UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission file number 1-13145
JONES LANG LASALLE INCORPORATED
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 36-4150422
------------------------- ---------------------------------
(State or other jurisdic- (IRS Employer Identification No.)
tion of incorporation or
organization)
200 East Randolph Drive, Chicago, IL 60601
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/782-5800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class August 13, 1999
----- ----------------
Common Stock ($0.01 par value) 30,633,565
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . 21
Item 3. Quantitative and Qualitative Disclosures about
Market Risk. . . . . . . . . . . . . . . . . . . . . 30
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 32
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . . . . 32
Item 5. Other Matters. . . . . . . . . . . . . . . . . . . . 33
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 33
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(in thousands, except share data)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998
---------- -----------
ASSETS
- ------
Current assets:
Cash and cash equivalents. . . . . . . . . $ 38,664 16,941
Trade receivables, net of allowances
of $12,964 and $3,978 in 1999 and
1998, respectively . . . . . . . . . . . 189,622 116,965
Notes receivable and advances to
real estate ventures . . . . . . . . . . 15,417 17,042
Other receivables. . . . . . . . . . . . . 17,023 3,385
Prepaid expenses . . . . . . . . . . . . . 8,396 2,185
Other assets . . . . . . . . . . . . . . . 6,590 --
Deferred and current tax benefit . . . . . 39,672 9,926
---------- ---------
Total current assets . . . . . . . 315,384 166,444
Property and equipment, at cost,
less accumulated depreciation of
$45,365 and $35,859 in 1999
and 1998, respectively . . . . . . . . . . 63,127 28,773
Intangibles resulting from
business acquisitions, net of
accumulated amortization of $19,404
and $11,961 in 1999 and 1998,
respectively . . . . . . . . . . . . . . . 381,704 229,437
Investments in real estate ventures. . . . . 53,066 52,976
Long-term receivables, net . . . . . . . . . 10,926 10,950
Deferred tax assets. . . . . . . . . . . . . -- 660
Prepaid pension asset. . . . . . . . . . . . 20,533 --
Other assets, net. . . . . . . . . . . . . . 3,548 1,681
---------- ----------
$ 848,288 490,921
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and
accrued liabilities. . . . . . . . . . . $ 82,022 51,101
Accrued compensation . . . . . . . . . . . 81,952 58,398
Short-term borrowings. . . . . . . . . . . 14,618 --
Other liabilities. . . . . . . . . . . . . 40,019 8,324
---------- ----------
Total current liabilities. . . . . 218,611 117,823
Long-term liabilities:
Credit facilities. . . . . . . . . . . . . 327,343 202,923
Deferred tax liability . . . . . . . . . . 1,391 --
Other. . . . . . . . . . . . . . . . . . . 2,800 603
Commitments and contingencies
---------- ----------
Total liabilities. . . . . . . . . 550,145 321,349
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS - CONTINUED
JUNE 30, 1999 AND DECEMBER 31, 1998
(in thousands, except share data)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998
---------- -----------
Stockholders' equity:
Common stock, $.01 par value per share,
100,000,000 shares authorized;
30,633,565 shares issued and
outstanding. . . . . . . . . . . . . . . 307 163
Additional paid-in capital . . . . . . . . 473,856 123,543
Deferred stock compensation. . . . . . . . (128,864) --
Unallocated ESOT shares. . . . . . . . . . (9) --
Retained earnings (deficit). . . . . . . . (48,327) 44,792
Accumulated other comprehensive
income . . . . . . . . . . . . . . . . . 1,180 1,074
---------- ----------
Total stockholders' equity . . . . 298,143 169,572
---------- ----------
$ 848,288 490,921
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(in thousands, except share data)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Fee-based services . . . . . . . . . . . . . . . . . .$ 172,018 72,554 272,722 122,456
Equity in earnings from unconsolidated
ventures . . . . . . . . . . . . . . . . . . . . . . 1,870 1,182 2,051 1,874
Other income . . . . . . . . . . . . . . . . . . . . . 5,256 476 5,792 947
---------- ---------- ---------- ----------
Total revenue. . . . . . . . . . . . . . . . . . 179,144 74,212 280,565 125,277
Operating expenses:
Compensation and benefits. . . . . . . . . . . . . . . 124,640 41,683 200,079 79,036
Operating, administrative and other. . . . . . . . . . 47,273 17,347 78,590 33,792
Depreciation and amortization. . . . . . . . . . . . . 10,106 2,962 17,061 5,578
---------- ---------- ---------- ----------
Total operating expenses before merger
related non-recurring charges. . . . . . . . . 182,019 61,992 295,730 118,406
---------- ---------- ---------- ----------
Merger related non-recurring charges:
Stock compensation expense . . . . . . . . . . . . . . 21,242 -- 67,441 --
Integration and transition expenses. . . . . . . . . . 14,345 -- 22,189 --
---------- ---------- ---------- ----------
Total merger related non-recurring
charges. . . . . . . . . . . . . . . . . . . . 35,587 -- 89,630 --
---------- ---------- ---------- ----------
Total operating expenses . . . . . . . . . . . . 217,606 61,992 385,360 118,406
---------- ---------- ---------- ----------
Operating income (loss). . . . . . . . . . . . . (38,462) 12,220 (104,795) 6,871
Interest expense . . . . . . . . . . . . . . . . . . . . 4,703 335 7,345 579
---------- ---------- ---------- ----------
Earnings (loss) before provision
for income taxes . . . . . . . . . . . . . . . (43,165) 11,885 (112,140) 6,292
Net provision (benefit) for income taxes . . . . . . . . (5,461) 4,575 (19,021) 2,422
---------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . . . . . .$ (37,704) 7,310 (93,119) 3,870
========== ========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME - CONTINUED
THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(in thousands, except share data)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Other comprehensive income,
net of tax:
Foreign currency translation
adjustments. . . . . . . . . . . . . . . . . . . . .$ 483 3 106 298
---------- ---------- ---------- ----------
Comprehensive income (loss). . . . . . . . . . . . . . .$ (37,221) 7,313 (93,013) 4,168
========== ========== ========== ==========
Basic earnings (loss) per common share . . . . . . . . .$ (1.62) 0.45 (4.52) 0.24
========== ========== ========== ==========
Weighted average shares outstanding. . . . . . . . . . .23,297,467 16,200,000 20,620,715 16,200,000
========== ========== ========== ==========
Diluted earnings (loss) per common share . . . . . . . .$ (1.62) 0.45 (4.52) 0.24
========== ========== ========== ==========
Diluted weighted average shares
outstanding. . . . . . . . . . . . . . . . . . . . . .23,297,467 16,392,626 20,620,715 16,374,883
========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PERIODS ENDED JUNE 30, 1999 AND DECEMBER 31, 1998
(in thousands, except share data)
(UNAUDITED)
<CAPTION>
Deferred Effect of
Common Stock Additional Retained Stock Unallocated Cumulative
------------------- Paid-In Earnings Compen- ESOT Translation
Shares Amount Capital (Deficit) sation Shares Adjustment Total
---------- ------ ---------- --------- ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1997 . . . . . . . . .16,200,000 162 121,778 24,327 -- -- 630 146,897
Net earnings. . . . . -- -- -- 20,465 -- -- -- 20,465
Shares issued
under stock
purchase plan. . . . 64,176 1 1,765 -- -- -- -- 1,766
Other . . . . . . . . -- -- -- -- -- -- 444 444
---------- ----- -------- ------ -------- ------- ------ --------
Balances at
December 31, 1998 . . .16,264,176 163 123,543 44,792 -- -- 1,074 169,572
Net loss. . . . . . . -- -- -- (93,119) -- -- -- (93,119)
Shares issued in
connection with:
Stock option
plan . . . . . . . 21,292 -- 495 -- -- -- -- 495
Stock compensa-
tion program . . . 93,981 1 2,630 -- -- -- -- 2,631
Merger with JLW. . .14,254,116 143 355,233 -- (160,253) (9) -- 195,114
Stock compensa-
tion adjustments. . -- -- (8,045) -- 6,606 -- -- (1,439)
Amortization of
deferred stock
compensation. . . . -- -- -- -- 24,783 -- -- 24,783
Other . . . . . . . . -- -- -- -- -- -- 106 106
---------- ----- -------- ------- -------- ------- ------ --------
Balances at
June 30, 1999. . . . .30,633,565 $ 307 473,856 (48,327) (128,864) (9) 1,180 298,143
========== ===== ======== ======= ======== ======= ====== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(in thousands, unless otherwise noted)
(UNAUDITED)
1999 1998
-------- --------
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . $(93,119) 3,870
Reconciliation of net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization. . . . . . . . . 17,061 5,578
Equity in earnings from unconsolidated
ventures . . . . . . . . . . . . . . . . . . (2,051) (1,874)
Provision for loss on receivables and
other assets . . . . . . . . . . . . . . . . 4,537 2,103
Foreign exchange loss. . . . . . . . . . . . . -- 106
Stock compensation expense . . . . . . . . . . 67,000 --
Changes in:
Receivables. . . . . . . . . . . . . . . . . . 49,152 3,333
Prepaid expenses and other assets. . . . . . . (6,046) 461
Deferred and current tax benefit . . . . . . . (22,486) --
Accounts payable, accrued liabilities and
compensation and other liabilities . . . . . (112,863) (11,381)
-------- --------
Net cash provided by
operating activities . . . . . . . . . . (98,815) 2,196
Cash flows provided by (used in) investing
activities:
Net capital additions - property and
equipment. . . . . . . . . . . . . . . . . . . (12,715) (6,667)
Net proceeds from disposition of property
and equipment. . . . . . . . . . . . . . . . . -- 91
Cash balances assumed in Jones Lang Wootton
merger, net of cash paid and transaction
costs (Note 4) . . . . . . . . . . . . . . . . 11,170 --
Other acquisition, net of cash acquired
and transaction costs. . . . . . . . . . . . . (3,195) (5,465)
Investments in real estate ventures:
Capital contributions and advances to
real estate ventures . . . . . . . . . . . . (3,528) (21,286)
Distributions, repayments of advances
and sale of investments. . . . . . . . . . . 6,611 2,363
-------- --------
Net cash provided by (used in)
investing activities . . . . . . . . . . (1,657) (30,964)
Cash flows provided by (used in) financing
activities:
Net borrowings under long-term credit
facilities . . . . . . . . . . . . . . . . . . 121,879 9,776
Common stock issued under stock option plan. . . 495 --
-------- --------
Net cash provided by financing activities. 122,374 9,776
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
($ in thousands, unless otherwise noted)
(UNAUDITED)
1999 1998
-------- --------
Effects of foreign currency translation on
cash balances. . . . . . . . . . . . . . . . . . (179) 16
-------- --------
Net increase (decrease) in
cash and cash equivalents. . . . . . . . 21,723 (18,976)
Cash and cash equivalents, beginning of period . . 16,941 30,660
-------- --------
Cash and cash equivalents, end of period . . . . . $ 38,664 11,684
======== ========
Supplemental disclosure of cash flow information:
Combined interest paid was $7,537 and $530 for the periods
ended June 30, 1999 and 1998, respectively.
Taxes paid were $11,892 and $1,622 for the periods
ended June 30, 1999 and 1998, respectively.
See accompanying notes to consolidated financial statements.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(in millions, except where otherwise noted)
(UNAUDITED)
Readers of this quarterly report should refer to our audited financial
statements for the year ended December 31, 1998, which are included in our
1998 Form 10-K, filed with the Securities and Exchange Commission, as
certain footnote disclosures which would substantially duplicate those
contained in such audited financial statements have been omitted from this
report.
(1) ORGANIZATION
Jones Lang LaSalle Incorporated ("Jones Lang LaSalle") formerly
LaSalle Partners Incorporated [successor to LaSalle Partners Limited
Partnership and LaSalle Partners Management Limited Partnership
(collectively, the "Predecessor Partnerships")], was incorporated in
Maryland on April 15, 1997 (collectively referred to as the "Company"). On
July 22, 1997, the Company completed an initial public offering (the
"Offering") of 4.0 million shares of Jones Lang LaSalle common stock, $.01
par value per share (the "Common Stock"). In addition, all of the
partnership interests held in the Predecessor Partnerships were contributed
to the Company, pursuant to agreements among the general and limited
partners, in exchange for an aggregate of 12.2 million shares of common
stock. The contribution occurred immediately prior to the closing of the
Offering. The 4.0 million shares were offered at $23 per share,
aggregating $82.8 million, net of offering costs, of which $63.5 million
was used to retire long-term debt and related interest.
The Predecessor Partnerships were subject to a reorganization as part
of the Company's incorporation. Due to the existence of a paired share
arrangement between the Predecessor Partnerships and between the former
general partners of the Predecessor Partnerships, as well as the existence
of identical ownership before and after the incorporation of the
Predecessor Partnerships, such transactions were accounted for in a manner
similar to the accounting used for a pooling of interests. Thus, the
Company's financial statements include the financial positions and results
of operations of the Predecessor Partnerships at their historical basis.
On March 11, 1999, LaSalle Partners Incorporated and Jones Lang
Wootton ("JLW") completed the merger of their operations. In connection
with the merger, LaSalle Partners Incorporated changed its name to Jones
Lang LaSalle Incorporated.
(2) INTERIM INFORMATION
The consolidated financial statements as of June 30, 1999 and for the
three and six month periods ended June 30, 1999 and 1998 are unaudited;
however, in the opinion of management, all adjustments (consisting solely
of normal recurring adjustments) necessary for a fair presentation of the
consolidated financial statements for these interim periods have been
included. The results for the periods ended June 30, 1999 and 1998 are not
necessarily indicative of the results to be obtained for the full fiscal
year.
Certain amounts have been reclassified to conform with the June 30,
1999 presentation.
<PAGE>
(3) STOCK-BASED COMPENSATION
The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares at
the date of grant. The Company follows the requirements of the Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees" in accounting for stock-based compensation, and, accordingly,
recognizes no compensation expense for stock option grants, but provides
the annual pro forma disclosures required by the Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation".
In connection with the merger with JLW, the Company issued shares to
former employees of JLW which are subject to vesting provisions or are
contingently returnable. Shares issued that are contingently returnable
are accounted for as a variable stock award plan. The remaining shares
issued are accounted for as a fixed stock award plan. Compensation expense
associated with shares subject to vesting is recognized over the vesting
period.
(4) JONES LANG WOOTTON MERGER
In accordance with the purchase and sale agreements, the Company
issued 14.3 million shares of its common stock, which is subject to a post-
closing net worth adjustment, plus $6.1 million in cash (collectively, the
"Consideration") in connection with the acquisition of the property and
asset management, advisory and other real estate businesses operated by a
series of JLW partnerships and corporations in Europe, Asia, Australia,
North America and New Zealand. Approximately 12.5 million of the shares
were issued to former JLW equity owners (having both direct and indirect
ownership) and 1.8 million of the shares were placed in an employee
ownership trust ("ESOT") to be distributed by December 31, 2000 to selected
employees of the former JLW entities. Issuance of the shares was not
registered under the U.S. securities laws, and the shares are generally
subject to a contractual one-year restriction on sale.
The transaction, which was principally structured as a share
exchange, has been treated as a purchase and is being accounted for using
both APB Opinion No. 16, "Business Combinations" and APB Opinion No. 25,
"Accounting for Stock Issued to Employees". Accordingly, JLW's operating
results have been included in the Company's results as of March 1, 1999,
the effective date of the merger for accounting purposes.
Assuming that the closing net worth requirements are met, 7.6 million
shares, or 53% of the shares issued, are subject to accounting under APB
Opinion No. 16. The value of those shares totaled $149.5 million for
accounting purposes based on the five-day average closing stock price
surrounding the date the financial terms of the merger with JLW were
substantially complete, discounted at a rate of 20% for transferability
restrictions. The value of the shares, in addition to a cash payment of
$5.7 million and capitalizable transaction costs of approximately $15.6
million were allocated to the identifiable assets and liabilities acquired,
based on management's estimate of fair value, which totaled $243.5 million
and $233.3 million, respectively. Included in the assets acquired is $32.0
million in cash. The resulting excess purchase price of $160.5 million was
allocated to goodwill which is being amortized on a straight-line basis
over 40 years based on management's estimate of useful lives.
The remaining 6.7 million shares, or 47% of the shares issued, and
$.4 million in cash paid are subject to accounting under APB Opinion No.
25. Accordingly, shares issued are being accounted for as compensation
expense or deferred compensation expense to the extent
<PAGE>
they are subject to forfeiture or vesting provisions. Included in
the 6.7 million shares are 1.6 million shares that are subject to variable
stock award plan accounting. The remaining 5.1 million shares and the $.4
million in cash paid are subject to fixed stock award plan accounting.
Compensation expense incurred for the three and six months ended June 30,
1999 totaled $21.2 million and $67.4 million, respectively, inclusive of
the compensation expense recognized at closing and the amortization of
deferred compensation for the periods.
(5) EARNINGS PER SHARE
The basic and diluted losses per common share were calculated based
on basic weighted average shares outstanding of 23.3 million and 20.6
million for the three and six months ended June 30, 1999, respectively.
Consideration shares issued as a result of the merger with JLW, to the
extent included, have been weighted as of March 11, 1999. As a result of
the operating loss incurred for the period, diluted weighted average shares
outstanding for the three and six months ended June 30, 1999 do not give
effect to common stock equivalents, consisting principally of consideration
shares issued in connection with the JLW merger that are subject to vesting
provisions or are contingently returnable, as to do so would be anti-
dilutive. Basic earnings per share was based on weighted average shares
outstanding of 16.2 million for both the three and six month periods ended
June 30, 1998. Diluted earnings per share was based on weighted average
shares outstanding of 16.4 million for the three and six month periods
ended June 30, 1998, which reflects an increase of .2 million shares
primarily representing the dilutive effect of outstanding stock options
whose exercise price was less than the average market price of the
Company's stock for the period, and, to a lesser extent, the dilutive
effect of shares to be issued under the Company's employee stock benefit
plans.
(6) BUSINESS SEGMENTS
As a result of the merger with JLW, Jones Lang LaSalle is managing
its business along a combination of functional and geographic lines.
Accordingly, operations have been classified into six business segments,
two global functional businesses: (i) Investment Management and (ii) Hotel
Services; and four geographic regions consisting of the: (iii) Americas;
(iv) Europe; (v) Asia; and (vi) Australasia. The Investment Management
segment provides real estate investment management services to
institutional investors, corporations, and high net worth individuals. The
Hotels Services segment provides strategic advisory, sales, acquisition and
asset management services related solely to hotel, conference and resort
properties. The geographic regions of the Americas, Europe, Asia and
Australasia each provide Owner and Occupier Services which consist
primarily of tenant representation and agency leasing, investment
disposition and acquisition, and valuation services (collectively,
"implementation services") and property, facility, development and project
management services (collectively, "management fees"). Results for 1998
have been realigned based upon the current business segments.
Total revenue by industry segment includes revenue derived from
services provided to other segments. Operating income represents total
revenue less direct and indirect allocable expenses. The Company allocates
all expenses, other than interest and income taxes, as substantially all
expenses incurred benefit one or more of the segments. Merger related non-
recurring charges are not allocated to the segments.
