dove Group Businesses to
the LLC, including, but not limited to, the right, title, and interest in and
to, and the right to use, the names "Ross-Dove Company, Inc.," "Dovemedia,
Ltd.," and "Dove Capital Corporation" and all similar names used by the Dove
Group in connection with or relating to the Dove Group Businesses (the
"Rights"), subject to the provisions of the LLC Operating Agreement. Reasonably
promptly after the Closing, Ross and Kirk will cause the name of Ross-Dove
Company, Inc. to be changed to "The Dove Company."
2.7 Inventory, Office Supplies and Furnishings. All inventory,
------------------------------------------
office supplies and furnishings used in the operations of the Dove Group
Businesses.
2.8 Claims. Any claims that the Dove Group now has or may have
------
against any third parties (the "Claims").
-4-
<PAGE>
2.9 Prepayments. All prepaid deposits and prepaid expenses of the
-----------
Dove Group as of the Closing Date.
2.10 Dove Group Employees. The Parties recognize and agree that one
--------------------
of the most valuable assets that the Dove Group has is its employees and the
Dove Group hereby agrees to use its reasonable, good faith efforts to cause its
employees to accept employment with the LLC effective as of the Closing Date or
as soon as reasonably possible thereafter.
2.11 Other Assets. Any and all other assets not specifically noted
------------
above, except as expressly set forth in Section 2.12, that are of any value or
use whatsoever in the Dove Group Businesses.
2.12 Excluded Assets. The Assets to be transferred to the LLC shall
---------------
exclude: (a) the RDC real property described on Exhibit "C" attached hereto
(the "Real Estate"); and (b) the shareholder notes from Ross and Kirk payable to
RDC in the total principal amount of Eight Hundred Seven Thousand Six Hundred
Twenty Dollars and Seventy-four Cents ($807,620.74) (the "Notes"). Other than
the leasehold interest set forth in the "Occupancy Lease" attached hereto as
Exhibit "D," the LLC shall not acquire any right, title or interest in the Real
Estate. The LLC shall not acquire any right, title or interest in the Notes.
3. Assumption of Dove Group Liabilities. The LLC shall assume only those
------------------------------------
Dove Group liabilities that are expressly set forth on Exhibit "E" attached
hereto (such assumed liabilities being hereinafter referred to as the
"Liabilities"). The accounts payable included in the Liabilities shall consist
only of those accounts payable incurred in the ordinary and normal course of
business in the amounts as set forth on Exhibit E, subject to increases or
decreases in said amounts based upon the normal and ordinary course of
operations of the Dove Group Businesses.
The LLC shall not assume or become in any way liable for any debts,
liabilities, claims, contingencies or other obligations relating to the Real
Estate or of any other kind at any time owed by the Dove Group which are not
expressly provided for in this Section 3.
4. Contribution of Dovetech Stock. On the Closing Date, Ross and Kirk
------------------------------
each will transfer to the LLC all of their respective right, title and interest
in all of the issued and outstanding stock of Dovetech held by them, which shall
represent 100% of the issued and
-5-
<PAGE>
outstanding common stock of Dovetech (the "Stock"). Ross and Kirk shall each
provide to Koll on or before the Closing Date an acknowledgment by their
respective wives consenting to the transfer of the Stock to the LLC.
5. Koll Contribution. Koll hereby agrees to make an aggregate
-----------------
contribution of * Dollars ($ * ) (the "Koll
Contribution") to the LLC in accordance with the terms and conditions as set
forth in this Section 5.
5.1 Initial Contribution. On the Closing Date, Koll shall contribute
--------------------
* Dollars ($ * ) in immediately available funds to
the LLC (the "Initial Contribution").
5.2 Secondary Contribution. On or before the 30th day following the
----------------------
Closing Date, provided that Koll shall have received unaudited consolidated and
consolidating balance sheets and statements of income, changes in stockholders'
equity and cash flow for the Ross-Dove Companies for the month ended January 31,
1995 (which may lack footnotes and other presentation items), Koll shall
contribute an additional * Dollars ($ * ) in
immediately available funds to the LLC (the "Secondary Contribution").
5.3 Deferred Contribution. Koll shall contribute an additional
---------------------
* Dollars ($ * ) in immediately available funds to the
LLC no later than December 31, 1997 (the "Deferred Contribution"). If a majority
of the Managers (as defined in the LLC Operating Agreement) determines that all
or part of the Deferred Contribution is desirable to provide increased growth,
value and profitability for the LLC, Koll shall contribute all or part of the
Deferred Contribution prior to December 31, 1997 at such times and in such
amounts as a majority of the Managers so determines.
6. Issuance of LLC Units. As consideration for the transfer of the
---------------------
Assets, the Stock, the Businesses and the Koll Contribution, ownership interests
in the LLC shall be issued to those parties set forth below by issuing units in
the LLC in the amounts and percentages set forth opposite each party's name:
<TABLE>
<CAPTION>
Party LLC Units LLC % Ownership Interest
- ----- --------- ------------------------
<S> <C> <C>
Koll Management
</TABLE>
-6-
* Confidential Treatment
Requested
<PAGE>
<TABLE>
<S> <C> <C>
Services, Inc. 500,000 50.0%
Ross-Dove Company, Inc. 309,000 30.9%
Dovemedia, Ltd. 180,000 18.0%
Dove Capital Corporation 1,000 0.1%
Ross Dove 5,000 0.5%
Kirk Dove 5,000 0.5%
</TABLE>
7. Representations and Warranties of the Ross-Dove Companies and Ross and
----------------------------------------------------------------------
Kirk. In order to induce Koll to enter into this Agreement which provides in
- ----
part for Koll's agreement to make the Koll Contribution and to consummate the
transactions contemplated hereby, the Ross-Dove Companies and Ross and Kirk do
hereby jointly and severally represent and warrant to Koll as follows (for
purposes of this Section 7 the definitions of the Assets, Equipment and
Receivables shall include the assets, equipment and receivables of Dovetech as
though described as part of Section 2):
7.1 Organization, Good Standing and Qualification.
---------------------------------------------
(a) The Ross-Dove Companies are corporations duly organized,
validly existing and in good standing under the laws of the State of California
and have all necessary corporate power and authority to carry on their
businesses as they are now conducted and to own, lease and operate their
properties wherever situated. Dovetech has applied to become qualified as a
foreign corporation in good standing in California, Colorado, Florida and
Massachusetts. Except as set forth in Schedule 7.1(a), the Ross-Dove Companies
have no subsidiaries or any equity or other ownership interest in any
corporation, partnership, joint venture or other entity.
(b) Copies of the Certificates of Incorporation and By-laws of
the Ross-Dove Companies and all amendments thereof, as well as Certificates of
Authority (Good Standing Certificates) for California for the Ross-Dove
Companies, have been delivered to Koll and, except as set forth in Schedule
7.1(b), are complete and correct as of the date hereof.
7.2 Authorization and Enforceability. The Ross-Dove Companies and
--------------------------------
Ross and Kirk have full power and authority
-7-
<PAGE>
(including full corporate power and authority) to execute and deliver this
Agreement and the other agreements referenced herein, and to perform their
respective obligations hereunder and thereunder. Without limiting the generality
of the foregoing, the respective Boards of Directors and the shareholders of the
Ross-Dove Companies have duly authorized the execution, delivery and performance
of this Agreement by the Ross-Dove Companies. This Agreement, and the other
agreements referenced herein, when executed and delivered by each of the Ross-
Dove Companies and Ross and Kirk, will constitute the valid and binding
obligations of the Ross-Dove Companies and of Ross and Kirk and will be
enforceable in accordance with their respective terms, except to the extent
limited by bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, and except that the remedy of specific enforcement
or similar equitable relief is available only at the discretion of the court
before which enforcement is sought.
7.3 Financial Statements. Attached hereto as Schedule 7.3 are the
--------------------
following financial statements (collectively the "Financial Statements"):
(i) Audited consolidated and unaudited consolidating balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the fiscal years ended December 31, 1992 and December 31, 1993;
and
(ii) Unaudited consolidated and consolidating balance sheets and
statements of income, changes in stockholders' equity, and cash flow for the
fiscal year ended December 31, 1994 (the "Most Recent Fiscal Year End" and the
"Most Recent Financial Statements").
The Financial Statements (including the Notes thereto) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Ross-Dove Companies as of such dates and the results
of operations of the Ross-Dove Companies for such periods, are correct and
complete and are consistent with the books and records of the Ross-Dove
Companies (which books and records are correct and complete in all material
respects); provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material) and lack
footnotes and other presentation items. The audited Financial Statements for
the fiscal year ended
-8-
<PAGE>
December 31, 1994 shall be prepared and shall replace the Most Recent Financial
Statements contemporaneous with the Closing Date.
7.4 No Changes. Except as set forth in Schedule 7.4, since December
----------
31, 1994:
(a) there has been no material change in the type of Businesses
conducted by the Ross-Dove Companies;
(b) there has not been any damage, destruction or loss (whether
covered by insurance or not) which has resulted in or is reasonably likely to
result in a Material Adverse Effect (as defined in Section 17.11);
(c) there has not occurred any sale, encumbrance or disposition
of any asset of the Ross-Dove Companies outside of the ordinary course of
business, or the creation, assumption or undertaking of any liability or
obligation encumbering any of the Assets, except in the ordinary course of
business;
(d) the Ross-Dove Companies have not increased any compensation
payable or to become payable to any of the officers, directors or employees of
the Ross-Dove Companies or in any insurance, pension or other benefit plan,
payment or arrangement made for, to or with any officer, director or employee,
except in the ordinary course of business;
(e) the Ross-Dove Companies have not engaged in any other
activity or transaction that would result in a Material Adverse Effect; and
(f) the Ross-Dove Companies have made no commitment or agreement
to do any of the foregoing.
7.5 Tax Returns, Audits and Claims.
------------------------------
(a) Except as set forth in Schedule 7.5: (i) all federal, state
and local tax returns and tax reports required to be filed by the Ross-Dove
Companies on or before the Closing Date have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such returns and
reports are required to be filed; (ii) all federal, state and local income,
franchise, sales, use, property, employment, excise and other taxes (including
interest and penalties and including estimated tax installments where
-9-
<PAGE>
required to be filed and paid) due from the Ross-Dove Companies as of the date
hereof have been fully paid or accrued by the Ross-Dove Companies; and (iii) all
taxes and other assessments and levies which the Ross-Dove Companies are
required by law to have withheld or collected on or before the date hereof have
been duly withheld and collected, and have been paid over to the proper
governmental authorities to the extent due and payable.
(b) Except as set forth in Schedule 7.5: (i) none of the
aforedescribed tax returns or tax reports of the Ross-Dove Companies is being
audited by the Internal Revenue Service or any state or local taxing authority,
and no waivers of statutes of limitations have been given or requested; and (ii)
there are no outstanding or pending claims, deficiencies or assessments against
the Ross-Dove Companies for any taxes (including sales and/or use taxes, and
including interest and penalties) with respect to or arising out of any
operations of the Ross-Dove Companies.
(c) None of the Ross-Dove Companies has waived any statute of
limitations in respect to any taxes that may be assessed against the Ross-Dove
Companies or agreed to any extension of time with respect to any said tax
assessments or deficiencies.
7.6 Personal Property; Liens; and Sales Taxes.
-----------------------------------------
(a) The Ross-Dove Companies have good, valid and transferable
title to, and possession of, all of the Assets, free and clear of all liens,
pledges, claims, security interests, encumbrances and adverse interests
whatsoever, except for those liens, pledges, claims, security interests,
encumbrances, leasehold and adverse interests set forth in Schedule 7.6(a) (the
"Liens"). All of the Assets (including all books, records and documents of title
relating thereto) are physically located at the facilities of the Ross-Dove
Companies set forth in Schedule 7.6(a), except for Assets which are used from
time to time by the Ross-Dove Companies at auction and other sites in the
ordinary course of business.
(b) All of the Equipment is in good working condition and
repair, ordinary wear and tear excepted. Except as set forth in Schedule 7.6(b),
the Ross-Dove Companies own all of the material items of Equipment utilized in
the operation of the Businesses. There are no defects or deficiencies in the
operating condition or state of repair of, or any other condition or state of
facts affecting, the Equipment or any of the other Assets, except any such
defects,
-10-
<PAGE>
deficiencies, other conditions and state of facts which in the aggregate do not
have a Material Adverse Effect.
(c) In the conduct of the Businesses, to the extent that the
Ross-Dove Companies have been required to collect any sales tax relating to the
purchase and sale of goods and services, said sales tax has been collected in
full and delivered to all appropriate governmental authorities, including, but
not limited to, the California State Board of Equalization, except with respect
to sales tax the collection and delivery of which is the subject of a good faith
dispute in appropriate proceedings which, if resolved adversely to the Ross-Dove
Companies, would not result in a Material Adverse Effect.
7.7 Accounts Receivable. All of the Receivables:
-------------------
(i) Have arisen and will arise only in the normal and ordinary
course of business;
(ii) Represent amounts owed to the Ross-Dove Companies from
services provided or sales made in the normal and ordinary course of business;
(iii) Are not subject to any pending or threatened recoupments,
set-offs, or counterclaims; and
(iv) Are properly reflected on the books and records of the
Ross-Dove Companies and will be collected in accordance with their terms at
their recorded amounts, subject only to the reserve for bad debts set forth on
the balance sheet of the Most Recent Financial Statements (rather than in any
notes thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Ross-Dove Companies and
except for such adjustments, compromises and exceptions made in the ordinary
course of business which in the aggregate would not result in a Material Adverse
Effect.
7.8 Inventory. Any inventory in the possession of the Ross-Dove
---------
Companies to be transferred to the LLC is saleable in the ordinary course of
business in accordance with the past custom and practice of the Ross-Dove
Companies.
7.9 Intellectual Property. The Ross-Dove Companies do not own or
---------------------
have any interest in, and are not a party to or bound by (in
-11-
<PAGE>
any capacity), any license, patents, trademarks, trade names, copyrights or
other intangibles (domestic or foreign) which in any way relate to any business
except for the Ross-Dove Companies Businesses (collectively, the "Intellectual
Property"); and except for the Ross-Dove Companies' rights, if any, in and to
the Intellectual Property set forth in Schedule 7.9, there are no trademarks,
trade names, copyrights, patents, licenses, processes or other intangibles
required or utilized in the Businesses. Except as set forth in Schedule 7.9, the
Ross-Dove Companies have not received any notice that any of the Intellectual
Property, or any use thereof by the Ross-Dove Companies, infringes upon or
violates any rights of any other person.
7.10 Major Customers and Suppliers. Neither the Ross-Dove Companies
-----------------------------
nor Ross and Kirk have any actual knowledge: (a) that any clients constituting
more than five percent of the Businesses during 1993 and 1994 and included in
projections for 1995 will materially reduce their volume of business with the
Ross-Dove Companies from the volume of business that said clients have engaged
in with the Ross-Dove Companies in the fiscal years ending December 31, 1993 and
1994; or (b) of any existing, announced or anticipated changes in the policies
of any clients which in the aggregate would result in a Material Adverse Effect.
7.11 Labor Agreements; Benefit Plans.
-------------------------------
(a) Except as set forth in Schedule 7.11(a), the Ross-Dove
Companies (i) are not parties to any collective bargaining agreement or other
labor agreement, or to any written agreements with respect to the employment of
any non-hourly and/or non-union employee(s), and (ii) do not have any employee
manuals or any written policies with respect to its employees. None of the
employees of the Ross-Dove Companies is subject to any contractual or other
restriction in favor of the Ross-Dove Companies which would prohibit or impair
such employee from working for the LLC from and after the Closing.
(b) Except as set forth in Schedule 7.11(b), the Ross-Dove
Companies neither maintain nor have any obligation to make contributions to or
in respect of any bonus, deferred compensation, pension, profit sharing,
retirement, group insurance or other employee benefit or welfare plans, written
or oral, relating to employees or agents of the Ross-Dove Companies and the
Ross-Dove Companies are not presently paying any pension, deferred
-12-
<PAGE>
compensation or retirement allowance to anyone. Schedule 7.11 reflects which of
such employee benefit plans are "qualified" under Section 401(a) of the Internal
Revenue Code of 1986, as amended, and the Ross-Dove Companies are not aware of
any state of facts, events, occurrences, causes or conditions concerning such
qualified status which would be reasonably likely to result in a Material
Adverse Effect.
(c) To the best knowledge of the Ross-Dove Companies and Ross
and Kirk, the Ross-Dove Companies and all subject plan administrators have
managed, and fulfilled all of their respective obligations to, all of the
aforedescribed employee benefit and welfare plans, in accordance with all
applicable laws, rules and regulations and the terms of such plans, except as
set forth in Schedule 7.11(c) and except for such deviations which in the
aggregate would not result in a Material Adverse Effect. Without limitation of
the foregoing, but without qualification as to knowledge, except as set forth in
Schedule 7.11(c), the Ross-Dove Companies have made all required contributions
to date to the aforedescribed employee benefit and welfare plans, there have
been no prohibited transactions under applicable law in connection with the
administration of any such plans for which a statutory or administrative
exemption is not available, and there is presently no accumulated funding
deficiency under applicable law with respect to any of such plans.
7.12 Insurance Policies.
------------------
(a) Schedule 7.12 contains a list of all insurance policies held
or maintained by the Ross-Dove Companies, reflecting the types of coverage,
respective face amounts, applicable deductibles and premiums in respect thereof.
Copies of such policies have previously been, or will be at the Closing,
delivered by the Ross-Dove Companies to the LLC.
(b) Except as set forth in Schedule 7.12, the Ross-Dove
Companies have paid all required premiums in connection with the insurance
policies listed in Schedule 7.12, and the Ross-Dove Companies have not received
any notice of cancellation or nonrenewal of any of such policies, or any notice
of any material increase in the premiums payable thereunder.
-13-
<PAGE>
7.13 Compliance with Laws.
--------------------
(a) The Ross-Dove Companies are in compliance with all laws and
governmental rules and regulations (domestic, foreign, federal, state and local,
including, without limitation, the provisions of ERISA, the Environmental
Protection Act, and the Occupational Safety and Health Act) applicable to the
Businesses, and are in compliance with all requirements of insurance policies
applicable to the Businesses and/or the Assets, all except for such failures to
comply which in the aggregate would not result in a Material Adverse Effect.
The Ross-Dove Companies and Ross and Kirk have no knowledge of any state of
facts, events, conditions or occurrences relating to the Businesses which would
constitute or result in a violation of any of the foregoing laws, rules or
regulations, or which would give rise to the assertion of any such violation
with respect to any past acts, practices, policies or conditions of the Ross-
Dove Companies, all except for such violations which in the aggregate would not
result in a Material Adverse Effect.
(b) The Ross-Dove Companies have not received any notice of
default or violation, nor are the Ross-Dove Companies or, to the best knowledge
of the Ross-Dove Companies and Ross and Kirk, any of their directors or officers
in default or violation, with respect to any judgment, order, writ, injunction,
decree, demand or assessment issued by any court or any federal, state,
municipal or other governmental agency, board, commission, bureau,
instrumentality or department, domestic or foreign, relating to the Businesses
or any of the Assets. The Ross-Dove Companies have not received any notice of,
or to the best knowledge of the Ross-Dove Companies are not charged with or are
not under investigation with respect to, any violation of any provision of any
federal, state, municipal or other law or administrative rule or regulation,
domestic or foreign, relating to the Businesses or any of the Assets.
(c) The Ross-Dove Companies possess all required permits,
licenses and/or franchises from whatever governmental authorities or agencies
having jurisdiction over the Ross-Dove Companies to permit the operation of the
Businesses in the manner presently conducted and as anticipated to be conducted
in the future, and all of such permits, licenses and/or franchises are valid,
current and in full force and effect, all except where the failure to obtain
and/or maintain such permits, licenses and/or franchises in the aggregate would
not result in a Material Adverse Effect.
-14-
<PAGE>
(d) To the best knowledge of the Ross-Dove Companies, Ross and
Kirk, there have been no audits or inspections of the Ross-Dove Companies
conducted by or on behalf of the Environmental Protection Agency, the
Occupational Safety and Health Administration, and/or any other governmental
agency (federal, state and/or local).
7.14 Litigation.
----------
(a) Except as set forth in Schedule 7.14, (i) there is no suit,
action, arbitration, or legal, administrative or other proceeding, or
governmental investigation, pending or, to the best knowledge of the Ross-Dove
Companies and Ross and Kirk, threatened, against the Ross-Dove Companies or any
of the Assets, or pertaining to the transactions contemplated by this Agreement
or their consummation; and (ii) the Ross-Dove Companies are not aware of any
event, cause or condition which might reasonably give rise to or form the basis
of any suit, action, arbitration or proceeding all of which, if determined
adversely to the Ross-Dove Companies, reasonably would be expected to result in
a Material Adverse Effect.