Summarized unaudited financial information by business segment for
the three and six month periods ended June 30, 1999 and 1998 is as follows
($ in thousands):
<PAGE>
<TABLE>
<CAPTION>
SEGMENT OPERATING RESULTS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ------------------------
1999 1998 1999 1998
--------- -------- --------- --------
<S> <C> <C> <C> <C>
OWNER AND OCCUPIER SERVICES -
AMERICAS
Revenue:
Implementation services. . . . . . . . . . . . . . .$ 23,173 27,278 38,607 38,079
Management fees. . . . . . . . . . . . . . . . . . . 28,739 15,544 55,349 31,210
Equity earnings. . . . . . . . . . . . . . . . . . . 281 (1) 101 (6)
Other services . . . . . . . . . . . . . . . . . . . 2,246 1,828 4,493 3,118
Intersegment revenue . . . . . . . . . . . . . . . . 78 235 140 306
---------- ---------- ---------- ----------
54,517 44,884 98,690 72,707
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . . . . . . . . 60,431 39,889 117,517 77,070
Depreciation and amortization. . . . . . . . . . . . 5,033 1,367 10,076 3,217
---------- ---------- ---------- ----------
Operating income (loss). . . . . . . . . . . .$ (10,947) 3,628 (28,903) (7,580)
========== ========== ========== ==========
EUROPE
Revenue:
Implementation services. . . . . . . . . . . . . . .$ 43,435 123 61,869 123
Management fees. . . . . . . . . . . . . . . . . . . 23,500 (3) 29,831 --
Equity earnings. . . . . . . . . . . . . . . . . . . (72) -- (93) --
Other services . . . . . . . . . . . . . . . . . . . 1,148 150 4,187 150
---------- ---------- ---------- ----------
68,011 270 95,794 273
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . . . . . . . . 60,186 284 81,375 569
Depreciation and amortization. . . . . . . . . . . . 2,357 -- 2,972 --
---------- ---------- ---------- ----------
Operating income (loss). . . . . . . . . . . .$ 5,468 (14) 11,447 (296)
========== ========== ========== ==========
<PAGE>
SEGMENT OPERATING RESULTS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ------------------------
1999 1998 1999 1998
--------- -------- --------- --------
AUSTRALASIA
Revenue:
Implementation services. . . . . . . . . . . . . . .$ 11,924 -- 15,156 --
Management fees. . . . . . . . . . . . . . . . . . . 5,240 -- 6,815 --
Equity earnings. . . . . . . . . . . . . . . . . . . 24 -- -- --
Other services . . . . . . . . . . . . . . . . . . . 443 -- 906 --
---------- ---------- ---------- ----------
17,631 -- 22,877 --
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . . . . . . . . 14,214 -- 20,584 --
Depreciation and amortization. . . . . . . . . . . . 700 -- 898 --
---------- ---------- ---------- ----------
Operating loss . . . . . . . . . . . . . . . .$ 2,717 -- 1,395 --
========== ========== ========== ==========
ASIA
Revenue:
Implementation services. . . . . . . . . . . . . . .$ 8,400 170 10,700 215
Management fees. . . . . . . . . . . . . . . . . . . 5,888 -- 7,781 --
Other services . . . . . . . . . . . . . . . . . . . 1,515 -- 1,803 1
---------- ---------- ---------- ----------
15,803 170 20,284 216
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . . . . . . . . 15,829 422 20,830 803
Depreciation and amortization. . . . . . . . . . . . 948 8 1,156 10
---------- ---------- ---------- ----------
Operating loss . . . . . . . . . . . . . . . .$ (974) (260) (1,702) (597)
========== ========== ========== ==========
HOTEL SERVICES -
Revenue:
Implementation services. . . . . . . . . . . . . . .$ 2,246 -- 3,100 --
Management fees. . . . . . . . . . . . . . . . . . . 473 -- 473 --
Other services . . . . . . . . . . . . . . . . . . . 462 -- 462 --
---------- ---------- ---------- ----------
3,181 -- 4,035 --
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . . . . . . . . 3,619 -- 4,539 --
Depreciation and amortization. . . . . . . . . . . . 50 -- 61 --
---------- ---------- ---------- ----------
Operating loss . . . . . . . . . . . . . . . .$ (488) -- (565) --
========== ========== ========== ==========
<PAGE>
SEGMENT OPERATING RESULTS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ------------------------
1999 1998 1999 1998
--------- -------- --------- --------
INVESTMENT MANAGEMENT -
Revenue:
Implementation services. . . . . . . . . . . . . . .$ 4,431 1,727 6,037 2,679
Advisory fees. . . . . . . . . . . . . . . . . . . . 14,190 25,881 30,804 47,297
Equity earnings. . . . . . . . . . . . . . . . . . . 1,637 1,183 2,043 1,880
Other services . . . . . . . . . . . . . . . . . . . (179) 332 141 531
Intersegment revenue . . . . . . . . . . . . . . . . (35) -- -- --
---------- ---------- ---------- ----------
20,044 29,123 39,025 52,387
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . . . . . . . . 17,678 18,670 33,964 34,692
Depreciation and amortization. . . . . . . . . . . . 1,017 1,587 1,898 2,351
---------- ---------- ---------- ----------
Operating income . . . . . . . . . . . . . . .$ 1,349 8,866 3,163 15,344
========== ========== ========== ==========
Total segment revenue. . . . . . . . . . . . . . . . . .$ 179,187 74,447 280,705 125,583
Intersegment revenue eliminations. . . . . . . . . . . . (43) (235) (140) (306)
---------- ---------- ---------- ----------
Total revenue. . . . . . . . . . . . . . . . .$ 179,144 74,212 280,565 125,277
========== ========== ========== ==========
Total segment operating expenses . . . . . . . . . . . .$ 182,062 62,227 295,870 118,712
Intersegment operating expense
eliminations . . . . . . . . . . . . . . . . . . . . . (43) (235) (140) (306)
---------- ---------- ---------- ----------
Total operating expenses
before merger related
non-recurring charges. . . . . . . . . . . .$ 182,019 61,992 295,730 118,406
========== ========== ========== ==========
Operating income (loss)
before merger related
non-recurring charges. . . . . . . . . . . .$ (2,875) 12,220 (15,165) 6,871
========== ========== ========== ==========
</TABLE>
<PAGE>
(7) PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Pro Forma results for the three and six months ended
June 30, 1999 give effect to the merger with JLW as if it occurred on
January 1, 1999. Jones Lang LaSalle Actual results reflect the results of
operations of the LaSalle Partners' businesses for the two months ended
February 28, 1999 and the operations of the merged Jones Lang LaSalle
businesses for the period from March 1, 1999 to June 30, 1999. JLW Results
reflect operating results for each of the JLW companies for the two months
ended February 28, 1999, as adjusted for market compensation, taxes and
other costs associated with the integration of the companies. Acquisition
Adjustments represent the impact of the additional amortization of goodwill
resulting from the merger, and income taxes as if the Company was taxable
for the period at an effective tax rate of 38%. Merger-Related Adjustments
reflect the additional non-cash compensation expense associated with
certain shares issued in connection with the JLW merger and the related
income tax effect as if the merger had occurred on January 1, 1999. Pro
Forma weighted average shares outstanding include shares issued in
connection with the merger with JLW, excluding those shares which are
contingently returnable or subject to vesting provisions, as though they
were issued on January 1, 1999.
The pro forma adjustments are based upon available information and
certain assumptions that management believes are reasonable. The pro forma
consolidated financial statements are not necessarily indicative of what
the actual results of operations would have been for the three and six
month periods ended June 30, 1999 had the JLW merger been completed as of
the dates indicated nor does it purport to represent the future financial
position or results of operations of the Company.
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------------------------
Jones Lang Merger-
LaSalle JLW Acquisition Adjusted Related
Actual Results Adjustments Pro Forma Adjustments Pro Forma
---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Fee-based services . . . . . $ 172,018 -- -- 172,018 -- 172,018
Equity in earnings from uncon-
solidated ventures . . . . 1,870 -- -- 1,870 -- 1,870
Other income . . . . . . . . 5,256 -- -- 5,256 -- 5,256
---------- ---------- ---------- ---------- ---------- ----------
Total revenue. . . . . 179,144 -- -- 179,144 -- 179,144
Operating expenses:
Compensation and benefits. . 124,640 -- -- 124,640 -- 124,640
Operating, administrative
and other. . . . . . . . . 47,273 -- -- 47,273 -- 47,273
Depreciation and
amortization . . . . . . . 10,106 -- -- 10,106 -- 10,106
---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses before
merger related non-
recurring charges. . 182,019 -- -- 182,019 -- 182,019
---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)
before merger
related non-
recurring charges. . (2,875) -- -- (2,875) -- (2,875)
Merger related non-recurring
charges:
Stock compensation
expense. . . . . . . . . 21,242 -- -- 21,242 (5,934) 15,308
Integration and transition
expense. . . . . . . . . 14,345 -- -- 14,345 -- 14,345
---------- ---------- ---------- ---------- ---------- ----------
Total merger related
non-recurring
charges. . . . . . . 35,587 -- -- 35,587 (5,934) 29,653
---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses . . . . . . 217,606 -- -- 217,606 (5,934) 211,672
---------- ---------- ---------- ---------- ---------- ----------
<PAGE>
Jones Lang Merger-
LaSalle JLW Acquisition Adjusted Related
Actual Results Adjustments Pro Forma Adjustments Pro Forma
---------- ---------- ----------- ---------- ----------- ----------
Operating income
(loss) . . . . . . . (38,462) -- -- (38,462) 5,934 (32,528)
Interest expense, net. . . . 4,703 -- -- 4,703 -- 4,703
---------- ---------- ---------- ---------- ---------- ----------
Earnings (loss) before
provision (benefit)
for income taxes . . (43,165) -- -- (43,165) 5,934 (37,231)
Net benefit for
income taxes . . . . . . . (5,461) -- -- (5,461) (1,628) (7,089)
---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss). . $ (37,704) -- -- (37,704) 7,562 (30,142)
========== ========== ========== ========== ========== ==========
Other comprehensive income
(loss), net of tax:
Foreign currency trans-
lation adjustments . . . $ 483 -- -- 483 -- 483
---------- ---------- ---------- ---------- ---------- ----------
Comprehensive loss . . $ (37,221) -- -- (37,221) 7,562 (29,659)
========== ========== ========== ========== ========== ==========
Basic loss per
common share . . . . . . . $ (1.62) $ (1.29)
========== ==========
Basic weighted average
shares outstanding . . . . 23,297,467 23,297,467
========== ==========
Diluted loss per
common share . . . . . . . $ (1.62) $ (1.29)
========== ==========
Diluted weighted average
shares outstanding . . . . 23,297,467 23,297,467
========== ==========
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------------------------------------------------
Jones Lang Merger-
LaSalle JLW Acquisition Adjusted Related
Actual Results Adjustments Pro Forma Adjustments Pro Forma
---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Fee-based services . . . . . $ 272,722 58,039 -- 330,761 -- 330,761
Equity in earnings from uncon-
solidated ventures . . . . 2,051 -- -- 2,051 -- 2,051
Other income . . . . . . . . 5,792 421 -- 6,213 -- 6,213
---------- ---------- ---------- ---------- ---------- ----------
Total revenue. . . . . 280,565 58,460 -- 339,025 -- 339,025
Operating expenses:
Compensation and benefits. . 200,079 43,610 -- 243,689 -- 243,689
Operating, administrative
and other. . . . . . . . . 78,590 18,360 -- 96,950 -- 96,950
Depreciation and
amortization . . . . . . . 17,061 2,197 850 20,108 -- 20,108
---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses before
merger related non-
recurring charges. . 295,730 64,167 850 360,747 -- 360,747
---------- ---------- ---------- ---------- ---------- ----------
Operating loss before
merger related non-
recurring charges. . (15,165) (5,707) (850) (21,722) -- (21,722)
Merger related non-recurring
charges:
Stock compensation
expense. . . . . . . . . 67,441 -- -- 67,441 2,729 70,170
Integration and transition
expense. . . . . . . . . 22,189 12,325 -- 34,514 -- 34,514
---------- ---------- ---------- ---------- ---------- ----------
Total merger related
non-recurring
charges. . . . . . . 89,630 12,325 -- 101,955 2,729 104,684
---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses . . . . . . 385,360 76,492 850 462,702 2,729 465,431
---------- ---------- ---------- ---------- ---------- ----------
Operating loss . . . . (104,795) (18,032) (850) (123,677) (2,729) (126,406)
Interest expense, net. . . . 7,345 (93) -- 7,252 -- 7,252
---------- ---------- ---------- ---------- ---------- ----------
<PAGE>
Jones Lang Merger-
LaSalle JLW Acquisition Adjusted Related
Actual Results Adjustments Pro Forma Adjustments Pro Forma
---------- ---------- ----------- ---------- ----------- ----------
Loss before benefit
for income taxes . . (112,140) (17,939) (850) (130,929) (2,729) (133,658)
Net benefit for income
taxes. . . . . . . . . . . (19,021) (2,133) (323) (21,477) (1,300) (22,777)
---------- ---------- ---------- ---------- ---------- ----------
Net loss . . . . . . . $ (93,119) (15,806) (527) (109,452) (1,429) (110,881)
========== ========== ========== ========== ========== ==========
Basic loss per common share. $ (4.52) $ (4.76)
========== ==========
Weighted average shares
outstanding. . . . . . . . 20,620,715 23,283,666
========== ==========
Diluted loss per common
share. . . . . . . . . . . $ (4.52) $ (4.76)
========== ==========
Diluted weighted average
shares outstanding . . . . 20,620,715 23,283,666
========== ==========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Jones Lang LaSalle Incorporated (formerly LaSalle Partners
Incorporated) is a leading full-service real estate services firm that
provides investment management, hotel acquisition, disposition, strategic
advisory and valuation, property management, facility management,
development management, project management, tenant and agency leasing,
investment disposition, acquisition, financing and capital placement
services on a local, regional and global basis. With over 6,000 employees
in 98 key markets spanning 34 countries and five continents, Jones Lang
LaSalle is able to satisfy local service needs on a regional and
international basis. The ability to provide this network of services
around the globe was solidified effective March 11, 1999 with the merger of
LaSalle Partners Incorporated and the Jones Lang Wootton ("JLW") companies.
In accordance with the purchase and sale agreements, Jones Lang
LaSalle issued 14.3 million shares of common stock, which is subject to a
post closing net worth adjustment, in addition to $6.2 million in cash
(collectively, the "Consideration"). Included in the 14.3 million shares
are 1.2 million shares subject to the closing net worth adjustment.
Management anticipates that the calculations with respect to the closing
net worth adjustment will be completed in the third quarter of 1999 with
the resulting impact on shares issued resolved shortly thereafter.
Approximately 12.5 million of the shares were issued to former JLW equity
owners and 1.8 million shares were placed in an employee ownership trust
("ESOT") to be distributed by December 31, 2000 to selected employees of
the former JLW entities. Included in the total ESOT shares are .9 million
that were allocated on March 11, 1999, with the remaining .9 million shares
to be allocated by December 31, 2000. Issuance of the shares was not
registered under the U.S. securities laws, and the shares are generally
subject to a contractual one-year restriction on sale.
The merger, which was principally structured as a share exchange, has
been treated as an acquisition and is being accounted for using both APB
Opinion No. 16, "Business Combinations" and APB Opinion No. 25, "Accounting
for Stock Issued to Employees". In accordance with the purchase and sale
agreements, the merger is effective for accounting purposes as of March 1,
1999. Accordingly, the results of operations for the former JLW entities
have been included in the first quarter results of Jones Lang LaSalle from
that date.
As a general matter, the accounting treatment of the Consideration is
dependent on whether the recipient (i) had a legal ownership interest in
the JLW entities prior to the integration of those entities ("Current JLW
Owners"); (ii) obtained their legal ownership interest in the JLW entities
as part of the JLW integration ("New JLW Owners"); or, (iii) will receive
their shares from the ESOT. The accounting treatment is further dependent
on whether the shares issued are non-restricted ("Non-restricted Shares"),
issued from the ESOT ("ESOT Shares"), or are subject to (i) forfeiture
provisions ("Forfeiture Shares); (ii) indemnification provisions
("Indemnification Shares"); or, (iii) closing net worth requirements
("Adjustment Shares").
All Consideration paid to Current JLW Owners, excluding Forfeiture
Shares, has been accounted for using the purchase method of accounting
under APB Opinion No. 16. Such Consideration, assuming the net worth
requirements are met, consists of 7.6 million shares and $5.7 million in
cash. The shares were valued based on the average price of Jones Lang
LaSalle common stock of $24.66 per share for the five day period that
includes the two trading days immediately preceding, the trading day of,
and the two trading days immediately following the date of substantial
completion of negotiations regarding the principal financial terms of the
<PAGE>
merger (October 9, 1998) discounted at a rate of 20%, to account for
transferability restrictions applicable to such shares. The total value
attributed to the issuance of shares, $149.5 million, in addition to the
cash payment and capitalizable transaction costs of approximately $15.6
million have been allocated to the identifiable assets and liabilities
acquired with the excess value being allocated to goodwill which is being
amortized over its estimated useful life of 40 years.
Accounting under APB Opinion No. 25 is being applied to the remaining
6.7 million shares which represents all shares issued to New JLW Owners,
shares allocated from the ESOT and Forfeiture Shares issued to Current JLW
Owners. Shares issued or allocated from the ESOT at March 11, 1999 were
valued at $35.375, the market price of Jones Lang LaSalle common stock on
March 10, 1999. Shares to be allocated from the ESOT on December 31, 1999
and 2000, totaling .9 million, will be valued based on the prevailing
market price of the common stock on those dates.
Of the 5.8 million shares issued or allocated from the ESOT on
March 11, 1999, 1.4 million shares, which are deemed to be contingently
returnable, are being accounted for as a variable stock award plan. Such
shares include Forfeiture Shares issued to the JLW Asia Shareholders (which
are subject to indemnification provisions) in addition to Adjustment and
Indemnification Shares issued to New JLW Owners and allocated from the ESOT
at March 11, 1999. 1.2 million shares subject to forfeiture or vesting
provisions have been accounted for as deferred compensation with
compensation expense to be recognized over the forfeiture or vesting
period. The value of the remaining .2 million shares was accounted for as
compensation expense on March 11, 1999. Under a variable stock award plan,
the amount of compensation expense and value of deferred compensation will
be adjusted at the end of each quarter based on the change in stock price
from the previous quarter until the final number of shares to be issued is
known.
The remaining 4.4 million shares issued or allocated from the ESOT on
March 11, 1999 subject to accounting under APB Opinion No. 25 are being
accounted for as a fixed stock award plan. Such shares include Forfeiture
Shares issued to Current JLW Owners (excluding Forfeiture Shares issued to
JLW Asia Shareholders which are subject to indemnification provisions) and
New JLW Owners in addition to shares allocated from the ESOT on March 11,
1999 which are not subject to indemnity and adjustment provisions. 3.4
million of those shares are subject to forfeiture or vesting provisions and
have been accounted for as deferred compensation with compensation expense
to be recognized over the forfeiture or vesting period. The value of the
remaining 1.0 million shares, in addition to a cash payment of $.4 million,
were accounted for as compensation expense on March 11, 1999.
Compensation expense incurred for the three and six months ended
June 30, 1999 related to the issuance of shares and the amortization of
deferred compensation totaled $21.2 million and $67.4 million,
respectively, net of the quarterly adjustment for the change in stock
price. Deferred compensation at June 30, 1999 totaled $128.9 million,
including the effect of the quarterly adjustment for the change in stock
price, which will be amortized into compensation expense through December
31, 2000. Such compensation expense, in addition to compensation expense
anticipated to be incurred at December 31, 1999 and 2000 associated with
the final allocations of ESOT shares, is expected to result in significant
non-cash net losses for Jones Lang LaSalle for those periods.
<PAGE>
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE AND SIX
MONTHS ENDED JUNE 30, 1998
Operating results for the three and six months ended June 30, 1999
include the results of the acquired Compass businesses (the acquisition was
completed in October 1998) and the results of the JLW entities effective
March 1, 1999. Total revenue, after elimination of intersegment revenue,
increased $104.9 million to $179.1 million for the three months ended
June 30, 1999 and increased $155.3 million to $280.6 million for the six
months ended June 30, 1999 from the prior year periods, primarily as a
result of these two transactions. These increases were partially offset by
lower performance fees generated on the disposition of assets under
management during the three and six months ended June 30, 1999 as compared
to the prior year periods, which had high levels of performance fees.
Total operating expenses, after elimination of intersegment expenses and
excluding the effect of merger related non-recurring charges, increased
$120.0 million to $182.0 million for the three months ended June 30, 1999
and increased $177.3 million to $295.7 million for the six months ended
June 30, 1999, as compared with the prior year periods, also substantially
a result of these transactions.
Merger related non-recurring charges totaled $35.6 million and $89.6
million for the three and six months ended June 30, 1999, respectively.
$21.2 million and $67.4 million of these charges for the three and six
months ended June 30, 1999, respectively, represent non-cash compensation
expense recorded as a result of shares issued to certain former employees
of JLW in connection with the merger. $14.3 million and $22.2 million of
these charges represent non-recurring transition and integration costs for
the three and six months ended June 30, 1999, respectively, of which
approximately $4.3 million are attributable to the integration of the
acquired Compass businesses for the six months ended June 30, 1999. The
remaining transition expense relates to the merger with JLW, and represents
non-capitalizable expenses such as rebranding, office consolidations, and
information technology initiatives.
The resulting operating loss for the three months ended June 30, 1999,
excluding the effect of merger related non-recurring charges, totaled $2.9
million compared to operating income of $12.2 million in the prior year
period, and the operating loss for the six months ended June 30, 1999,
excluding the effect of merger related non-recurring charges, totaled $15.2
million compared to operating income of $6.9 million in the prior year
period. The operating losses for the periods are primarily attributable to
a few key factors, (i) the seasonal nature of the operations and the
compounding effect of the Compass acquisition; (ii) distractions caused by
the integration of the Compass and JLW operations; (iii) increased
infrastructure costs associated with the implementation and roll out of the
JD Edwards property accounting and information system and a delay in the
capture of anticipated cost savings; and (iv) lower performance fees
generated on the disposition of certain assets under management.
Historically, the leasing & management, facility services, project
management and development management businesses in the Americas Region
have incurred an operating loss through the third quarter of each year.
This pattern was intensified with the acquisition of Compass which had the
same seasonal experience and doubled the size of the Jones Lang LaSalle
leasing & management portfolio. In addition, the efforts taken to fully
integrate the employees and business processes of the Compass and JLW
entities, specifically in the United States, resulted in a significant
distraction to the senior management of the Americas Region resulting in
less new business generation as compared to the prior year periods.
Further, this distraction resulted in a delay in capturing the anticipated
synergies from the Compass acquisition as well as the benefits anticipated
<PAGE>
from the implementation of the JD Edwards system. Finally, performance
fees generated on the disposition of assets under management by both the
Investment Management segment and Americas Region in both the three and six
months ended June 1998 were well above those generated during the same
periods in 1999, consistent with management's expectation that the timing
of dispositions and related performance fees could result in significant
fluctuations in periodic earnings. These matters are expected to effect
the performance of Jones Lang LaSalle for the full year 1999 reporting
period as discussed in the Jones Lang LaSalle press release dated July 30,
1999 (filed as an exhibit to this Form 10-Q). The integration of the
businesses is well underway and significant progress has been made toward
creating the platform with which to grow the business.
Including the effect of the merger related non-recurring charges, the
operating loss for the three and six months ended June 30, 1999 totaled
$38.5 million and $104.8 million, respectively, compared to operating
income in the prior year periods of $12.2 million and $6.9 million,
respectively.
SEGMENT OPERATING RESULTS
INVESTMENT MANAGEMENT. Investment Management revenue decreased $9.1
million to $20.4 million for the three months ended June 30, 1999 from the
prior year period and decreased $13.4 million to $39.0 million for the six
months ended June 30, 1999 from the prior year period. These decreases are
primarily attributable to performance fees generated in the second quarter
of 1998 on the disposition of certain assets under management, partially
offset by increased advisory and acquisition fees earned as a result of the
merger with JLW during the second quarter of 1999. Operating expenses
decreased $1.6 million to $18.7 million for the three months ended June 30,
1999 and decreased $1.2 million to $35.9 million for the six months ended
June 30, 1999 as compared with the prior year periods. This decrease was
primarily a result of lower accruals for bonus compensation consistent with
the lower levels of revenue generated for the three and six months ended
June 30, 1999, partially offset by increased operating expenses incurred as
a result of the merger with JLW.
HOTEL SERVICES. Hotel Services, a new reportable segment as a result
of the recent merger, had total revenue of $3.2 million and $4.0 million
for the three and six months ended June 30, 1999, respectively. Services
provided represented a combination of valuation, disposition and
acquisition services. Operating expenses for the segment totaled $3.7
million and $4.6 million for the three and six months ended June 30, 1999,
respectively.
AMERICAS REGION. Revenue for the Americas Region increased $9.6
million to $54.5 million for the three months ended June 30, 1999 and
increased $26.0 million to $98.7 million for the six months ended June 30,
1999 compared to the prior year periods. The increases are primarily
attributable to the acquisition of Compass, and the resulting increase in
leasing, property management and facility services fees, and, to a lesser
extent, to the merger with JLW. This increase for the three months ended
June 30, 1999 was partially offset by lower performance fees generated on
the disposition of assets during the second quarter of 1998. Operating
expenses for the segment increased $24.2 million to $65.5 million for the
three months ended June 30, 1999 and increased $47.3 million to $127.6
million for the six months ended June 30, 1999 compared to the prior year
periods. These increases are primarily a result of the acquisition of
Compass, the merger with JLW, and incremental infrastructure costs
associated with the implementation and roll out of the JD Edwards property
accounting and information system, for which anticipated cost synergies
have not yet been realized.
<PAGE>
EUROPE REGION. Revenue for the Europe Region, which is substantially
a new reportable segment as a result of the JLW merger and the acquisition
of Compass, totaled $68.0 million and $95.8 million for the three and six
months ended June 30, 1999, respectively. The revenue generated by the
Region primarily reflects robust activity within the United Kingdom
primarily in the form of tenant and agency leasing activities and
investment sales and acquisition transactions, and to a lesser extent to
investment and leasing activities for the second quarter of 1999 in France.
This positive performance was slightly offset by a weakening of the pound
sterling and the Euro against the US dollar for the period beginning
March 1, 1999. Operating expenses for the region totaled $62.5 million and
$84.3 million for the three and six months ended June 30, 1999,
respectively.
ASIA REGION. Revenue for the Asia Region, also substantially a new
reportable segment as a result of the merger, totaled $15.8 million and
$20.3 million for the three and six months ended June 30, 1999,
respectively, primarily reflecting strong activity within Hong Kong
representing management fees, agency leasing activity, consulting and
valuation services. Operating expenses totaled $16.8 million and $22.0
million for the three and six months ended June 30, 1999, respectively.
The currency valuation throughout most of the Asia Region remained stable
for the periods and although recovery of the Asian markets is expected to
be more protracted than originally anticipated, property prices and rents
in a number of the Asia markets have begun to stabilize.
AUSTRALASIA REGION. Revenue for the Australasia Region, a new
reportable segment as a result of the JLW merger and the acquisition of
Compass, totaled $17.6 million and $22.9 million for the three and six
months ended June 30, 1999, respectively. Operating expenses totaled $14.9
million and $21.5 million for the three and six months ended June 30, 1999,
respectively. The Australasia Region operations continue to benefit from
several positive trends, including the outsourcing of property management
functions by corporations and a strengthening in the Australian dollar
against the U.S. dollar.
INTEREST EXPENSE
Interest expense increased $4.4 million to $4.7 million for the three
months ended June 30, 1999 and increased $6.8 million to $7.3 million for
the six months ended June 30, 1999 from the prior year periods, primarily
as a result of the acquisition of Compass and the related borrowings on the
acquisition facility, and to a lesser extent, to additional borrowings on
the revolving credit facilities as a result of the transition and
integration charges associated with the acquisition of Compass and merger
with JLW.
BENEFIT FOR INCOME TAXES
The benefit for income taxes increased $10.0 million to $5.5 million
for the three months ended June 30, 1999 and increased $21.4 million to
$19.0 million for the six months ended June 30, 1999 from a provision of
$4.6 million and $2.4 million, respectively, in the prior year periods,
primarily as a result of the increased net loss, exclusive of the
compensation expense associated with the issuance of shares to former JLW
employees in connection with the merger, at an effective tax rate of 38%.
In addition, a benefit has been recognized on a portion of the stock
compensation expense, which is largely non-deductible for tax purposes,
based on the rates prevailing in applicable countries.
NET LOSS
The net loss for the three months ended June 30, 1999 totaled $37.7
million compared to net income of $7.3 million in the prior year period.
The net loss for the six months ended June 30, 1999 totaled $93.1 million
compared to net income of $3.9 million for the prior year period. The
increase in net loss compared to the prior year periods is predominantly a
result of the merger related non-recurring charges, in addition to the
effects on operations previously discussed by segment.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, Jones Lang LaSalle has financed its operations and
acquisition and co-investment activities with internally generated funds,
the common stock of the company and borrowings under credit facilities. As
of June 30, 1999 our existing five year unsecured $150 million revolving
credit facility and our $175 million credit facility, used exclusively to
finance the acquisition of Compass, were fully drawn, including the impact
of letters of credit. In May 1999 we obtained a short-term facility of $45
million (collectively, the "Facilities") with an original maturity of
July 31, 1999 which had an outstanding balance of $2.8 million at June 30,
1999.
We are currently holding discussions with our lenders regarding
appropriate forms of long-term capitalization, including increasing and
extending the maturity on our revolving credit facility. As we continue
discussions with our lenders to increase our existing revolving facility,
the maturity on the short-term facility was extended to September 30, 1999.
There can be no assurances as to the terms and conditions with regard to
any modification to the revolving credit facility. The revolving credit
facility and the short-term credit facility are available for working
capital, co-investment, and acquisitions.
Jones Lang LaSalle has the right to extend the $175 million credit
facility to September 21, 2000. Management had anticipated repaying a
portion of this facility with the proceeds from an equity offering. With
the significant decrease in our stock price, Jones Lang LaSalle no longer
expects to be able to access capital from the equity markets at a price
acceptable to management in the immediate future. As such, we are
currently discussing alternatives with our lenders to renegotiate the
terms of this debt, however, there can be no assurances as to the terms and
conditions.
The Facilities are guaranteed by certain of our subsidiaries. We must
maintain a certain level of consolidated net worth and ratio of funded debt
to earnings before interest expense, taxes, depreciation and amortization
("EBITDA"), and must meet a minimum fixed charge coverage ratio.
Additionally, we are restricted from, among other things, incurring certain
levels of indebtedness to lenders outside of the Facilities or disposing of
a significant portion of our assets, and are subject to lender approval on
certain levels of co-investment. For the twelve month period ended
June 30, 1999, we exceeded the required ratio of funded debt to EBITDA, and
the lenders under the Facilities provided waivers. In our discussion with
our lenders regarding the renegotiations of our Facilities, management is
addressing the adequacy of current covenants contained in the existing
credit agreements. The Facilities bear variable rates of interest based on
market rates. Jones Lang LaSalle uses interest rate swaps to convert a
portion of the floating rate indebtedness to a fixed rate. Our effective
interest rate on the Facilities was 5.82% and 5.83% for the three and six
months ended June 30, 1999, respectively.
Jones Lang LaSalle has additional access to liquidity via various
overdraft facilities and short-term credit facilities in Europe, Asia, and
Australia. The aggregate amount available under these facilities
approximates $37.6 million, of which $12.5 million was outstanding at June
30, 1999. Borrowings on these facilities are currently limited to $25
million under the terms of the credit agreements governing the Facilities.
Management believes that in order to meet our future capital and
liquidity requirements, it will be necessary to renegotiate our existing
credit facilities. Based on current operating plans, cash generated from
operations is anticipated to be very strong for the remainder of 1999.
However, permanent financing needs to be obtained for the significant
disbursements related to opportunities generated from the merger with JLW
and acquisition of Compass. These disbursements include merger and
integration costs, one-time capital expenditures to establish a global
platform, and the funding of a world wide co-investment program.
<PAGE>
During the six months ended June 30, 1999, cash flows used in
operating activities totaled $98.8 million compared to cash flows provided
by operations of $2.2 million in the prior year period. The increased use
is primarily a result of increased operating expenses resulting from the
acquisition of Compass and the merger with JLW, and the related payment of
integration, transition and transaction costs associated with the
transactions, and, in addition to the significantly higher operating loss
at June 30, 1999 as compared to the prior year period. To a lesser extent,
the increased use is due to higher bonus accruals at December 31, 1998 as
compared to December 31, 1997, which are paid in the first quarter of the
following year.
Jones Lang LaSalle expects to continue to pursue co-investment
opportunities with investment management clients, for which the holding
period typically ranges from three to seven years. While this program
remains very important to the continued growth of the Investment Management
segment, the future commitment to co-investment is completely discretionary
and can be increased or decreased based on the availability of capital and
other factors. The performance of the Investment Management segment would
likely be negatively impacted if a substantial decrease in co-investing
were to occur. Management anticipates that co-investment activity within
the Americas and Europe regions will increase with potential expansion into
Asia and Australasia, as appropriate opportunities arise. This strategy
should serve to grow the assets under management, generate returns on
investment and create potential opportunities to provide other services.
Such co-investments are represented by non-controlling general partner and
limited partner interests. In addition to a share of investment returns,
we typically earn investment management fees, and in some cases, property
management and leasing fees on these investments. The equity earnings from
these co-investments have had a relatively small impact on our current
earnings and cash flow. However, our increased participation could
increase fluctuations in our net earnings and cash flow as a result of the
timing and magnitude of the gains or losses and potential performance fees,
if any, to be recognized upon the disposition of these assets. In certain
of these investments, we will not have complete discretion to control the
timing of the disposition of such investments. As of June 30, 1999, we had
a total investment of $53.1 million in 31 separate property or fund co-
investments with additional capital commitments of $10.2 million for future
fundings of co-investments.
We anticipate that 1999 total capital expenditures will be
approximately $48 to $55 million which is significantly higher than prior
years or expected annual expenditures in 2000 and beyond. The increased
level of expenditures in the current year are associated primarily with the
implementation of the JD Edwards property accounting and information
system, the integration of a global accounting system, and office
consolidations related to the recent merger and acquisition.
Net cash used in investing activities was $1.7 million for the six
months ended June 30, 1999 compared with net cash used in investing
activities of $31.0 million in the prior year period. The decreased use of
cash of $24.8 million is primarily attributable to the significant co-
investment activity in 1998, including our $18.8 million investment in
LaSalle Hotel Properties, partially offset by increased expenditures on
capital during 1999 as a result of the JLW merger and acquisition of
Compass, and the related consolidation of corporate offices, and the
continued customization and implementation of the JD Edwards property
accounting and information system.
Net cash provided by financing activities was $122.4 million for the
six months ended June 30, 1999 compared with $9.8 million in the prior year
period. The increase in cash flows is primarily a result of increased
borrowings on our long-term credit facilities as a result of the increased
use of operating cash flows, and expenditures made on office consolidations
and technology enhancements.
<PAGE>
SEASONALITY
Historically, our revenue, operating profits and net earnings in the
first three calendar quarters are substantially lower than in the fourth
quarter. This seasonality is due to a calendar year-end focus, primarily
in the United States on the completion of transactions, which is consistent
with the real estate industry generally. In contrast, our Investment
Management segment earns performance fees on client's returns on their real
estate investments. Such performance fees are generally earned when the
asset is disposed of, the timing of which we do not have complete
discretion over. Our non-variable operating expenses, which are treated as
expenses when incurred during the year, are relatively constant on a
quarterly basis. Therefore, we typically sustain a loss in the first
quarter of each calendar year, typically report a small profit or loss in
the second and third quarters and record a substantial majority of our
earnings in the fourth calendar quarter, barring the recognition of
investment generated performance fees.
INFLATION
Jones Lang LaSalle's operations are directly affected by various
national and local economic conditions, including interest rates, the
availability of credit to finance real estate transactions and the impact
of tax laws. To date, we do not believe that general inflation has had a
material impact on operations, as revenue, bonuses, and other variable
costs related to revenue are primarily impacted by real estate supply and
demand rather than general inflation.
OTHER MATTERS
ACCOUNTING MATTERS
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" becomes effective for all
fiscal quarters for fiscal years beginning after June 15, 2000 and is not
expected to have a material impact on our financial statements.
YEAR 2000 ISSUES
The "Year 2000 Issue" is the result of computer programs and systems
having been designed and developed to use two digits, rather than four, to
define the applicable year. As a result, these computer programs and
systems may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in system failure or miscalculations causing
disruption of operations, including, among other things, a temporary
inability to process transactions, pay invoices or engage in similar normal
business activities. Jones Lang LaSalle has defined five key phases in
addressing the Year 2000 Issue: Awareness, Assessment, Renovation,
Validation and Implementation.
<PAGE>
Under the guidance of a Year 2000 program team, whose strategy is
supported by senior management, we have in place a firmwide Awareness Phase
and will continue this phase through December 31, 1999 to maintain a
heightened sense of awareness to the Year 2000 Issue. As part of the
Assessment Phase, we have reviewed the year 2000 readiness of our
information technology systems through the creation of critical
applications, systems software and hardware inventories. These inventories
included detailed information relating to the potential impact of the
Year 2000 issue to Jones Lang LaSalle. The global Assessment Phase was
completed in early 1999.
Renovation and Validation Phase efforts have commenced. We conduct
our business primarily with commercial software purchased from third-party
vendors versus in house developed software. Over the last two years, we
have significantly upgraded our information systems capabilities, and are
currently in the final stages of rolling out new property and client
accounting systems. Continued upgrades of critical business systems
provide a historically sound software infrastructure, and positively impact
the degree of effort necessary related to the renovation process of
converting, replacing or eliminating selected platforms, applications,
databases and utilities, as well as the validation process of testing and
verifying for Year 2000 readiness. The schedule for completion of these
renovations and validation efforts remains on schedule with anticipated
completion by the third quarter of 1999.
The continuing Implementation Phase, which involves returning the
tested systems to operational status and the development of contingency
plans for critical business systems, is also anticipated to be completed by
the third quarter of 1999.
Management expects that the cost of additional modifications to our
software to meet Year 2000 requirements will not be material. The total
anticipated costs related to the phases previously discussed is currently
projected to be approximately $6.0 million, including approximately $4.3
million of operating expenses associated with testing and other matters and
$1.7 million of capital expenditures primarily representing system upgrades
which provide operational benefits above and beyond Year 2000 compliance.
Jones Lang LaSalle has incurred $2.1 million in operating expenses to date.
Factors that could impact our ability to make the necessary modifications
or replacement of our software include, but are not limited to, the
availability and cost of trained personnel and the ability of such
personnel to locate and correct all relevant computer codes. If such
modifications are not completed on a timely basis or are more costly to
implement than anticipated, our financial condition or results of
operations could be materially adversely affected.
Properties for which we provide management services rely on a variety
of third party suppliers to provide critical operating services. These
suppliers may utilize systems and embedded technologies to control the
operation of building systems such as utilities, lighting, security,
elevators, heating, ventilation and air conditioning systems. Jones Lang
LaSalle is in the process of obtaining assurances from suppliers as to
their Year 2000 readiness and preparing contingency plans, including the
identification of alternative suppliers. We do not control these third
party suppliers, and for some suppliers, such as utility companies, there
may be no feasible alternative suppliers available. The failure to these
suppliers' systems could have a material adverse effect on the operations
of the affected property, and widespread failures could have a material
adverse effect on Jones Lang LaSalle. Plans for a complete millennium
period staffing and communication strategy are underway to address any
concerns.
<PAGE>
A corporate business resumption strategy has been defined to create
specific response action plans throughout our organization to deal with
situations which arise that could cause interruption to or have serious
impact on the continuation of normal business operations. The strategy
includes specific remedies and implementation plans to be instituted at the
time of an emergency, and will allow our resources to effectively react to
critical issues resulting from any Year 2000 related occurrences.
The ability of third parties with whom we transact business or
companies that we may acquire to adequately address their Year 2000 issues
is outside Jones Lang LaSalle's control. At this time we are in the
process of reviewing the Year 2000 readiness of our major suppliers and
customers. There can be no assurance that the failure of major suppliers
and customers to adequately address Year 2000 issues will not have a
material adverse effect on our business, financial condition, and results
of operations.
Although we are not aware of any threatened claims related to the
Year 2000, we may become subject to litigation arising from such claims,
and, depending on the outcome, such litigation could have a material
adverse affect on Jones Lang LaSalle. It is not clear whether our
insurance coverage would be adequate to offset these and other business
risks related to the Year 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
Jones Lang LaSalle is exposed to interest rate changes primarily as a
result of our lines of credit used to maintain liquidity and to fund
capital expenditures, acquisitions, co-investments and operations. Our
interest rate risk management objective is to limit the impact of interest
rate changes on earnings and cash flows and to lower our overall borrowing
costs. To achieve our objectives, we borrow primarily at variable rates
and enter into derivative financial instruments such as interest rate swap
agreements when appropriate. We do not enter into derivative or interest
rate transactions for speculative purposes.
We have entered into interest rate swap agreements with a notional
amount of $85 million providing for an average fixed interest rate of
approximately 5.02% through September 21, 1999. Such interest rate swap
agreements had an approximate market value of $.2 million at June 30, 1999.
The carrying value of the debt approximates its fair value. As of June 30,
1999, the outstanding borrowings on our long-term credit facilities were
$327.3 million. The Facilities bear variable rates of interest based on
market rates which approximated 5.82% and 5.83% for the three and six
months ended June 30, 1999, including the effect of the interest rate swap
agreements.
FOREIGN CURRENCY RISK
Jones Lang LaSalle's reporting currency is the U.S. Dollar. We
transact business in various foreign currencies throughout Europe, Asia,
and Australasia. The financial statements of subsidiaries outside the
U.S., except those located in highly inflationary economies, are generally
measured using the local currency as the functional currency. As a result,
fluctuations in the U.S. Dollar relative to the other currencies in which
we generate earnings can impact our business, operating results and
financial condition as reported in U.S. dollars. For the three and six
months ended June 30, 1999, on a pro forma basis (excluding the effect of
stock compensation expense), 128% and 89% of our net loss was denominated
in U.S. Dollars and (28%) and 11% was denominated in other currencies,
respectively. Our revenues and expenses have primarily been earned and
incurred in the currency of the location where the operations generating
the revenues and expenses have occurred, thereby limiting. Our exposure to
exchange rate fluctuations to some extent.
<PAGE>
On a limited basis, we enter into forward currency exchange contracts
to manage currency risks and reduce our exposure resulting from
fluctuations in the designated foreign currency associated with existing
commitments, assets or liabilities. There were no forward exchange
contracts in effect at June 30, 1999. We do not use foreign currency
exchange contracts for trading purposes.
DISCLOSURE OF LIMITATIONS
As the information presented above includes only those exposures that
exist as of June 30, 1999, it does not consider those exposures or
positions which could arise after that date. Moreover, because firm
commitments are not presented, the information presented has limited
predictive value. As a result, our ultimate realized gain or loss with
respect to interest rate and foreign currency fluctuations will depend on
the exposures that arise during the period, our hedging strategies at the
time and interest and foreign currency rates.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Jones Lang LaSalle is a defendant in various litigation matters
arising in the ordinary course of business, some of which involve claims
for damages that are substantial in amount. Many of these matters are
covered by insurance. In the opinion of management, the ultimate resolution
of such litigation matters is not expected to have a material adverse
effect on our financial position, results of operations and liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the annual meeting of stockholders held on May 3, 1999, the
following business was conducted:
A. Stockholders elected ten directors as follows:
(i) The following two Class I Directors were elected for
terms expiring at the 2001 annual meeting of stockholders and until their
successors are elected and qualify:
Henri-Claude de Bettignies: 26,270,943 votes for and
335,513 votes withheld.
Earl E. Webb: 26,270,943 votes for and 335,513 votes
withheld.
(ii) The following five Class II Directors were elected for
terms expiring at the 2002 annual meeting of stockholders and until their
successors are elected and qualify:
David K.P. Li: 26,270,943 votes for and 335,513 votes
withheld.
Christopher A. Peacock: 26,270,943 votes for and 335,513
votes withheld.
Clive J. Pickford: 26,270,943 votes for and 335,513
votes withheld.
Stuart L. Scott: 26,270,838 votes for and 335,618 votes
withheld.
John R. Walter: 26,270,643 votes for and 335,813 votes
withheld.
(iii) The following three Class III Directors were elected for
terms expiring at the 2000 annual meeting of stockholders and until their
successors are elected and qualify:
Derek A. Higgs: 26,270,943 votes for and 335,513 votes
withheld.
Peter H.T. Lee: 26,270,943 votes for and 335,513 votes
withheld.
Michael J. Smith: 26,270,943 votes for and 335,513 votes
withheld.
B. Stockholders ratified the appointment of KPMG LLP as the
Company's independent auditors for the fiscal year ending December 31, 1999
as follows:
Votes for: 16,758,943
Votes against: 2,814
Votes abstained: 9,844,699
<PAGE>
ITEM 5. OTHER MATTERS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995:
Certain statements in this filing and elsewhere (such as in reports,
other filings with the Securities and Exchange Commission, press releases,
presentations and communications by Jones Lang LaSalle or its management
and written and oral statements) may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance, achievements, plans and objectives to be materially different
from any future results, performance, achievements, plans and objectives
expressed or implied by such forward-looking statements. Such factors are
discussed in (i) each of the Quarterly Reports on Form 10-Q for the quarter
ended June 30, 1999 and March 31, 1999, in Item 2. "Management's Discussion
and Analysis of Financial Condition and Results of Operations", Item 3.
"Quantitative and Qualitative Disclosures About Market Risk", and
elsewhere, (ii) our Annual Report on Form 10-K for the year ended December
31, 1998, in Item 1. "Business", Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations", Item 7A.
"Quantitative and Qualitative Disclosures About Market Risk", and
elsewhere, and (iii) our Proxy Statement dated February 4, 1999 under the
captions "Risk Factors", "The Transactions", "The Purchase Agreements",
"JLW Management's Discussion and Analysis of Financial Condition and
Results of Operations of the JLW Companies", and elsewhere, and in other
reports filed with the Securities and Exchange Commission. We expressly
disclaim any obligation or undertaking to update or revise any
forward-looking statements to reflect any changes in events or
circumstances or in our expectations or results.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) A list of exhibits is set forth in the Exhibit Index which
immediately precedes the exhibits and which is incorporated by reference
herein.
(b) Reports on Form 8-K
The following Form 8-Ks were filed during the 1999 second quarter.
1. Form 8-K, dated July 8, 1999, to announce that Jones Lang
LaSalle Incorporated expects to report adjusted pro forma results for the
1999 second quarter and full year that will be substantially below analyst
estimates.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
JONES LANG LASALLE INCORPORATED
Dated: August 13, 1999 BY:/S/ WILLIAM E. SULLIVAN
------------------------------
William E. Sullivan
Executive Vice President and
Chief Financial Officer
(Authorized Officer and
Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
10.1 $45,000,000 Credit Agreement dated as of
May 4, 1999.