(b) Except as disclosed in Schedule 7.14, the Ross-Dove
Companies are not currently engaged in any legal action of a nature to recover
any sums of money due to the Ross-Dove Companies or damages sustained by the
Ross-Dove Companies in the operation of the Businesses.
7.15 Maintenance of Books and Records. All accounts, books, ledgers
--------------------------------
and records material to the Business have been fully, properly and accurately
maintained in all material respects, and there are no inaccuracies or
discrepancies of any kind contained or reflected therein except for such
inaccuracies or discrepancies which in the aggregate would not result in a
Material Adverse Effect, and they fairly present the financial position of the
Ross-Dove Companies on an ongoing daily basis, subject to normal information-
posting practices and normal period-ending adjustments.
7.16 Absence of Unknown Liabilities. Except as set forth in any of
------------------------------
the Schedules, there are no debts, liabilities, or obligations of any nature,
whether accrued, absolute, contingent or otherwise, known or unknown, due or to
become due, that are either not set forth on the Most Recent Financial
Statements or incurred in the ordinary course of business since the date of the
Most Recent
-15-
<PAGE>
Financial Statements which in the aggregate, if they existed, would result in a
Material Adverse Effect.
7.17 Hazardous Waste. The Ross-Dove Companies have not, in the
---------------
conduct of the Businesses, engaged in violation of any law, and are not aware of
the installation, presence, use, generation, manufacture, storage, release,
threatened release or disposal of hazardous materials that would result in a
Material Adverse Effect. "Hazardous Materials" for purposes of this Agreement
includes, but is not limited to, any materials or substances that are deemed
hazardous, dangerous, contaminated or toxic pursuant to all applicable
governmental rules, laws and statutes. The operations of the Businesses are in
compliance with all applicable environmental and toxic waste laws and ordinances
except such failures to comply which in the aggregate would not result in a
Material Adverse Effect. In furtherance and not in limitation of the foregoing,
(i) the Ross-Dove Companies are not the subject of any litigation or proceeding
or, to the best knowledge of the Ross-Dove Companies and Ross and Kirk, any
governmental or private investigation relating to any disposal, release or
placement of any hazardous or toxic substances; and (ii) the Ross-Dove Companies
have not disposed of hazardous or toxic substances, waste or other materials
into any waste disposal site owned or operated by a third party which is the
subject of any litigation or governmental investigation or proceeding relating
to any such disposal, release or placement.
The LLC shall not be liable for any liability, directly or indirectly,
arising out of the installation, presence, use, generation, manufacture,
storage, release, threatened release or disposal of hazardous materials by the
Ross-Dove Companies prior to the Closing Date, or the cost of any required or
necessary repair, cleanup, detoxification, demolition or disposal, directly or
indirectly, arising from said activities by the Ross-Dove Companies.
7.18 Contract Assignments and Consents. The Ross-Dove Companies shall
---------------------------------
use their reasonable, good faith efforts to obtain assignments of Contracts
assigned pursuant to this Agreement to the LLC in accordance with the following
terms and conditions:
7.18.1 Consents. To the extent that the assignment to the LLC
--------
of any Contract requires the consent of any other party to any such Contract,
this Agreement shall not constitute an agreement to assign the same if an
assignment or attempted assignment would constitute a breach thereof, unless and
until such consent is
-16-
<PAGE>
obtained. The Ross-Dove Companies agree that they will use their reasonable,
good faith efforts to obtain all such consents prior to the Closing Date.
7.18.2 Failure to Obtain Consent Prior to Closing. If any
------------------------------------------
consent to the assignment of a Contract is not obtained before the Closing Date,
the LLC may, at its option, require the Ross-Dove Companies to continue to use
their reasonable, good faith efforts to obtain such required consent. If the LLC
elects to require the Ross-Dove Companies to continue to use their reasonable,
good faith efforts to obtain such required consent, the Ross-Dove Companies
shall cooperate with the LLC after the Closing Date in any reasonable
arrangement (such as subcontracting, sublicensing, or subleasing) designed to
provide to the LLC the benefits and obligations under the applicable Contracts,
at the LLC's cost and expense in so far as they apply to the Businesses. The
Parties agree that, so long as the LLC is receiving, or has received, the
benefit of such Contracts, the LLC will perform the Ross-Dove Companies'
obligations thereunder.
7.18.3 No Fees Required. The LLC shall not be required to pay
----------------
any fee or other consideration to induce any party whose consent is required for
the assignment of any Contract to be assigned hereunder, nor shall any of such
Contracts be revised or modified (other than to reflect the substitution of the
LLC for the Ross-Dove Companies) as a condition of such assignment without the
LLC's prior written consent.
7.19 Interest in Suppliers and Clients. Neither the Ross-Dove
---------------------------------
Companies nor, to the best knowledge of the Ross-Dove Companies and Ross and
Kirk, any of their respective officers, directors, shareholders or affiliates
have any direct or indirect interest in any of the Ross-Dove Companies'
substantial suppliers or clients. No default exists with respect to or on the
part of the Ross-Dove Companies under any contract or arrangement with any of
its suppliers or clients, except any such defaults which in the aggregate do not
have a Material Adverse Effect.
7.20 Disclosure Qualifications. All documents heretofore or hereafter
-------------------------
delivered by Ross, Kirk or Lee C. Cochran on behalf of the Ross-Dove Companies
(or made available by Ross, Kirk or Lee C. Cochran on behalf of the Ross-Dove
Companies) to Koll as referred to in this Agreement were and continue to be
complete and accurate records of the subject documents, except for any
inadvertent omissions or inaccuracies which in the aggregate do not have a
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<PAGE>
Material Adverse Effect. The representations and warranties contained in this
Section 7 do not contain any untrue statement of material fact or omit to state
a material fact necessary to make the statements contained in this Section 7 not
misleading.
7.21 Noncontravention. Neither the execution and the delivery of this
----------------
Agreement by the Ross-Dove Companies and Ross and Kirk, nor the consummation of
the transactions contemplated hereby by the Ross-Dove Companies and Ross and
Kirk (including the assignments and assumptions set forth in this Agreement),
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which any of the Ross-Dove Companies are subject
or any provision of the charters or by-laws of the Ross-Dove Companies; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which the Ross-Dove Companies are a party or
by which they are bound or to which any of the Assets are subject (or result in
the imposition of any security interest upon any of the Assets), all except any
such violations, conflicts, breaches or defaults which in the aggregate would
not result in a Material Adverse Effect. None of the Ross-Dove Companies nor
Ross or Kirk needs to give any notice to, make any filing with or obtain any
authorization, consent or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
7.22 Trust Accounts. The trust account balances reflected as assets
--------------
and liabilities on the Most Recent Financial Statements properly and accurately
account for all monies required to be held in trust by the Ross-Dove Companies
and no money required to be held by the Ross-Dove Companies in trust for the
benefit of third parties have been withdrawn and/or used by the Ross-Dove
Companies for any purpose other than to make payment to the appropriate third
party beneficiaries thereof.
7.23 Capitalization of Dovetech. The entire authorized capital stock
--------------------------
of Dovetech consists of One Hundred Thousand (100,000) shares of which Three
Hundred (300) shares are issued and outstanding with Ross and Kirk each owning
One Hundred Fifty (150) shares of said issued and outstanding Stock. The Stock
has been duly authorized, is validly issued, fully paid and nonassessable and is
held
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<PAGE>
of record by Ross and Kirk as noted in the preceding sentence. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or commitments
that could require Dovetech to issue, sell or otherwise cause to become
outstanding any additional shares of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock, profit participation or similar
rights with respect to Dovetech. There are no voting trusts, proxies or other
agreements or understandings with respect to the voting of the capital stock of
Dovetech.
7.24 Ownership of the Stock. Ross and Kirk hold of record and own
----------------------
beneficially the number of Dovetech's shares of capital stock as set forth in
Section 7.23, free and clear of any restrictions on transfer pursuant to the
transactions set forth in this Agreement, taxes, security interests, options,
warrants, purchase rights, contracts, commitments, equities, claims and demands.
Neither Ross nor Kirk is a party to any option, warrant, purchase right or other
contract or commitment that could require either of them to sell, transfer or
otherwise dispose of any capital stock of Dovetech (other than this Agreement).
Neither Ross nor Kirk is a party to any voting trust, proxy or other agreement
or understanding with respect to the voting of any capital stock of Dovetech.
7.25 Representations and Warranties True at Closing. The
----------------------------------------------
representations and warranties set forth in this Section 7 shall be true and
correct as of the Closing Date as though made on and as of the Closing Date.
8. Representations and Warranties of Koll. In order to induce the Ross-
--------------------------------------
Dove Companies and Ross and Kirk to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, Koll hereby represents and
warrants to the Ross-Dove Companies and Ross and Kirk as follows:
8.1 Organization and Good Standing. Koll is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Koll has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and the other agreements
referenced herein, and to perform its obligations hereunder and thereunder.
8.2 Authorization and Enforceability. The execution, delivery and
--------------------------------
performance of this Agreement and the other
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<PAGE>
agreements referenced herein and the consummation of the transactions
contemplated hereby and thereby by Koll have been duly authorized by the Board
of Directors of Koll. This Agreement and the other agreements referenced herein,
when executed and delivered by Koll, will constitute the valid and binding
obligations of Koll and will be enforceable in accordance with their respective
terms, except to the extent limited by bankruptcy, insolvency, reorganization
and other laws affecting creditors' rights generally, and except that the remedy
of specific enforcement or similar equitable relief is available only at the
discretion of the court before which enforcement is sought.
8.3 Noncontravention. Neither the execution and delivery of this
----------------
Agreement by Koll, nor consummation of the transactions contemplated hereby by
Koll will: (i) violate any constitution, statute, regulation rule, injunction,
judgment, order, decree ruling, charge or other restriction of any government,
governmental agency or court to which Koll is subject or any provision of the
charter or bylaws of Koll; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which Koll is a party or by which it is bound or to which any of its assets
are subject (or result in the imposition of any security interest upon any of
its assets), all except any such violations, conflicts, breaches or defaults
which in the aggregate would not result in a material adverse effect on Koll.
Koll does not need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
9. Conduct Pending the Closing Date. From and after December 31, 1994
--------------------------------
and to the date immediately preceding the Closing Date, the Ross-Dove Companies
shall provide Koll and its officers, directors and agents reasonable access to
conduct due diligence; shall operate the Businesses in substantially the same
manner as theretofore conducted; shall use its reasonable, good faith efforts to
preserve and maintain its relationships with its suppliers and clients; and
shall not otherwise engage in any activities not in the ordinary course of
business.
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<PAGE>
10. Additional Agreements of the Parties.
------------------------------------
10.1 Employment Agreements. Employment Agreements substantially in
---------------------
the form of Exhibits "F" and "G" shall be entered into concurrent with the
Closing by and between the LLC and Ross and Kirk.
10.2 Buy/Sell Agreement. A Buy/Sell Agreement substantially in the
------------------
form attached hereto as Exhibit "H" shall be entered into concurrent with the
execution of the LLC Operating Agreement and the Closing.
10.3 Additional Agreements and Instruments. On or before the Closing
-------------------------------------
Date, the Parties shall execute, deliver and file all exhibits, agreements,
certificates, instruments and other documents, not inconsistent with the
provisions of this Agreement, which are normal and customary in a transaction of
this nature and which, in the opinion of counsel to any of the parties hereto,
shall reasonably be required to be executed, delivered and filed in order to
consummate the transactions contemplated by this Agreement.
11. Conditions Precedent to Performance by Koll. The obligations of Koll
-------------------------------------------
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction, on or before the Closing Date, of all the following conditions,
any one or more of which may be waived in writing by Koll:
11.1 Performance. The Ross-Dove Companies and Ross and Kirk shall
-----------
have performed, satisfied and complied with all covenants, agreements, and
conditions required by this Agreement to be performed, satisfied or complied
with by them on or before the Closing Date, including, without limitation, the
covenants and agreements contained in Section 7.
11.2 Absence of Material Changes. There shall not have occurred, in
---------------------------
the reasonable judgment of Koll, any material adverse change in the Businesses,
Assets, financial condition or operations of the Ross-Dove Companies taken as a
whole from the date of this Agreement on or before the Closing Date.
11.3 Consents. Subject to the provisions in Section 7.18, all
--------
necessary agreements, consents, waivers and/or estoppel certificates of any
parties to any Contracts which are material to the Businesses shall have been
obtained and true and complete copies thereof
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<PAGE>
delivered to Koll. Without limitation of the foregoing, the Ross-Dove Companies
and Ross and Kirk shall deliver, or cause to be delivered, to Koll any and all
releases, termination statements and/or other instruments as may be reasonably
necessary or appropriate to transfer the Assets and the Businesses to the LLC
free and clear of all liens, encumbrances, security interests, pledges and other
adverse interests, including, but not limited to, the spousal consents noted in
Section 4, except as set forth in Schedules 7.6(a) and 7.6(b).
11.4 Exhibits and Schedules. At the Closing, there shall have been
----------------------
delivered to Koll all of the Exhibits, all of the Schedules, including without
limitation Schedule 2.0 listing the Assets, and all other documents, instruments
and agreements as contemplated herein, duly executed by the Ross-Dove Companies
and Ross and Kirk (as applicable).
11.5 Resolutions. Koll shall have received certified resolutions of
-----------
the respective Boards of Directors and shareholders of the Ross-Dove Companies
in form and substance reasonably satisfactory to counsel for Koll authorizing
the Ross-Dove Companies to execute, deliver and perform this Agreement, the
Exhibits hereto and all other documents, instruments and agreements as
contemplated herein, the transactions contemplated hereby and thereby, and all
actions to be taken by the Ross-Dove Companies hereunder.
12. Conditions Precedent to Performance by the Ross-Dove Companies and
------------------------------------------------------------------
Ross and Kirk. The obligations of the Ross-Dove Companies and Ross and Kirk to
- -------------
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or before the Closing Date, of all of the following conditions,
any one or more of which may be waived in writing by the Ross-Dove Companies and
Ross and Kirk:
12.1 Performance. Koll shall have made the Initial Contribution and
-----------
shall have performed, satisfied and complied with all other covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by Koll on or before the Closing Date, including, without
limitation, all covenants and agreements set forth in Section 8. There shall
have been no change in Koll's financial or business condition or commitments,
nor any litigation or proceeding, actual or threatened, which is reasonably
likely to prevent Koll from performing any obligation
-22-
<PAGE>
undertaken by it under this Agreement which is to be performed after the
Closing.
12.2 Exhibits. On the Closing, there shall have been delivered to the
--------
Ross-Dove Companies all of the Exhibits and all other documents, instruments and
agreements as contemplated herein, duly executed by Koll.
12.3 Resolutions. The Ross-Dove Companies and Ross and Kirk shall have
-----------
received certified resolutions of the Board of Directors of Koll, in the form
and substance reasonably satisfactory to counsel for the Ross-Dove Companies and
Ross and Kirk, authorizing Koll's execution, delivery and performance of this
Agreement, all of the Exhibits and all other documents, instruments and
agreements as contemplated herein, the transactions contemplated hereby and
thereby, and all actions to be taken by Koll hereunder and thereunder.
13. Closing. The Closing shall take place at the offices of Howard, Rice,
-------
Nemerovski, Canady, Falk & Rabkin, A Professional Corporation, Three Embarcadero
Center, Seventh Floor, San Francisco, CA 94111 at 10 a.m. local time on March
13, 1995, or at such other time and location as may be mutually agreed upon by
the parties (the "Closing" and the "Closing Date"). Unless this Agreement is
otherwise terminated in accordance with the terms and conditions expressly set
forth in Section 14, the consummation of the transactions contemplated by this
Agreement shall be deemed to take place as of 12:01 a.m. on the Closing Date and
the LLC shall have received the Initial Contribution and the Promissory Note and
shall be deemed to take possession of the Stock, the Assets and the Businesses
at 12:01 a.m. on the Closing Date.
14. Termination of Agreement. This Agreement may be terminated at any
------------------------
time prior to the Closing: (a) by the mutual consent of the Parties; or (b) by
Koll, on the one hand, or by the Ross-Dove Companies and Ross and Kirk, on the
other hand, if: (i) a breach shall exist with respect to the written
representations and warranties made herein by the other Party or Parties, as the
case may be, (ii) the other Party or Parties, as the case may be, shall fail or
refuse to perform in any material respect any covenant or agreement to be
performed on its or their part under this Agreement, (iii) the other Party or
Parties, as the case may be, shall take any action prohibited by this Agreement,
(iv) the other Party or Parties, as the case may be, shall not have furnished
such certificates
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<PAGE>
and documents in connection with the transactions contemplated hereby as it or
they shall have agreed to furnish, or (v) any consent of any governmental agency
or other person not a party to the transactions contemplated hereby is necessary
to prevent a default under any outstanding obligation which is material to Koll,
or to the Ross-Dove Companies or Ross and Kirk, and such consent is not
obtainable without undue expense or penalty.
15. Indemnification.
---------------
15.1 General.
-------
(a) Indemnification by the Dove Group and Ross and Kirk. The
---------------------------------------------------
Dove Group and Ross and Kirk shall jointly and severally indemnify, defend and
hold harmless Koll and the LLC against and in respect of any and all losses,
costs, expenses, obligations, liabilities, damages, recoveries, deficiencies,
interest paid to any third party, penalties and reasonable attorneys' fees that
Koll and the LLC may incur, sustain or suffer as a result of, by reason of, or
in connection with (i) the breach of any of the representations and warranties
of the Ross-Dove Companies and Ross and Kirk contained in this Agreement; (ii)
the breach of, or failure by the Ross-Dove Companies and Ross and Kirk to
perform, any of the covenants or agreements to be performed by them pursuant to
this Agreement; (iii) any liability of the Ross-Dove Companies and Ross and Kirk
which is expressly excluded from the LLC pursuant to this Agreement; and (iv)
the operation by the Ross-Dove Companies of the Businesses prior to the Closing
Date in contravention of this Agreement. The representations and warranties and
other obligations of the Ross-Dove Companies and Ross and Kirk set forth in this
Agreement are being made for the benefit of Koll and the LLC, therefore, Koll
may elect, in its sole and absolute discretion, to pursue any action for its own
benefit directly against the Ross-Dove Companies and/or Ross and Kirk that gives
rise to damages hereunder to either the LLC and/or Koll, or Koll may elect to
pursue said action through the LLC or in conjunction with the LLC; provided,
however, that Koll may recover damages hereunder only to the extent of damages
actually suffered by Koll.
(b) Indemnification by Koll. Koll shall indemnify, defend and
-----------------------
hold harmless the Ross-Dove Companies and Ross and Kirk and the LLC against and
in respect of any and all losses, costs, expenses, obligations, liabilities,
damages, recoveries, deficiencies, interest paid to any third party, penalties
and reasonable attorneys'
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<PAGE>
fees that the Ross-Dove Companies and/or Ross and Kirk and the LLC may incur,
sustain or suffer, as a result of, by reason of, or in connection with any
breach of, or failure by Koll to perform, any of the representations,
warranties, covenants or agreements of Koll contained in this Agreement.
15.2 Claims for Indemnity. Whenever a claim shall arise for which any
--------------------
Party may be or become entitled to indemnification hereunder, the indemnified
party shall notify the indemnifying party promptly, and in the case of a third
party claim, in writing within thirty (30) days of the indemnified party's first
receipt of written notice of such third party claim, and in any event within
such shorter period as may be legally required for the indemnifying party or
parties to take appropriate action to resist such claim. The failure to give a
timely notice, as provided in the preceding sentence, shall not operate as a
waiver of an indemnified party's right to indemnification, provided that the
failure to give such notice did not materially prejudice the legal rights of the
indemnifying party. Such notice shall specify all facts known to the
indemnified party giving rise to such indemnity rights and shall estimate (to
the extent determinable) the amount of the liability arising therefrom.
15.3 Right to Defend; Settlement.
---------------------------
(a) If the facts giving rise to any claim for indemnification
shall involve any actual or threatened action or demand by any third party
against the indemnified party or any of its affiliates, the indemnifying party
or parties shall be entitled (without prejudice to the right of the indemnified
party to participate at its own expense through counsel of its own choosing), at
their expense and through a single counsel of their own choosing, to defend or
prosecute such claim in the name of the indemnifying party or parties, or any of
them, and if consented to by the indemnified party, in the name of the
indemnified party.