27.1 Financial Data Schedule.
99.1 Jones Lang LaSalle press release announcing
second quarter and year to date 1999 earnings.
EXHIBIT 10.1
- ------------
================================================================
U.S. $45,000,000
CREDIT AGREEMENT
DATED AS OF
MAY 4, 1999
AMONG
JONES LANG LASALLE INCORPORATED,
THE GUARANTORS PARTY HERETO,
THE BANKS PARTY HERETO,
HARRIS TRUST AND SAVINGS BANK
as Agent
AND
THE CHASE MANHATTAN BANK
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS CO-ARRANGERS.
================================================================
<PAGE>
CREDIT AGREEMENT
This Credit Agreement, dated as of May 4, 1999, is among Jones Lang
LaSalle Incorporated, a Maryland corporation (the "Borrower"), the
Guarantors (as hereinafter defined) party hereto, the banks from time to
time party hereto (each a "Bank" and, collectively, the "Banks") and Harris
Trust and Savings Bank, as Agent.
SECTION 1. THE REVOLVING CREDIT.
Section 1.1. The Loan Commitment. Subject to the terms and conditions
hereof, each Bank severally agrees to make a loan or loans (individually a
"Loan" and collectively "Loans") to the Borrower from time to time on a
revolving basis in U.S. Dollars in an aggregate outstanding principal
amount up to the amount of its commitment set forth on the applicable
signature page hereof (its "Commitment" and, cumulatively for all the
Banks, the "Commitments"), subject to any reductions thereof pursuant to
the terms hereof, before the Termination Date. The sum of the aggregate
principal amount of Loans at any time outstanding shall not exceed the
Commitments in effect at such time. As provided in Section 1.4(a) hereof,
the Borrower may elect that each Borrowing of Loans be either Domestic Rate
Loans or Eurodollar Loans. Loans may be repaid and the principal amount
thereof reborrowed before the Termination Date, subject to all the terms
and conditions hereof.
Section 1.2. Applicable Interest Rates. (a) Domestic Rate Loans. Each
Domestic Rate Loan made or maintained by a Bank shall bear interest during
each Interest Period it is outstanding (computed on the basis of a year of
365 or 366 days, as applicable, and actual days elapsed) on the unpaid
principal amount thereof from the date such Loan is advanced, continued or
created by conversion from a Eurocurrency Loan until maturity (whether by
acceleration or otherwise) at a rate per annum equal to the Domestic Rate
from time to time in effect, payable on the last day of its Interest Period
and at maturity (whether by acceleration or otherwise).
"Domestic Rate" means for any day the greater of:
(i) the rate of interest announced by the Agent from time to time
as its prime commercial rate, or equivalent, as in effect on such day, with
any change in the Domestic Rate resulting from a change in said prime
commercial rate to be effective as of the date of the relevant change in
said prime commercial rate; and
(ii) the sum of (x) the rate determined by the Agent to be the
prevailing rate per annum (rounded upwards, if necessary, to the nearest
one hundred-thousandth of a percentage point) at approximately 10:00 a.m.
(Chicago time) (or as soon thereafter as is practicable) on such day (or,
if such day is not a Business Day, on the immediately preceding Business
Day) for the purchase at face value of overnight Federal Funds in an amount
comparable to the principal amount owed to the Banks for which such rate is
being determined, plus (y) 1/2 of 1% (0.50%)
-2-
<PAGE>
(b) Eurocurrency Loans. Each Eurocurrency Loan made or maintained
by a Bank shall bear interest during each Interest Period it is outstanding
(computed on the basis of a year of 360 days and actual days elapsed) on
the unpaid principal amount thereof from the date such Loan is advanced,
continued, or created by conversion from a Domestic Rate Loan until
maturity (whether by acceleration or otherwise) at a rate per annum equal
to the sum of 1% plus the Adjusted LIBOR applicable for such Interest
Period, payable on the last day of the Interest Period and at maturity
(whether by acceleration or otherwise), and, if the applicable Interest
Period is longer than three months, on each day occurring every three
months after the commencement of such Interest Period.
"Adjusted LIBOR" means, for any Borrowing of Eurocurrency Loans, a
rate per annum determined in accordance with the following formula:
Adjusted LIBOR = LIBOR
-----------------------------------
1 - Eurocurrency Reserve Percentage
"LIBOR" means, for an Interest Period for a Borrowing of Eurocurrency
Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available, and (b) if the LIBOR Index Rate cannot be determined, the
average rate of interest per annum (rounded upwards, if necessary, to the
nearest one hundred-thousandth of a percentage point) at which deposits in
U.S. Dollars in immediately available funds are offered to the Agent at
11:00 a.m. (London, England time) two (2) Business Days before the
beginning of such Interest Period by major banks in the interbank
eurocurrency market for delivery on the first day of and for a period equal
to such Interest Period in an amount equal or comparable to the principal
amount of such Borrowing.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth
of a percentage point) for deposits in U.S. Dollars for a period equal to
such Interest Period, which appears on the appropriate Telerate Page for
such currency, as of 11:00 a.m. (London, England time) on the day two (2)
Business Days before the commencement of such Interest Period.
"Telerate Page" means the page designated on the Telerate Service (or
such other service as may be nominated by the British Bankers' Association
as the information vendor) for the purpose of displaying British Bankers'
Association Interest Settlement Rates for the applicable currency.
"Eurocurrency Reserve Percentage" means, for any Borrowing of
Eurocurrency Loans, the daily average for the applicable Interest Period of
the maximum rate, expressed as a decimal, at which reserves (including,
without limitation, any supplemental, marginal and emergency reserves) are
imposed during such Interest Period by the Board of Governors of the
Federal Reserve System (or any successor) on "eurocurrency liabilities", as
defined in such Board's Regulation D (or in respect of any other category
of liabilities that includes deposits by reference to which the interest
rate on Eurocurrency Loans is determined or any category of extensions of
credit or other assets that include loans by non-United States offices of
any Bank to United States residents), subject to any amendments of such
reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this
-3-
<PAGE>
definition, the Eurocurrency Loans shall be deemed to be "eurocurrency
liabilities" as defined in Regulation D without benefit or credit for any
prorations, exemptions or offsets under Regulation D.
(c) Rate Determinations. The Agent shall determine each interest
rate applicable to the Loans, and a reasonable determination thereof by the
Agent shall be conclusive and binding except in the case of manifest error
or willful misconduct.
Section 1.3. Minimum Borrowing Amounts. Each Borrowing of Domestic
Rate Loans shall be in an amount not less than $500,000 and in integral
multiples of $100,000. Each Borrowing of Eurocurrency Loans shall be in an
amount not less than an $1,500,000 and in integral multiple of $100,000.
Section 1.4. Manner of Borrowing Loans and Designating Interest Rates
Applicable to Loans. (a) Notice to the Agent. The Borrower shall give
notice to the Agent by no later than 12:00 noon (Chicago time) (i) at least
three (3) Business Days before the date on which the Borrower requests the
Banks to advance a Borrowing of Eurocurrency Loans and (ii) on the date the
Borrower requests the Banks to advance a Borrowing of Domestic Rate Loans.
The Loans included in each Borrowing shall bear interest initially at the
type of rate specified in such notice of a new Borrowing. Thereafter, the
Borrower may from time to time elect to change or continue the type of
interest rate borne by each Borrowing or, subject to Section 1.3's minimum
amount requirement for each outstanding Borrowing, a portion thereof, as
follows: (i) if such Borrowing is of Eurocurrency Loans, on the last day of
the Interest Period applicable thereto, the Borrower may continue part or
all of such Borrowing as Eurocurrency Loans for an Interest Period or
Interest Periods specified by the Borrower or, convert part or all of such
Borrowing into Domestic Rate Loans, (ii) if such Borrowing is of Domestic
Rate Loans, on any Business Day, the Borrower may convert all or part of
such Borrowing into Eurocurrency Loans for an Interest Period or Interest
Periods specified by the Borrower. The Borrower shall give all such notices
requesting the advance, continuation, or conversion of a Borrowing to the
Agent by telephone or telecopy (which notice shall be irrevocable once
given and, if by telephone, shall be promptly confirmed in writing).
Notices of the continuation of a Borrowing of Eurocurrency Loans for an
additional Interest Period or of the conversion of part or all of a
Borrowing of Eurocurrency Loans into Domestic Rate Loans or of Domestic
Rate Loans into Eurocurrency Loans must be given by no later than 12:00
noon (Chicago time) at least three (3) Business Days before the date of the
requested continuation or conversion. All such notices concerning the
advance, continuation, or conversion of a Borrowing shall specify the date
of the requested advance, continuation or conversion of a Borrowing (which
shall be a Business Day), the amount of the requested Borrowing to be
advanced, continued, or converted, the type of Loans to comprise such new,
continued or converted Borrowing and, if such Borrowing is to be comprised
of Eurocurrency Loans, the currency and Interest Period applicable thereto.
The Borrower agrees that the Agent may rely on any such telephonic or
telecopy notice given by any person it in good faith believes is an
Authorized Representative without the necessity of independent
investigation, and in the event any such notice by telephone conflicts with
any written confirmation, such telephonic notice shall govern if the Agent
has acted in reliance thereon.
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(b) Notice to the Banks. The Agent shall give prompt telephonic or
telecopy notice to each Bank of any notice from the Borrower received
pursuant to Section 1.4.(a) above. The Agent shall give notice to the
Borrower and each Bank by like means of the interest rate applicable to
each Borrowing of Eurocurrency Loans.
(c) Borrower's Failure to Notify. Any outstanding Borrowing of
Domestic Rate Loans shall, subject to Section 6.2 hereof, automatically be
continued for an additional Interest Period on the last day of its then
current Interest Period unless the Borrower has notified the Agent within
the period required by Section 1.4(a) that it intends to convert such
Borrowing into a Borrowing of Eurocurrency Loans or notifies the Agent
within the period required by Section 1.7(a) that it intends to prepay such
Borrowing. If the Borrower fails to give notice pursuant to Section 1.4(a)
above of the continuation or conversion of any outstanding principal amount
of a Borrowing of Eurocurrency Loans before the last day of its then
current Interest Period within the period required by Section 1.4(a) and
has not notified the Agent within the period required by Section 1.7(a)
that it intends to prepay such Borrowing, such Borrowing shall
automatically be converted into a Borrowing of Domestic Rate Loans, subject
to Section 6.2 hereof.
(d) Disbursement of Loans. Not later than 11:00 a.m. (Chicago time)
on the date of any requested advance of a new Borrowing of Eurocurrency
Loans, and not later than 1:00 p.m. (Chicago time) on the date of any
requested advance of a new Borrowing of Domestic Rate Loans, subject to
Section 6 hereof, each Bank shall make available its Loan comprising part
of such Borrowing in funds immediately available at the principal office of
the Agent in Chicago, Illinois. The Agent shall make the Loans available to
the Borrower at the Agent's principal office in Chicago, Illinois in each
case in the type of funds received by the Agent from the Banks.
(e) Agent Reliance on Bank Funding. Unless the Agent shall have
been notified by a Bank before the date on which such Bank is scheduled to
make payment to the Agent of the proceeds of a Loan (which notice shall be
effective upon receipt) that such Bank does not intend to make such
payment, the Agent may assume that such Bank has made such payment when due
and the Agent may in reliance upon such assumption (but shall not be
required to) make available to the Borrower the proceeds of the Loan to be
made by such Bank and, if any Bank has not in fact made such payment to the
Agent, such Bank shall, on demand, pay to the Agent the amount made
available to the Borrower attributable to such Bank together with interest
thereon in respect of each day during the period commencing on the date
such amount was made available to the Borrower and ending on (but
excluding) the date such Bank pays such amount to the Agent at a rate per
annum equal to the Federal Funds Rate. If such amount is not received from
such Bank by the Agent immediately upon demand, the Borrower will, on
demand, repay to the Agent the proceeds of the Loan attributable to such
Bank with interest thereon at a rate per annum equal to the interest rate
applicable to the relevant Loan, but without such payment being considered
a payment or prepayment of a Loan under Section 1.10 hereof, so that the
Borrower will have no liability under such Section with respect to such
payment.
Section 1.5. Interest Periods. As provided in Section 1.4(a) hereof,
at the time of each request to advance, continue, or create by conversion a
Borrowing of Eurocurrency Loans, the Borrower shall select an Interest
Period applicable to such Loans from among the available
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options. The term "Interest Period" means the period commencing on the date
a Borrowing of Loans is advanced, continued, or created by conversion and
ending: (a) in the case of Domestic Rate Loans, on the last day of the
calendar quarter in which such Borrowing is advanced, continued, or created
by conversion (or on the last day of the following quarter if such Loan is
advanced, continued or created by conversion on the last day of a calendar
quarter), and (b) in the case of Eurocurrency Loans, 1, 2 or 3 months
thereafter; provided, however, that:
(a) any Interest Period for a Borrowing of Domestic Rate
Loans that otherwise would end after the Termination Date shall end on the
Termination Date;
(b) for any Borrowing of Eurocurrency Loans, the Borrower may
not select an Interest Period that extends beyond the Termination Date;
(c) whenever the last day of any Interest Period would
otherwise be a day that is not a Business Day, the last day of such
Interest Period shall be extended to the next succeeding Business Day,
provided that, if such extension would cause the last day of an Interest
Period for a Borrowing of Eurocurrency Loans to occur in the following
calendar month, the last day of such Interest Period shall be the
immediately preceding Business Day; and
(d) for purposes of determining an Interest Period for a
Borrowing of Eurocurrency Loans, a month means a period starting on one day
in a calendar month and ending on the numerically corresponding day in the
next calendar month; provided, however, that if there is no numerically
corresponding day in the month in which such an Interest Period is to end
or if such an Interest Period begins on the last Business Day of a calendar
month, then such Interest Period shall end on the last Business Day of the
calendar month in which such Interest Period is to end.
Section 1.6. Maturity of Loans. Each Loan shall mature and become due
and payable by the Borrower on the Termination Date.
Section 1.7. Prepayments. (a) Optional. The Borrower may prepay
without premium or penalty and in whole or in part (but, if in part, then:
(i) if such Borrowing is of Domestic Rate Loans, in an amount not less than
$500,000, (ii) if such Borrowing is of Eurocurrency Loans, in an amount not
less than $1,000,000 and (iii) in an amount such that the minimum amount
required for a Borrowing pursuant to Section 1.3 hereof remains
outstanding) any Borrowing of Eurocurrency Loans upon three Business Days'
prior notice to the Agent or, in the case of a Borrowing of Domestic Rate
Loans, notice delivered to the Agent no later than 12:00 noon (Chicago
time) on the date of prepayment, such prepayment to be made by the payment
of the principal amount to be prepaid and, in the case of a prepayment of a
Eurocurrency Loan, accrued interest thereon to the date fixed for
prepayment; provided that in the case of any such prepayment of
Eurocurrency Loans, such prepayment shall be accompanied by amounts owing
under Section 1.10 hereof. The Agent will promptly advise each Bank of any
such prepayment notice it receives from the Borrower. Any amount paid or
prepaid before the Termination Date may, subject to the terms and
conditions of this Agreement, be borrowed, repaid and borrowed again.
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Section 1.8. Default Rate. If any payment of principal on any Loan is
not made when due (whether by acceleration or otherwise), such Loan shall
bear interest (computed on the basis of a year of 360 days and actual days
elapsed or, if based on the Domestic Rate, on the basis of a year of 365 or
366 days, as applicable, and the actual number of days elapsed) from the
date such payment was due until paid in full, payable on demand, at a rate
per annum equal to:
(a) for any Domestic Rate Loan, the sum of two percent (2%)
plus the Domestic Rate from time to time in effect; and
(b) for any Eurocurrency Loan, the sum of two percent (2%)
plus the rate of interest in effect thereon at the time of such default
until the end of the Interest Period applicable thereto and, thereafter, at
a rate per annum equal to the sum of two percent (2%) plus the Domestic
Rate from time to time in effect.
Section 1.9. Noteless Agreement; Evidence of Indebtedness. (i) Each
Bank shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to such Bank resulting
from each Loan made by such Bank from time to time, including the amounts
of principal and interest payable and paid to such Bank from time to time
hereunder.
(ii) The Agent shall also maintain accounts in which it will record
(a) the amount of each Loan made hereunder, the Type thereof and the
Interest Period with respect thereto, (b) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to
each Bank hereunder and (c) the amount of any sum received by the Agent
hereunder from the Borrower and each Bank's share thereof.
(iii) The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the
existence and amounts of the Obligations therein recorded; provided,
however, that the failure of the Agent or any Bank to maintain such
accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Obligations in accordance with their terms.
(iv) Any Bank may request that its Loans be evidenced by a
promissory note (a "Note"). In such event, the Borrower shall prepare,
execute and deliver to such Lender a Note payable to the order of such Bank
in a form supplied by the Agent. Thereafter, the Loans evidenced by such
Note and interest thereon shall at all times (including after any
assignment pursuant to Section 12.10) be represented by one or more Notes
payable to the order of the payee named therein or any assignee pursuant to
Section 12.10, except to the extent that any such Bank or assignee
subsequently returns any such Note for cancellation and requests that such
Loans once again be evidenced as described in paragraphs (i) and (ii)
above.
Section 1.10. Funding Indemnity. If any Bank shall incur any loss,
cost or expense (including, without limitation, any loss of profit, and any
loss, cost or expense incurred by reason of the liquidation or re-
employment of deposits or other funds acquired by such Bank to fund or
maintain any Eurocurrency Loan or the relending or reinvesting of such
deposits or amounts paid or prepaid to such Bank) as a result of:
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(a) any payment, prepayment or conversion of a Eurocurrency
Loan on a date other than the last day of its Interest Period,
(b) any failure (because of a failure to meet the conditions
of Section 6 or otherwise) by the Borrower to borrow or continue a
Eurocurrency Loan, or to convert a Domestic Rate Loan into a Eurocurrency
Loan, on the date specified in a notice given pursuant to Section 1.4(a) or
established pursuant to Section 1.4(c) hereof,
(c) any failure by the Borrower to make any payment of
principal on any Eurocurrency Loan when due (whether by acceleration or
otherwise), or
(d) any acceleration of the maturity of a Eurocurrency Loan
as a result of the occurrence of any Event of Default hereunder,
then, upon the demand of such Bank, the Borrower shall pay to such Bank
such amount as will reimburse such Bank for such loss, cost or expense. If
any Bank makes such a claim for compensation, it shall provide to the
Borrower, with a copy to the Agent, a certificate executed by an officer of
such Bank setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the
computation of such loss, cost or expense) and the amounts shown on such
certificate if reasonably calculated shall be conclusive absent manifest
error.
Section 1.11. Commitment Terminations. The Borrower shall have the
right at any time and from time to time, upon five (5) Business Days' prior
written notice to the Agent, to terminate the Commitments without premium
or penalty, in whole or in part, any partial termination to be (i) in an
amount not less than $2,500,000, and (ii) allocated ratably among the Banks
in proportion to their respective Percentages. The Agent shall give prompt
notice to each Bank of any such termination of Commitments. Any termination
of Commitments pursuant to this Section 1.11 may not be reinstated.
SECTION 2. FEES.
Section 2.1. Closing Fees. On the Effective Date the Borrower shall
pay to the Agent for the ratable account of the Banks in accordance with
their Percentages a closing fee equal to 0.25% of the Commitments.
SECTION 3. PLACE AND APPLICATION OF PAYMENTS.
Section 3.1. Place and Application of Payments. All payments of
principal of and interest on the Loans, and of all other amounts payable by
the Borrower under this Agreement, shall be made by the Borrower to the
Agent by no later than 12:00 Noon (Chicago time) on the due date thereof at
the principal office of the Agent in Chicago, Illinois (or such other
location in the State of Illinois as the Agent may designate to the
Borrower) for the benefit of the Person or Persons entitled thereto. Any
payments received after such time shall be deemed to have been received by
the Agent on the next Business Day. All such payments shall be made in U.S.
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Dollars, in immediately available funds at the place of payment without
setoff or counterclaim. The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest on
Loans or fees ratably to the Banks and like funds relating to the payment
of any other amount payable to any Person to such Person, in each case to
be applied in accordance with the terms of this Agreement.
SECTION 4. DEFINITIONS; INTERPRETATION.
Section 4.1. Definitions. The following terms when used herein have
the following meanings:
"Adjusted LIBOR" is defined in Section 1.2(b) hereof.
"Affiliate" means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled
by, such Person. As used in this definition, "control" (including, with
their correlative meanings, "controlled by" and "under common control
with") means possession, directly or indirectly, of power to direct or
cause the direction of management or policies of a Person (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise), provided that, in any event for purposes of this
definition: (i) any Person which owns directly or indirectly 5% or more of
the securities having ordinary voting power for the election of directors
or other governing body of a corporation or 5% or more of the partnership
or other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to control such corporation or
other Person; and (ii) each director and executive officer of the Borrower
or any Subsidiary shall be deemed an Affiliate of the Borrower and each
Subsidiary.
"Agent" means Harris Trust and Savings Bank and any successor
pursuant to Section 10.7 hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Borrower pursuant to Section 6.1(g) hereof, or on
any updated such list provided by the Borrower to the Agent, or any further
or different officer of the Borrower so named by any Authorized
Representative of the Borrower in a written notice to the Agent.
"Bank" is defined in the first paragraph of this Agreement.
"Borrower" means Jones Lang LaSalle Incorporated, a Maryland
corporation.
"Borrowing" means the total of Loans of a single type advanced,
continued for an additional Interest Period, or converted from a different
type into such type by the Banks on a single date and for a single Interest
Period. Borrowings of Loans are made and maintained ratably from each of
the Banks according to their Percentages. A Borrowing is "advanced" on
the day Banks advance funds comprising such Borrowing to the Borrower, is
"continued" on the day a new Interest Period for the same type of Loans
commences for such Borrowing, and is "converted" on the day such Borrowing
is changed from one type of Loan to the other, all as requested by the
Borrower pursuant to Section 1.4(a).