(b) Each Party hereto shall give the other Party advance written
notice of any proposed compromise or settlement of any such action or claim.
Except as otherwise provided in Section 15.3(c), neither the indemnifying party
nor the indemnified party shall compromise or settle such action or claim
without the prior written consent of the other party.
(c) In the event and to the extent that the plaintiff, in any
action in which an indemnifying party shall be liable to
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<PAGE>
indemnity an indemnified party hereunder, shall offer to settle any such
litigation or controversy, and the indemnifying party shall notify the plaintiff
and the indemnified party in writing to the effect that the indemnifying party
is willing to accept such settlement and pay all sums required to be paid to
settle such dispute and effect a dismissal with prejudice of any such action,
the maximum liability of the indemnifying party hereunder with respect to such
matter or controversy shall thereafter be limited to the amount offered by the
plaintiff for settlement and acceptable to the indemnifying party, in the event
that the indemnified party shall elect not to effect a settlement of such matter
---
on the terms and conditions acceptable to the plaintiff and the indemnifying
party. In addition, the indemnified party shall thereafter be liable to the
indemnifying party for any additional legal fees incurred by the indemnifying
party in continuing to defend such litigation following the indemnified party's
refusal to accept such settlement offer otherwise acceptable to the plaintiff
and the indemnifying party. The provisions of this Section 15.3(c) shall not,
---
however, be applicable in the event that the proposed settlement acceptable to
the plaintiff and the indemnifying party shall impose any ongoing financial or
business liability or obligation upon the indemnified party, or would otherwise
have a material adverse effect on the business or financial condition of the
indemnified party.
15.4 Right to Offset. To the extent that the Dove Group or Ross and
---------------
Kirkare obligated to pay any amount to Koll either directly or through Koll's
interest as a member of the LLC pursuant to the terms of the obligation to Koll
pursuant to Section 15.1(a), the LLC Operating Agreement shall provide that Koll
shall receive an additional preferred return in the amount of said obligation.
Koll's right hereunder to receive said preferred return shall not in any way
mitigate the ability of Koll to recover damages directly from the Dove Group or
Ross and Kirk for said obligation, however, Koll shall be entitled to receive
said preference from the LLC only to the extent Koll has not been adequately
compensated by the Dove Group or Ross and Kirk for the amount of said
obligation. In addition, Koll shall have the right to offset any damages
against any Koll Contributions not contributed to Koll.
16. Costs.
-----
16.1 Finder's or Broker's Fees. The Parties represent and warrant
-------------------------
that they have not dealt with any broker or finder in connection with this
transaction other than Emmett De Moss and,
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<PAGE>
insofar as they know, no other broker or person is entitled to any commission or
finder's fee in connection with any part of this transaction. Except for any
finder's fee or commission payable to Mr. De Moss in connection with this
transaction, which shall be paid and satisfied solely by Koll, the Parties will
indemnify each other against any such claims.
16.2 Expenses. The costs and expenses incurred or to be incurred by
--------
each of the Parties hereto in negotiating and preparing this Agreement and in
consummating the transactions contemplated hereby shall be paid by the LLC as
provided in the Operating Agreement; provided, however, that if this Agreement
is terminated pursuant to Sections 14(a), 14(b)(v) or 14(c), each of the Parties
hereto shall pay its or his own costs and expenses.
17. General Provisions.
------------------
17.1 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder, shall continue in full force and effect for a
period of two (2) years thereafter with the exception of any representations and
warranties relating to taxes and hazardous waste as set forth in Sections 7.5,
7.6(c) and 7.17 above, with said representations and warranties relating thereto
to continue in full force and effect at all times following the Closing until
the lapse of any applicable statutes of limitations.
17.2 Assignment. Neither this Agreement nor any duties or obligations
----------
hereunder shall be assignable by any Party without the prior express written
consent of each of the other Parties.
17.3 Notices. All notices pertaining to this Agreement shall be in
-------
writing and shall be transmitted by (a) personal hand delivery; (b) through the
facilities of the United States Post Office, certified or registered mail,
return receipt requested; (c) facsimile transmission; or (d) overnight courier.
The addresses set forth below for the respective Parties shall be the places
where notices shall be sent, unless written notice of a change of address is
given.
If to the Ross-Dove Companies, to:
Ross M. Dove, Chairman
1241 East Hillsdale Blvd.
Foster City, CA 94404
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<PAGE>
Facsimile No.: 415/571-5980
If to Ross, to:
Ross M. Dove
130 Montalvo
Redwood City, CA 94062
If to Kirk, to:
Kirk Dove
214 Oak Grove
Atherton, CA 94025
In each case with a copy to:
Jeffrey L. Schaffer, Esq.
Howard, Rice, Nemerovski, Canady,
Falk & Rabkin
A Professional Corporation
Three Embarcadero Center
Seventh Floor
San Francisco, CA 94111
If to Koll, to:
Gary Nielsen, Senior Vice President
Koll Management Services, Inc.
4343 Von Karman Avenue
Newport Beach, CA 92660
Facsimile No.: 714/833-3755
With a copy to:
Roger L. Neu, Esq.
Law Offices of Roger L. Neu, Inc.
500 Newport Center Drive, Suite 520
Newport Beach, CA 92660
Facsimile No.: 714/640-0463
Any such notices shall be deemed to be given as of the date so
delivered.
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<PAGE>
17.4 Attorneys' Fees. In the event that any legal, declaratory, self
---------------
help, or equitable action or arbitration or any other action not considered to
be a legal or equitable action is commenced between the Parties hereto or their
personal representatives concerning any provision of this Agreement or the
rights and duties of any person in relation thereto, the prevailing Party shall
be entitled, in addition to such other relief that may be granted, to a
reasonable sum for their attorneys' fees and any other costs and expenses
relating thereto.
17.5 Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be controlled by and construed under the
laws of the State of California. In the event of any litigation arising out of
any dispute in connection with this Agreement, the Parties hereby consent to the
jurisdiction of the California courts.
17.6 Binding Effect. Each and every covenant, term, provision and
--------------
agreement herein contained shall be binding upon and inure to the benefit of the
Parties hereto and their respective heirs, successors, assigns and legal
representatives and shall survive the termination of this Agreement where
appropriate to carry out the terms thereof.
17.7 Severability. Every provision of this Agreement is intended to
------------
be severable. If any terms or provisions hereof are illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of the Agreement.
17.8 Agreement Preparation. Each Party has cooperated in the drafting
---------------------
and preparation of this Agreement. Hence, in any construction to be made of
this Agreement, the same shall not be construed against any Party.
17.9 Parties in Interest. Nothing in this Agreement shall confer any
-------------------
rights or remedies under or by reason of this Agreement on any persons other
than the Parties and their respective successors and assigns nor shall anything
in this Agreement relieve or discharge the obligation or liability of any third
person to any party to this Agreement, nor shall any provision give any third
person any right of subrogation or action over or against any Party to this
Agreement.
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<PAGE>
17.10 Entire Agreement. This Agreement, including the Exhibits and
----------------
Schedules, contains the entire Agreement between the Parties hereto, and
supersedes any prior written or oral agreement between the Parties concerning
the subject matter contained herein. There are no representations, agreements,
arrangements or understandings, oral or written between the Parties hereto,
relating to the subject matter contained in this Agreement, which are not fully
expressed herein.
17.11 Certain Definitions. For purposes of this Agreement, the term
-------------------
"Material Adverse Effect" shall mean an adverse effect or adverse change in or
on the value of the Assets, the Businesses, financial condition or results of
operations of the Ross-Dove Companies or the ability of the Ross-Dove Companies
to conduct the Businesses on substantially the same basis as they are being
conducted as of the date hereof, in each case that is material to the Ross-Dove
Companies taken as a whole; provided, however, that in the aggregate any
Material Adverse Effects hereunder shall not exceed Ten Thousand Dollars
($10,000). For purposes of this Agreement, the terms "Exhibit," "Schedule" and
"Section" shall refer to an exhibit, schedule or section of this Agreement.
17.12 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same document.
-30-
<PAGE>
This Agreement is hereby adopted and made effective by the Parties as
of the date first set forth above as evidenced by the signatures set forth
below.
ROSS-DOVE COMPANY, INC. KOLL MANAGEMENT SERVICES, INC.
By: ________________________________ By: ________________________________
Ross M. Dove, Chairman Glen Raiger, Executive Vice
President
By: ________________________________
Kirk Dove, President
and Chief Executive DOVE CAPITAL CORPORATION
Officer
DOVETECH, INC. By: ________________________________
Ross M. Dove, Chairman
By: ____________________________
Ross M. Dove, Chairman By: ________________________________
Kirk Dove, President and Chief
Executive Officer
By: ____________________________
Kirk Dove, President
and Chief Executive
Officer ________________________________
Kirk Dove
DOVEMEDIA, LTD.
________________________________
By: ____________________________ Ross Dove
Ross M. Dove, Chairman
By: ____________________________
Kirk Dove, President
and Chief Executive
Officer
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<PAGE>
EXHIBIT 10.48
* Confidential Treatment
Requested
KOLL-DOVE GLOBAL DISPOSITION SERVICES, LLC
BUY/SELL AGREEMENT
================================================================================
THIS Buy/Sell Agreement (this "Agreement"), is entered into by and between
Koll-Dove Global Disposition Services, LLC, a California limited liability
company (the "Company") and each member ("Member") executing this Agreement,
with respect to all units owned by said Member of the Company's units now or
hereafter outstanding (the "Units"), for the purpose of protecting the Company
and the other Members in the event of a purchase or transfer of the Units of any
Member as provided for in this Agreement.
R E C I T A L S:
A. The Members executing this Agreement are the owners of the Units of
the Company.
B. This Agreement is being entered into concurrent with and as part of
the Company's Operating Agreement. Defined terms used herein shall have the same
meaning as set forth in the Operating Agreement unless otherwise expressly
defined herein.
C. The Company and its Members believe it is in their respective best
interest to enter into this Buy/Sell Agreement to provide for the purchase of
the Units by the Company or remaining Members, or sale of the Company, upon the
occurrence of the events set forth herein subject to the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the terms
and conditions set forth below, the parties agree as follows.
A G R E E M E N T
1. Membership Certificates. If certificates are issued, Members shall
-----------------------
have placed on all the certificates representing the Units the legend set forth
in Section 9 of this Agreement. None of the Units shall be transferred,
encumbered, or in any way alienated except under the terms of this Agreement.
Members shall have the right to vote the Units and receive the distributions
thereon, if any, until the Units are sold or transferred as provided in this
Agreement.
<PAGE>
2. Transfer Restrictions.
---------------------
(a) Consent to Transfer. Except as otherwise provided in this
-------------------
Agreement, Members shall not transfer, or in any way dispose of any of the Units
or any right or interest in them without obtaining the prior written consent of
the Company and of a majority of the Members unless the Members shall first have
given written notice to the Company, of their intention to do so (the "Notice")
and comply with the terms and conditions of this Agreement. The Notice must name
the proposed transferee and specify the number of Units to be transferred, the
price per Unit, and the terms of payment. Promptly on receipt of the Notice, the
secretary of the Company, shall forward a copy of the Notice to each of the
Company's Managers, and within five (5) days thereafter a meeting of the
Managers, shall be duly called, noticed, and held to consider the proposed
transfer. For fifteen (15) days following the Notice to the Company or ten (10)
days after the determination of valuation pursuant to Section 8, whichever is
later (the "Time Period"), the Company may purchase the Units at the price and
on the terms set forth in Sections 7 and 8 respectively (the "Option").
(b) Exercise of Option. The Company shall exercise the Option by
------------------
giving notice to the selling Member of its intent to exercise on or before the
expiration of the Time Period. If the Option is exercised by the Company, the
Company shall purchase the Units at the price and on the terms as set forth in
Sections 7 and 8, respectively.
(c) Members' Option. If the Option is not exercised by the Company
---------------
as to all Units set forth in the Notice of intention to transfer within the Time
Period, notice of the proposed transfer in the same form as the Notice given to
the Company shall be given immediately to the remaining Members (the "Second
Notice"), who shall have the option to purchase any Units, not purchased by the
Company, at the price and on the terms and conditions as referred to in Section
2(a) above. Within fifteen (15) days after giving the Second Notice, any Members
desiring to acquire any part or all of the Units offered shall deliver to the
secretary of the Company a written election (the "Written Elections") to
purchase the Units or a specified number of them.
If the total number of Units specified in the Written Elections exceeds the
number of available Units, each remaining Member shall have priority, up to the
number of Units specified in his Written Election to purchase, to such
proportion of the available Units as the number of the Company's Units that he
holds bears to the total number of the Company's Units held by all Members
electing to purchase. The Units not purchased on such a priority basis shall be
allocated in one or more successive allocations to those Members electing to
purchase more than the
-2-
<PAGE>
number of Units to which they have a priority right, up to the number of Units
specified in their respective Written Elections, in the proportion that the
number of Units held by each of them bears to the number of Units held by all of
them. Immediately after the Company's receipt of the Written Elections, the
Secretary of the Company shall notify each remaining Member of the number of
Units as to which his Written Election was effective, and the remaining Members
shall meet the terms and conditions of the purchase within ten (10) days
thereafter.
(d) Failure to Purchase All Units. If the Company and the remaining
-----------------------------
Members do not purchase all the Units set forth in the Notice of intention to
transfer, all the Units may be transferred at any time within ninety (90) days
from the date of the Notice on the terms specified in the Notice. The transferee
will hold the Units subject to the provisions of this Agreement and will not be
admitted as a substitute Member except as provided in Section 12(b). No transfer
of the Units shall be made after the end of the ninety (90) day period, nor
shall any change in the terms of transfer be permitted without a new notice of
intention to transfer and compliance with the requirements of this Section.
3. Permitted Transfers. Notwithstanding any provisions in this Agreement
-------------------
to the contrary, each Member may transfer the Units subject to this Agreement to
any Affiliate of said Member, subject to the consent of the Company which may
not be unreasonably withheld. Such transferee(s) shall hold the Units subject to
all the provisions of this Agreement, as provided in Section 4 of this
Agreement. The Parties acknowledge that it is contemplated that Dove Capital
Corporation and Dovemedia, Ltd. may merge or otherwise be combined with Ross
Dove Company, Inc. and that pursuant to such merger, the Units held by Dove
Capital Corporation and Dovemedia, Ltd. would be transferred to Ross Dove
Company Corporation, and the Company consents in advance to any such transfer of
the Units held by Dove Capital Corporation and Dovemedia, Ltd.
4. Obligations of Transferees. Each transferee or any subsequent
--------------------------
transferee of the Units, or any interest in such Units, shall, unless this
Agreement expressly provides otherwise, hold such Units or interest in the Units
subject to all of the provisions of this Agreement and shall make no further
transfers except as provided in this Agreement.
5. Option to Purchase On Death. In the case of a Member, within a period
---------------------------
beginning with the death of the Member and ending ninety (90) days following the
Member's death and qualification of an executor or administrator, or ninety (90)
days following the date of final valuation pursuant to Section 7, whichever is
later, the Company shall have the option to purchase and redeem all the
decedent's Units of the Company's stock, at the price and on the terms provided
in Sections 7 and 8 of this Agreement, respectively.
-3-
<PAGE>
If the Company does not purchase all of the decedent's Units, then the remaining
Members shall have the option to purchase any of decedent's Units not acquired
by the Company pursuant to the terms and conditions of Section 2(d). The "Second
Notice" pursuant to Section 2(d) shall be given on or before the fifth (5th)
business day following the end of the Company's prescribed option period as set
forth in this Section 5. In the event this option is not exercised upon death as
to all the Units owned by the decedent, his estate will hold those Units subject
to the provisions of this Agreement.
Notwithstanding the foregoing, if either Ross Dove or Kirk Dove dies (the
"Decedent"), the surviving brother (the "Survivor") and/or Ross-Dove Company,
Inc. shall have a first right of refusal to purchase the Decedent's Units within
the period beginning with the death of the Decedent and ending sixty (60) days
following the Decedent's death and qualification of an executor or
administrator, or sixty (60) days following the date of final valuation pursuant
to Section 7, whichever is later. The terms and conditions for the purchase of
the Decedent's Units by the Survivor shall be as agreed upon between the
Survivor and the Decedent's estate. In the event the Survivor does not elect to
exercise the Survivor's option by notifying the Company on or before expiration
of the sixty (60) day time period, then the Company and the other Members shall
have the right to purchase the Decedent's Units in accordance with the foregoing
paragraph.
6. Optional Purchase On Bankruptcy. The Company and the remaining
-------------------------------
Members shall have the option to purchase all of the Units owned by a Member
with respect to which an event of Bankruptcy has occurred (the "Insolvent
Member") for a period ending the later of: (i) thirty (30) days following the
final determination of value pursuant to Section 7 below; (ii) ninety (90) days
following the date that all of the remaining Members have actual knowledge of
the Bankruptcy; or (iii) ninety (90) days following notice of the Bankruptcy
(the "Option Period"). Upon the occurrence of the Bankruptcy, the Insolvent
Member shall notify the Company that the event has occurred within ten (10) days
after the Bankruptcy. The Insolvent Member's Units shall be subject to purchase
by the Company and the remaining Members pursuant to this Section 6. The Company
shall have the option during the Option Period to purchase the Units at the
price and on the terms set forth in Sections 7 and 8, respectively. If the
Company does not purchase all of the Units available for purchase, the remaining
Members shall have the right to purchase any remaining Units in accordance with
the provisions set forth in Section 2(d) above for a fifteen (15) day period
following the expiration of the Option Period. In the event this Option is not
exercised as to all the Units owned by the Insolvent Member, the Units not
purchased shall thereafter be held by the Insolvent Member's successors in
interest subject to the provisions of this Agreement.
-4-
<PAGE>
7. Purchase Price. The purchase price (the "Purchase Price") shall be
--------------
equal to a multiple of * times the Company's net income for the
immediately preceding complete fiscal year. "Net income" shall be determined by
the Company's accountants in accordance with generally accepted accounting
principles consistently applied.
8. Payment and Transfer of Units. If Units are transferred pursuant to
-----------------------------
Sections 2, 5 or 6, the consideration to be paid for the Units shall be paid to
the Member or his estate, as the case may be. If a Member is deceased, the
deceased Member's personal representative shall apply for and obtain any
necessary court approval or confirmation of the sale of the deceased Member's
Units under this Agreement. In all events, consideration for the Units shall be
delivered by paying twenty-five (25%) of the Purchase Price in cash on the date
preceding the expiration of the applicable time period in which to purchase the
Units and by delivering a note concurrently therewith (the "Note"). The Note
shall provide for payment of principal in three (3) equal annual installments
with interest on the unpaid balance at the rate of ten percent (10%) per annum,
with full privilege of prepayment of all or any part of the principal at any
time without penalty or bonus. Any prepaid sums shall be applied against the
installments thereafter falling due in inverse order of their maturity, or
against all the remaining installments equally, at the option of the payors. The
Note shall provide that, in case of default, after failure to cure within
fifteen (15) days, at the election of the holder the entire sum of principal and
interest will immediately be due and payable, and that the makers shall pay
reasonable attorney's fees to the holder in the event suit is commenced because
of default. The Note shall be secured by a pledge of all the Units being
purchased in the transaction to which the Note relates. As long as no default
occurs in payments on the Note, the purchasers shall be entitled to vote the
Units and receive dividends thereon.
9. Legends on Certificates. Any Member's certificate, when issued, shall
-----------------------
have conspicuously endorsed on its face the following words:
"SALE, TRANSFER, OR HYPOTHECATION OF THE UNITS REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED BY THE PROVISIONS OF A BUY/SELL
AGREEMENT BETWEEN MEMBER AND THE COMPANY, A COPY OF WHICH MAY BE
INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY, AND ALL THE
PROVISIONS OF WHICH ARE INCORPORATED BY REFERENCE IN THIS
CERTIFICATE."
10. Spouses. Individual Members shall cause their spouses to execute a
-------
Spousal Consent form in substantially the form attached
-5-
* Confidential Treatment
Requested
<PAGE>
hereto as Exhibit "B" and incorporated herein by this reference, which shall
include an express provision providing that the spouse agrees to the terms and
conditions of this Agreement.
11. Transfer Subject to Indebtedness. Except as expressly set forth
--------------------------------
herein, the transferee of the Units shall be substituted in the place of a
transferring Member as to that portion of any debt guaranteed by said Member on
behalf of the Company, with said transferee assuming full responsibility for
said guarantee. If the transferring Member's liability cannot be assigned, the
purchaser of the Units shall adequately indemnify said transferee against said
liability. In no event, however, shall Koll be required to assume any liability
for the GE Capital Debt.