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"Business Day" means any day other than a Saturday or Sunday on which
Banks are not authorized or required to close in Chicago, Illinois and, if
the applicable Business Day relates to the borrowing or payment of a
Eurocurrency Loan, on which banks are dealing in U.S. Dollar deposits in
the interbank market in London, England.
"Change of Control" means at any time:
(i) any Person becomes the beneficial owner of securities of
the Borrower representing 30% or more of the then outstanding Voting Stock
of the Borrower; or
(ii) during any period of twenty-four consecutive months
beginning after the date of this Agreement, individuals who at the
beginning of such period constitute the Board of Directors of the Borrower
(the "Board"), together with any new director (other than a director
designated by a person who has entered into an agreement with the Borrower
to effect a transaction described in clause (i) of this Change of Control
definition) whose election or nomination for election was approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board.
For purposes of the definition of Change of Control Event, "Person"
shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act as supplemented by Section 13(d)(3) of the Exchange Act;
provided, however, that Person shall not include (i) the Borrower or any
Wholly-Owned Subsidiary, or (ii) any person who, as of the date of this
Agreement, was the Beneficial Owner of securities of the Borrower
representing 20% or more of the combined voting power.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" is defined in Section 1.1 hereof.
"Controlled Group" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated)
under common control that, together with the Borrower or any of its
Subsidiaries, are treated as a single employer under Section 414 of the
Code.
"Credit Documents" means this Agreement, the Notes, each Subsidiary
Guarantee Agreement delivered to the Agent pursuant to the terms hereof and
any security agreement delivered pursuant to the terms hereof.
"Credit Event" means the advancing of any Loan.
"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an
Event of Default.
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"Domestic Rate" is defined in Section 1.2(a) hereof.
"Domestic Rate Loan" means a Loan bearing interest prior to maturity
at a rate specified in Section 1.2(a) hereof.
"Domestic Subsidiary" shall mean any Subsidiary which is not a
Foreign Subsidiary.
"Effective Date" means the date hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurocurrency Loan" means a Loan bearing interest prior to maturity
at the rate specified in Section 1.2(b) hereof.
"Eurocurrency Reserve Percentage" is defined in Section 1.2(b)
hereof.
"Event of Default" means any of the events or circumstances specified
in Section 8.1 hereof.
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Domestic Rate in
Section 1.2(a) hereof.
"GAAP" means generally accepted accounting principles as in effect on
the Effective Date, applied by the Borrower and its Subsidiaries on a basis
consistent with the preparation of the Borrower's financial statements
furnished to the Banks as described in Section 5.4 of the Multicurrency
Credit Agreement.
"Guarantor" means (i) Jones Lang LaSalle Financial & Corporate
Services, Inc., a Maryland corporation, Jones Lang LaSalle Management
Services, Inc., a Maryland corporation, LaSalle Investment Management,
Inc., a Maryland corporation, Jones Lang LaSalle International, Inc., a
Delaware corporation, LP International, a limited liability company, a
Wyoming limited liability company, Jones Lang LaSalle Co-Investment, Inc.,
a Maryland corporation, LaSalle Hotel Advisors, Inc., a Maryland
corporation, Jones Lang Wooten USA, Inc. a Delaware corporation (ii) any
other Domestic Subsidiary which becomes a direct Subsidiary of the Borrower
and (iii) any other Subsidiary of the Borrower designated by the Borrower
as a Guarantor as required by Section 7.22 of the Multicurrency Credit
Agreement as incorporated herein.
"Indebtedness" means for any Person, (i) obligations of such Person
for borrowed money, (ii) obligations of such Person representing the
deferred purchase price of property or services other than accounts payable
arising in the ordinary course of business on terms customary in the trade,
(iii) obligations of such Person evidenced by notes, acceptances, or other
instruments of such Person or pursuant to letters of credit issued for such
Person's account, (iv) obligations, whether or not assumed, secured by
Liens or payable out of the proceeds or production from Property now or
hereafter owned or acquired by such Person, (v) Capitalized
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Lease Obligations of such Person and (vi) obligations for which such Person
is obligated pursuant to a Guaranty.
"Interest Period" is defined in Section 1.5 hereof.
"Lending Office" is defined in Section 9.4 hereof.
"LIBOR" is defined in Section 1.2(b) hereof.
"Loan" is defined in Section 1.1(a) hereof and, as so defined,
includes a Domestic Rate Loan or Eurocurrency Loan, each of which is a
"type" of Loan hereunder.
"Material Adverse Effect" means a material and adverse effect on the
business, operations, Property or financial or other condition of the
Borrower and its Subsidiaries, taken as
a whole.
"Multicurrency Credit Agreement" means the Multicurrency Credit
Agreement dated as of November 25, 1997 among Jones Lang LaSalle
Incorporated (f/k/a LaSalle Partners Incorporated), the Guarantors party
thereto, the Banks party thereto and Harris Trust and Savings Bank, as
Agent, as amended through and in effect on the date hereof.
"Note" means any promissory note issued at the request of a Lender
pursuant to Section 1.9 in the form of Exhibit A.
"Obligations" means all fees payable hereunder, all obligations of
the Borrower to pay principal or interest on Loans and all other payment
obligations of the Borrower arising under or in relation to any Credit
Document.
"PBGC" is means the Pension Benefit Guaranty Corporation.
"Percentage" means, for each Bank, the percentage of the Commitments
represented by such Bank's Commitment or, if the Commitments have been
terminated, the percentage held by such Bank of the aggregate principal
amount of all outstanding Obligations.
"Person" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or any agency or political subdivision thereof.
"Plan" means at any time an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code that is either (i) maintained by a member of the Controlled
Group or (ii) maintained pursuant to a collective bargaining agreement or
any other arrangement under which more than one employer makes
contributions and to which a member of the Controlled Group is then making
or accruing an obligation to make contributions or has within the preceding
five plan years made contributions.
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"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible, whether now
owned or hereafter acquired.
"Required Banks" means, as of the date of determination thereof,
Banks holding at least 51% of the Percentages.
"Set-Off" is defined in Section 12.7 hereof.
"Subsidiary" means, as to the Borrower, a corporation, partnership or
other entity that, under GAAP, is included in the consolidated financial
statements of the Borrower.
"Subsidiary Guarantee Agreement" means a letter to the Agent in the
form of Exhibit B hereto executed by a Subsidiary whereby it acknowledges
it is party hereto as a Guarantor under Section 11 hereof.
"Termination Date" means July 31, 1999.
"Voting Stock" of any Person means capital stock of any class or
classes or other equity interests (however designated) having ordinary
voting power for the election of directors or similar governing body of
such Person, other than stock or other equity interests having such
power only by reason of the happening of a contingency.
"Wholly-Owned" when used in connection with any Subsidiary of the
Borrower means a Subsidiary of which all of the issued and outstanding
shares of stock or other equity interests (other than directors' qualifying
shares as required by law) shall be owned by the Borrower and/or one or
more of its Wholly-Owned Subsidiaries.
Section 4.2. Interpretation. The foregoing definitions shall be
equally applicable to both the singular and plural forms of the terms
defined. All references to times of day in this Agreement shall be
references to Chicago, Illinois time unless otherwise specifically
provided. Where the character or amount of any asset or liability or item
of income or expense is required to be determined or any consolidation or
other accounting computation is required to be made for the purposes of
this Agreement, the same shall be done in accordance with GAAP, to the
extent applicable, except where such principles are inconsistent with the
specific provisions of this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents and warrants to each Bank as to itself
and, where the following representations and warranties apply to
Subsidiaries, as to each of its Subsidiaries, as
follows:
Section 5.1. Multicurrency Credit Agreement Representations. All of
the representations and warranties set forth in Section 5 of the
Multicurrency Credit Agreement are true and correct in all material
respects, except if any such representation or warranty relates solely to
an earlier date it need only remain true as of such date.
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Section 5.2. Corporate Authority and Validity of Obligations. The
Borrower has full power and authority to enter into this Agreement and the
other Credit Documents to which it is a party, to make the borrowings
herein provided for, to issue its Notes in evidence thereof and to perform
all of its obligations under the Credit Documents to which it is a party.
Each Guarantor has full power and authority to enter into this Agreement as
a signatory hereto or pursuant to a Subsidiary Guarantee Agreement and to
perform all of its obligations hereunder. Each Credit Document to which the
Borrower is a party has been duly authorized, executed and delivered by the
Borrower and constitutes valid and binding obligations of the Borrower in
accordance with its terms. Each Credit Document to which a Guarantor is a
party has been duly authorized, executed and delivered by such Guarantor
and constitutes valid and binding obligations of such Guarantor in
accordance with its terms. No Credit Document to which the Borrower is a
party, nor the performance or observance by the Borrower of any of the
matters or things therein provided for, contravenes any provision of law or
any charter or by-law provision of the Borrower or (individually or in the
aggregate) any material Contractual Obligation of or binding upon the
Borrower or any of its Properties or results in or requires the creation or
imposition of any Lien on any of the Properties or revenues of the
Borrower. No Credit Document to which a Guarantor is a party, nor the
performance or observance by such Guarantor of any of the matters or things
therein provided for, contravenes any provision of law or any charter or
by-law provision of such Guarantor or (individually or in the aggregate)
any material Contractual Obligation of or binding upon such Guarantor or
any of its Properties or results in or requires the creation or imposition
of any Lien on any of the Properties or revenues of such Guarantor.
Section 5.3. Approvals. No authorization, consent, license,
exemption, filing or registration with any court or governmental
department, agency or instrumentality, nor any approval or consent of the
stockholders of the Borrower or any Subsidiary or from any other Person, is
necessary to the valid execution, delivery or performance by the Borrower
or any Subsidiary of any Credit Document to which it is a party except for
such approvals and consents which have been obtained and are in full force
and effect.
SECTION 6. CONDITIONS PRECEDENT.
The obligation of each Bank to advance, continue, or convert any Loan
shall be subject to the following conditions precedent:
Section 6.1. Initial Credit Event. Before or concurrently with the
first Credit Event:
(a) The Agent shall have received for each Bank the favorable
written opinion of Hagan & Associates, counsel to the Borrower and
Guarantors in form and substance acceptable to the Agent;
(b) The Agent shall have received for each Bank copies of (i)
a certificate of good standing, for the Borrower, certified as of a date
not earlier than 20 days prior to the date hereof by the appropriate
governmental officer of the Borrower's jurisdiction of incorporation and
(ii) the Borrower's Certificate of Incorporation, together with all
amendments, bylaws and any amendments thereto, certified in each instance
by its secretary or an assistant secretary;
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(c) The Agent shall have received copies of the partnership
agreements of each Guarantor that is a partnership, certified by a general
partner or other duly authorized officer thereof to be a true, correct and
complete copy thereof;
(d) The Agent shall have received copies of the Certificate
of Incorporation and bylaws of each Guarantor that is a corporation,
certified in each instance by its secretary or an assistant secretary;
(e) The Agent shall have received copies, certified by the
secretary or assistant secretary of each Guarantor that is a corporation,
and of each corporate general partner in the case of each Guarantor that is
a partnership having a corporation as its general partner, of its board of
directors' resolutions authorizing the execution of the Credit Documents;
(f) The Agent shall have received certificates, executed by a
general partner of each Guarantor that is a partnership, and by the
secretary or assistant secretary of each Guarantor that is a corporation,
and of each corporate general partner in the case of each Guarantor that is
a partnership having a corporation as its general partner, which shall
identify by name and title and bear the signature of the partners or
officers authorized to sign the Credit Documents;
(g) The Agent shall have received for each Bank a list of the
Borrower's Authorized Representatives; and
(h) All legal matters incident to the execution and delivery
of the Credit Documents shall be satisfactory to the Banks.
Section 6.2. All Credit Events. As of the time of each Credit Event
hereunder:
(a) In the case of a Borrowing, the Agent shall have received
the notice required by Section 1.4 hereof;
(b) In the case of a Borrowing of Loans that would increase
the aggregate principal amount of Loans outstanding (after giving effect to
concurrent repayment of Loans), each of the representations and warranties
set forth or incorporated by reference in Section 5 hereof shall be and
remain true and correct in all material respects as of said time, except
that if any such representation or warranty relates solely to an earlier
date it need only remain true as of such date, taking into account any
amendments to such Section (including, without limitation, any amendments
to the Schedules referenced therein) made after the date of this Agreement
in accordance with the provision hereof;
(c) In the case of a Borrowing of Loans that would increase
the aggregate principal amount of Loans outstanding (after giving effect to
concurrent repayment of Loans), no Default or Event of Default shall have
occurred and be continuing or would occur as a result of such Credit Event;
and
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(d) Such Credit Event shall not violate any order, judgment
or decree of any court or other authority or any provision of law or
regulation applicable to any Bank (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve System).
Each request for a Borrowing hereunder shall be deemed to be a
representation and warranty by the Borrower on the date of such Credit
Event as to the facts specified in paragraphs (b) and (c) of this Section
6.2.
SECTION 7. COVENANTS.
The Borrower covenants and agrees that, so long as any Note is
outstanding hereunder, or any Commitment is available to or in use by the
Borrower hereunder, except to the extent compliance in any case is waived
in writing by the Required Banks:
Section 7.1. Credit Agreement Covenants. The Borrower agrees that it
will, for the benefit of the Banks, comply with, abide by, and be
restricted by all the agreements, covenants, obligations and undertakings
contained in the provisions of Section 7 of the Multicurrency Credit
Agreement, regardless of whether any Indebtedness is now or hereafter
remains outstanding thereunder or the Multicurrency Credit Agreement shall
have terminated, all of which provisions, together with the related
definitions, exhibits and ancillary provisions, are incorporated herein by
reference, mutatis mutandis, and made a part hereof to the same extent and
with the same force and effect as if the same had been herein set forth in
their entirety, and will be deemed to continue in effect for the benefit of
the Banks irrespective of whether the Multicurrency Credit Agreement
remains in effect, and without regard or giving effect to any amendment or
modification to such provisions or any waiver of compliance therewith, no
such amendment, modification or waiver of the provisions thereof as
incorporated herein unless consented to in writing by the Required Banks.
References in the Multicurrency Credit Agreement to (a) "Required Banks";
(b) the "Agent"; (c) "any Bank", "such Bank", the Banks" or "each
Bank"; (d) "Default"; (e) "Event of Default"; (f) "this Agreement"; and (g)
"Credit Documents"; shall, for the purposes of their incorporation into
this Agreement, be deemed references to (a) the Required Lenders; (b) the
Agent; (c) any Bank, such Bank, the Banks or each Bank, respectively; (d) a
Default hereunder; (e) one Event of Default hereunder (f) this Agreement;
and (g) the Credit Documents.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
Section 8.1. Events of Default. Any one or more of the following
shall constitute an Event of Default:
(a) default (x) in the payment when due of the principal
amount of any Loan or (y) for a period of three (3) days in the payment
when due of interest or of any other Obligation;
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(b) default by the Borrower or any Subsidiary in the
observance or performance of any covenant set forth in the first sentence
of Section 7.1, or Section 7.6(c), 7.9 through 7.12, or 7.14 through 7.18
of the Multicurrency Credit Agreement as incorporated herein;
(c) default by the Borrower or any Subsidiary in the
observance or performance of any provision hereof or of any other Credit
Document not mentioned in (a) or (b) above, which is not remedied within
thirty (30) days after notice thereof to the Borrower by the Agent (acting
at the request of any Bank);
(d) (i) failure to pay when due Indebtedness in an aggregate
principal amount of $1,000,000 or more of the Borrower or any Subsidiary or
(ii) default shall occur under one or more indentures, agreements or other
instruments under which any Indebtedness of the Borrower or any Subsidiary
in an aggregate principal amount of $1,000,000 or more is outstanding and
such default shall continue for a period of time sufficient to permit the
holder or beneficiary of such Indebtedness or a trustee therefor to cause
the acceleration of the maturity of any such Indebtedness or any mandatory
unscheduled prepayment, purchase or funding thereof;
(e) any representation or warranty made herein or in any
other Credit Document by the Borrower or any Subsidiary, or in any
statement or certificate furnished pursuant hereto or pursuant to any other
Credit Document by the Borrower or any Subsidiary, or in connection with
any Credit Document, shall be untrue in any material respect as of the date
of the issuance or making, or deemed making or issuance, thereof;
(f) the Borrower or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, or any analogous action is taken under any
other applicable law relating to bankruptcy or insolvency, (ii) fail to
pay, or admit in writing its inability to pay, its debts generally as they
become due, (iii) make an assignment for the benefit of creditors, (iv)
apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for
it or any substantial part of its Property, (v) institute any proceeding
seeking to have entered against it an order for relief under the United
States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail
within the time allowed therefor to file an answer or other pleading
denying the material allegations of any such proceeding filed against it,
(vi) take any corporate action (such as the passage by the Borrower's board
of directors of a resolution) in furtherance of any matter described in
parts (i)-(v) above, or (vii) fail to contest in good faith any appointment
or proceeding described in Section 8.1(g) hereof;
(g) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Borrower or any Subsidiary or
any substantial part of any of their Property, or a proceeding described in
Section 8.1(f)(v) shall be instituted against the
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Borrower or any Subsidiary, and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a
period of sixty (60) days;
(h) the Borrower or any Subsidiary shall fail within thirty
(30) days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $2,500,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith in a manner that
stays execution thereon;
(i) the Borrower or any other member of the Controlled Group
shall fail to pay when due an amount or amounts aggregating in excess of
$200,000 which it shall have become liable to pay to the PBGC or to a Plan
under Title IV of ERISA; or notice of intent to terminate a Plan or Plans
having aggregate Unfunded Vested Liabilities in excess of $200,000
(collectively, a "Material Plan") shall be filed under Title IV of ERISA by
the Borrower or any Subsidiary or any other member of the Controlled Group,
any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any Material Plan against
the Borrower or any other member of the Controlled Group to enforce Section
515 or 4219(c)(5) of ERISA and such proceeding shall not have been
dismissed within thirty (30) days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating
that any Material Plan must be terminated; or
(j) the Borrower or any Subsidiary, or any Person acting on
behalf of the Borrower or a Subsidiary, or any governmental authority
challenges the validity of any Credit Document or the Borrower's or a
Subsidiary's obligations thereunder or any Credit Document ceases to be in
full force and effect; or
(k) a Change of Control shall have occurred.
Section 8.2. Non-Bankruptcy Defaults. When any Event of Default other
than those described in subsections (f) or (g) of Section 8.1 hereof has
occurred and is continuing, the Agent shall, by written notice to the
Borrower: (a) if so directed by the Required Banks, terminate the remaining
Commitments and all other obligations of the Banks hereunder on the date
stated in such notice (which may be the date thereof); and (b) if so
directed by the Required Banks, declare the principal of and the accrued
interest on all outstanding Notes and all other amounts due under the
Credit Documents to be forthwith due and payable and thereupon all
outstanding Notes, including both principal and interest thereon, shall be
and become immediately due and payable together with all other amounts
payable under the Credit Documents without further demand, presentment,
protest or notice of any kind. The Agent, after giving notice to the
Borrower pursuant to Section 8.1(c) or this Section 8.2, shall also
promptly send a copy of such notice to the other Banks, but the failure to
do so shall not impair or annul the effect of such notice.
Section 8.3. Bankruptcy Defaults. When any Event of Default described
in subsections (f) or (g) of Section 8.1 hereof has occurred and is
continuing, then all outstanding
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Notes shall immediately become due and payable together with all other
amounts payable under the Credit Documents without presentment, demand,
protest or notice of any kind, and the obligation of the Banks to extend
further credit pursuant to any of the terms hereof shall immediately
terminate.
Section 8.4. Notice of Default. The Agent shall give notice to the
Borrower under Section 8.1(c) hereof promptly upon being requested to do so
by any Bank and shall thereupon notify all the Banks thereof.
Section 8.5. Expenses. The Borrower agrees to pay to the Agent and
each Bank, and any other holder of any Note outstanding hereunder, all
expenses reasonably incurred or paid by the Agent and such Bank or any such
holder, including reasonable attorneys' fees and court costs, in connection
with any Default or Event of Default by the Borrower hereunder or in
connection with the enforcement of any of the Credit Documents.
SECTION 9. CHANGE IN CIRCUMSTANCES.
Section 9.1. Change of Law. Notwithstanding any other provisions of
this Agreement or any Note, if at any time after the date hereof any change
in applicable law or regulation or in the interpretation thereof makes it
unlawful for any Bank to make or continue to maintain Eurocurrency Loans or
to perform its obligations as contemplated hereby, such Bank shall promptly
give notice thereof to the Borrower and such Bank's obligations to make or
maintain Eurocurrency Loans under this Agreement shall terminate until it
is no longer unlawful for such Bank to make or maintain Eurocurrency Loans.
The Borrower shall prepay on demand the outstanding principal amount of any
such affected Eurocurrency Loans, together with all interest accrued
thereon at a rate per annum equal to the interest rate applicable to such
Loan; provided, however, subject to all of the terms and conditions of this
Agreement, the Borrower may then elect to borrow the principal amount of
the affected Eurocurrency Loans from such Bank by means of Domestic Rate
Loans from such Bank, which Domestic Rate Loans shall not be made ratably
by the Banks but only from such affected Bank.
Section 9.2. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest
Period for any Borrowing of Eurocurrency Loans:
(a) the Agent determines that deposits in U.S. Dollars (in
the applicable amounts) are not being offered to it in the eurocurrency
interbank market for such Interest Period, or that by reason of
circumstances affecting the interbank eurocurrency market adequate and
reasonable means do not exist for ascertaining the applicable LIBOR, or
(b) Banks having 51% or more of the aggregate amount of the
Commitment reasonably determine and so advise the Agent that LIBOR as
reasonably determined by the Agent will not adequately and fairly reflect
the cost to such Banks or Bank of funding their or its Eurocurrency Loans
or Loan for such Interest Period,
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then the Agent shall forthwith give notice thereof to the Borrower
and the Banks, whereupon until the Agent notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the
obligations of the Banks or of the relevant Bank to make Eurocurrency Loans
in the currency so affected shall be suspended; provided that such
suspension shall have no effect on any Eurocurrency Loan then outstanding.