12. Other Transfer Restrictions.
---------------------------
(a) Further Restrictions on Transfer of Interests. In addition to
---------------------------------------------
other restrictions found in this Agreement, no Member shall transfer, assign,
convey, sell, encumber or in any way alienate all or any part of his or her
Member's Interest if the Member's Interest to be transferred, assigned, sold or
exchanged, when added to the total of all Members' Interests sold or exchanged
in the preceding twelve (12) consecutive months prior thereto, would cause the
termination of the Company under the Code, as determined by the Managers unless
the Managers determine that there will be no detrimental economic effect to the
Company or its Members arising out of said termination.
(b) Substitution of Members. A transferee of a Membership interest
-----------------------
shall have the right to become a substitute Member only if (i) a Majority Vote
of the Members consent to such substitution, which consent may be unreasonably
withheld, and (ii) such Person executes an instrument satisfactory to the
Managers accepting and adopting the terms and provisions of the Company's
Operating Agreement, and (iii) such person pays any reasonable expenses in
connection with such Member's admission as a new Member.
(c) Rights of Legal Representatives. If a Member who is an
-------------------------------
individual dies or is adjudged by a court of competent jurisdiction to be
incompetent to manage the Member's person or property, the Member's executor,
administrator, guardian, conservator or other legal representative may exercise
all of the Member's rights for the purpose of settling the Member's estate or
administering the Member's property, including any power the Member has under
the Articles of Organization of the Company or this Agreement to give an
assignee the right to become a Member. If a Member is a corporation, trust or
other entity and is dissolved or terminated, the powers of that Member may be
exercised by its legal representative or successor.
-6-
<PAGE>
13. Insurance.
---------
(a) Purchase of Insurance. The Company may, but need not, insure
---------------------
the life of each Member, naming itself as beneficiary of the life insurance
policies. All policies shall be listed on the Schedule of Insurance attached
hereto as Exhibit "A" and incorporated herein by this reference. The policies
and any proceeds received thereunder shall be held by the Company in trust for
the purposes of this Agreement. The Company shall have the right to take out
additional insurance on the life of any Member whenever, in the opinion of the
Company's Managers, additional insurance may be required and desirable to carry
out its obligations under this Agreement. Any such additional policies shall be
listed on the Schedule of Insurance and shall be otherwise subject to the terms
of this Agreement. This Company shall pay all premiums on insurance policies
taken out by it pursuant to this Agreement. The Company shall be the sole owner
of all such policies and may apply to the payment of premiums, any dividends
declared and paid on the policies. The proceeds of the policies insuring a life
of a deceased Member shall be paid by the Company to the successor of the
decedent to the extent necessary and sufficient to discharge the Company's
obligations hereunder. The Company agrees that it will not cancel any such
policy, change the named beneficiary or the method of payment of the proceeds,
or change the policy in any other manner, or assign the rights in it, as long as
this Agreement remains in effect. The Company may not borrow against the cash
value of the policy.
(b) Option Regarding Insurance Policies. If this Agreement is
-----------------------------------
terminated for any reason other than death, each Member shall have the option to
purchase from the Company all or any of the insurance policies covering his
respective life for a price equal to its cash surrender value plus the amount of
any other premium paid by the Company as of the date of such termination. The
option to purchase said policy shall be exercised within sixty (60) days
following the termination date, and shall be evidenced by the payment of the
purchase price to the Company. The Company shall deliver said policies to the
purchaser and shall execute and deliver any reasonable or necessary instruments
of transfer.
14. Transfer of Units. With respect to those Members that are entities in
-----------------
which Ross Dove and Kirk Dove, either individually or collectively, have more
than a fifty percent (50%) economic or management ownership interest in, any
transfer by Ross and Kirk of said interest that results in their collective
ownership therein to be reduced to fifty percent (50%) or less, except as
provided in Section 3 above, shall constitute a transfer of Units for purposes
of this Agreement. The intent of this Section is to provide terms and conditions
whereby the Members that are owned and controlled by Ross and Kirk shall remain
under the control of Ross and Kirk and
-7-
<PAGE>
Ross and Kirk shall continue to have a majority of the economic benefit
therefrom. At such time as said control and economic benefit is transferred to a
third party the Units held by said Members shall be subject to purchase pursuant
to this Agreement.
15. Noncompetition. Concurrent with the execution of this Agreement, the
--------------
Members entered into a Contribution Agreement and as part of the Contribution
Agreement formed the Company. Ross and Kirk, concurrent with the execution of
this Agreement, entered into Employment Agreements with the Company (the
"Employment Agreements"). In part, the Contribution Agreement and the Operating
Agreement of the Company provide that Koll will contribute *
Dollars ($ * ) to the Company subject to the terms and conditions set
forth therein. The Members hereby acknowledge and agree that the Contribution
constitutes partial consideration in return for the agreement not to compete by
Ross and Kirk pursuant to this Section (the "Noncompetition Restriction"). Koll
is making the Contribution to the Company based upon the condition that Ross and
Kirk agree not to compete pursuant to the terms and conditions of this Section.
If either Ross or Kirk terminate their employment with the Company on any
date (the "Termination Date") for any reason on or before the end of the third
(3rd) year following the date of this Agreement (the "Employment Period"), they
hereby agree that they shall not, either directly or indirectly, engage in or
have any interest in any person, firm, corporation or business (whether as an
employee, officer, director, agent, security holder, creditor, consultant or
otherwise) that engages in any activity any place in the United States (the
"Territory"), which activity is the same as, similar to or competitive with any
activity that is the same as or similar to the activities engaged in by the
Company or any of its Affiliates in the Territory on or before the date of
termination. This prohibition against competition shall continue for as long,
but not exceeding, the period ending three (3) years from the date of this
Agreement, as the Company and its Affiliates or any person deriving title to the
business and assets thereof carries on a like business in the Territory. If the
Company defaults in its obligations pursuant to Section 5(b) of the Employment
Agreements, the Noncompetition Restriction shall terminate as of the date of
said default with respect to the employee subject to said default.
In the event the employment of Ross and/or Kirk is terminated (the
"Departing Employee") for any reason following the Employment Period, the
Departing Employee shall compensate the Company in the amount set forth in this
Section (the "Compensation") if the Departing Employee, or any entity that he is
associated with in any way, engages in any business with existing or past
clients of the Company (the "Company Clients") during the two (2) year period
following the Employment Period (the "Compensation Period"). The Compensation
shall be equal to one hundred percent (100%) of the
-8-
* Confidential Treatment
Requested
<PAGE>
gross profits ("Gross Profit") derived by the Company from the applicable
Company Clients during the Employment Period reduced by a percentage equal to
the number of days from the end of the Employment Period to the date of the
first auction or appraisal by the Departing Employee for the applicable Company
Client to the total number of days in the Compensation Period. For example, if
the Departing Employee conducts an auction for a Company Client 400 days after
the end of the Employment Period and the Gross Profit for that Company Client
during the Employment Period was $600,000, the Compensation would be equal to
$271,260 (400 / 730 = 54.79%; $600,000 - 54.79% = $271,260). The Gross Profit
upon which the Compensation is based shall be the Gross Profit derived by the
Company from the same activities that the Company conducted on behalf of the
Company Client as are being conducted by the Departing Employee. For example, if
the Departing Employee conducts an appraisal for a Company Client, Compensation
shall be based upon the Gross Profits from the appraisal business for that
Company Client. If the Departing Employee later conducts an auction for that
same Company Client, then the Compensation would be recalculated to include
payment based upon Gross Profit of the Company for the auction business for that
Company Client. If the Company Client conducts business with the Departing
Employee and then later transacts business with the Company on or before the end
of the Compensation Period, the Compensation shall be adjusted prorata based on
the number of days remaining from the date the Company Client comes back to the
Company to the end of the Compensation Period. The Compensation due and payable
by the Departing Employee to the Company shall be paid on or before the 30th day
after the date that the Departing Employee completes the first auction or
appraisal for the applicable Company Client.
Ross and Kirk also agree that during the period from the Termination Date,
until the expiration of the Compensation Period that they and/or any entity that
they are associated with in any way shall not employ any employees of the
Company that were employees of the Company as of the Termination Date.
The Company was established for the purpose of allowing Koll to invest in
the businesses previously conducted by the Dove Group and in Dovetech. Ross and
Kirk each own fifty percent (50%) of the interest in the companies in the Dove
Group and prior to the contribution of the Dovetech stock to the Company, each
owned fifty percent (50%) of the stock of Dovetech; therefore, Ross and Kirk are
the direct beneficiaries of the Contribution to the Company. It is agreed that
the Contribution constitutes valid consideration for enforcement of the covenant
not to compete as set forth in this Section 15 pursuant to California Business
and Professions Code Section 16601. In the event that the Contribution is deemed
by any judicial body or authority not to constitute adequate consideration for
the noncompetition agreement set forth herein, Koll shall have the right to
purchase part or all, but not less than ten percent
-9-
<PAGE>
(10%) of the Departing Employee's Units and the Purchase Price (as defined in
Section 7) shall be deemed to constitute adequate consideration for said Units
and the noncompetition agreement set forth herein.
16. Sale of the Company. Following the expiration of the Employment
-------------------
Period, any Member (the "Electing Member") can elect to have the Company sold
(the "Election"). The Electing Member shall notify the other Members (the
"Election Notice"). The Members shall have a sixty (60) day period following the
Election Notice (the "Negotiation Period") in which to try to negotiate a
transaction involving a purchase and sale of some of the Members' interests that
are satisfactory to all Members (the "Member Sale"). If the Parties are unable
to agree to a Member Sale, and if the Electing Member does not give notice to
the other Members on or before the fifth (5th) day following the expiration of
the Negotiation Period that the Election is withdrawn, the Company, in its
entirety, shall be offered for sale. All of the Members shall use their
reasonable good faith efforts to market the Company and shall cause the Company
to use those means and provide the resources that would normally be used and
provided in selling a company of this nature. Approval of the sale of the
Company shall be subject to the approval requirements as set forth in the
Company's Operating Agreement.
17. General Provisions.
------------------
(a) Notices. All notices pertaining to this Agreement shall be in
-------
writing and shall be transmitted either by personal hand delivery or through the
facilities of the United States Post Office, certified or registered mail,
return receipt requested. The addresses set forth below for the respective
parties shall be the places where notices shall be sent, unless written notice
of a change of address is given.
Any such notices shall be deemed to be given as of the date so delivered.
(b) Attorney's Fees. In the event that any legal, declaratory,
---------------
self help, or equitable action is commenced between the Parties hereto or their
personal representatives concerning any provision of this Agreement or the
rights and duties of any person in relation thereto, the prevailing Party shall
be entitled, in addition to such other relief that may be granted, to a
reasonable sum for their attorneys' fees and any other costs and expenses
relating thereto.
(c) Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be controlled by and construed under the
laws of the State of California. In the event of any litigation arising out of
any dispute in connection
-10-
<PAGE>
with this Agreement, the Parties hereby consent to the jurisdiction of the
California courts.
(d) Modification. This Agreement may only be modified by the mutual
------------
consent of the Parties in writing.
(e) Binding Effect. Each and every covenant, term, provision and
--------------
agreement herein contained shall be binding upon and inure to the benefit of the
Parties hereto and their respective heirs, successors, assigns and legal
representatives and shall survive the termination of this Agreement where
appropriate to carry out the terms thereof.
(f) Severability. Every provision of this Agreement is intended to
------------
be severable. If any terms or provisions hereof are illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of the Agreement.
(g) Entire Agreement. This Agreement contains the entire Agreement
----------------
between the Parties hereto, and supersedes any prior written or oral agreement
between the Parties concerning the subject matter contained herein. There are no
representations, agreements, arrangements or understandings, oral or written
between the Parties hereto, relating to the subject matter contained in this
Agreement, which are not fully expressed herein.
This Agreement is adopted and made effective this _______ day of March,
1995, as evidenced by the signatures set forth below.
Koll-Dove Global Disposition
Services, LLC
By:
-------------------------
Ross M. Dove,
Chief Executive Officer
By:
-------------------------
Kirk Dove, President
Address: 1241 East Hillsdale
Blvd.
Foster City
California 94404
[Signatories continued]
-11-
<PAGE>
"MEMBERS"
Ross-Dove Company, Inc. Dovemedia, Ltd.
By: By:
-------------------------- --------------------------
Ross M. Dove, Chairman Ross M. Dove, Chairman
By: By:
-------------------------- --------------------------
Kirk Dove, President and Kirk Dove, President and
Chief Executive Officer Chief Executive Officer
Address: 1241 East Hillsdale Address: 1241 East Hillsdale
Blvd. Blvd.
Foster City Foster City
California 94404 California 94404
Dove Capital Corporation Koll Management Services, Inc.
By: By:
-------------------------- --------------------------
Ross M. Dove, Chairman Glen Raiger,
Executive Vice President
By:
-------------------------- Address: 4343 Von Karman Ave.
Kirk Dove, President and Newport Beach
Chief Executive Officer California 92660
Address: 1241 East Hillsdale
Blvd.
Foster City
California 94404
- ----------------------------- -----------------------------
Ross Dove Kirk Dove
Address: 130 Montalvo Address: 214 Oak Grove
Redwood City Atherton
California 94062 California 94025
-12-
<PAGE>
KOLL REAL ESTATE SERVICES
EXHIBIT 11--STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS FOUR
ENDED YEAR MONTHS
JUNE 30, ENDED ENDED
-------------- MARCH 31, MARCH 31,
1996 1995 1996 1995
------ ------ --------- ---------
<S> <C> <C> <C> <C>
Shares used in computing earnings per
share......................................
Weighted average common shares
outstanding..............................
Net effect of dilutive stock options--
based on the treasury stock method using
average market price.....................
Net effect of stock options issued at less
than the IPO price within twelve months,
based on the treasury stock method.......
------ ------ ------ ----
====== ====== ====== ====
Net income (loss)........................... $ (22) $ 104 $2,047 $388
====== ====== ====== ====
Earnings (loss) per share................... $ $ $ $
====== ====== ====== ====
</TABLE>
<PAGE>
EXHIBIT 21
SUSIDIARIES
-----------
<TABLE>
<CAPTION>
State of
Subsidiary Incorporation Type of Name Under Which Subsidiary
or Entity does business if different
Organization or in addition to Subsidiary Name
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Koll Management Services, Inc. Delaware Corporation KOLL THE REAL ESTATE SERVICES COMPANY
CBS Investment Realty, Inc. Arizona Corporation
CBS Investment Realty of New Arizona Corporation
Mexico, Inc.
Koll Corporate Services, Inc. Delaware Corporation
Renaissance Center Management Michigan Corporation
Company
Koll Medical Services, Inc. Delaware Corporation
KMS Construction Co. Delaware Corporation
Koll Investment Management, Inc. California Corporation K/B Realty Advisors
D.A. Management, Inc. California Corporation
K/B Realty Advisors, Inc. Delaware Corporation
Koll Capital Markets Group, Inc. Delaware Corporation
Koll Partnerships I, Inc. Delaware Corporation
Bonutto-Hofer Investments California Corporation
Koll Partnerships II, Inc. Delaware Corporation
Koll Tender Corporation I Delaware Corporation
Koll Tender Corporation II Delaware Corporation
Koll Tender Corporation III Delaware Corporation
K/B Retail Associates, Inc. Maryland Corporation
K/B Retail Corp. Delaware Corporation
Koll Holdings International, Inc. Delaware Corporation
Koll Asia Pacific-Hawaii, Inc. Hawaii Corporation
Koll Dove Global Disposition California Limited
Services, L.L.C. Liability Co.
Koll/CC&F Management Services California General Partnership
Koll Management Services Limited Ohio Limited
Partnership Partnership
(formerly Koll/Tipton Management
Services, L.P.)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
KE Holdings, L.P. Washington General
Partnership
KB Investors I California General
Partnership
KB Investors II California General
Partnership
KB Investors IV California General
Partnership
SM Brell, L.P. California Limited
Partnership
KB Opportunity Investors California General
Partnership
KB Opportunity Investors II California General
Partnership
KB Opportunity Investors III California General
Partnership
Koll/Bradford Joint Venture Illinois General
Partnership
Koll/Cornerstone California General
Partnership
Strategic Industrial Holdings California Limited
Partnership
Tamarack Brea Partners California Limited
Partnership
Van Buren Business Park Partners California Limited
Partnership
Koll Cornerstone Van Buren, L.P. California Limited
Partnership
Koll Cornerstone II California General
Partnership
Lurline Chatsworth Partners California Limited
Partnership
Torrance Amapola Business Park California Limited
Partners Partnership
Koll Cornerstone Torrance Amapola California Limited
Partnership
K/B Opportunity Fund I, L.P. Delaware Limited
Partnership
K/B Opportunity Fund II, L.P. Delaware Limited
Partnership
K/B Fund II Delaware Limited
Partnership
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
K/B Opportunity Fund III, L.P. Delaware Limited
Partnership
K/B Fund III Delaware Limited
Partnership
K/B Retail, L.P. Delaware Limited
Partnership
K/B Retail Properties, L.P. California Limited
Partnership
BHI-Dover VII California Limited
Partnership
BHI-Dover VIII California Limited
Partnership
BHI-Dover XI California Limited
Partnership
BHI-Dover XVI California Limited
Partnership
BHI-Dover VI California Limited
Partnership
BHI-Dover X California Limited
Partnership
BHI-Dover XV California Limited
Partnership
BHI-Dover XVII California Limited
Partnership
Koll Asia Holdings Ltd. Hong Kong Hong Kong
WPI/Koll Asia Pacific Advisors, L.L.C. Delaware Limited
Liability Co.
Koll Asia Pacific Unlimited Hong Kong Hong Kong
Koll Asia Pacific Real Estate Services Shanghai Shanghai,
(Shanghai) Co. Ltd. PRC
KAP (Singapore) Pte Ltd. Singapore Singapore
Koll Projects Services Pte Ltd. Singapore Singapore
Koll Asia Pacific Pte Ltd. Singapore Singapore
Koll Merchants Ltd. Hong Kong Hong Kong
Harvest Property Management Shanghai Shanghai
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated August 16, 1996 (except Note 10 to the
consolidated financial statements and Note 2 to Schedule I, as to which the
date is , 1996) with respect to the consolidated financial statements and
schedules of Koll Real Estate Services as of March 31, 1996 and 1995 and for
the year ended March 31, 1996 and four months ended March 31, 1995, and the
consolidated statements of operations, stockholders' equity and cash flows of
Koll Management Services, Inc. for the eight months ended November 30, 1994 and
the year ended March 31, 1994, in the Registration Statement and related
Prospectus of Koll Real Estate Services to be filed on or about August 19,
1996.
Ernst & Young LLP
Newport Beach, California
, 1996
The foregoing consent is in the form that will be signed upon the completion
of the transactions described in Note 10 to the consolidated financial
statements.
/s/ Ernst & Young LLP
Newport Beach, California
August 16, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated August 7, 1996 for the Business Acquired from
Karsten Realty Advisors, July 27, 1996 for the Business Acquired from
Midstates Management Company, Inc., August 2, 1996 for the Business Acquired
from CBS Investment Realty, Inc. and Affiliates, and August 5, 1996 for the
Business Acquired from The Shelard Group, Inc. and Affiliate in the
Registration Statement and related Prospectus of Koll Real Estate Services to
be filed on or about August 19, 1996.
/s/ Ernst & Young LLP
Newport Beach, California
August 16, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report, and to all references to our Firm, included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
San Jose, California
August 16, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996
<PERIOD-START> APR-01-1996 APR-01-1995
<PERIOD-END> JUN-30-1996 MAR-31-1996
<CASH> 2,299 6,968
<SECURITIES> 0 0
<RECEIVABLES> 26,522 25,802
<ALLOWANCES> 1,174 1,147
<INVENTORY> 0 0
<CURRENT-ASSETS> 40,203 44,830
<PP&E> 8,601 8,333
<DEPRECIATION> 2,606 2,372
<TOTAL-ASSETS> 122,379 126,207
<CURRENT-LIABILITIES> 35,255 32,034
<BONDS> 0 0
0 0
0 0
<COMMON> 53 53
<OTHER-SE> 35,166 35,192
<TOTAL-LIABILITY-AND-EQUITY> 122,379 126,207
<SALES> 29,193 116,310
<TOTAL-REVENUES> 29,630 119,700
<CGS> 22,025 80,497
<TOTAL-COSTS> 30,170 115,610
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 997 3,891
<INCOME-PRETAX> (55) 5,002
<INCOME-TAX> (29) 2,955
<INCOME-CONTINUING> (26) 2,047
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (26) 2,047
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