Section 9.3. Increased Cost and Reduced Return. (a) If, on or after
the date hereof, the adoption of any applicable law, rule or regulation, or
any change therein, or any change 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 Bank (or its Lending Office) with any request or directive (whether or
not having the force of law but, if not having the force of law, compliance
with which is customary in the relevant jurisdiction) of any such
authority, central bank or comparable agency:
(i) shall subject any Bank (or its Lending Office) to any
tax, duty or other charge with respect to its Eurocurrency Loans, its Notes
or its obligation to make Eurocurrency Loans or shall change the basis of
taxation of payments to any Bank (or its Lending Office) of the principal
of or interest on its Eurocurrency Loans, or any other amounts due under
this Agreement in respect of its Eurocurrency Loans, or its obligation to
make Eurocurrency Loans (except for changes in the rate of tax on the
overall net income or profits of such Bank or its Lending Office imposed by
the jurisdiction in which such Bank or its lending office is incorporated
in which such Bank's principal executive office or Lending Office is
located); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit, capital or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding with respect to any Eurocurrency
Loans any such requirement included in an applicable Eurocurrency Reserve
Percentage) against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Lending Office) or shall impose on any
Bank (or its Lending Office) or on the interbank market any other condition
affecting its Eurocurrency Loans, its Notes or its obligation to make
Eurocurrency Loans;
and the result of any of the foregoing is to increase the cost to such Bank
(or its Lending Office) of making or maintaining any Eurocurrency Loan or
to reduce the amount of any sum received or receivable by such Bank (or its
Lending Office) under this Agreement or under its Notes with respect
thereto, by an amount deemed by such Bank to be material, then, within
fifteen (15) days after demand by such Bank (with a copy to the Agent), the
Borrower shall be obligated to pay to such Bank such additional amount or
amounts as will compensate such Bank for such increased cost or reduction;
provided, however, that such Bank shall promptly notify the Borrower of an
event which might cause it to seek compensation, and the Borrower shall be
obligated to pay only such compensation which is incurred or which arises
after the date ninety (90) days prior to the date such notice is given. In
the event any law, rule, regulation or interpretation described above is
revoked, declared invalid or inapplicable or is otherwise rescinded, and as
a result thereof a Bank is determined to be entitled to a refund from the
applicable authority for any
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amount or amounts which were paid or reimbursed by Borrower to such Bank
hereunder, such Bank shall refund such amount or amounts to Borrower
without interest.
(b) Each Bank that determines to seek compensation under this
Section 9.3 shall notify the Borrower and the Agent of the circumstances
that entitle the Bank to such compensation pursuant to this Section 9.3 and
will designate a different Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in
the reasonable judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate of any Bank claiming compensation under this Section
9.3 and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods.
Section 9.4. Lending Offices. Each Bank may, at its option, elect to
make its Loans hereunder at the branch, office or affiliate specified on
the appropriate signature page hereof (each a "Lending Office") for each
type of Loan available hereunder or at such other of its branches, offices
or affiliates as it may from time to time elect and designate in a written
notice to the Borrower and the Agent.
Section 9.5. Discretion of Bank as to Manner of Funding.
Notwithstanding any other provision of this Agreement, each Bank shall be
entitled to fund and maintain its funding of all or any part of its Loans
in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if
each Bank had actually funded and maintained each Eurocurrency Loan through
the purchase of deposits of U.S. Dollars in the eurocurrency interbank
market having a maturity corresponding to such Loan's Interest Period and
bearing an interest rate equal to LIBOR for such Interest Period.
SECTION 10. THE AGENT.
Section 10.1. Appointment and Authorization of Agent. Each Bank
hereby appoints Harris Trust and Savings Bank as the Agent under the Credit
Documents and hereby authorizes the Agent to take such action as Agent on
its behalf and to exercise such powers under the Credit Documents as are
delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto.
Section 10.2. Agent and its Affiliates. The Agent shall have the same
rights and powers under this Agreement and the other Credit Documents as
any other Bank and may exercise or refrain from exercising the same as
though it were not the Agent, and the Agent and its affiliates may accept
deposits from, lend money to, and generally engage in any kind of business
with the Borrower or any Affiliate of the Borrower as if it were not the
Agent under the Credit Documents. The term "Bank" as used herein and in all
other Credit Documents, unless the context otherwise clearly requires,
includes the Agent in its individual capacity as a Bank. References in
Section 1 hereof to the Agent's Loans, or to the amount owing to the Agent
for which an interest rate is being determined, refer to the Agent in its
individual capacity as a Bank.
Section 10.3. Action by Agent. If the Agent receives from the
Borrower a written notice of an Event of Default pursuant to Section 7.6(c)
hereof, the Agent shall promptly give each of
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the Banks written notice thereof. The obligations of the Agent under the
Credit Documents are only those expressly set forth therein. Without
limiting the generality of the foregoing, the Agent shall not be required
to take any action hereunder with respect to any Default or Event of
Default, except as expressly provided in Sections 8.2 and 8.5. In no event,
however, shall the Agent be required to take any action in violation of
applicable law or of any provision of any Credit Document, and the Agent
shall in all cases be fully justified in failing or refusing to act
hereunder or under any other Credit Document unless it shall be first
indemnified to its reasonable satisfaction by the Banks against any and all
costs, expense, and liability which may be incurred by it by reason of
taking or continuing to take any such action. The Agent shall be entitled
to assume that no Default or Event of Default exists unless notified to the
contrary by a Bank or the Borrower. In all cases in which this Agreement
and the other Credit Documents do not require the Agent to take certain
actions, the Agent shall be fully justified in using its discretion in
failing to take or in taking any action hereunder and thereunder.
Section 10.4. Consultation with Experts. The Agent may consult with
legal counsel, independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken by
it in good faith in accordance with the advice of such counsel, accountants
or experts.
Section 10.5. Liability of Agent; Credit Decision. Neither the Agent
nor any of its directors, officers, agents, or employees shall be liable
for any action taken or not taken by it in connection with the Credit
Documents (i) with the consent or at the request of the Required Banks or
(ii) in the absence of its own gross negligence or willful misconduct.
Neither the Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or
verify (i) any statement, warranty or representation made in connection
with this Agreement, any other Credit Document or any Credit Event; (ii)
the performance or observance of any of the covenants or agreements of the
Borrower or any Guarantor contained herein or in any other Credit Document;
(iii) the satisfaction of any condition specified in Section 6 hereof,
except receipt of items required to be delivered to the Agent; or (iv) the
validity, effectiveness, genuineness, enforceability, perfection, value,
worth or collectibility hereof or of any other Credit Document or of any
other documents or writing furnished in connection with any Credit
Document; and the Agent makes no representation of any kind or character
with respect to any such matter mentioned in this sentence. The Agent may
execute any of its duties under any of the Credit Documents by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Banks, the Borrower, or any Guarantor or any other Person for the default
or misconduct of any such agents or attorneys-in-fact selected with
reasonable care. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, other document or statement
(whether written or oral) reasonably believed by it to be genuine or to be
sent by the proper party or parties. In particular and without limiting any
of the foregoing, the Agent shall have no responsibility for confirming the
accuracy of any Compliance Certificate or other document or instrument
received by it under the Credit Documents. The Agent may treat the payee of
any Note as the holder thereof until written notice of transfer shall have
been filed with the Agent signed by such payee in form satisfactory to the
Agent. Each Bank acknowledges that it has independently and without
reliance on the Agent or any other Bank, and based upon such information,
investigations and inquiries as it deems appropriate, made its own credit
analysis and decision to extend credit to the Borrower in the
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manner set forth in the Credit Documents. It shall be the responsibility of
each Bank to keep itself informed as to the creditworthiness of the
Borrower and the Guarantors, and the Agent shall have no liability to any
Bank with respect thereto.
Section 10.6. Indemnity. The Banks shall ratably, in accordance with
their respective Percentages, indemnify and hold the Agent, and its
directors, officers, employees, agents and representatives harmless from
and against any liabilities, losses, costs or expenses suffered or incurred
by it under any Credit Document or in connection with the transactions
contemplated thereby, regardless of when asserted or arising, except to the
extent they are promptly reimbursed for the same by the Borrower and except
to the extent that any event giving rise to a claim was caused by the gross
negligence or willful misconduct of the party seeking to be indemnified.
The obligations of the Banks under this Section 10.6 shall survive
termination of this Agreement.
Section 10.7. Resignation of Agent and Successor Agent. The Agent may
resign at any time by giving written notice thereof to the Banks and the
Borrower. Upon any such resignation of the Agent, the Required Banks shall
have the right to appoint a successor Agent with the consent of the
Borrower. If no successor Agent shall have been so appointed by the
Required Banks, and shall have accepted such appointment, within thirty
(30) days after the retiring Agent's giving of notice of resignation, then
the retiring Agent may, on behalf of the Banks and with the consent of the
Borrower, appoint a successor Agent, which shall be any Bank hereunder or
any commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus
of at least $200,000,000. Upon the acceptance of its appointment as the
Agent hereunder, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring or removed Agent
under the Credit Documents, and the retiring Agent shall be discharged from
its duties and obligations thereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Section 10 and all
protective provisions of the other Credit Documents shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent.
SECTION 11. THE GUARANTEES.
Section 11.1. The Guarantees. To induce the Banks to provide the
credits described herein and in consideration of benefits expected to
accrue to each Guarantor by reason of the Commitments and for other good
and valuable consideration, receipt of which is hereby acknowledged, each
Guarantor hereby unconditionally and irrevocably guarantees jointly and
severally to the Agent, the Banks, and each other holder of an Obligation,
the due and punctual payment of all present and future indebtedness of the
Borrower evidenced by or arising out of the Credit Documents, including,
but not limited to, the due and punctual payment of principal of and
interest on the Notes and the due and punctual payment of all other
Obligations now or hereafter owed by the Borrower under the Credit
Documents as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, according to the terms
hereof and thereof. In case of failure by the Borrower punctually to pay
any indebtedness or other Obligations guaranteed hereby, each Guarantor
hereby unconditionally agrees jointly and severally to make such payment or
to cause such payment to be made punctually as and when the same shall
become due and payable, whether at stated maturity, by acceleration or
otherwise, and as if such payment were made by the Borrower.
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Section 11.2. Guarantee Unconditional. The obligations of each
Guarantor as a guarantor under this Section 11 shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not
be released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower or of any other
Guarantor under this Agreement or any other Credit Document or by operation
of law or otherwise;
(b) any modification or amendment of or supplement to this
Agreement or any other Credit Document;
(c) any change in the corporate existence, structure or
ownership of, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting, the Borrower, any other Guarantor, or any of
their respective assets, or any resulting release or discharge of any
obligation of the Borrower or of any other Guarantor contained in any
Credit Document;
(d) the existence of any claim, set-off or other rights which
the Guarantor may have at any time against the Agent, any Bank or any other
Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or
demand or any exercise of, or failure to exercise, any rights or remedies
against the Borrower, any other Guarantor or any other Person or Property;
(f) any application of any sums by whomsoever paid or
howsoever realized to any obligation of the Borrower, regardless of what
obligations of the Borrower remain unpaid;
(g) any invalidity or unenforceability relating to or against
the Borrower or any other Guarantor for any reason of this Agreement or of
any other Credit Document or any provision of applicable law or regulation
purporting to prohibit the payment by the Borrower or any other Guarantor
of the principal of or interest on any Note or any other amount payable by
it under the Credit Documents; or
(h) any other act or omission to act or delay of any kind by
the Agent, any Bank or any other Person or any other circumstance
whatsoever that might, but for the provisions of this paragraph, constitute
a legal or equitable discharge of the obligations of the Guarantor under
this Section 11.
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances. Each Guarantor's obligations under this Section 11
shall remain in full force and effect until the Commitments are terminated
and the principal of and interest on the Notes and all other amounts
payable by the Borrower under this Agreement and all other Credit Documents
shall have been paid in full. If at any time any payment of the principal
of or interest on any Note or any other amount payable by the Borrower
under the Credit Documents is rescinded or
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must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Borrower or of a Guarantor, or otherwise, each
Guarantor's obligations under this Section 11 with respect to such payment
shall be reinstated at such time as though such payment had become due but
had not been made at such time.
Section 11.4. Waivers. (a) General. Each Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided
for herein, as well as any requirement that at any time any action be taken
by the Agent, any Bank or any other Person against the Borrower, another
Guarantor or any other Person.
(b) Subrogation and Contribution. Unless and until the Obligations
have been fully paid and satisfied and the Commitments have terminated,
each Guarantor hereby irrevocably waives any claim or other right it may
now or hereafter acquire against the Borrower or any other Guarantor that
arises from the existence, payment, performance or enforcement of such
Guarantor's obligations under this Section 11 or any other Credit Document,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, or any right to participate in
any claim or remedy of the Agent, any Bank or any other holder of an
Obligation against the Borrower or any other Guarantor whether or not such
claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive
from the Borrower or any other Guarantor directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim or other right.
Section 11.5. Limit on Recovery. Notwithstanding any other provision
hereof, the right to recovery of the holders of the Obligations against
each Guarantor under this Section 11 shall not exceed $1.00 less than the
amount which would render such Guarantor's obligations under this Section
11 void or voidable under applicable law, including without limitation
fraudulent conveyance law.
Section 11.6. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower under this Agreement or any
other Credit Document is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of this Agreement or the other Credit
Documents shall nonetheless be payable jointly and severally by the
Guarantors hereunder forthwith on demand by the Agent made at the request
of the Required Banks.
SECTION 12. MISCELLANEOUS.
Section 12.1. Withholding Taxes. (a) Payments Free of Withholding.
Except as otherwise required by law and subject to Section 12.1(b) hereof,
each payment by the Borrower and each Guarantor under this Agreement or the
other Credit Documents shall be made without withholding for or on account
of any present or future taxes (other than overall net income taxes on the
recipient) imposed by or within the jurisdiction in which the Borrower or
such Guarantor is domiciled, any jurisdiction from which the Borrower or
such Guarantor makes any payment, or (in each case) any political
subdivision or taxing authority thereof or therein. If any such withholding
is so required, the Borrower or relevant Guarantor shall make the
withholding, pay
-25-
<PAGE>
the amount withheld to the appropriate governmental authority before
penalties attach thereto or interest accrues thereon and forthwith pay such
additional amount as may be necessary to ensure that the net amount
actually received by each Bank and the Agent free and clear of such taxes
(including such taxes on such additional amount) is equal to the amount
which that Bank or the Agent (as the case may be) would have received had
such withholding not been made. If the Agent or any Bank pays any amount in
respect of any such taxes, penalties or interest the Borrower shall
reimburse the Agent or that Bank for that payment on demand in the currency
in which such payment was made. If the Borrower or any Guarantor pays any
such taxes, penalties or interest, it shall deliver official tax receipts
evidencing that payment or certified copies thereof to the Bank or Agent on
whose account such withholding was made (with a copy to the Agent if not
the recipient of the original) on or before the thirtieth day after
payment. If any Bank or the Agent determines it has received or been
granted a credit against or relief or remission for, or repayment of, any
taxes paid or payable by it because of any taxes, penalties or interest
paid by the Borrower or any Guarantor and evidenced by such a tax receipt,
such Bank or Agent shall, to the extent it can do so without prejudice to
the retention of the amount of such credit, relief, remission or repayment,
pay to the Borrower or such Guarantor as applicable, such amount as such
Bank or Agent determines is attributable to such deduction or withholding
and which will leave such Bank or Agent (after such payment) in no better
or worse position than it would have been in if the Borrower had not been
required to make such deduction or withholding. Nothing in this Agreement
shall interfere with the right of each Bank and the Agent to arrange its
tax affairs in whatever manner it thinks fit nor oblige any Bank or the
Agent to disclose any information relating to its tax affairs or any
computations in connection with such taxes.
(b) U.S. Withholding Tax Exemptions. Each Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
shall submit to the Borrower and the Agent on or before the earlier of the
date the initial Borrowing is made hereunder and thirty (30) days after the
date hereof, two duly completed and signed copies of either Form 1001
(relating to such Bank and entitling it to a complete exemption from
withholding under the Code on all amounts to be received by such Bank,
including fees, pursuant to the Credit Documents and the Loans) or Form
4224 (relating to all amounts to be received by such Bank, including fees,
pursuant to the Credit Documents and the Loans) of the United States
Internal Revenue Service.
Thereafter and from time to time, each Bank shall submit to the
Borrower and the Agent such additional duly completed and signed copies of
one or the other of such Forms (or such successor forms as shall be adopted
from time to time by the relevant United States taxing authorities) as may
be (i) requested by the Borrower in a written notice, directly or through
the Agent, to such Bank and (ii) required under then-current United States
law or regulations to avoid or reduce United States withholding taxes on
payments in respect of all amounts to be received by such Bank, including
fees, pursuant to the Credit Documents or the Loans.
(c) Inability of Bank to Submit Forms. If any Bank determines, as a
result of any change in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to submit
to the Borrower or Agent any form or certificate that such Bank is
obligated to submit pursuant to subsection (b) of this Section 12.1. or
that such Bank is required to withdraw or cancel any such form or
certificate previously submitted or any such form or certificate otherwise
becomes ineffective or inaccurate, such Bank shall promptly notify the
Borrower and Agent of such fact and the Bank shall to that extent not be
obligated to provide
-26-
<PAGE>
any such form or certificate and will be entitled to withdraw or cancel any
affected form or certificate, as applicable.
Section 12.2. No Waiver of Rights. No delay or failure on the part of
the Agent or any Bank or on the part of the holder or holders of any Note
in the exercise of any power or right under any Credit Document shall
operate as a waiver thereof, nor as an acquiescence in any default, nor
shall any single or partial exercise thereof preclude any other or further
exercise of any other power or right, and the rights and remedies hereunder
of the Agent, the Banks and the holder or holders of any Notes are
cumulative to, and not exclusive of, any rights or remedies which any of
them would otherwise have.
Section 12.3. Non-Business Day. If any payment of principal or
interest on any Loan or of any other Obligation shall fall due on a day
which is not a Business Day, interest or fees (as applicable) at the rate,
if any, such Loan or other Obligation bears for the period prior to
maturity shall continue to accrue on such Obligation from the stated due
date thereof to but not including the next succeeding Business Day, on
which the same shall be payable.
Section 12.4. Documentary Taxes. The Borrower agrees that it will pay
any documentary, stamp or similar taxes payable in respect to any Credit
Document, including interest and penalties, in the event any such taxes are
assessed, irrespective of when such assessment is made and whether or not
any credit is then in use or available hereunder.
Section 12.5. Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall
survive the execution and delivery of this Agreement and the other Credit
Documents, and shall continue in full force and effect with respect to the
date as of which they were made as long as any credit is in use or
available hereunder.
Section 12.6. Survival of Indemnities. All indemnities and all other
provisions relative to reimbursement to the Banks of amounts sufficient to
protect the yield of the Banks with respect to the Loans, including, but
not limited to, Section 1.11, Section 9.3 and Section 12.15 hereof, shall
survive the termination of this Agreement and the other Credit Documents
and the payment of the Loans and all other Obligations.
Section 12.7. Sharing of Set-Off. Each Bank agrees with each other
Bank a party hereto that if such Bank shall receive and retain any payment,
whether by set-off or application of deposit balances or otherwise ("Set-
off"), on any of the Loans in excess of its ratable share of payments on
all such obligations then outstanding to the Banks, then such Bank shall
purchase for cash at face value, but without recourse, ratably from each of
the other Banks such amount of the Loans, held by each such other Banks (or
interest therein) as shall be necessary to cause such Bank to share such
excess payment ratably with all the other Banks; provided, however, that if
any such purchase is made by any Bank, and if such excess payment or part
thereof is thereafter recovered from such purchasing Bank, the related
purchases from the other Banks shall be rescinded ratably and the purchase
price restored as to the portion of such excess payment so recovered, but
without interest.
-27-
<PAGE>
Section 12.8. Notices. Except as otherwise specified herein, all
notices under the Credit Documents shall be in writing (including telecopy
or other electronic communication) and shall be given to a party hereunder
at its address or telecopier number set forth below or such other address
or telecopier number as such party may hereafter specify by notice to the
Agent and the Borrower, given by courier, by United States certified or
registered mail, or by other telecommunication device capable of creating a
written record of such notice and its receipt. Notices under the Credit
Documents to the Banks and the Agent shall be addressed to their respective
addresses, telecopier or telephone numbers set forth on the signature pages
hereof, and to the Borrower and the Guarantors to:
Jones Lang LaSalle Incorporated
200 East Randolph Street
Chicago, Illinois 60601
Attention: Brian P. Hake
Telecopy: (312) 228-0980
Telephone: (312) 228-2522
with a copy of notices of Defaults
and Events of Defaults to:
Hagan & Associates
200 East Randolph Street
Chicago, Illinois 60601
Attention: Robert K. Hagan
and Fritz E. Freidinger
Telecopy: (312) 228-2050
Telephone: (312) 228-0982
Each such notice, request or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section 12.8 or on the signature pages
hereof and a confirmation of receipt of such telecopy has been received by
the sender, (ii) if given by courier, when delivered, (iii) if given by
mail, three business days after such communication is deposited in the
mail, registered with return receipt requested, addressed as aforesaid or
(iv) if given by any other means, when delivered at the addresses specified
in this Section 12.8 or on the signature pages hereof; provided that any
notice given pursuant to Section 1 hereof shall be effective only upon
receipt.
Section 12.9. Counterparts. This Agreement may be executed in any
number of counterpart signature pages, and by the different parties on
different counterparts, each of which when executed shall be deemed an
original but all such counterparts taken together shall constitute one and
the same instrument.
Section 12.10. Successors and Assigns. This Agreement shall be
binding upon the Borrower and its successors and assigns, and shall inure
to the benefit of each of the Banks and the benefit of their respective
successors and assigns, including any subsequent holder of any Note. The
Borrower may not assign any of its rights or obligations under any Credit
Document without the written consent of all of the Banks.
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<PAGE>
Section 12.11. Participants. Each Bank shall have the right at its
own cost to grant participations (to be evidenced by one or more agreements
or certificates of participation) in the Loans made and/or Commitments held
by such Bank at any time and from time to time to one or more other
Persons; provided that no such participation shall relieve any Bank of any
of its obligations under this Agreement, and, provided, further that no
such participant shall have any rights under this Agreement except as
provided in this Section 12.11, and the Agent shall have no obligation or
responsibility to such participant. Any agreement pursuant to which such
participation is granted shall provide that the granting Bank shall retain
the sole right and responsibility to enforce the obligations of the
Borrower and Guarantors under this Agreement and the other Credit Documents
including, without limitation, the right to approve any amendment,
modification or waiver of any provision of the Credit Documents, except
that such agreement may provide that such Bank will not agree to any
modification, amendment or waiver of the Credit Documents that would reduce
the amount of or postpone any fixed date for payment of any Obligation in
which such participant has an interest or release (other than pursuant to
the terms hereof) any Guarantor from its guaranty of any Obligations. Any
party to which such a participation has been granted shall have the
benefits of Section 1.11 and Section 9.3 hereof.
Section 12.12. Assignment of Commitments by Banks. (a) Each Bank
shall have the right at any time, with the prior written consent of the
Borrower (which consent shall not be unreasonably withheld or delayed) and
the Agent, to assign all or any part of its Commitment (including the same
percentage of its Note, outstanding Loans) to one or more Persons; provided
that each such assignment is in an amount of at least $5,000,000 or the
entire Commitment of such Bank; provided further that (i) the consent of
the Borrower to any such assignment shall not be required during the
continuance of an Event of Default and (ii) neither the consent of the
Borrower nor of the Agent shall be required if the assignee is an Affiliate
of the assigning Bank.
Each such assignment shall set forth the assignee's address for
notices to be given under Section 12.8 hereof hereunder and its designated
Lending Office pursuant to Section 9.4 hereof. Upon any such assignment,
delivery to the Agent and the Borrower of an executed copy of such
assignment agreement and the forms referred to in Section 11.1 hereof, if
applicable, and, the payment of a $2,500 recordation fee to the Agent, the
assignee shall become a Bank hereunder, all Loans and the Commitment it
thereby holds shall be governed by all the terms and conditions hereof and
the Bank granting such assignment shall have its Commitment, and its
obligations and rights in connection therewith, reduced by the amount of
such assignment. At the time of the assignment the Borrower shall execute
and deliver to the assignor and/or assignee new Notes.
(b) Any Bank may at any time, without the consent of the
Borrower or Agent, assign all or a portion of its rights under the Credit
Documents to a Federal Reserve Bank; provided, however, that no such
assignment shall release the transferor Bank from its obligations hereunder
or cause such Federal Reserve Bank to become a "Bank" hereunder.
Section 12.13. Amendments. Any provision of the Credit Documents may
be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by (a) the Borrower, (b) the Required Banks, and (c)
if the rights or duties of the Agent are affected thereby, the Agent;
provided that:
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<PAGE>
(i) no amendment or waiver pursuant to this Section 12.13 shall
(A) increase or extend any Commitment of any Bank without the consent of
such Bank or (B) reduce the amount of or postpone any fixed date for
payment of any principal of or interest on any Loan or of any fee payable
hereunder without the consent of each Bank; and
(ii) no amendment or waiver pursuant to this Section 12.13
shall, unless signed by each Bank, change any provision of this Section
12.13, or the definition of Required Banks, or affect the number of Banks
required to take any action under the Credit Documents, or release (other
than pursuant to the terms hereof) any Guarantor from its guaranty of any
Obligations.
Section 12.14. Headings. Section headings used in this Agreement are
for reference only and shall not affect the construction of this Agreement.
Section 12.15. Legal Fees, Other Costs and Indemnification. The
Borrower agrees to pay all reasonable costs and expenses of the Agent in
connection with the preparation and negotiation of the Credit Documents,
including without limitation, the reasonable fees and disbursements of
Chapman and Cutler, counsel to the Agent, in connection with the
preparation and execution of the Credit Documents, and any amendment,
waiver or consent related hereto, whether or not the transactions
contemplated herein are consummated. The Borrower further agrees to
indemnify each Bank, the Agent, and their respective directors, officers
and employees, against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor, whether or not the indemnified Person
is a party thereto) which any of them may incur or reasonably pay arising
out of or relating to any Credit Document or any of the transactions
contemplated thereby or the direct or indirect application or proposed
application of the proceeds of any Loan, other than those which arise from
the gross negligence or willful misconduct of the party claiming
indemnification. The Borrower, upon demand by the Agent or a Bank at any
time, shall reimburse the Agent or Bank for any reasonable legal or other
expenses incurred in connection with investigating or defending against any
of the foregoing except if the same is directly due to the gross negligence
or willful misconduct of the party to be indemnified.
Section 12.16. Set Off. 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 and during the continuance of any Event of
Default, each Bank and each subsequent holder of any Note is hereby
authorized by the Borrower and each Guarantor at any time or from time to
time, without notice to the Borrower, to the Guarantors 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 or
other accounts of the Borrower or any Guarantor in a fiduciary capacity,
and in whatever currency denominated) and any other indebtedness at any
time held or owing by that Bank or that subsequent holder to or for the
credit or the account of the Borrower or any Guarantor, whether or not
matured, against and on account of the obligations and liabilities of the
Borrower or any Guarantor to that Bank or that subsequent holder under the
Credit Documents, including, but not limited to, all claims of any nature
or description arising out of or connected with the Credit Documents,
irrespective of
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<PAGE>
whether or not (a) that Bank or that subsequent holder shall have made any
demand hereunder or (b) the principal of or the interest on the Loans or
Notes and 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.
Section 12.17. Entire Agreement. The Credit Documents constitute the
entire understanding of the parties thereto with respect to the subject
matter thereof and any prior or contemporaneous agreements, whether written
or oral, with respect thereto are superseded thereby.
Section 12.18. Governing Law. This Agreement and the other Credit
Documents, and the rights and duties of the parties hereto, shall be
construed and determined in accordance with the internal laws of the State
of Illinois.
Section 12.19. Submission to Jurisdiction; Waiver of Jury Trial. The
Borrower and each Guarantor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Northern District of Illinois
and of any Illinois State court sitting in the City of Chicago for purposes
of all legal proceedings arising out of or relating to this Agreement, the
other Credit Documents or the transactions contemplated hereby or thereby.
The Borrower and each Guarantor irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been brought in
an inconvenient forum. THE BORROWER, EACH GUARANTOR, THE AGENT, AND EACH
BANK HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY.
Section 12.20. Limitation of Liability. In addition to, and not in
limitation of, any limitation on liability provided by law or by any
contract, agreement, instrument or document, the liability of each
Guarantor that is a partnership shall be limited to the assets of such
Guarantor, and no present or future partner of any such Guarantor shall
have any personal liability under this Agreement, except if such partner is
itself a Guarantor or the Borrower.
Section 12.21. Confidentiality. Each Bank agrees to keep confidential
any confidential written information provided to it by or on behalf of the
Borrower pursuant to or in connection with this Agreement; provided that
nothing herein shall prevent any Bank from disclosing any such information
(i) to the Agent or any other Bank, (ii) to any participant or assignee or
prospective participant or assignee so long as such participant or assignee
or prospective participant or assignee agrees in writing to the requirement
that such information be kept confidential in the manner contemplated by
this Section 12.21, (iii) to its employees involved in the administration
of this Agreement, directors, attorneys, accountants and other professional
advisors (each of which shall be instructed to hold the same in
confidence), (iv) in response to the request or demand of any governmental
authority, (v) in response to any order of any court or other governmental
authority or as may otherwise be required pursuant to any law, regulation
or legal process provided, however, that such Bank, to the extent legally
permitted to do so, will use its best efforts to notify the Company prior
to any disclosure of information contemplated by this
-31-
<PAGE>
subparagraph (v), (vi) which has been publicly disclosed other than in
breach of this Agreement, or (vii) in connection with the exercise of any
remedy hereunder or under any Credit Document.
-32-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date
first above written.
JONES LANG LASALLE INCORPORATED
By Brian P. Hake
____________________________________
Title Vice President and Treasurer
________________________________
JONES LANG LASALLE CO-INVESTMENT,
INC., as Guarantor
By Brian P. Hake
____________________________________
Title Vice President and Treasurer
________________________________
LP INTERNATIONAL, A LIMITED LIABILITY
COMPANY, as Guarantor
By Brian P. Hake
____________________________________
Title Vice President and Treasurer
________________________________
JONES LANG LASALLE INTERNATIONAL,
INC., as Guarantor
By Brian P. Hake
____________________________________
Title Vice President and Treasurer
________________________________
LASALLE INVESTMENT MANAGEMENT, INC.,
as Guarantor
By Brian P. Hake
____________________________________
Title Vice President and Treasurer
________________________________
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<PAGE>
JONES LANG LASALLE MANAGEMENT
SERVICES, INC., as Guarantor
By Brian P. Hake
____________________________________
Its Vice President and Treasurer
__________________________________
JONES LANG LASALLE FINANCIAL &
CORPORATE SERVICES, INC., as Guarantor
By Brian P. Hake
____________________________________
Title Vice President and Treasurer
________________________________
LASALLE HOTEL ADVISORS, INC., as
Guarantor
By Vaugh Hooks
____________________________________
Title Vice President and
Assistant Treasurer
________________________________
JONES LANG WOOTEN USA, INC., as
Guarantor
By Brian P. Hake
____________________________________
Title Vice President and Treasurer
________________________________
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<PAGE>
Accepted and Agreed to as of the day and year last above written.
Address and Amount of Commitments:
Address: HARRIS TRUST AND SAVINGS BANK, in its
individual capacity as a Bank and as Agent
111 West Monroe Street
Chicago, Illinois 60690
Attn.: Scott Geik
By Scott Geik
Telecopy: (312) 461-2591 ----------------------------------------
Telephone: (312) 461-2801 Its Managing Director
__________________________________
Commitment: $15,000,000
Lending Offices:
Domestic Rate Loans:
111 West Monroe Street
Chicago, Illinois 60690
Attn.: Scott Geik
Eurocurrency Loans:
111 West Monroe Street
Chicago, Illinois 60690
Attn.: Scott Geik
-35-
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
Address:
One First National By Lynn Braun
Plaza, Suite 0151
Chicago, Illinois 60670 Its Corporate Banking Officer
Attn: Lynn Braun __________________________________
Telecopy: (312) 732-1117
Telephone: (312) 732-3827
Commitment: $15,000,000
Lending Offices:
Domestic Rate Loans:
One First National Plaza, Suite 0151
Chicago, Illinois 60670
Attn: Lynn Braun
Eurocurrency Loans:
One First National Plaza, Suite 0151
Chicago, Illinois 60670
Attn: Lynn Braun
-36-
<PAGE>
THE CHASE MANHATTAN BANK
Address:
380 Madison Avenue, By Charles E. Hoagland
10th Floor ____________________________________
New York, New York 10017 Its Vice President
Attn.: Charles Hoagland __________________________________
Telecopy: (312) 622-3395
Telephone: (312) 622-3369
Commitment: $15,000,000
Lending Offices:
Domestic Rate Loans:
380 Madison Avenue, 10th Floor
New York, New York 10017
Attn.: Charles Hoagland
Eurocurrency Loans:
380 Madison Avenue, 10th Floor
New York, New York 10017
Attn.: Charles Hoagland.
<PAGE>
EXHIBIT A
NOTE
________________, _____
FOR VALUE RECEIVED, the undersigned, Jones Lang LaSalle Incorporated,
a Maryland corporation (the "Borrower"), promises to pay to the order of
________________________ (the "Bank") on the Termination Date of the
hereinafter defined Credit Agreement, at the principal office of Harris
Trust and Savings Bank, in Chicago, Illinois, in the currency of such Loan
in accordance with Section 3.1 of the Credit Agreement, the aggregate
unpaid principal amount of all Loans made by the Bank to the Borrower
pursuant to the Credit Agreement, together with interest on the principal
amount of each Loan from time to time outstanding hereunder at the rates,
and payable in the manner and on the dates, specified in the Credit
Agreement.
The Bank shall record on its books or records or on a schedule
attached to this Note, which is a part hereof, each Loan made by it
pursuant to the Credit Agreement, together with all payments of principal
and interest and the principal balances from time to time outstanding
hereon, whether the Loan is a Domestic Rate Loan or a Eurocurrency Loan,
and the interest rate and Interest Period applicable thereto, provided that
prior to the transfer of this Note all such amounts shall be recorded on a
schedule attached to this Note. The record thereof, whether shown on such
books or records or on a schedule to this Note, shall be prima facie
evidence of the same, provided, however, that the failure of the Bank to
record any of the foregoing or any error in any such record shall not limit
or otherwise affect the obligation of the Borrower to repay all Loans made
to it pursuant to the Credit Agreement together with accrued interest
thereon.
This Note is one of the Notes referred to in the Credit Agreement
dated as of May 4, 1999, among the Borrower, the Guarantors party thereto,
Harris Trust and Savings Bank, as Agent, and the Banks party thereto (as
amended from time to time, the "Credit Agreement"), and this Note and the
holder hereof are entitled to all the benefits provided for thereby or
referred to therein, to which Credit Agreement reference is hereby made for
a statement thereof. All defined terms used in this Note, except terms
otherwise defined herein, shall have the same meaning as in the Credit
Agreement. This Note shall be governed by and construed in accordance with
the internal laws of the State of Illinois.
Prepayments may be made hereon and this Note may be declared due
prior to the expressed maturity hereof, all in the events, on the terms and
in the manner as provided for in the Credit Agreement.
-2-
<PAGE>
The Borrower hereby waives demand, presentment, protest or notice of
any kind hereunder.
JONES LANG LASALLE INCORPORATED
By ____________________________________
Its __________________________________.
<PAGE>
EXHIBIT B
SUBSIDIARY GUARANTEE AGREEMENT
________________, _____
HARRIS TRUST AND SAVINGS
BANK, as Agent for the Banks
party to the Credit Agreement
dated as of May 4, 1999 among
Jones Lang LaSalle
Incorporated, certain
Guarantors, such Banks and
such Agent (the "Credit
Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein. The undersigned, [name of
Subsidiary Guarantor], a [jurisdiction of incorporation] corporation,
hereby elects to be a "Guarantor" for all purposes of the Credit Agreement,
effective from the date hereof. The undersigned confirms that the
representations and warranties set forth in Section 5 of the Credit
Agreement are true and correct as to the undersigned as of the date hereof.
Without limiting the generality of the foregoing, the undersigned
hereby agrees to perform all the obligations of a Guarantor under, and to
be bound in all respects by the terms of, the Credit Agreement, including
without limitations Section 11 thereof, to the same extent and with the
same force and effect as if the undersigned were a direct signatory
thereto.
This Agreement shall be construed in accordance with and governed by
the internal laws of the State of Illinois.
-2-
<PAGE>
Very truly yours,
[NAME OF SUBSIDIARY GUARANTOR]
By ____________________________________
Name___________________________________
Title _________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH
REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 38,664
<SECURITIES> 0
<RECEIVABLES> 235,026
<ALLOWANCES> 12,964
<INVENTORY> 0
<CURRENT-ASSETS> 315,384
<PP&E> 108,492
<DEPRECIATION> (45,365)
<TOTAL-ASSETS> 848,288
<CURRENT-LIABILITIES> 218,611
<BONDS> 0
<COMMON> 307
0
0
<OTHER-SE> 297,836
<TOTAL-LIABILITY-AND-EQUITY> 848,288
<SALES> 0
<TOTAL-REVENUES> 280,565
<CGS> 0
<TOTAL-COSTS> 380,823
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,537
<INTEREST-EXPENSE> 7,345
<INCOME-PRETAX> (112,140)
<INCOME-TAX> (19,021)
<INCOME-CONTINUING> (93,119)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,119)
<EPS-BASIC> (4.52)
<EPS-DILUTED> (4.52)
</TABLE>
EXHIBIT 99.1
- ------------
JONES LANG
LASALLE NEWS RELEASE
200 East Randolph Drive,
Chicago, Illinois 60601
22 Hanover Square
London W1A 2BN
Contact: Bill Sullivan
Chief Financial Officer
312/228-2685
JONES LANG LASALLE REPORTS SECOND QUARTER RESULTS
Continues to Expect 1999 Full Year Adjustment Proforma EPS
Of At Least $1.00 Per Share
Outlines Plan to Achieve $10 Million in Synergies
by Streamlining U.S. Operations
CHICAGO AND LONDON, JULY 30, 1999 -- Jones Lang LaSalle (NYSE: JLL)
today announced an adjusted proforma net loss of $4.7 million, or $0.15 per
share, for its second quarter ended June 30, 1999, on adjusted proforma
revenues of $179.1 million. When combined with the adjusted proforma net
loss for the first quarter of $13.3 million, the Company is reporting an
adjusted proforma net loss for the six months of $18.0 million, or $0.59
per share. These adjusted proforma results include the operations of the
Jones Lang Wootton companies from the beginning of the year through the
closing date of the merger, and exclude the non-recurring transition and
integration costs and non-cash compensation expenses associated with the
Jones Lang Wootton merger and the acquisition of COMPASS Management and
Leasing and the U.S. retail businesses of Lend Lease Corporation Limited.
The Company reported an actual net loss for the quarter of $37.7
million, or $1.62 per diluted share, compared with earnings of $7.3
million, or $0.45 per diluted share from the prior year period. The actual
second quarter 1999 loss includes $21.2 million of non-cash compensation
expenses associated with the issuance of shares pursuant to the recent
merger between LaSalle Partners and the Jones Lang Wootton companies, and
$14.3 million of non-recurring transition and integration costs associated
with the merger and the October 1998 acquisition of COMPASS.
Management had always assumed that results for the first six months
of 1999 would fall below the comparable year-earlier period as a result of
exceptional performance fees generated in the first half of 1998. However,
the Company reported that its results for the first half of 1999 were $0.35
per share below management's expectation as a result of factors discussed
below as affecting the Company's expectations for full-year performance.
-- more --
<PAGE>
JONES LANG LASALLE REPORTS SECOND QUARTER RESULTS -- Add One
Said Stuart L. Scott, Chairman and Chief Executive Officer of Jones
Lang LaSalle: "Since our July 8 earnings warning, we have completed the
analysis of our weaker than expected performance. It is clear to us that
although most of our businesses around the world are performing well, our
expectations for some of our U.S. businesses (leasing and management,
facility, retail and development services) were too optimistic,
particularly given the inevitable distractions of our two major mergers
since October 1998. As a result of these distractions, we did not achieve
the new business activity levels we anticipated, nor did we capture the
synergies and cost efficiencies of the COMPASS acquisition and the rollout
of our J.D. Edwards information technology system as quickly as we had
expected."
He continued, "While disappointing, the net loss should not detract
from the significant progress we have made in establishing a tremendous
platform for growth. On the strength of our combined organization, we have
succeeded in expanding several significant client relationships while
securing a number of global strategic alliance relationships and increasing
our business pipeline. For the full year, we expect adjusted proforma
earnings of at least $1.00 per share with some upside possible. For next
year, the combination of cost synergies and a record business pipeline in
the Americas gives us confidence that we can expect major gains in both
revenues and earnings."
Mr. Scott outlined two initiatives that are already underway to
improve performance, including:
- To achieve the estimated $10 million in cost synergies from
streamlining North American operations, the Company has given direct
accountability to two of its key senior executives: Peyton H. Owens, Jr.,
who recently was named Chief Operating Officer of the Americas, and William
T. Krouch, who recently was named Chief Operating Officer of the Leasing
and Management Group.
- To strengthen management reporting capabilities and identify
areas for process efficiencies and cost containment, Vivian I. Mumaw,
currently Senior Vice President and Global Controller, will be taking the
roll of Chief Financial Officer of the Americas, and Jeremy Snoad, former
Chief Financial Officer of the German operation, has been appointed Vice
President of Global Management Assurance. Mr. Snoad will be assisted by
PricewaterhouseCoopers.
Chris Peacock, President and Chief Operating Officer, said: "The
entire Jones Lang LaSalle senior management team is committed to maximizing
our platform for growth and profitability, and to restoring credibility
with our shareholders, including the Jones Lang LaSalle employees who own
nearly 65 percent of the outstanding shares. The fundamentals of our
business are sound, and the majority of our operations are performing well
and are in line with our expectations. We definitely have an unparalleled
ability to provide the highest level of service to our clients around the
world."
-- more --
<PAGE>
JONES LANG LASALLE REPORTS SECOND QUARTER RESULTS -- Add Two
HIGHLIGHTS OF PERFORMANCE BY BUSINESS SEGMENT
- ---------------------------------------------
OWNER & OCCUPIER SERVICES
Jones Lang LaSalle's Owner and Occupier Services segment, which is
managed on a regional basis, includes property management, facility
services, leasing, retail, investment banking and other transaction
services. Revenues for the second quarter in the Americas were $54.5
million, up from adjusted proforma revenues of $47.8 million in the first
quarter. As noted, this segment's performance was impacted principally by
management's distraction following two major mergers since October 1998.
The operating loss of $10.9 million in the second quarter compared with an
adjusted proforma operating loss of $21.8 million in the first quarter.
In Europe, Owner and Occupier Services generated $68 million in
revenue, up from adjusted proforma revenues of $65.0 million in the first
quarter. The Company's strong performance in this region, which was better
than expected, was offset by the effects of a strong U.S. dollar versus
European currencies. As a result, operating profits declined modestly to
$5.5 million in the second quarter from an adjusted proforma operating
profit of $5.8 million in the first quarter.
Operations in Australasia are benefitting from several positive
trends, including outsourcing of property management. Revenues for this
segment were $17.6 million in the second quarter, up from adjusted proforma
revenues of $10.9 million in the first quarter. Operating income also
improved, with profits of $2.7 million compared with an adjusted proforma
operating loss of $3.7 million in the first three months.
In Asia, Owner and Occupier Services secured a number of significant
contracts in the period. Revenues were $15.8 million, up from adjusted
proforma revenues of $13.8 million in the first quarter. To take advantage
of future growth opportunities in Asia, the Company created a region-wide
Capital Markets Group, expanding its debt raising and capital placement
capabilities. The segment's operating loss in the period was essentially
unchanged at approximately of $1.0 million in both quarters.
HOTEL SERVICES
For global Hotel Services, revenues were $3.2 million in the quarter,
up from adjusted proforma revenues of $2.3 million in the first quarter.
The segment's performance was affected by the strength of the U.S. dollar
versus the Euro, continued subdued activity in Asia and a delay in the
closing of a significant hotel transaction in the United States. As a
result, the segment reported an operating loss of $488,000 as compared with
an adjusted proforma operating loss of $339,000 in the first three months.
-- more --
<PAGE>
JONES LANG LASALLE REPORTS SECOND QUARTER RESULTS -- Add Three
INVESTMENT MANAGEMENT
LaSalle Investment Management revenues were $20.0 million in the
quarter, basically even with adjusted proforma revenues of $20.1 million
the prior quarter. This business generated operating income of $1.3
million in the second quarter, versus adjusted proforma operating income of
$2.3 million in the first quarter, reflecting increased expenses due to
underwriting and transaction costs related to new investments.
Jones Lang LaSalle is the world's leading real estate services and
investment management firm, operating across 98 key markets in 34 countries
on five contingents. The Company provides comprehensive and wide-ranging
integrated expertise on a local, regional and global level to owners,
occupiers and investors. It operates through six business segments: Hotel
Services, Investment Management and four geographic regions of Owner and
Occupier Services. The Company's investment management business, LaSalle
Investment Management, is one of the world's largest and most diverse real
estate investment management firms, with $20.8 billion (pound/sterling 12.8
billion) of assets under management. Jones Lang LaSalle is also the
industry leader in real estate management services with a portfolio of 680
million square feet of property under management.
Statements in this press release regarding, among other things, future
financial results and performance, achievements, plans and objectives may
be considered forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors which may cause actual
results, performance, achievements, plans and objectives of Jones Lang
LaSalle to be materially different from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to
differ materially include those discussed under "Business," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Quantitative and Qualitative Disclosures about Market Risk," and elsewhere
in LaSalle Partners' Annual Report on Form 10-K for the year ended December
31, 1998, under "Risk Factors," "The Transactions," "The Purchase
Agreements," "JLW Management's Discussion and Analysis of Financial
Condition and Results of Operations of the JLW Companies," and elsewhere in
LaSalle Partners' Proxy Statement dated February 4, 1999, under
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," "Quantitative and Qualitative Disclosures about Market Risk,"
and elsewhere in Jones Lang LaSalle's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, and in other reports filed with the
Securities and Exchange Commission. Statements speak only as of the date
of this release. Jones Lang LaSalle expressly disclaims any obligation or
undertaking to update or revise any forward-looking statements contained
herein to reflect any change in Jones Lang LaSalle's expectations or
results, or any change in events.
# # #
NOTE TO EDITORS:
- ---------------
. Media contacts may listen to the Jones Lang LaSalle second quarter
results discussion at 9:00 a.m. EDT on July 30, 1999 with investors and
market analysts by dialing +1 719-457-2654 outside the United States, or +1
888-208-1812 within the United States.
. A replay of the call may be accessed by dialing +1 719-457-0820
outside the United States and +1 888-203-1112 in the United States from
noon EDT on July 30, 1999 until 6 p.m. EDT on August 6, 1999. The replay
passcode is: 731563.
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
Adjusted Pro Forma Consolidated Statements of Earnings
Six Months Ended June 30, 1999 and 1998
(in thousands, except share data)
(Unaudited)
<CAPTION>
1999 Results 1998 Results
-------------------------------------- -------------------------------------
First
Quarter June YTD Adjusted
Adjusted Second Adjusted June YTD Pro Forma June YTD
Pro Forma Quarter Pro Forma Actual Adjust- Adjusted
(1) Actual (1) Results ments (2) Pro Forma
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Fee-based services . . . . $ 158,743 172,018 330,761 122,456 254,931 377,387
Equity in earnings
from unconsolidated
ventures. . . . . . . . . 181 1,870 2,051 1,874 -- 1,874
Other income . . . . . . . 957 5,256 6,213 947 7,336 8,283
---------- ---------- ---------- ---------- ---------- ----------
Total revenue. . . . . 159,881 179,144 339,025 125,277 262,267 387,544
Operating expenses:
Compensation and
benefits . . . . . . . . 119,049 124,640 243,689 79,036 147,175 226,211
Operating, administra-
tive and other . . . . . 49,677 47,273 96,950 33,792 97,209 131,001
Depreciation and
amortization . . . . . . 10,002 10,106 20,108 5,578 12,611 18,189
---------- ---------- ---------- ---------- ---------- ----------
Total operating ex-
penses before merger
related non-recurring
charges. . . . . . . 178,728 182,019 360,747 118,406 256,995 375,401
---------- ---------- ---------- ---------- ----------
Adjusted operating
income (loss) before
merger related non-
recurring charges. . (18,847) (2,875) (21,722) 6,871 5,272 12,143
Interest expense . . . . . . 2,549 4,703 7,252 579 6,720 7,299
---------- ---------- ---------- ---------- ---------- ----------
<PAGE>
JONES LANG LASALLE INCORPORATED
Adjusted Pro Forma Consolidated Statements of Earnings - CONTINUED
1999 Results 1998 Results
-------------------------------------- -------------------------------------
First
Quarter June YTD Adjusted
Adjusted Second Adjusted June YTD Pro Forma June YTD
Pro Forma Quarter Pro Forma Actual Adjust- Adjusted
(1) Actual (1) Results ments (2) Pro Forma
---------- ---------- ---------- ---------- ---------- ----------
Adjusted earnings
(loss) before merger
related non-recurring
charges. . . . . . . (21,396) (7,578) (28,974) 6,292 (1,448) 4,844
Net provision (benefit) for
income taxes . . . . . . . (8,130) (2,880) (11,010) 2,391 (550) 1,841
Minority interest. . . . . . -- -- -- -- 570 570
---------- ---------- ---------- ---------- ---------- ----------
Adjusted net earnings
(loss) before merger
related non-recurring
charges. . . . . . . $ (13,266) (4,698) (17,964) 3,901 (1,468) 2,433
========== ========== ========== ========== ========== ==========
Adjusted EBITDA (3). . . . . $ (8,845) 7,231 (1,614) 12,449 17,883 29,762
========== ========== ========== ========== ========== ==========
Adjusted earnings per
common share (4) . . . . . $ (0.43) (0.15) (0.59) 0.08
========== ========== ========== ==========
Adjusted weighted
average shares
outstanding (4). . . . . . 30,538,404 30,566,160 30,552,359 30,634,681
========== ========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
Adjusted Pro Forma Consolidated Statements of Earnings - CONTINUED
<FN>
(1) First Quarter Adjusted Pro Forma results and June YTD Adjusted Pro Forma results give effect to the
operating results of the Jones Lang Wootton companies for the two months ended February 28, 1999, the period prior
to their merger with LaSalle Partners Incorporated, amortization expense of the goodwill resulting from the merger
as if the merger occurred on January 1, 1999, and a benefit for taxes as if the Jones Lang Wootton companies and
LaSalle Partners Incorporated were taxable entities at an effective tax rate of 38% as of January 1, 1999. No
effect has been given to the compensation expense incurred associated with the issuance of shares to former
employees of Jones Lang Wootton. Further, this analysis excludes the effect of merger related non-recurring
expenses associated with the merger with Jones Lang Wootton and the acquisition of Compass. This analysis is not
intended to be a presentation in accordance with generally accepted accounting principles.
(2) 1998 Adjusted Pro Forma Adjustments give effect to the operations of Compass and the Jones Lang Wootton
companies for the six months ended June 30, 1998 as if the acquisition and merger occurred on January 1, 1998,
amortization expense of the goodwill resulting from the transactions, and a benefit for taxes as if Compass, the
Jones Lang Wootton companies and LaSalle Partners Incorporated were taxable entities at an effective tax rate of
38% as of January 1, 1998. No effect has been given to the compensation expense incurred associated with the
issuance of share to former employees of Jones Lang Wootton. Further, this analysis excludes the effect of merger
related non-recurring expenses associated with the merger with Jones Lang Wootton and the acquisition of Compass.
This analysis is not intended to be a presentation in accordance with generally accepted accounting principles.
(3) Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation and amortization and
merger related non-recurring charges. Merger related non-recurring charges represent non-cash compensation expense
resulting from the issuance of shares to former Jones Lang Wootton employees including the effect of quarterly
adjustments on certain of those shares as a result of changes in the stock price, in addition to non-capitalizable
integration and transition costs incurred related to the acquisition of Compass and the merger with Jones Lang
Wootton.
(4) Adjusted earnings per common share represents adjusted net earnings divided by the weighted average
committed shares outstanding. Committed shares are inclusive of shares subject to forfeiture, vesting, indemnity
and adjustment provisions which are not considered in the calculation of weighted average basic or diluted shares
outstanding under generally accepted accounting principles.
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
Segment Operating Results
Actual and Adjusted Pro Forma Results for the Three Months Ended
March 31 and June 30, 1999 and the Six Months Ended June 30, 1999
(in thousands)
(Unaudited)
<CAPTION>
First Quarter 1999 Adjusted
------------------------------------------- Pro Forma
Adjusted Second Six Months
Pro Forma Quarter Ended
Adjust- Adjusted 1999 June 30,
Actual (1) ments (2) Pro Forma Actual 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OWNER & OCCUPIER SERVICES -
AMERICAS
Revenue:
Implementation Services. . . $ 15,434 3,641 19,075 23,173 42,248
Management fees. . . . . . . 26,610 -- 26,610 28,739 55,349
Equity earnings. . . . . . . (180) -- (180) 281 101
Other services . . . . . . . 2,247 -- 2,247 2,246 4,493
Intersegment revenue . . . . 62 -- 62 78 140
---------- ---------- ---------- ---------- ----------
44,173 3,641 47,814 54,517 102,331
Operating expenses:
Compensation, operating
and administrative . . . . 57,086 7,241 64,327 60,431 124,758
Depreciation and
amortization . . . . . . . 5,043 275 5,318 5,033 10,351
---------- ---------- ---------- ---------- ----------
Operating (loss) . . . . $ (17,956) (3,875) (21,831) (10,947) (32,778)
========== ========== ========== ========== ==========
EUROPE
Revenue:
Implementation services. . . $ 18,434 26,539 44,973 43,435 88,408
Management fees. . . . . . . 6,331 6,707 13,038 23,500 36,538
Equity earnings. . . . . . . (21) -- (21) (72) (93)
Other services . . . . . . . 3,039 4,007 7,046 1,148 8,194
---------- ---------- ---------- ---------- ----------
27,783 37,253 65,036 68,011 133,047
Operating expenses:
Compensation, operating
and administrative . . . . 21,189 35,797 56,986 60,186 117,172
Depreciation and
amortization . . . . . . . 615 1,648 2,263 2,357 4,620
---------- ---------- ---------- ---------- ----------
Operating income
(loss) . . . . . . . . $ 5,979 (192) 5,787 5,468 11,255
========== ========== ========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
Segment Operating Results - CONTINUED
First Quarter 1999 Adjusted
------------------------------------------- Pro Forma
Adjusted Second Six Months
Pro Forma Quarter Ended
Adjust- Adjusted 1999 June 30,
Actual (1) ments (2) Pro Forma Actual 1999
---------- ---------- ---------- ---------- ----------
AUSTRALASIA
Revenue:
Implementation services. . . $ 3,232 3,081 6,313 11,924 18,237
Management fees. . . . . . . 1,575 2,383 3,958 5,240 9,198
Equity earnings. . . . . . . (24) -- (24) 24 --
Other services . . . . . . . 463 236 699 443 1,142
---------- ---------- ---------- ---------- ----------
5,246 5,700 10,946 17,631 28,577
Operating expenses:
Compensation, operating
and administrative . . . . 6,370 7,839 14,209 14,214 28,423
Depreciation and
amortization . . . . . . . 198 266 464 700 1,164
---------- ---------- ---------- ---------- ----------
Operating income
(loss) . . . . . . . . $ (1,322) (2,405) (3,727) 2,717 (1,010)
========== ========== ========== ========== ==========
ASIA
Revenue:
Implementation services. . . $ 2,300 5,027 7,327 8,400 15,727
Management fees. . . . . . . 1,893 3,849 5,742 5,888 11,630
Other services . . . . . . . 288 446 734 1,515 2,249
---------- ---------- ---------- ---------- ----------
4,481 9,322 13,803 15,803 29,606
Operating expenses:
Compensation, operating
and administrative . . . . 5,001 8,886 13,887 15,829 29,716
Depreciation and
amortization . . . . . . . 208 735 943 948 1,891
---------- ---------- ---------- ---------- ----------
Operating income
(loss) . . . . . . . . $ (728) (299) (1,027) (974) (2,001)
========== ========== ========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
Segment Operating Results - CONTINUED
First Quarter 1999 Adjusted
------------------------------------------- Pro Forma
Adjusted Second Six Months
Pro Forma Quarter Ended
Adjust- Adjusted 1999 June 30,
Actual (1) ments (2) Pro Forma Actual 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
HOTEL SERVICES -
Revenue:
Implementation services. . . . $ 854 1,074 1,928 2,246 4,174
Management fees. . . . . . . . -- -- -- 473 473
Other services . . . . . . . . -- 371 371 462 833
---------- ---------- ---------- ---------- ----------
854 1,445 2,299 3,181 5,480
Operating expenses:
Compensation, operating and
administrative expenses . . . 920 1,650 2,570 3,619 6,189
Depreciation and
amortization. . . . . . . . . 11 57 68 50 118
---------- ---------- ---------- ---------- ----------
Operating loss. . . . . . $ (77) (262) (339) (488) (827)
========== ========== ========== ========== ==========
INVESTMENT MANAGEMENT -
Revenue:
Implementation services. . . . $ 1,606 336 1,942 4,431 6,373
Advisory fees. . . . . . . . . 16,614 577 17,191 14,190 31,381
Equity earnings. . . . . . . . 406 -- 406 1,637 2,043
Other services . . . . . . . . 320 186 506 (179) 327
Intersegment revenue . . . . . 35 -- 35 (35) --
---------- ---------- ---------- ---------- ----------
18,981 1,099 20,080 20,044 40,124
Operating expenses:
Compensation, operating and
administrative expenses. . . 16,286 557 16,843 17,678 34,521
Depreciation and
amortization . . . . . . . . 881 66 947 1,017 1,964
---------- ---------- ---------- ---------- ----------
Operating income . . . . . $ 1,814 476 2,290 1,349 3,639
========== ========== ========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
Segment Operating Results - CONTINUED
First Quarter 1999 Adjusted
------------------------------------------- Pro Forma
Adjusted Second Six Months
Pro Forma Quarter Ended
Adjust- Adjusted 1999 June 30,
Actual (1) ments (2) Pro Forma Actual 1999
---------- ---------- ---------- ---------- ----------
Total segment revenue. . . . . . $ 101,518 58,460 159,978 179,187 339,165
Intersegment revenue
eliminations . . . . . . . . . (97) -- (97) (43) (140)
---------- ---------- ---------- ---------- ----------
Total revenue. . . . . . . $ 101,421 58,460 159,881 179,144 339,025
========== ========== ========== ========== ==========
Total segment operating
expenses . . . . . . . . . . . $ 113,808 65,017 178,825 182,062 360,887
Intersegment operating
expense eliminations . . . . . (97) -- (97) (43) (140)
---------- ---------- ---------- ---------- ----------
Total operating expenses
before merger related
non-recurring charges. . $ 113,711 65,017 178,728 182,019 360,747
========== ========== ========== ========== ==========
Operating income (loss)
before merger related
non-recurring charges. . $ (12,290) (6,557) (18,847) (2,875) (21,722)
========== ========== ========== ========== ==========
<FN>
(1) Actual results for the three months ended March 31, 1999 represent the operations of the LaSalle
Partners' businesses for the two months ended February 28, 1999 and the operations of the merged Jones Lang
LaSalle businesses for the month ended March 31, 1999.
(2) Adjusted Pro Forma Adjustments give effect to the operating results of the Jones Lang Wootton
companies for the two months ended February 28, 1999, the period prior to their merger with LaSalle Partners
Incorporated, amortization expense of the goodwill resulting from the merger as if the merger occurred on January
1, 1999, and a benefit for taxes as if the Jones Lang Wootton companies and LaSalle Partners Incorporated were
taxable entities at an effective tax rate of 38% as of January 1, 1999. Adjustments exclude the effect of
compensation expense incurred as a result of the shares issued to former employees of Jones Lang Wootton. This
analysis is not intended to be a presentation in accordance with generally accepted accounting principles.
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
Consolidated Statements of Earnings and Comprehensive Income
For the Three and Six Months Ended June 30, 1999 and 1998
(in thousands, except share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Fee-based services . . . . . . . . . . . . . . . . . .$ 172,018 72,554 272,722 122,456
Equity in earnings from unconsolidated
ventures . . . . . . . . . . . . . . . . . . . . . . 1,870 1,182 2,051 1,874
Other income . . . . . . . . . . . . . . . . . . . . . 5,256 476 5,792 947
---------- ---------- ---------- ----------
Total revenue. . . . . . . . . . . . . . . . . . 179,144 74,212 280,565 125,277
Operating expenses:
Compensation and benefits. . . . . . . . . . . . . . . 124,640 41,683 200,079 79,036
Operating, administrative and other. . . . . . . . . . 47,273 17,347 78,590 33,792
Depreciation and amortization. . . . . . . . . . . . . 10,106 2,962 17,061 5,578
---------- ---------- ---------- ----------
Total operating expenses before merger
related non-recurring charges. . . . . . . . . 182,019 61,992 295,730 118,406
---------- ---------- ---------- ----------
Operating income (loss) before merger
related non-recurring charges. . . . . . . . . (2,875) 12,220 (15,165) 6,871
Merger related non-recurring charges:
Stock compensation expense . . . . . . . . . . . . . . 21,242 -- 67,441 --
Integration and transition expenses. . . . . . . . . . 14,345 -- 22,189 --
---------- ---------- ---------- ----------
Total merger related non-recurring
charges. . . . . . . . . . . . . . . . . . . . 35,587 -- 89,630 --
---------- ---------- ---------- ----------
Total operating expenses . . . . . . . . . . . . 217,606 61,992 385,360 118,406
---------- ---------- ---------- ----------
Operating income (loss). . . . . . . . . . . . . (38,462) 12,220 (104,795) 6,871
Interest expense . . . . . . . . . . . . . . . . . . . . 4,703 335 7,345 579
---------- ---------- ---------- ----------
Earnings (loss) before provision
(benefit) for income taxes . . . . . . . . . . (43,165) 11,885 (112,140) 6,292
Net provision (benefit) for income taxes . . . . . . . . (5,461) 4,575 (19,021) 2,422
---------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . . . . . .$ (37,704) 7,310 (93,119) 3,870
========== ========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Statements of Earnings and Comprehensive Income - CONTINUED
Three Months Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Other comprehensive income (loss),
net of tax:
Foreign currency translation
adjustments. . . . . . . . . . . . . . . . . . . . .$ 483 3 106 298
---------- ---------- ---------- ----------
Comprehensive income (loss). . . . . . . . . . . . . . .$ (37,221) 7,313 (93,013) 4,168
========== ========== ========== ==========
Basic earnings (loss) per common share . . . . . . . . .$ (1.62) 0.45 (4.52) 0.24
========== ========== ========== ==========
Basic weighted average shares outstanding. . . . . . . .23,297,467 16,200,000 20,620,715 16,200,000
========== ========== ========== ==========
Diluted earnings (loss) per common share . . . . . . . .$ (1.62) 0.45 (4.52) 0.24
========== ========== ========== ==========
Diluted weighted average shares
outstanding. . . . . . . . . . . . . . . . . . . . . .23,297,467 16,392,626 20,620,715 16,374,883
========== ========== ========== ==========
</TABLE>
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(in thousands)
(Unaudited)
June 30, December 31,
1999 1998
---------- -----------
ASSETS
- ------
Current assets:
Cash and cash equivalents. . . . . . . . . $ 38,664 16,941
Trade receivables, net of allowances . . . 189,622 116,965
Notes receivable and advances to
real estate ventures . . . . . . . . . . 15,417 17,042
Other receivables. . . . . . . . . . . . . 17,023 3,385
Prepaid expenses . . . . . . . . . . . . . 8,396 2,185
Other assets . . . . . . . . . . . . . . . 6,590 --
Deferred and current tax benefit . . . . . 39,672 9,926
---------- ---------
Total current assets . . . . . . . 315,384 166,444
Property and equipment, at cost,
less accumulated depreciation. . . . . . . 63,127 28,773
Intangibles resulting from
business acquisitions, net of
accumulated amortization . . . . . . . . . 381,704 229,437
Investments in real estate ventures. . . . . 53,066 52,976
Long-term receivables, net . . . . . . . . . 10,926 10,950
Deferred tax assets. . . . . . . . . . . . . -- 660
Prepaid pension asset. . . . . . . . . . . . 20,533 --
Other assets, net. . . . . . . . . . . . . . 3,548 1,681
---------- ----------
$ 848,288 490,921
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued
liabilities. . . . . . . . . . . . . . . $ 82,022 51,101
Accrued compensation . . . . . . . . . . . 81,952 58,398
Short-term borrowings. . . . . . . . . . . 14,618 --
Other liabilities. . . . . . . . . . . . . 40,019 8,324
---------- ----------
Total current liabilities. . . . . 218,611 117,823
Long-term liabilities:
Credit facilities. . . . . . . . . . . . . 329,520 202,923
Deferred tax liability . . . . . . . . . . 1,391 --
Other. . . . . . . . . . . . . . . . . . . 623 603
---------- ----------
Total liabilities. . . . . . . . . 550,145 321,349
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Balance Sheets - CONTINUED
June 30, December 31,
1999 1998
---------- -----------
Stockholders' equity:
Common stock, $.01 par value per share,
100,000,000 shares authorized;
30,566,160 shares issued and
outstanding. . . . . . . . . . . . . . . 307 163
Additional paid-in capital . . . . . . . . 473,856 123,543
Unallocated ESOT shares. . . . . . . . . . (9) --
Deferred stock compensation. . . . . . . . (128,864) --
Retained earnings (deficit). . . . . . . . (48,327) 44,792
Accumulated other comprehensive
income . . . . . . . . . . . . . . . . . 1,180 1,074
---------- ----------
Total stockholders' equity . . . . 298,143 169,572
---------- ----------
$ 848,288 490,921
========== ==========
